Market In Review: The Wells Fargo ViewSM

Refinances and first-time homebuyer property sales largely contributed to third quarter volume

Consumers were active in the housing market during the third quarter with refinance and purchase applications. Existing homeowners fueled the refi activity, and first-time homebuyers accounted for 43% of home purchases in August, according to the Sept. 18 issue of Inside Mortgage Finance.

In a September 2009 Wells Fargo Home Mortgage survey, 56% of first-time homebuyers cited the $8,000 tax credit for their reason to purchase. Low interest rates drove 66% of these borrowers, and 74% attributed the decision to low home prices.

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In the same survey, renters shared their reasons for intending to purchase their first home within six months. Roughly 84% said low home prices were the reason, 74% cited low interest rates, and 72% referenced the tax credit as the key deciding factor.

As of the publication date, there is still debate in Congress about whether the first-time homebuyer tax credit will be extended beyond the Nov. 30 deadline.

When will local housing markets recover?
Recent news released from the National Association of REALTORS® showed that pending home sales have increased for seven consecutive months based on contracts signed in August. In addition, the S&P/Case-Shiller Home Price Indices demonstrated that the annual decline in home price values continues to slow and that many markets have experienced some sustained monthly increases.

A recent Bankrate.com article provided information for consumers looking to research the housing market in their local community. The article recommends tracking inventory, housing starts and unemployment data, and encourages a comparison to historical data.

The following organizations provide data that may be useful to perform local research:
• national, state and local REALTOR associations;
• Federal Reserve Bank of New York;
• U.S. Census Bureau; and
• U.S. Bureau of Labor Statistics.

Mortgage lenders and servicers provide relief for millions Working with the U.S. government, the nation’s largest mortgage servicers – including Wells Fargo – have continued to increase the number of trial and completed loan modifications for customers at risk of losing their homes. These efforts, along with record refinance activity, have reduced mortgage payments for millions of Americans. At Wells Fargo, for instance, more than 1.3 million
households have benefitted from payment relief in 2009.

The statistics show that modification efforts have accelerated as more families across the nation experience financial hardships that warrant a mortgage payment reduction.

As just one example, on Oct. 8, almost one month ahead of schedule, the Treasury announced that servicers had reached the goal to do more than 500,000 trial modifications under the federal Home Affordable Modification Program (HAMP). This program is the first of several options servicers can use to benefit customers in need.

Other customers – who may not qualify for HAMP or who could be better served through another program – are offered other options. Through Sept. 30 for instance, Wells Fargo did roughly 63,000 trial and completed Home Affordable Modifications and an additional 292,000 through its own programs – a total increase of 25 percent over August.

RESPA Reminder
The new Real Estate Settlement Procedures Act (RESPA) regulations will be effective on Jan. 1, 2010. All lenders and brokers must comply. Lenders and mortgage brokers will be required to:
• provide a three-page Good Faith Estimate (GFE) that discloses key loan terms and closing costs;
• provide a revised three-page Settlement Statement (HUD-1) that allows borrowers to easily compare their final closing costs and loan terms with those listed on the GFE;
• comply with tolerance limitations on settlement charges (fees); and
• disclose lender-paid mortgage broker compensation as a credit.

Wells Fargo continues to work with internal and external sources to prepare for the
new regulations.

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