The housing rebound has given new life to an old, but little-known sales practice called “pocket listings,” where agents reserve homes for serious buyers only.

Most homes that are put up for sale are posted on databases called multiple listing services (MLS), on which agents share information with one another in order to find buyers. There are open houses on Sunday afternoons and listings posted on real estate websites.

But with pocket listings, properties are kept under wraps and brokers only show them to people they expect will put money down if the property and the price are right, said Richard Smith, CEO of Realogy, the parent company of Coldwell Banker, Century 21, Better Homes & Gardens and other real estate brokerages. Ideally, the buyer has deep pockets and is willing to pay in cash, fast.

“High-end sellers often don’t want to have the world coming to their property,” said Michael Izquierdo, a Los Angeles-based real estate agent and acquisitions manager for LAPocketListings.com. “When it’s put on the MLS, sometimes the next morning you see people standing outside the property, hoping to talk to the sellers.”

Izquierdo recently got a pocket listing for a $1.2 million home in Mar Vista, Calif., where the sellers wanted to preserve some privacy. They also hoped to heighten interest among buyers by creating an aura of exclusivity.

But pocket listings aren’t just for luxury clients anymore. With the number of buyers far outpacing the number of homes for sale in hot markets like Los Angeles and Manhattan, pocket listings are becoming more common among more moderately-priced homes as well, he said. He has some pocket deals where sellers are asking for as little as $500,000

When Izquierdo gets a pocket listing, he combs his client list for good fits. If he can’t find one, he contacts colleagues to see if they have potential buyers.

If the home is overpriced, the seller and agent will find out quickly, said Alex Clark, founder of pocketlistings.net. “I put in the email, ‘Not listed on the MLS,’” he said. “If it’s priced right, there’s a really good chance you can sell it as a pocket listing.”

If it doesn’t sell, then Clark tries to convince the seller to readjust the price and list it publicly on the MLS.

Some sellers, however, aren’t interested in going public. They are purely using the pocket listing to fish for a “make-me-move” deal. “These are not motivated sellers. They’re saying, ‘Get me a good price,’” said Manhattan real estate agent Wei Min Tan.

Not everyone endorses these pocket deals, however. In New York, the practice could violate the Universal Co-Brokerage Agreement, according to Neil Garfinkel, counsel for the Real Estate Board of New York, the local trade association. Under the agreement, agentsmust share listings. They can only withhold listings if sellers request they do so.

In some cases, agents may try to convince sellers to use pocket listings in order to double their commissions by acting as agent for both the buyer and the seller.

“That’s where it starts to get into the gray area,” said Garfinkel. “If an agent is putting their own economic interest ahead of the seller’s, it’s a violation of state law.”

They may, for example, steer the deal to a buyer they represent even though another broker’s buyer put in a higher bid.

“Most of the time, pocket listings are done ethically and fairly,” said Betty Graham, president of Coldwell Banker Previews International/NRT, Realogy’s luxury brand.

Nevertheless, she believes listing the property publicly increases the likelihood that a home will sell for the best price.

The National Association of Realtors does not have an official policy on pocket listings, according to spokesman Walt Molony. But most agents, like Graham, profess that sellers are almost always better off getting as many bids from as many potential buyers as possible.

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ. Our office is ranked in the top 5 of all Weichert offices in the country. Call us today to start looking for your Dream home down the Shore! We also specialize in summer rentals. It’s not to late to be part of the fun at the Shore! Call us at (609) 522-1112 or visit us on the web at WRcoastal.com

After years of wild swings, the U.S. housing market is slowly returning to normal.

The latest forecast from Fiserv (FISV) Case-Shiller predicts home prices will increase by an average of 3.3% annually over the five years ending September, 2017.

“2012 was the first year since 1997 that the housing market has resembled something [close to] normal,” said David Stiff, Fiserv’s chief economist. “For the past 15 years, home price changes and sales volumes have either been boosted by a bubble mentality or crushed by crash psychology.”

From 1998 until the housing bubble peaked in 2006,home prices grew by 5% or more a year. But once the bubble burst, home prices plunged, falling 30.5% through the end of September 2012.

It wasn’t until late 2011 that markets started to stabilize, according to Stiff. Between September 2011 and September 2012, average U.S. home prices rose 3.6%. By then, 62% of the 384 metro areas Fiserv tracks reported rising home prices, up from just 12.5% of all markets during the same period a year earlier.

Many of the metro areas hit hardest by the housing bust recorded the biggest price gains during those 12 months. In Phoenix, for example, prices climbed back by nearly 21%; prices in Detroit rose almost 16%; and homes in San Jose, Calif., gained 12.5%.

Values continued to decline on Long Island, N.Y., however, where prices fell 8.1% and where Stiff said the turnaround in median income lagged the rest of the nation by about a year. Brunswick, Ga., also saw declines, down 7.1%, as did Valdosta, Ga, off 6.9%. Both areas saw jumps in foreclosures.

By the end of this year, Fiserv predicts that home prices will be heading higher in almost every metro area it tracks. Medford, Ore., is expected to gain 9.7% in the 12 months through September, the highest of any city. Other big gainers are expected to be Santa Fe, N.M., up 8.1%, Billings, Mont., 5.5% and Syracuse, N.Y., 5%.

Fiserv expects Miami home prices to sustain a 10.7% loss over the same period, the largest drop of any market. Stiff said a steady stream of foreclosures will keep prices soft in the area during that time.

While Stiff said home price gains will be similar to those experienced back in 1997, he noted the similarities stopped there. Currently, millions of homes are either in foreclosure or on the verge of it.

Otherwise, there are many positive trends in today’s market, he said. Prices are extremely affordable and mortgage rates are at or near historic lows. Overall, Fiserv Case-Shiller expects stronger demand for housing, and the sector should, once again, have a positive impact on the economy.

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ. Our office is ranked in the top 5 of all Weichert offices in the country. Call us today to start looking for your Dream home down the Shore! We also specialize in summer rentals. It’s not to late to be part of the fun at the Shore! Call us at (609) 522-1112 or visit us on the web at WRcoastal.com

Foreclosure filings in January plunged to their lowest level since April 2007.

Notices of default, scheduled auctions, bank repossessions and other filings fell to 150,864 last month, a 7% decline from the previous month and a 28% drop from January 2012, according to RealtyTrac. New foreclosure filings fell to the lowest level since June 2006.

“We’re now well past the peak of the foreclosure crisis,” said Daren Blomquist, spokesman for RealtyTrac.

Regulations that took effect in California contributed to the dramatic decline. The state had long been recording the highest number of foreclosure filings of any state. But on January 1, a Homeowner Bill of Rights became law, offering more protections for California borrowers in default. As a result, new foreclosure filings in California fell 62% in January.

Under the new rules, mortgage servicers must halt all foreclosure proceedings once a borrower applies for a mortgage modification. Servicers will also face fines of up to $7,500 per loan if they record and file multiple unverified documents in foreclosure proceedings.

“There’s was a bum’s rush to get people out of their homes before this law came into effect,” said Bill Purdy, a real estate attorney in Soquel, Calif. Once 2013 began, filings in California dropped abruptly, down 40% from December and 65% from January 2012.

Last month marked the first time since January, 2007 that California did not lead the country in foreclosure filings. Instead, Florida took the top spot, with 29,800 filings — or one out of every 300 homes — followed by Nevada and Illinois.

The nation’s foreclosure problem isn’t fixed — but we’re getting closer, according to Blomquist. Filings are still running at about twice the pace of 2005, before the subprime mortgage crisis derailed the housing market. And foreclosure auctions rose in 26 states, including four big ones: Florida, Illinois, Pennsylvania and New Jersey.

But bank repossessions, the end game for borrowers when they actually lose their homes, fell to less than half the record 102,134 set in September, 2010. Blomquist is forecasting steady improvement through 2013.

“It’s likely that by this time next year, we’ll start to see 2005-type, pre-crisis numbers again,” he said.

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ. Our office is ranked in the top 5 of all Weichert offices in the country. Call us today to start looking for your Dream home down the Shore! We also specialize in summer rentals. It’s not to late to be part of the fun at the Shore! Call us at (609) 522-1112 or visit us on the web at WRcoastal.com

Home construction got off to a strong start in 2013, as builders filed for the greatest number of permits in more than four years in January

Permits are a sign of builders’ confidence in the market. It’s also less affected by weather than housing starts. Last month, builders filed for permits at an annual rate of 925,000, up about 2% from December and up 35% from a year earlier. It was the best month for permits since June 2008.

Meanwhile, the pace of housing starts slowed to an annual rate of 890,000 in January, down 9% from December, when there was a spike related to repairs from Superstorm Sandy. But even the lower pace of starts was up 24% from a year ago.

The housing market has been helped by a number of factors in recent months, including increased sales of both new homes and previously-owned houses, adrop in foreclosures, and near record low mortgage rates. A drop in the nation’sunemployment rate is also helping.

Related: Construction jobs difficult to fill

The rebound in housing is good news for builders, such as PulteGroup (PHM), KB Home(KBH), D.R. Horton (DHI) and Toll Brothers (TOL), whose shares are all outpacing gains in the broader markets so far this year. But all were down in early premarket trading Wednesday ahead of the government report because Toll Brothers reported financial results that missed forecasts.

Housing stocks, which not so long ago looked as likely to pay off as a $2 Powerball ticket, have become a hot commodity.

Anticipating the real estate recovery that surfaced in the fall — home prices in October were up 6.3% from a year earlier, and new-home construction reached a four-year high — housing-related stocks led the market in 2012.

Homebuilders (returning 77% through early December), the lumber industry (74%), and home-improvement stores (55%) were the top-performing industries in 2012, according to Morningstar. And the Dow Jones U.S. Home Construction ETF traded in December at a lofty 27 times projected earnings — nearly double the figure for the S&P 500.

These numbers may make a housing investment look expensive, but it’s not too late for you to profit from the revival. The 2012 surge in stock prices was merely a snap back from the worst real estate correction on record, says Michael Magiera, manager of real estate analysis for investment firm Manning & Napier. “Keep that performance in the context of the long cyclical recovery we’re going to have,” he says.

Of course, various factors could delay progress: elimination of the mortgage interest tax deduction, for example, or an unexpected surge in foreclosures. Still, economists predict a continued upswing.

Moody’s housing economist Celia Chen, for one, forecasts above-average growth in construction, prices, and home sales through 2014. “After that,” she says, “growth will still be healthy.”

That’s good news for the slice of your portfolio invested in real estate.

Over the past 20 years, home-related stocks have roughly tracked new construction, itself perhaps the best indicator of the housing market’s health. Plus, growth over a cycle can justify the high price/earnings ratios that housing stocks might have initially; future earnings and price appreciation can make those formerly costly-looking stocks seem cheap in hindsight.

To maximize your profit, though, you have to look beyond what real estate fund managers judge to be the most expensive parts of the industry: homebuilders and real estate investment trusts that own apartment buildings.

So here are three creative strategies for investing in the boom, along with stock and fund picks for each.

STRATEGY NO.1: Buy the suppliers, not the homebuilders

The numbers support more growth in the housing market. October’s annualized figure of 894,000 housing starts — up 42% from a year earlier — was still well below the industry’s 50-year average of 1.5 million. Existing-home prices will rise 3.3% a year through 2017, forecasts Fiserv Case-Shiller.

“All signs are flashing green,” says Jeff Kolitch, manager of the Baron Real Estate Fund.

Problem is, the most obvious beneficiaries of this trend — homebuilders — are the costliest stocks in this arena, say Kolitch and other fund managers. “The risk-reward proposition,” he says, “is more interesting elsewhere.”

One such area: companies selling to homebuilders. The suppliers may have similarly high P/Es, but their prospects for earnings growth are better, partly because their profits come as a delayed reaction to homebuilder activity.

The picks: The division of Weyerhaeuser Co. (WY, Fortune 500) supplying lumber and plywood board to builders — a money loser in the bust — has begun to drive earnings, thanks to the minimal investment needed to boost production.

The company’s profits, up 48% in 2012, are forecast by analysts to jump 88% in 2013. (Weyerhaeuser converted to a real estate investment trust in 2010, giving it favorable tax treatment in return for paying out most of its earnings as a dividend, now 2.5%.) While the company’s 30 P/E is high, a return to 2004 earnings levels — not a stretch — would translate into a P/E of only 12, says Ryan Dobratz, co-manager of Third Avenue Real Estate Value, where Weyerhaeuser is a top 10 holding.

A broader way to play the growing demand for timber is via a low-cost exchange-traded fund: iShares S&P Global Timber & Forestry Index (WOOD), which has Weyerhaeuser, Rayonier, and Plum Creek Timber as its top holdings. The average-size home uses about $25,000 worth of lumber, according to the National Association of Home Builders, and construction activity powers the ETF’s performance. In December, the fund was up 19% for the year.

STRATEGY NO. 2: Get in on the renovation resurgence

Each percentage point of appreciation in housing prices translates to an additional $190 billion in home equity — or about $2,500 per household — says the National Association of Realtors. That uptick makes owners feel more confident about spending money to fix up their houses.

U.S. remodeling spending, which by July 2010 had fallen 37% from its 2007 peak, is on the rise again, up 12% year over year in September. The NAHB predicts a 2013 rise of 3.4%.

Companies tied to renovation didn’t go unnoticed in 2012; like the high-performing home-improvement retailers, furniture companies racked up big returns — 29% through early December. Still, many renovation stocks are expected to grow earnings at double the rate of the average large stock.

The picks: Lowe’s (LOW, Fortune 500), operator of 1,745 home-improvement stores around the country, is one of the biggest beneficiaries of this upsurge in activity, says Dobratz; recently reported sales to professional contractors were particularly strong.

The company does more business than larger rival Home Depot (HD, Fortune 500) in big-ticket items like cabinets and appliances, which are snapping back in the recovery.

Or you can buy a basket of home-improvement stocks via S&P Homebuilders ETF(XHB). Don’t be fooled by the name: The ETF has 45% of its assets in home furnishings and other remodeling-related companies (and only 25% in homebuilders). Lowe’s is its top holding; Whirlpool, Home Depot, and Pier 1 Imports are among its top 10.

STRATEGY NO. 3: Profit from people on the move again

Underwater mortgages and low-ball prices of distressed properties froze home sales after the housing bubble burst; sales of existing homes in mid-2010 bottomed out at the annualized rate of 3.4 million a year. That’s changing: Sales as of October were up to 4.8 million a year, reports the National Association of Realtors, which forecasts 5.1 million sales in 2013.

Driving the sales, along with low mortgage rates, are rising prices.

Longtime owners who were reluctant to match fire-sale foreclosure deals have been lured off the sidelines. And fewer shorter-term owners are stuck where they live, owing more on their mortgages than their homes are worth. Data firm CoreLogic says 1.3 million homeowners exited underwater territory as of June, and another 5% price increase would lift 2 million more borrowers above the waterline.

The picks: Roughly half of all self-storage transactions are tied to relocations, according to the National Self-Storage Association. CubeSmart (CUBE) is one of the best values in the sector, says Magiera of Manning & Napier. It trades at a lower P/E than larger rivals and has better prospects as it swaps out facilities in low-growth areas for regions with more potential. A recent dividend hike boosted the REIT’s yield to 3.2%.

A fresh coat of paint is a top item on the to-do list both for sellers preparing to list their homes and for recent buyers. Year-over-year growth in paint sales at Sherwin-Williams(SHW, Fortune 500) in the first half of 2012 was the highest since 2005, and the company’s cost of raw materials is falling. The stock, a top holding of veteran real estate manager Ken Heebner of CGM Funds, trades at a 30% discount to the S&P 500 when weighing its P/E against its projected earnings growth.

As home sales pick up, another demographic trend comes into play: the aging of America. Fourteen percent of buyers over 50 bought senior housing in 2012, says the NAR, up from 10% in 2010. And the pool of potential buyers — purchasers’ median age is currently 64 — is expanding: The 65-and-older population will rise from 40 million in 2010 to 72 million in 2030.

Two standout senior housing companies, says the Baron Fund’s Kolitch, are Brookdale Senior Living (BKD), which owns 565 properties in 35 states, and Emeritus (ESC), which focuses on assisted living and Alzheimer’s services. The firms, which are top holdings in his fund, trade for what Kolitch estimates to be 30% less than their private-market value — a wide discount compared to the REITs they resemble.

Or you could simply buy Baron Real Estate (BREFX) itself, which is 18% invested in senior housing and 30% overall in housing-related stocks (much of the rest of its holdings are in hotels and gaming stocks). Manager Kolitch joined Baron Funds as a real estate analyst in 2005; the fund has topped its category in two of the three years since its January 2010 launch.

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ. Our office is ranked in the top 5 of all Weichert offices in the country. Call us today to start looking for your Dream home down the Shore! We also specialize in summer rentals. It’s not to late to be part of the fun at the Shore! Call us at (609) 522-1112 or visit us on the web at WRcoastal.com

It’s impossible to ignore the increasingly loud cheers: The housing recovery is in full swing! Just on Monday, CoreLogic reported that home prices increased more than 8 percent year-over-year in December — the largest gain in six years, when the boom was at its height. Home sales recently have been the strongest we’ve seen in a long time (though they are expected to temper in January due to a normal winter slowdown). All of that sounds great, but here’s the problem: It seems to be mostly smoke and mirrors.

As CNBC reported, the jump in home prices is on an upward trajectory as dramatic as it was in the boom years. Prices soared 7, 8 and 12 percent year-over-year in the early 2000s, prompting experts to scream that the huge leaps were unsustainable. As we all know, the crash hit shortly thereafter. Now, though home prices are still down by double digits from where they were, the shoot up is happening at a similarly fast and furious pace. Conditions like these are what set us up for the last housing bubble to burst. The question now is: Are we heading for another housing bubble (that will inevitably pop)?

There’s another factor that is also a cause for concern. As David Stockman, former director of the Office of Management and Budget under President Reagan, told Yahoo! Finance, a disproportionately large chunk of home sales has been driven by investors buying up distressed properties and betting on being able to flip them for big profits once prices rise further. But the everyday homebuyers (first-time buyers and buyers trading up for larger properties) that investors would need to sell to have been mostly staying out of the real estate market. Financial hardships, continued unemployment (albeit improving) and other factors are keeping them on the sidelines. So when prices reach a level where investors are ready to sell, there may not be many buyers to sell to — and that could be disastrous for home prices once again.

“I would say we have a housing bubble again,” said Stockman, who recently has been working in the private equity sector. “We don’t have a real organic sustainable recovery because, in a world of medicated money by the central bank, things aren’t what they appear to be. … It’s happening in the most speculative subprime markets, where massive amounts of ‘fast money’ is rolling in to buy, to rent, on a speculative basis for a quick trade. And as soon as they conclude prices have moved enough, they’ll be gone as fast as they came.”

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ. Our office is ranked in the top 5 of all Weichert offices in the country. Call us today to start looking for your Dream home down the Shore! We also specialize in summer rentals. It’s not to late to be part of the fun at the Shore! Call us at (609) 522-1112 or visit us on the web at WRcoastal.com

Investors are betting big on the housing recovery.

Hedge funds and private equity firms have been rushing in to buy up companies and assets in every part of the housing supply chain, including undeveloped land, homebuilders, foreclosed homes, and building parts manufacturers.

One of the most notable moves is coming from hedge fund manager John Paulson, best known for his big (and lucrative) bets against subprime mortgages in 2006 and 2007.

Now, he’s turned his attention to snapping up undeveloped land in areas hardest hit by the housing crisis. “Land is the accordion in the home building equation,” said Michael Barr, who runs Paulson’s real estate investments. “It falls the most in a downturn, but also rises the most in an upturn.”

Over the past two years, Paulson & Co has bought up enough land in California, Arizona and Nevada to build up to 25,000 homes and is aggressively scouting for more, according to Barr.

Private equity firms are also getting in on the game.

Blackstone Group (BX) spent $2.7 billion last year to buy 17,000 single family homes, post-foreclosure, around the United States and plans to continue ramping up those efforts in 2013.

Pine River Capital Management took real estate investment trust Silver Bay Realty Trust(SBY) public in December. Silver Bay, which acquires, renovates, leases and manages single family homes, has already purchased more than 2,500 homes in areas hard hit by the housing crisis. In a recent SEC filing, Silver Bay said that it plans to purchase 3,100 more homes.

And in a sign of investors’ growing appetite for a piece of the housing market, shares of publicly traded homebuilders have been soaring. PulteGroup (PHM), KB Home(KBH), and Lennar (LEN) are all trading near 52-week highs. Pulte’s shares have more than doubled over the past year, while the KB Home and Lennar’s shares have nearly doubled.

And for the first time since 2004, homebuilders are testing the IPO waters.

Tri Pointe Homes (TPH), which builds single family homes in California and Colorado raised $232 million through an IPO last week. Shares of the company, owned by Starwood Capital, rallied 20% on their first day of trading.

Others are lining up.

Scottsdale, Ariz., homebuilder Taylor Morison has filed to go public and is expected to kick off its investor roadshow in the next few weeks. And building supply company Boise Cascade, jointly owned by PE firm Madison Dearborn and OfficeMax (OMX, Fortune 500), plans to make its public debut next week.

Investment bankers and IPO investors say they expect more homebuilders to go public this year. “As the sector rotates back into favor again, it makes sense for housing companies to monetize,” said Brad Miller, co-head of global equity syndicates at Deutsche Bank.

Brad Geisen, CEO of Foreclosure.com, which keeps a database of foreclosures around the nation, said he’s been seeing a lot of interest from investors looking to buy up large numbers of foreclosed properties over the past three months.

“A lot of investors see a short window of opportunity where there’s good inventory on the market at bottom market prices,” said Geisen. “No one knows how long it will last, so these investors are trying to buy as much as they can right now.”

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ. Our office is ranked in the top 5 of all Weichert offices in the country. Call us today to start looking for your Dream home down the Shore! We also specialize in summer rentals. It’s not to late to be part of the fun at the Shore! Call us at (609) 522-1112 or visit us on the web at WRcoastal.com

Steady December home sales capped the best year for the U.S. real estate market in five years, according to an industry trade group report Tuesday.

The National Association of Realtors said that December sales of previously-owned homes came in just slightly below November’s sales pace, but up 12.8% from a year ago. That brought full-year sales to 4.65 million, up 9% from 2011 and the best year for home sales since 2007, when there were 5 million homes sold just before the start of the recession.

Sales are being helped by a combination of strong market fundamentals — near record low mortgage rates, lower unemployment and a rebound in home prices, all of which are bringing in buyers into the market who had been waiting for it to hit bottom. The mortgage rates and years of depressed home priceshave also combined to create the most affordable housing market on record, according to the Realtors group.

And the Realtors are predicting strong sales should continue into 2013 and beyond. It has a forecast for 5.1 million existing home sales this year, and 5.4 million next year.

The improved demand for homes in December led to the inventory of homes for sale to fall to 1.82 million homes on the market, the lowest supply since January 2001. One factor in tightening supplies is a drop in foreclosures and other distressed home sales, which made up only 24% of home sales in December compared to 32% a year ago. The tighter supply, and the drop in distressed sales, have helped to lift home prices so that the median sales price for the year rose to $176,600, up 6.3% from 2011. That’s the biggest gain in prices in since the bubble year of 2005.

The rebound in the market for previously-owned homes is also showing up in the market for new homes, where sales rebounded to their highest levels since 2009, while housing starts reached the highest level since 2008.

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ. Our office is ranked in the top 5 of all Weichert offices in the country. Call us today to start looking for your Dream home down the Shore! We also specialize in summer rentals. It’s not to late to be part of the fun at the Shore! Call us at (609) 522-1112 or visit us on the web at WRcoastal.com

Federal officials issued new rules for mortgage servicers Thursday aimed at protecting homeowners facing foreclosure. But consumer groups say the rules don’t do enough to help prevent borrowers from unnecessarily losing their homes.

Since the housing crisis began, many mortgage servicers — which collect payments for the owner of the loan and handle things like loan modifications and foreclosures — have been ill equipped to handle the flood of delinquent loans, the Consumer Financial Protection Bureau said.

“In too many cases, it has led to unnecessary foreclosures,” said CFPB director Richard Cordray. “Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes.”

Among the new rules are restrictions that prohibit servicers from foreclosing on borrowers who are seeking loan modifications and rules that require them to explore all alternatives to foreclosure. There are also guidelines for issuing clear, straightforward mortgage statements.

Yet, consumer advocates say the new rules don’t go far enough.

“While the establishment of industry-wide standards is important, the failure to require meaningful loan modification protections is a retreat from current safeguards under the soon-to-expire HAMP loan modification program,” the consumer rights organization said.

Requiring servicers to lower rates on loans or postpone payments would help prevent qualified borrowers from being unnecessarily foreclosed on, the organization said.

Still, the rules, which take effect in January 2014, address many of the problems borrowers face. Here’s a rundown of the new requirements:

Restrictions on foreclosure proceedings while borrower seeks a mortgage modification: Referred to as “dual-tracking,” servicers will no longer be able to start foreclosure proceedings on borrowers while they are actively seeking a loan modification or other alternative to foreclosure. To give borrowers time to apply for a modification, servicers cannot file the first foreclosure notice until the borrower falls at least 120 days behind on payments.

No foreclosure sales until alternatives are considered: If a borrower applies for a loan modification at least 37 days before their foreclosure auction is scheduled, the servicer must consider and respond to the request. They also must give the borrower enough time to accept an alternative to foreclosure before proceeding with the sale.

While the 37-day rule provides additional protections to borrowers in judicial foreclosure states, where courts review foreclosure cases, it does little to help those who live in non-judicial states, said Alys Cohen, a staff attorney with the National Consumer Law Center. Many homeowners in non-judicial states, like California and Arizona, won’t know the sale date until it’s too late since sales in these states are often scheduled with less than 37 days’ notice.

“The rules give servicers an opportunity to manipulate the system,” said Cohen.

Consumer advocates also say the rules do not allow for appeals of a loan modification review when they are submitted within 90 days of a foreclosure sale. “If the data is wrong, the borrower is just out of luck,” said Mike Calhoun, president of the Center for Responsible Lending.

Consider all foreclosure alternatives: After a borrower has missed two consecutive payments, the servicer must send a written notice with examples of alternatives to foreclosure the borrower can pursue.

In addition, servicers must consider all available foreclosure alternatives as opposed to the ones that are just financially favorable to the servicer. These options may range from deferred payments to loan modifications.

Provide direct access to help: Servicers will be required to provide borrowers with easy access to employees who are dedicated and empowered to help them.

Publish clear mortgage statements: Servicers will have to break down mortgage payments by principal, interest, fees, and escrow (to pay property taxes and insurance premiums) and include the amount and due date of the next payment, recent transactions and alerts about fees.

Offer early warnings on rate hikes: For most adjustable-rate mortgages, servicers must notify borrowers about upcoming interest rate changes that will affect their payments. If the new payment is unaffordable, servicers must provide information about alternatives and counseling.

Avoid overpriced “force-placed” insurance: Mortgage borrowers are nearly always required to insure their homes but if they don’t have coverage, their servicers can buy insurance for them and charge the premiums to the borrower. This “force-placed” insurance can be very expensive and the CFPB would require servicers to give advance notice and pricing information before putting clients into this coverage. If servicers buy the insurance but receive evidence that it was not needed, they must terminate it within 15 days and refund the premiums.

Credit payments and correct errors quickly: Servicers must credit a consumer’s account on the date a payment arrives. They will also have 7 business days to respond to written requests from borrowers to pay off the balances of their mortgages.

Also, within 30 days, servicers must conduct an investigation and either correct an error or dispute it.

Maintain accurate, accessible documents and information: Servicers must store borrowers’ information in a way that allows it to be easily accessible. They must also have policies and procedures in place to ensure that they can provide timely and accurate information to borrowers, investors, and in any foreclosure proceeding, the courts.

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ.  Our office is ranked in the top 5 of all Weichert offices in the country.  Call us today to start looking for your Dream home down the Shore!  We also specialize in summer rentals.  It’s not to late to be part of the fun at the Shore!  Call us at (609) 522-1112 or visit us on the web at WRcoastal.com

Federal officials unveiled new mortgage rules on Thursday meant to reduce risky lending and make it easier for borrowers to know exactly what they are getting into.

The aim of one rule is to keep lenders from issuing loans to borrowers who can’t afford to pay them off.

“When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford,” said Richard Cordray, director of the Consumer Financial Protection Bureau.

The rules are meant to avoid the kind of mortgage mess that spawned the financial crisis and ultimately led to the Great Recession.

During the housing bubble, many lenders had lax underwriting standards. Banks often didn’t check documentation, didn’t require minimum credit scores and didn’t determine whether borrowers had income enough to keep up payments.

Now, when a loan meets new lending criteria outlined by the CFPB, it becomes a “qualified mortgage,” which will give protection for the banks from lawsuits filed by aggrieved borrowers or buyers of mortgage-backed bonds.

“It’s a set of standards that protects consumers from bad loans but it also protects lenders from lawsuits,” said Davis Stevens, CEO of the Mortgage Bankers Association. “Lenders are not protected if they go outside the guidelines.”

The new rules will eventually change the process homebuyers go through in obtaining mortgages. Here’s what you need to know.

Which lenders do the rules cover? All companies that give out mortgages will be governed by the new rules — big national banks, savings and loans, community banks and credit unions.

“The rules will encompass most of the market as it exists today,” said William Emerson, president of QuickenLoans.

How is a “qualified mortgage” defined? The rules spell out what is called a qualified mortgage. To judge whether a loan is qualified, lenders must consider these factors:

• Income and assets must be sufficient to repay the loan;
• Borrowers must document their jobs;
• Credit scores must meet minimum standards;
• Monthly payments must be affordable;
• Borrowers must be able to afford other debts associated with the property such as home equity loans;
• Borrowers must be able to afford all home-related expenses such as property taxes; and
• Lenders must consider a borrower’s other obligations like student loans, car loans and credit cards.

What if a borrower doesn’t meet all those guidelines? A homebuyer could still get a mortgage, but only if the mortgage payments don’t exceed 43% of the borrower’s pre-tax income.

What other requirements are there? When judging ability to repay, lenders can’t use payments based on interest-only loans or so-called negative-amortization rates, in which mortgage balances grow over time.

They also can’t use teaser rates, which adjust higher after a set term. Loan terms cannot exceed 30 years, and up-front fees, such as points paid to reduce interest rates, must not be excessive.

To be clear: The rules don’t prohibit those unconventional types of loans. But lenders, in deciding whether to give out such a loan, must judge a borrower’s ability to repay as if the loan were a conventional loan.

When will the rules go into effect? The rules start to kick in by January 21, but lenders will have 12 months to fully implement them.

What about jumbo loans? The ability -to-repay rule covers even the large, so-called jumbo loans, which are not backed by any government agencies such as Fannie Mae or Freddie Mac. But Stevens of the mortgage bankers group said he still expects jumbo lenders to follow the qualified mortgage guidelines. That will give them legal protection.

Are there any exceptions? People with subprime adjustable-rate mortgages or other risky loans who are refinancing can do so without going through the full underwriting process required by the new rules.

The CFPB is also proposing that mortgages issued by certain non-profits for low-income homebuyers be exempt from the rules. The agency also wants to make exceptions for some refinacings made through the Home Affordable Modification Program and for some loans issued by small community lenders. These proposals, if approved, will be finalized this spring.

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WRcoastal.com is the online home of Weichert Coastal in Wildwood, NJ.  Our office is ranked in the top 5 of all Weichert offices in the country.  Call us today to start looking for your Dream home down the Shore!  We also specialize in summer rentals.  It’s not to late to be part of the fun at the Shore!  Call us at (609) 522-1112 or visit us on the web at WRcoastal.com