Real Estate Information

SUB PRIME LOANS IN MONTANA

OR

WHY OUR HOUSING SLUMP IS SOFTER THAN ELSE WHERE

IN LOOKING AT THE HOUSING MARKET IN THE UNITED STATES THEN MONTANA AS A SUB MARKET OF THAT  THE USE OF SUB PRIME LOANS WAS SMALL WHEN COMPARED TO THE COUNTRY AS A WHOLE  IF COMPARED TO CALIFORNIA ALMOST NOT USED.

LET’S LOOK AT THE NUMBER OF SUB PRIMES IN FORCE RIGHT NOW

            UNITED STATES                   CALIFORNIA                        MONTANA

# OF LOANS              2,586,243                                              369,857                                 3,598

FROM THE ABOVE NUMBERS YOU CAN SEE HOW SMALL THE NUMBER OF SUB PRIME LOANS ISSUED  IN MONTANA WAS IN A POPULATION COMPARISON CALIFORNIA ISSUED A 1000 TIMES MORE SUB PRIME LOANS IF IT HAD THE DEGREE OF POPULATION THERE WOULD BE ALMOST 100 MILLION PEOPLE LIVING  THERE. PUTS THE COMPARISON IN PERSPECTIVE

THE NEXT COMPARISON IS THE LOAN AMOUNT WHEN WE LOOK AT THE NUMBERS FOR MONTANA; THE THING THAT STANDS OUT TO ME IS THE LOAN AMOUNT. AT THE AVERAGE BALANCE IT SAYS TO ME THAT AT LEAST IN MONTANA IT APPEARS THE LOANS WE USED FOR FIRST TIME BUYER CATEGORY HOMES AND INDIVIDUALS.

            UNITED STATES                   CALIFORNIA                        MONTANA

LOAN AMOUNT       $181,412                               $322,260                                               $150,656

ON THE SURFACE IT WOULD BE A CONCERN THAT HOME PURCHASERS WERE DIRECTED AWAY FROM MORE DESIRABLE LOANS FOR THE PURCHASER TO A HIGHER PROFIT LOAN FOR THE LENDER.

AS PART OF THE DISCUSSION ABOUT PROFITABILITY AND COSTS THE MAIN ITEM WOULD BE THE INTEREST RATE ON THE LOAN AND THAT INFORMATION IS AS FOLLOWS.

            UNITED STATES                   CALIFORNIA                        MONTANA

INTEREST RATE       8.17                                    7.37                                                       8.41

YOU CAN SEE BY THE COMPARISON THAT BORROWERS WERE DEFINITELY PAYING MORE TO BORROW SUB PRIME THAN NATION AS WHOLE AND STARK CONTRAST TO CALIFORNIA.

PART ON THE DISCUSSION OF COST TO OBTAIN FINANCING HAS TO CONTAIN THE CREDIT SCORE DISCUSSION AND THERE IS DISTINCT DIFFERENCE BETWEEN MONTANA AND CALIFORNIA YET NOT A WIDE VARIANCE COMPARED TO THE UNITED STATES. SINCE THE INFORMATION I HAVE DOES NOT BREAK DOWN BY COUNTY I MUST ASSUME AS WITH THE MAJORITY OF ACTIVITY IN MONTANA THE LENDING OCCURRED IN THE SEVEN LARGEST “URBAN” AREAS.

SINCE MONTANA TENDS TO HAVE LOWER WAGES INDIVIDUALS DON’T HAVE AS MUCH CUSHION OR MARGIN OF ERROR IN THEIR FINANCES WHICH MAY HELP EXPLAIN SOME OF THE DIFFERENCE IN THE FICO SCORES. THE FIRST SET OF FICO SCORES IS THE AVERAGE FOR ALL THE LOAN THAT WERE ISSUED THE SECOND SET OF NUMBERS IS FOR THE NUMBER OF LOANS ISSUSSED WITH A FICO SCORE ABOVE 660. WITH THAT SCORE, AT LEAST IN MONTANA, I WOULD HAVE BELIEVED THAT THOSE BORROWERS WOULD HAVE BEEN BETTER SERVED WITH A FHA OR MONTANA BOARD LOAN.

                                                AVERAGE FICO SCORES FOR LOANS ISSUED

                  UNITED STATES                   CALIFORNIA                        MONTANA

FICO SCORE             617                                                         640                                            612

      PERCENTAGE OF LOANS WITH A FICO SCORE OF 660 OR HIGHEER

                  UNITED STATES                   CALIFORNIA                        MONTANA

FICO SCORE             21.4%                                              35.1%                                            18.3%

THE LAST ISSUE I WILL DEAL WITH IS DEFAULT RATE. THE MAJOR ISSUE TERMS OF VALUE IS THE AMOUNT OF REO HOMES ON THE MARKET. LENDERS HAVE NO INTEREST IN OWING  PROPERTY, WHILE NOT THEIR OVERALL DESIRE TO LOSE MONEY ON AN REO FROM AN OVER ALL REGULATORY ENVIRONMENT IT IS NOT A POSITIVE TO HAVE A LARGE REO INVENTORY. THEREFORE LENDERS WILL CHANGE PRICING TO “SELL” THE PROPERTIES RATHER THAN RETAIN THEM.

NUMBERS OF LOANS WITH A LATE PAYMENT IN THE LAST 12 MONTHS

                 UNITED STATES                   CALIFORNIA                        MONTANA

FICO SCORE           64.0%                                     67.1%                                                     54.9%

 PERCENT OF LOANS IN REO

                  UNITED STATES                   CALIFORNIA                        MONTANA

 % OF REO             6.3%                                               12.0%                                                     2.9%

WHEN LOOKING THE INFORMATION IN TOTAL THE PICTURE OF MODERATE HOUSING PROBLEMS EXIST IN MONTANA CAUSED BY SUB PRIME LENDING. THIS IS AN OVERALL VERY POSITIVE POSITION FOR MONTANA AS WHOLE TO BE  IN. WHILE I KNOW THE WESTERN HALF OF THE STATE IS STRUGGLING MUCH MORE THE EASTERN HALF, THE WESTERN HALF STRUGGLES WILL LARGELY BE CORRECTED BY THE ENDING OF THE RECESSION AND EMPLOYMENT OF PEOPLE LIVING IN MONTANA. OF COURSE THOSE AREAS WILL STRUGGLE SOME WITH PRICING ADJUSTMENT WITH THE WITH DRAWL OF “OUTER STATER’S” BIDDING UP RECREATIONAL PROPERTIES WITH THE OVERFLOW HIGHER VALUES OF MONTANAN’S RESIDENCES. OVERALL MONTANA WILL NOT SEE THE WEAPONS OF MASS FINANCIAL DESTRUCTION CRUSH HOME VALUES IN MONTANA.

I AM IN THE PROCESS OF GETTING MY END OF THE MONTH REPORT READY AND THINKING THRU SOME ISSUES OF THE MARKET PLACE. YOU CAN SEE THE DRAMATIC EFFECT OF THE 8K FIRT TIME HOME BUY3R TAX CREDIT AND LOW INTEREST RATES. FOR FIRST TIME BUYERS BETWEEN 120K TO 180K UNIT VOLUME IS DOWN ONLY 18% BY IN 2009. BY PERCENTAGE OF THE MARKET PLACE THAT PRICE RANGE OF HOMES HAS GONE FROM 22% OF THE HOMES SOLD IN 2008 TO 29% IN 2009. WHEN YOU LOOK AT THE LOWER REGISTERS FROM THERE YOU RUN INTO AND AWFUL LOT OF JUNK HENCE THE DROP IN MARKET ACTIVITY.  THE OTHER GLARING ISSUE IS THE STAND STILL BETWEEN 400K AND 500K ONLY 2 CLOSED IN THE COUNTY THROUGH MLS REPORTED THROUGH THE APRIL 30^TH TIME LINE.

THOUGHT YOU MIGHT FIND INTERESTING.

Interesting information about how lenders may issue both primary and second loans on homes. IT is a new part of regulation Z; which requires disclosure of terms and conditions of loan. the two major things that i see is it expressly prohibit lending to a property owner solely on the equity without regard to income of the borrower and the  debt to income can not exceed 50% of the verified income of the borrower. the rules go into effect for lender in October of this year.

YESTERDAY I WAS READING ABOUT THE FORTUNE 500 COMAPNIES VALUE IS 13% BELOW THE VALUE OF 1998 SO YOUR INVESTMENT STARTING POINT IS OVER ELEVEN YEARS BACK. IF YOU HAD HAD BOUGHT HOUSES INSTEAD OF STOCK IN THE 20 LARGEST CITIES THE VALUE OF YOUR INVESTMENT WOULD HAVE ONLY GONE BACKWARDS TO JULY 2003 BASICALLY 6 YEARS OFF THE PEAK. IF YOU HAD INVESTED IN REAL ESTATE IN BILLINGS MONTANA YOU WOULD BE BACK TO THE END OF 2007 BASICALLY 2 YEARS OFF THE PEAK

SO THE QUESTIONS IF YOU ARE TRYING TO GET EVEN AND BACK INTO THE BLACK ON YOUR INVESTMENTS WHICH WOULD YOU RATHER BE 11 YEARS BACK IN STOCKS; 6 YEARS BACK IN REAL ESTATE IN THE 20 LARGEST CITIES OR ABOUT 2 YEARS BACK IN BILLINGS MONTANA.

AND THEY BLAME REAL ESTATE FOR THE COUNTRY’S PROBLEMS

I KNOW WHERE THE EASIEST BREAK BACK TO POSITIVE ON MY INVESTMENT IS.

Billings Area has enjoyed steady upward price movement. Average sales price for a family home in Yellowstone County is $199,566 (2009- thru April 15th) down from $202,842 (2008- thru April 15th). Average square footage for a family home sold is 2299 (2009- thru April 15th) up from 2283 (2008- thru April 15th). Long term the Billings market has seen approximately 5.72% yearly appreciation since 1968. Homes are selling at 95.49% of their asking price. Market time is 79 days to offer in 2009 as compared to 70 days in 2008. Inventory is UP 10%, presently 828 (2009)residential properties in MLS as compared to 753 (2008), affording buyers a good selection, the number of closed sales are 345 (2009- thru April 15th) compared to 505 (2008- thru April 15th) buyers do need to make a timely decision on which home to purchase.
On the Rental side of the market the average asking price for an apartment in Billings is $695 (2009) as compared to $678 (2008). Home rental rates average $1086 (2009) as compared to $1114 (2008). Number of rentals advetised on sundays is UP in 2009 136 PER SUNDAYas compared to 108 PER SUNDAY 2008. So Billings is experinceing a slight increase availibity of units to rent.

If your Thinking of Buying or Selling, Please call me for the current facts about the Billings Market.
Howard Sumner 406-245-6890 or 800-317-5769

just thought this is of interst to nay any one buying or selling

Learn more about the Home Valuation Code of Conduct:

                        Call (800) FREDDIE

                        Visit www. FreddieMac.com/singlefamily/home_valuation.html

• Requires absolute independence within a lender’s organization between the appraisal function and loan production and limits communication with the appraiser.

􀂃 A lender’s loan production staff is prohibited from being involved in the selection of the appraiser, or having any substantive communications with an appraiser or appraisal management company about valuation.

􀂃 The loan production staff consists of those responsible for generating loan volume or approving loans, as well as their subordinates. This includes an employee whose compensation is based on loan volume or the closing of a loan transaction. Employees responsible for the credit administration function or credit risk management are not considered loan production staff.

• The lender’s use of an appraisal report prepared by an in-house appraiser or an affiliate in underwriting a loan must meet certain conditions including:

􀂃 The appraiser, or the company for which the appraiser works, reports to a function of the lender independent of sales or loan production, and sales and loan production staff have no involvement in the operation of appraisal functions or selection of the appraiser.

􀂃 Sales and loan production staff are not allowed to have substantive communications with in-house appraisers relating to or having an impact on valuation and do not provide the appraiser any estimated or target value of the property or loan amount (except a copy of the purchase contract may be provided.)

􀂃 The appraiser’s compensation does not depend on the final estimate of value or the closing of the loan.

• The lender has written policies and procedures implementing the Code and has mechanisms to report and discipline any violators.

• The lender’s appraisal functions are either annually audited by an external auditor or are subject to federal or state regulatory examination, and the lender provides to Freddie Mac any adverse audit findings indicating Code non-compliance.

                        Allows lenders to also use in-house staff appraisers to: 1) order appraisals; 2) conduct appraisal reviews and other quality control functions; 3) develop, deploy, or use internal automated valuation models; and 4) prepare appraisals in connection with transactions other than mortgage origination transactions, such as workouts, if the lender complies with the terms of the Code.

                        Lenders may use appraisal reports prepared by other entities engaged by the lender to provide other settlement services for the same transaction, as long as certain conditions are met.

                        Requires lenders to quality control test a randomly selected 10 percent (or other bona fide statistically significant percentage) sample of appraisal reports or valuations used by the lender, and report any adverse findings, including non-compliance of the Code, to Freddie Mac with respect to loans sold to us.

                        Allows Sellers with an asset size of less than $250 million to be considered a small bank as defined in 12 U.S.C. Section 2908 and exempting them from the requirements in Section IV of the Code. Sellers that qualify for this exemption must represent and warrant that they have in place appropriate policies and procedures, as well as adequate controls to prevent undue appraiser influence.

2806 Lewis Avenue - $177,500

You won't want to miss seeing this great West Billings home in a convenient location, close to schools, fenced yard, garage, covered deck, 4 bedrooms, 2 baths, storage and so much more.  Call today to see!

This is a graph showing the ratio of pending sales to active listings. This shows a up trend in the number of pending sales to active listing which is positive in the overall market place. Also indicates some strength through buyers entering the market place. When you look forward you can see that 2009 will,if trends continue, surpass 2008 in the relationship to pending compared to active listings. This will stabilize pricing since demand will approximate the supply. as I have mentioned else where this continues my belief that the best description of the real estate market in Yellowstone county is a high grade corporate bond it protects your capital and gives you a reasonable return on your investment. It will be intersting to follow.

The question of timing of a purchase of home, in economically turbulent times. would perplex most rational thinking person. The short answer i would give it depends. The largest factor i would suggest that a buyer whether, a first time or an move buyer, ask them "is how long do i plan to stay in the home i purchase?" I believe this is the critical component of comparing the "rent vs buy" dilemma. The short answer in most markets in the past would be a minimum ownership of 24 months. The prudent answer with today's environment would suggest a longer view of ownership ranging more in the 36 to 60 month range to receive the benifits of ownership versus the cost of buying and selling when compared to the lost opportunity of ownership and renting. Below is a graph showing the monthly principal and interest payment of the average sales priced home as compared to the average asking price for a home for rent in Yellowstone county. I hope this would give the reader more insight into recent develops that would tip the balance to purchasing within the parameters i outlined above.  

3542 Howard Avenue

You'll be amazed at how much this home has to offer, 3 bedrooms, 2 baths, all on one-level, garage, super sized fenced yard , and convenient location.   $167,000