More Underwater Homes Floating To The Surface

     With the housing recovery firmly on track and home prices rising at a consistent pace for over a year now, underwater home owners can now see the light at the end of the tunnel. For those of you who do not understand the term "underwater", it refers to the concept that the homeowners owe more towards their mortgage then what the current value of the home is worth. A recent report from RealtyTrac has shown that 10.7 million households, as of September 2013, owe 25% more on their mortgages then the value of the home itself (The 10.7 million accounts for 23% of all homes nationwide that have mortgages). Although this seems to be a staggering number, it is actually a great improvement seeing that in May 2013, just a few months ago, the number was 11.3 million and September 2012 the number was 12.5 million.

     

     It has been a long six years since the housing collapse that caused countless homeowners to sink underwater on their mortgages. As I have mentioned in many of my previous posts, the issue of the housing inventory shortage has plagued buyers for quite some time, and having millions of home owners underwater is a big part of the problem. A majority of the home owners currently underwater would like to sell their home and move on, however that cannot be done until they resurface on their mortgages.

     Good News! The same report from RealtyTrac shows that the recent spike in home prices has moved a good amount of these underwater households much closer to resurfacing on their mortgages. An approximate 8.3 million households, that have been underwater, are expected to gain enough equity back in their homes to be able to sell within the next 15 months; without having to succumb to a short sale. This is great news for the housing market because this means that we are getting much closer to a more abundant housing inventory. 

“Steadily rising home prices are lifting all boats in this housing market and should spill over into more inventory of homes for sale in the coming months,” says Daren Blomquist, the vice president at RealtyTrac.

Mortgage Backing For Previous Foreclosed Homeowners

     Obtaining a mortgage in today's market can be a difficult task for some people. Credit scores are the focal point for mostly all lenders and it is causing many people to be rejected as the lenders are requiring a score of approximately 640 for an FHA loan and 740 for a conventional loan. In the case of people affected by the housing market crash and forced into foreclosure, the feat of obtaining a mortgage may seem impossible. NOT ANYMORE! The Federal Housing Administration (FHA) is giving some former home owners a second chance at home ownership. The FHA has sent a letter to mortgage lenders saying that they will offer mortgage insurance to homeowners that once filed for bankruptcy or homeowners that lost their homes through short a short sale of foreclosure during the economic recession. This is great news for many people whose credit scores were ruined by the housing crash.

"FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage," according to the letter FHA sent to lenders.

     This does NOT mean that every single person who was foreclosed upon will receive this mortgage backing from the FHA. If you are someone who fits into this category, you will still be obligated to meet all other FHA requirements and the FHA needs to see proof that you are no longer financially constrained. In other words, it will not be a free-for-all as it was in the beginning of the housing bubble where mortgages were handed out regardless of your financial situation. Potential buyers that were once foreclosed upon need to show proof that they are financially able to afford the amount they are being lent. These borrowers will also have to take part in housing counseling and the FHA is requiring all lenders to make sure at least a year has passed since the foreclosure or bankruptcy occurred. 

More Housing Bubble Fears Brew

More Housing Bubble Fears Brew