In a recent Time magazine article written
by Jed Kolko, Trulia’s chief economist, Kolko, highlights the key issues that had the greatest impact on the real estate
market in 2011.
Here are a few of the issues having
some of the greatest impact:
1. The robo-signing scandal
The issue: Banks were accused of approving numerous foreclosures
without proper reviews when a robo-signing scandal first broke in October 2010,
continuing well-into 2011.
The fallout: Banks slowed their processing of foreclosures greatly in
2011, making sure to take extra precautions. Regulators and states are working
on a settlement with banks over the scandal — one that could include reducing
loan balances of current home owners, if approved. Once a settlement is in
place, housing experts predict the pace of foreclosures to pick up in
2012.
2. Natural disasters
The issue: A series of natural disasters wreaked havoc on real estate
in 2011, from tornados, floods, and hurricanes. The National Flood Insurance
Program was pushed into the spotlight, a program still financially strapped
after Hurricane Katrina. The program’s insurance premiums were not fully
covering insurance claims in disasters this year, according to the Time
magazine article.
The fallout: For home owners living in flood-prone areas, “you can’t get
a mortgage if you don’t have flood insurance,” the Time magazine article notes.
“Without NFIP, housing markets in these areas would skid to a stop.” NFIP
recently received an extension until May 2012 but experts say the future of the
program still remains uncertain.
3. The conforming loan limit
The issue: In October, the government lowered the conforming loan
limit for loans backed by Fannie Mae and Freddie Mac as well as those insured
by the Federal Housing Administration from $729,750 to $625,500 in most areas.
The real estate industry urged the government to keep the conforming loan
limits higher. In November, the government raised the loan limits back up for
FHA loans, but they left out Fannie and Freddie loans.
The fallout: “Mortgage lenders are willing to charge lower rates for loans
that are backed by Fannie or Freddie; with a lower conforming loan limit, a small
number of loans that used to qualify for federal backing no longer do,” the
Time magazine article notes.
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