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Mixed Reviews on New Foreclosure Plan

Cited: Time

The reaction to President Obama’s plan to prevent up to 4 million homeowners from losing their mortgages because they are underwater and may default on their loans over the next three years is a bit mixed.

Under the new plan, unveiled Friday, March 26, banks will be asked to lower the principal loan balance for certain homeowners whose mortgages exceed the value of their homes. The loans would be refinanced as mortgages insured by the Federal Housing Administration (FHA), fully backed by the government. In the past, loan modifications under the $50 billion federal Home Modification Program (HAMP) involved primarily reducing interest rates or lengthening the term of the mortgage, and most did not entail a government guarantee.

Also, up to $14 billion of TARP funds will be used to provide subsidies to lenders and loan servicers who agree to write down at least 10% of a first mortgage; the combined value of first and second mortgages can be no greater than 115% of the current value of the home. The new monthly payment cannot exceed 31% of the homeowner’s income. Investors in the loans would clearly take the up-front hit, but the risk of future default on the modified loan would be transferred to the government.

The FHA part of the program has tight restrictions: homeowners must be current on their mortgage payments, live in the home, have a FICO score of at least 500 and qualify for a standard FHA-backed loan once the principal is reduced. Those who get a modified loan must make full monthly payments for three years for the principal to be reduced permanently. The high standards for these loan modifications suggest that the Administration hopes to head off another wave of loan defaults and foreclosures by providing help earlier in the process.

The Administration also announced an initiative to help unemployed homeowners, in which their monthly mortgage payments would be reduced or eliminated for three to six months while they look for work.

The latest initiatives are aimed at slowing the steady stream of homes that are headed toward foreclosure. The number of households receiving foreclosure filings, which includes default notices, auction-sale letters and bank repossessions, was 2.8 million in 2009, up from 2.3 million in 2008, according to Rick Sharga, vice president of marketing for RealtyTrac. He expects filings to increase to 3 million this year.

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Treasury Assistant Secretary Michael Barr says the principal-reduction program is voluntary, not mandatory, and that there’s no guarantee homeowners will not default on the new refinanced loans. “We don’t want to be overly optimistic about that,” said Barr during a briefing on Friday. “Modifications are hard — they’re done for people who are struggling with their mortgage, and so you expect a lot of people not to make it — and a lot of people won’t make it.” However, he says two-thirds of the people in the government’s present loan-modification program are current on their payments.

Treasury officials emphasize that the program will not save every troubled homeowner. They say it targets 3 million to 4 million of the 12 million who are expected to wind up in foreclosure in the next three years.

Initial reactions to the plan are mixed. Bob Curran, managing director of Fitch Ratings, calls it a step in the right direction. He says principal reductions will likely be more effective in modifying loans than past efforts that involved only interest-rate cuts and extensions of loan terms. “The loan-modification effort has not been very successful to this point in time,” he says. However, he believes that only a small fraction of troubled homeowners will qualify for the program. “It will probably help some additional portion of the public, but I’m not sure it’s enough to make a difference [in the overall housing recovery],” says Curran.

Curran also worries about how this round of loan-principal reductions will play out among investors who buy mortgage securities and whether they may be reluctant to buy new mortgage loans if there’s a chance the principal will wind up being reduced down the line. “The returns would have to rise to incorporate this risk,” says Curran. “Either they’ll have to be compensated or they won’t participate.”

Rick Sharga, vice president of marketing for RealtyTrac, is cautiously optimistic that the program will help slow foreclosures. “One of the things that’s prevented more success on these [loan-modification] programs is, we’ve had a principal-balance problem, and this program, on the face, would seem to resolve that.” He says it’s long been believed that homeowners would be able to support mortgage if they were based on current market values. Right now, many can’t refinance because their loans are worth more than their houses, he says.

Lawrence Yun, chief economist with the National Association of Realtors, believes the proposal only partially addresses the housing industry’s problem. Although it may help reduce foreclosures, it does nothing to stimulate demand for homes. “Stabilizing housing involves two parts. First is to raise the demand so that it eats into inventory. Second is to reduce supply, which means lessening foreclosures. This plan addresses the second. I hope it works better than prior foreclosure-mitigation plans.”

A more bearish opinion comes from Alex Barron, founder and senior research analyst at Housing Research Center LLC.  He believes that this latest program for foreclosure prevention will not solve the problem but is just another way to delay the inevitable. “My head is spinning,” says Barron. “They keep exacerbating the problem. All this government interference is simply prolonging the inevitable.”  He believes that the housing market can correct itself.  “And the sooner it’s allowed to do so, the sooner we can get on to a real recovery.”

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My Take: I think they should come at the housing problem from more than one direction.  People need money to pay for home and people need a job so they so they have the money to pay for a home.  If people have jobs, they can pay for homes.  That means the federal government should work on getting people back to work.

I know here in Phoenix there are a lot of foreclosures because I recently did a foreclosure search.  And there are many that are below $80,000.  There are even foreclosures and I’ve never heard of San Tan Valley.

One thing I have found that in searching the Internet and that is it if you’re going to purchase foreclosed homes you had best consult with a contracts attorney before signing anything.  This way you just make sure that you don’t get into any legal trouble warehouse is concerned.  I have even heard that some new homes are selling at very low prices here in Arizona.  I wouldn’t really want to purchase one because they don’t have the money to hire experienced workers.  In fact, I believe they have a construction accident lawyer on retainer.

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Basement Renovations

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A Smoke Free Home

Now that you have moved into your new home, you don’t want that home to smell of cigarettes like last one.  There is a way you can enjoy your cigarette and remained smoke-free.  A smoking alternative is available online for just this reason.  That alternative is the e-cig.  It is not a tobacco product in any way and it emits no significant odor, so that your breath, clothes, hair, car, home or anything else will not smell like cigarettes.

Housing Recovery May Stall As Federal Programs End

Cited: Time

April will see the expiration of two major federal programs, first-time home buyer tax credit initiative and the Federal Reserve $1.25 trillion mortgage-securities-purchase program.  It is unlikely that it will hinder the recovery currently in a battered housing market, that he could stall it according to experts.

To prevent a worsening of the housing situation, the White House is expected to announce today a new set of programs to shore up the market, including one that will cut the amount owed on troubled mortgages. There is also expected to be an upward bump in the cash incentives to lenders who reduce mortgage principals as part of loan modification, as well as a requirement that lenders trim monthly mortgage payments for the newly unemployed for a period of several months.

While the new programs should assist the most troubled end of the real estate market, they will not come close to replacing the huge intervention by the Federal Reserve in the mortgage-securities market, which helped keep mortgage rates enticingly low.

Still, many analysts believe the sector has stabilized enough to continue rebounding on its own, albeit at a painfully slow pace. “It’s not going to look like a V-shaped recovery in the housing market. It’s going to be one flat, long hockey stick, with anemic growth,” says Mark Fleming, chief economist at First American CoreLogic.

The other expiring program — the federal home-buyer tax-credit program, which offered an $8,000 credit to first-time home buyers — was so successful at luring home shoppers into the decimated market last year that the government extended it into 2010 and expanded it to include a $6,500 credit for non-first-time buyers. About 2 million families used the credit in 2009, and an additional 2.2 million to 2.4 million will take advantage of it this year, according to Yun. Approximately 800,000 of the transactions have involved home purchases that would not have been made without the credit, Yun estimates.

Analysts expect a surge in home-buying activity in the coming weeks as Americans rush to take advantage of the tax-credit program before its April 30 contract deadline. (Under the program, a contract must be signed by April 30 and the home closed by June 30.) Expect lobbying efforts calling for the credit to be extended a second time to escalate as the expiration date draws closer — similar to what happened in the weeks leading up to the first expiration date. But not all experts are on board. Jay Brinkmann, chief economist with the Mortgage Bankers Association, says he would not like to see the program extended a second time. “They work best if they’re somewhat rare and short-lived,” he says of such programs.

Of greater concern to many analysts is the pending expiration of the Federal Reserve program, which involved purchasing up to $1.25 trillion in mortgage securities backed by Fannie Mae and Freddie Mac. It could open the door to higher interest rates, although the Fed last week hinted that it would keep its benchmark rate near zero for the foreseeable future — a comment likely aimed at preventing panic.

“Right now, the one thing that really stands out to the advantage of the industry is affordability, and if interest rates were to move up sharply from here, that would meaningfully cut into affordability,” says Bob Curran, a managing director at Fitch Ratings.

Together, the federal programs baited buyers into the market at a time when unemployment exceeded 10% and the credit markets had seized up. Indeed, sales of existing homes have climbed year over year for eight consecutive months, reversing 43 consecutive months of decline. Curran expects housing starts to rise to 620,000 in 2010, from 540,000 in 2009. However, he notes that the 2010 projection is still far short of the 2005 peak of 2.1 million.

Certain markets are faring better than others. Boston, parts of southern California, Houston and Dallas have seen sales and prices start to pick up. Even though California was the epicenter of the boom and bust, prices have bottomed in many of its markets, especially for entry-level buyers. “Whenever a foreclosed property comes onto the market [in California], usually there are 10 people ready to jump on it,” says Yun. The weakest markets include Florida, Las Vegas and Phoenix, which saw the largest pricing gains in the bubble years, as well as Michigan and Ohio, where job losses have been big.

Stephen Kim, a senior real estate analyst at Alpine Woods Capital Investors LLC, which holds shares in homebuilding companies, says he thinks there will be “only modest” declines in the months following the programs’ expiration unless the overall economy, or employment, also tanks.

Other factors — rising unemployment, rate resets on certain adjustable-rate mortgages, shadow inventory and escalating foreclosures — could derail the housing recovery, especially in the absence of the federal programs.

Then there’s the elephant in the room: jobs. The U.S.’s unemployment rate, which stood at 9.7% in February, is expected to hit at least 10.3% before peaking later this year, according to Gus Faucher, director of macroeconomics at Moody’s Economy.com. Says Brinkmann: “The fundamental driver in demand for housing still comes down to jobs.”

At the same time, the industry is bracing for an avalanche of specialized adjustable-rate mortgages, known as option ARMs, as well as certain alt-A mortgages, to reset over the next 12 to 15 months. At least $60 billion in option ARMs will reset in 2010, and an additional $64 billion will do so in 2011, according to First American CoreLogic. Experts say this will likely trigger another round of mortgage defaults and foreclosures in the second half of 2010 and cause home prices to fall another 5% to 10% this year before the market bounces back.

It might take even longer for true strength to be evident in the housing market. “Recent estimates suggest that it would take about 33 months to clear all troubled mortgages at the current pace of liquidations,” wrote Merrill Lynch analyst Michael Hanson in a recent note. Alex Barron, founder and senior research analyst at Housing Research Center LLC, has similar worries: “We need to be concerned about the homes that are significantly underwater but haven’t yet defaulted,” he says. “It may take another two, three or four years before we’re well on our way towards a real recovery.”

There are already signs of how fragile the rebound truly is. The latest month-over-month data show sales have slowed in recent months despite low mortgage rates and the home-buyer tax-credit program. New and existing home sales fell 2.2% and 0.6% respectively from January to February, and unsold inventory rose 9.5% during the same period. Some of February’s sluggishness could be explained by cold, snowy weather that blasted the Eastern seaboard, but the precise impact of this is hard to know.

While many analysts believe the market has stabilized, they emphasize that housing has a deep hole to climb out of. Since the housing peak in July 2006, home prices have plunged 30% on average, with certain bubble markets such as Phoenix, Las Vegas and parts of Florida seeing prices plummet more than 60%. Losses from the housing meltdown totaled $7 trillion at the end of 2009, according to Yun.

“Our best guess is that the market continues to move sideways in 2010 and we start to see recovery in sales and prices in more markets across the U.S. in 2011,” says Heather Fernandez, vice president of Trulia, a real estate research firm. “The housing market overall is starting to stabilize and move a bit sideways but certainly is not on the upswing.”

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My Take: I, for one, hope that they do extend both programs.  It is not like people are trying to purchase villas in Spain, they are trying to give a home to their families.  Both of these programs are allowing people with lower incomes to purchase their first home.  Of course, if they had the money they would probably purchase Marbella real estate because of the beautiful views they could get.

However, it is more likely that they will purchase Palisades real estate because they either live in the area or they are moving to the area.  The point is, many people in need those programs be able forward a new home even if it is used or previously owned.  There are many Upper Nyack NY homes there for sale because the original owners could not afford the mortgage.  That means there are people who want the homes and with the programs can afford them.

Even people in the Midwest are having troubles with their mortgages.  In fact, most of the country is having trouble with mortgages.  People in Indiana are going for Indianapolis IN refinancing just for a chance to keep their homes.  People in Kentucky are even trying to get their Louisville KY mortgage refinance to keep their home.  And now the government wants to cancel the two programs that are helping people across the country, that seems a little ridiculous to me.

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Being a Landlord is Simple

Cited: Reality Times

Many people who become a landlord do not have the experience and they discover difficulties and troubles that slowly arise.  That is when they start to believe the horror stories that they have heard from former landlords.  Many of these people are becoming accidental landlords due to the current market conditions and they are looking to others to simplify the rental process.  And one company has stepped up to the plate to help by turning the old process of snail mail checks into electronic checks using the Internet.

A new site called PayYourRent.com aims to ease the process, eliminate the headaches for landlords, property managers, and tenants, and help facilitate rents payments. “What we do is we set up a merchant account that will send funds directly from the tenant’s account right into the owner’s account. It’s all completely electronic. The owner will receive an email that the payment has been made and the money will be deposited into the account,” says Kevin Eberly, CEO of PayYourRent.com.

“It really takes a lot of the frustration away for the homeowners who want to rent their homes but don’t know anything about property management,” says Eberly.

It also simplifies and provides a track record of repair work as well. “We provide a portal and Web site for the owner and tenant to submit maintenance requests, rental applications, online monthly recurring payments, and even connect the entire tenant’s utilities — all on one Web site,” says Eberly.

For those who are looking for mortgage refinancing . . . One company specializes in low rate purchase mortgages and IN and KY refinancing for homes.  It is a wholesale mortgage broker that shops many of the country’s largest lenders daily, wholesale rate catalog in order to find their clients exceptional pricing.  Biscuit company can also hope you choose one of the Louisville mortgage loan programs that will suit your needs.

Eberly says that some landlords who don’t have much experience may feel that some of the tasks of being a landlord are “out of their comfort zone” or simply too time consuming and that’s where he says his site can come to the rescue. The site helps tenants to make necessary changes quickly and easily online, alleviating the landlord from having to handle a constant stream of questions from tenants. “It’s one Web site where tenants can go to set up their water, power, gas, phone, cable, Internet, renter’s insurance, change of address form—everything is right there on one Web site and it compares prices from the local and the national brand for their area. And it has a best price guarantee,” says Eberly.

Another benefit is the roommate split-payment option. “The original tenant who registers on the site has the ability to add a roommate. So that roommate can go in with a secure username and password and submit payments toward the same property.

What about repairs? Eberly says the site is a great way to track exactly what needs to be done and what repairs have already been completed. The tenant logs in and submits a repair. An email is sent to the property owner or the person who the property owner has designated to receive it. A confirmation email is sent to the tenant. The site provides access 24/7 so that pending repair requests can be viewed by the property owner. Once the property owner marks the repair as completed it is removed from the property owner’s page on the site but PayYourRent.com keeps a back-log of all the previous maintenance requests so that in the event of litigation and the property owner wants proof that the repair was completed, a back-log is available.

“The idea is to make it a one-stop shop for property managers, owners and tenants.”  According to Eberly, the website is constantly improving because of feedback from those using it.  There is a monthly service fee of $15 for fewer than 10 units registered plus a $3.95 per check fee for those registered with the company.

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My Take: This seems like a fantastic service for management companies and landlords as well as tenants.  The only problem I can see is that there are some tenants who do not have Internet access.  However, the option to have the money taken directly from your checking account or credit card could alleviate that problem.

I like the idea that it can keep track of repairs and maintenance.  That would definitely come in handy if an owner wanted to replace the granite countertops in the home or apartment.  Sometimes tenants can be a little rough on the tile countertops requiring that they be replaced.  That is one of the plights of renting your property.  It definitely would help relieve the headaches of maintenance or repairs.

On the other hand, I am someone who does not like giving access to my checking account for my credit card to anybody for automatic payments.  Now if the process would allow me to set up the automatic payments, which would allow me to retain control over those payments, I would probably agree to it.

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Does a Tough Market Create More Business?

Cited: Reality Times

Many real estate agents often wonder how they can meet more prospects and get more business.  As with any business professional, they want to know what they need to do to increase their business and meet new prospects.  However, there is something that is more important than just acquiring new business or meeting new prospects.  That is earning the respect of the prospects that you meet to encourage them to do business with you.

You see, as agents we can’t control a lot of things when it comes to having a person buy or sell a home with us. We can’t control their job situation, their credit rating, or even the timing of their desire to move.

But what we can do is significantly impact their desire to want to work with us when it comes to facilitating the buying or selling of their largest personal asset. And if you’re able to do that on a consistent basis with a majority of the prospects you meet, then you’ll have a much better chance of getting more business, simply because it’s a byproduct of their desire to want to work with you.

So with that said, how can you increase your credibility – in their eyes – so that more prospects make you their Realtor of Choice? Here are a couple of my favorites.

Ask the right questions. I can’t tell you how many times I’ve seen people mess this up. Asking the right questions is less about your desire to want to close a deal, and more about developing an understanding of your prospect’s situation.

Some examples include:

• Why are you thinking about making a move?
• What do you want to see in your ideal neighborhood?
• Name a feature in your old house that you want to see in your new home?
• What kind of commute do you have now and what’s your tolerance going forward?

Those are all good questions because they focus on your prospects and their situation. From there, you’ll want to provide some ideas and options of different neighborhoods that fit their criteria.

For those looking for a beautiful home in New York . . . The Nyack Riverfront property and hamlets on the Hudson River are much like they were 100 years ago. Colonial, Victorian and other old world structures are found throughout the landscape. And modern, contemporary structures sit high on the mountaintops.  You will find many fine restaurants, art galleries, antique shops, marinas/boat clubs, bike shops, golf courses, country clubs and numerous riverfront parks and hiking trails near the Nyack NY real estate.

Obviously, you’ll want to do a more comprehensive search on MLS to make sure you’re getting everything that’s out there, but saying something like, “Ok, so you don’t want more than a 30 minute commute from downtown and you’re looking for a quiet neighborhood where you can raise a family, right? Have you taken a look at the XYZ subdivision lately? I was showing that to a client the other day, and it really looks like they’ve got some good deals on some nice homes. It’s located about 20 minutes from downtown, and from what I’ve seen, it looks like a really nice neighborhood to raise a family.”

You see how that automatically increases your credibility in the mind of that other person? You gave them information that they probably didn’t know, and you related it to their specific situation.  If you do that enough times, you see how it’s almost impossible for this prospect to not at least consider working with you?  Take my word for it: If you want to get more business in today’s tough market, asking the right questions (and providing insightful points) is always a great start.

Become a Problem Solver. A lot of times you’ll run into situations where a person wants to buy or sell a home, but there are some roadblocks standing in the way. I’m talking about things like credit rating, curb appeal or anything else that impacts your ability to facilitate their purchase, but falls outside of the traditional “Realtor” role.

If you want prospects to really want to work with you, then becoming a problem solver to handle those situations is the way to go. Instead of just saying, “Well it looks like you’ll need some help on getting your credit back into shape”, how about actually having a person – that you already know – who helps people out with these situations.

Instead of saying, “Boy, you really want to consider some landscaping work on the yard before we can even think about selling this house for top dollar”, how about having the name of a handyman or landscaper whose work you’ve personally seen, who can help out with some loose ends around the house.

You see how you identified the problem and provided an option for solving it?  Any Realtor can say, “Do this and do that”, but you’re now coming with options and solutions…which is exactly what you want to do when it comes to earning their respect.

For most people, buying or selling a house is one of the most stressful times in their lot and that is the bottom line.  You want to be the person who can ask the right questions, write the right answers and give options for moving things forward when challenges begin to pile up as they usually do.  You want to be there “go to” person.

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My Take: I believe in the old phrase, “The customer is always right!”  However, as we all know, the customer is also sometimes wrong.  That is why you should always be able to offer a client an alternative solution.  Of course, that does not mean the client will take the advice that you give, but at least you gave it.

For example, let us say that you have a client that is moving to Houston and you have some Houston homes for sale even though the client is not interested in Houston real estate.  They actually want to live on the outskirts of Houston in Cloverleaf, Galena Park or even Bellaire.  However, you have information on foreclosures in Houston that could save your client thousands of dollars.  This is the type of information that clients like and can earn you referrals.

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