Improvements prompt change

There’s good news to report this week as homeowners’ equity positions are improving.

CoreLogic reports that increasing home prices across the nation have benefited many homeowners by creating equity in their homes. Last year four million homes returned to a positive equity position. There are approximately 42.7 million homes whose owners have a positive equity position across the country. Of these homes, 21.1% have less than 20% equity and more than 3.75% have less than 5% equity. Approximately 13.3% remained in a negative equity position by the end of last year.

During the height of the crisis surrounding underwater mortgages (when homeowners owe more than their homes are worth) in December 2009, more than 12 million homeowners had a negative equity position. Since 2009, more than 5.5 million homeowners have recaptured equity, thereby minimizing risk of foreclosure and releasing some of the “pent-up” supply in the real estate market.

According to CoreLogic, 92% of homes valued at $200,000 have equity as opposed to 81% valued below $200,000.

The following states have the highest percentage of homes under water: Arizona (21.5%), Florida (28.1%), Illinois (18.7%), Nevada (30.4%) and Ohio (19%). It is hoped that increases in homeowners’ equity position will enable those wishing to sell to list their homes in many markets low on inventory, including in Greenwich.

Housing finance reform

A Senate Banking Committee plan intends to replace Fannie Mae and Freddie Mac with a new system of federally insured mortgage securities requiring private insurers to take initial losses prior to any government guarantee being provided.

This plan needs approval expected to be a long process. Although Democrats and Republicans on the Senate panel have reached an agreement, it is uncertain whether it will receive required support from the full Senate and the House. A concern by some legislatures is continuing a significant federal “backstop” for the U.S. mortgage market.

It is anticipated that Congress will not likely take up a bill given November’s midterm elections, as there will be insufficient time for debate. Further, consumer and industry groups are resistant to anything that will increase loan costs or limit the availability of mortgages.

Fannie and Freddie don’t create loans, rather they purchase loans from lenders. The U.S. took over Fannie and Freddie during the economic downturn and the Treasury provides significant support. With the recovery of the housing market, Fannie and Freddie have provided more than $185 billion to the Treasury in the form of dividend payments and a similar amount in dividends is expected over the next 10 years.

Another issue is how the bill will address private shareholders. Some of these investors have filed lawsuits opposing the government’s decision requiring Fannie and Freddie to pay profits as dividends to the Treasury preventing them from recapitalizing. The California Association of Realtors position articulates industry groups believing guarantees are necessary to provide access to 30-year, fixed-rate mortgages. That being, whether it’s called Fannie and Freddie or something else, it doesn’t matter as long as we have a government guarantee.


Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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