Headlines – week of December 6, 2009

December 11, 2009

Cities with the most overpriced properties (from Forbes)

Forbes magazine recently ranked markets it considered the most overpriced based on the ratio of the median initial list prices compared to the median list prices at the time the properties actually sold. It also factored in how long the properties stay on the market.

The top 10 areas where Forbes found the most over-priced properties were:

1. Orlando
2. Miami-Fort Lauderdale-Pompano Beach
3. Jacksonville, Fla.
4. Baltimore-Towson
5. Chicago-Naperville-Joliet
6. San Antonio, Texas
7. Denver-Aurora
8. Tampa-St. Petersburg-Clearwater
9. Indianapolis-Carmel
10. Austin-Round Rock

Full Article

Regulators Shut 6 Banks at Cost of $2.4 Billion (from Chicago Tribune)

In early December, regulators seized another six banks in three states with combined assets of $13.4 billion, generating an estimated loss of nearly $2.4 billion for the Federal Deposit Insurance Corp.

The Federal Deposit Insurance Corp. on Friday took over Ohio’s AmTrust Bank, the fourth-largest bank to fail this year, with about $12 billion in assets and $8 billion in deposits. The Cleveland-based bank’s failure is expected to cost the federal deposit insurance fund an estimated $2 billion.

The failure of Buckhead Community Bank (Georgia) is expected to cost the federal deposit insurance fund an estimated $241.4 million; that of First Security National Bank (Georgia), around $30.1 million; Tattnall Bank (Georgia), $13.9 million; Benchmark Bank (Illinois), about $64 million; and Greater Atlantic Bank (Virginia), $35 million.

Of the six, only AmTrust had a presence in Florida, operating 24 branches in Florida with combined deposits of $4.8 billion.

For the year 2009, 130 institutions with combined $154 billion in assets and $124 billion in deposits have failed, triggering combined losses of at least $34.4 billion. In 2008, 25 banks with combined assets of $374 billion and deposits of $234 billion failed, causing an estimated loss of at least $10.4 billion for the FDIC.

Georgia leads the nation in bank seizures with 24 failures in 2009. Illinois is second with 20 failures. Rounding out the top five rankings are California with 15 failures, Florida with 12 failures, and Minnesota with six failures.

The 130 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the federal deposit insurance fund more than $28 billion so far this year.

Overall, 33 states have had at least one bank fail in 2009. In 2008, bank failures occurred in 13 states.

The FDIC expects the cost of bank failures to grow to about $100 billion over the next four years.

Full Article

New FHA rules on condominium loans (from Federal Housing Administration)

The Federal Housing Administration issued new guidelines effective December 7, 2009 which could increase condominium sales, at least temporarily, to get FHA-backed mortgages.

The guidelines were written to address current market conditions and the glut of empty condominiums following the real estate bust.

Several of the policies, however, expire in December 2010.

The latest guidelines are described in two separate HUD/FHA documents:

Two big barriers to FHA financing have been a requirement that 51 percent of a condominium be owner-occupied, and a rule banning loans to buildings with “right of first refusal.”

Changes include reducing the number of units in a new condominium that must be owner-occupied, allowing condo boards to refuse buyers as long as it doesn’t violate the Fair Housing Act, and cutting the expensive requirement of having an attorney certify condominium documents before a sale.

The new temporary guidelines allow for 50 percent of units to be owner-occupied and doesn’t count units that are bank-owned, rented out, or vacant.

Allowing condos with “right of first refusal” access to financing is a permanent change.

The highlights of the New Guidelines are as follows:

  • Condominium project approval is not required for condominiums comprised of single family totally detached dwellings (no shared garages or any other attached buildings).
  • Until December 31, 2010, at least 30% presale level must be reached before any FHA mortgage can be granted on any unit. After 12/31/10, 50% presale level must be reached.
  • 50% owner occupancy rate for the entire project.
  • No more than 15% of unit owners can be delinquent (over 30 days late) on their condominium fees.
  • Capital reserve funding:  The reserve study requirement has been eliminated, along with the requirement of at least 60% of the fully funded reserves. The new requirement requires merely that at least 10% of the association’s annual budget be set aside for reserves.
  • Budget review:  Lenders must review the condominium budget to determine that the budget is adequate and: (i) includes allocations/line items to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project; (ii) provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget; and (iii) provides adequate funding for insurance coverage and deductibles.
  • No more than 25% of space allocated to commercial use.
  • No more than 10% of units held by a single investor.
  • The 1year waiting period for conversion condominiums is eliminated.
  • Unit owners must obtain individual HO6 insurance policies if the master policy doesn’t cover unit interiors.
  • Fidelity insurance must be obtained for 20+ unit projects.
  • Recertification required every 2 years.

Posted by Scott R. Lodde

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