Friday, October 28, 2011

Underwater Refinance Program Expanded


At a campaign stop in Nevada on Monday, President Obama announced an expansion of the HARP (Home Affordable Refinance Program) which would eliminate the current maximum LTV of 125%. The initiative is being looked at as a way to reward those homeowners who have been good payers of their mortgages but, because of declining home values, they could not take advantage of today’s lower interest rates.

While the actual details on the program will not be released until next month, here’s the buzz:

It will only pertain to loans currently being serviced by Fannie Mae or Freddie Mac
Because of the removal of the LTV cap, appraisals may not be required
With the only qualifying criteria announced being that the last six payments be on time, it is possible that income documentation may be streamlined and credit scores might be more forgiving
Fees allegedly will be reduced
Incentives may be offered to people who shorten their repayment time
It also sounds that the banks may be given some incentive by not holding them liable for the underwater portion of the new loan (a major incentive for sure).
The government is on the hook for these loans already. By lowering the payments (by offering lower rates), they will likely help these loans to continue to perform and make it less likely for the underwater homeowner to walk away.

The original HARP was expected to help 5 million families.  After two years, it has yet to reach 900,000; therefore, estimates ranging from 800,000 to 1.6 million borrowers who may benefit need to be taken with a grain of salt.

Whether the Administration is looking for purely political rhetoric points or not, my advice to underwater homeowners is too keep an eye out for the final guidelines because you just might be able to lower your payments.

Thursday, October 27, 2011

Will The 30 Year Mortgage Disappear?

Will the 30 Year Mortgage Disappear?
by THE KCM CREW on OCTOBER 26, 2011

The federal government is reconsidering their involvement in the home mortgage process. They plan to still ‘guarantee’ certain mortgages. However, they appear to be redefining what they consider a ‘qualified purchaser’. They are discussing stricter lending guidelines in four different areas:

The type of mortgage
The minimum down payment
The debt ratios of the buyer
The FICO score of the purchaser
Today, we want to look at #1.

It appears that there is at least conversation about eliminating the 30 year fixed rate mortgage which has been a staple in this country’s housing industry for some time. Some in government want to duplicate the mortgage process of other countries. In Canada, for example, they don’t even have 30 year fix rate mortgages available. The vast majority of Canadian home loans have a 25 year payout but the interest rate is renegotiated every five years. If rates go down, you will wind up with a lower rate. If rates go up, you end up paying a higher rate. If you want a fixed rate mortgage for 25 years you pay a rate approximately two percentage points higher than the going rate at the time of your closing.

Would the same happen in this country? Last week, Housing Wire quoted Janis Bowdler, senior policy analyst at the National Council of La Raza:

“Without some form of Fannie Mae and Freddie Mac, replacements to support these popular loans, many first time borrowers will be shut out.

“Without that guarantee lenders would not offer 30-year fixed-rate mortgages, at least not at rates the average person could afford. Yes, some would be available but not for the average family but for those with a large amount of inherited wealth they can put to a large down payment.”

Why Is This Important?

You probably want to set your housing expense at the lowest number possible for the longest time possible. This may be the appropriate time to lock-in your long term housing expense as three things seem possible, if not likely, in the future:

Mortgage rates will increase from current historic lows
The 30 year fixed rate mortgage may disappear
Rents will return to historic norms of 3% annual increases 
Bottom Line

If you want to purchase a home of your own but are waiting to see where prices will go, consider what you could be giving up while you wait.

Thursday, October 20, 2011

5 Tips to Prepare Your Home to Sell

With all the negative press coverage and constant onslaught of challenges facing Sellers, it's easy to lose sight of a critically important truth. Your home is in direct competition with other homes in your neighborhood. Preparing the home and making sure it looks as nice, clean and in good repair as possible will increase the chances of a buyer considering it over the others. A good frame of reference for a buyer showing is a job interview. You want to be well prepared and looking your best. Here are five tips to help give you the competitive edge.

5 Tips to Prepare Your Home for Sale

By: G. M. Filisko

Published: February 10, 2010

Working to get your home ship-shape for showings will increase its value and shorten your sales time.

1. Have a home inspection
Be proactive by arranging for a pre-sale home inspection. For $250 to $400, an inspector will warn you about troubles that could make potential buyers balk. Make repairs before putting your home on the market. In some states, you may have to disclose what the inspection turns up.

2. Get replacement estimates
If your home inspection uncovers necessary repairs you can’t fund, get estimates for the work. The figures will help buyers determine if they can afford the home and the repairs. Also hunt down warranties, guarantees, and user manuals for your furnace, washer and dryer, dishwasher, and any other items you expect to remain with the house.

3. Make minor repairs
Not every repair costs a bundle. Fix as many small problems—sticky doors, torn screens, cracked caulking, dripping faucets—as you can. These may seem trivial, but they’ll give buyers the impression your house isn’t well maintained.

4. Clear the clutter
Clear your kitchen counters of just about everything. Clean your closets by packing up little-used items like out-of-season clothes and old toys. Install closet organizers to maximize space. Put at least one-third of your furniture in storage, especially large pieces, such as entertainment centers and big televisions. Pack up family photos, knickknacks, and wall hangings to depersonalize your home. Store the items you’ve packed offsite or in boxes neatly arranged in your garage or basement.

5. Do a thorough cleaning
A clean house makes a strong first impression that your home has been well cared for. If you can afford it, consider hiring a cleaning service.

If not, wash windows and leave them open to air out your rooms. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Wash light fixtures and baseboards, mop and wax floors, and give your stove and refrigerator a thorough once-over.

Pay attention to details, too. Wash fingerprints from light switch plates, clean inside the cabinets, and polish doorknobs. Don’t forget to clean your garage, too.

More from HouseLogic
Develop a Landscape Plan to Fit Your Budget

Spring Cleaning Guide

G.M. Filisko is an attorney and award-winning writer who has found happiness in a Chicago brownstone with the best curb appeal on the block. A frequent contributor to many national publications including, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Friday, October 14, 2011

Coconut Grove Real Estate Market Snapshot - October 14, 2011

Notice to Buyers and Sellers

Real estate is a local business.  National, regional, state, county, municipal and even district statistics are largely inconclusive when it comes to buying or selling your home.  Homes are all about communities.  Sales activity in one community may differ dramatically from one community to the next for any number reasons (school districts, deed restrictions, predominant style of homes, lifestyle preferences, etc.). 
In addition to location, when people are looking to buy a home, they generally look within a certain property type (Single Family, Condo  or Townhouse).  Sales activity from one property type to another within a given community also performs differently.

Also, most buyers are limited by budget with respect to the home they may want to buy. Sales activity is predicated based on the various price segments of homes within them.

The following spreadsheet is a snapshot of the Coconut Grove market taken today.  The market is fluid, so the numbers will change from day to day.  However, like the balance sheet of a company, a market snapshot is a reflection of the strength of a given community's housing market. 

The national media depicts the country's housing market to be in dire straits, and in countless markets across the country this is irrefutable.  As you will see, however, Coconut Grove is not among them. 

In fact, only condos priced over $2M (of which there are only three available at the moment) have seen no sales activity in terms of closing or pended sales in the last 30 days.  Every other sub-segment has had movement.  Luxury single family homes listed over $2 Million have the highest inventory number with 16 months.  It is generally accepted that a healthy real estate market contains six months of available inventory or less. Every other other market segment is either on its way to falling below 6 months or already well below it.

While the media unleashes its daily dose of bad news with respect to real estate, it is critical to remember that it does represent markets at the local level, which is where it really counts.

Also, I have included the number of short sales and foreclosure across the same price segments to provide further insight as to the overall health of the market.  In some markets across South Florida, distress sales make up more than 60% of the total market.  In Coconut Grove, this is far from the case.

If you are a buyer or a seller, this is critical information that should play an important role in your buying or selling decisions.  An experienced and qualified Realtor is your best source of information and guidance.

Thursday, October 13, 2011

Homeownership Under Fire!

This Time We Are Sounding the Alarms

by Steve Harney on October 12, 2011 ·

Occasionally, Steve Harney, our founder and lead content creator, asks us permission to share his personal feelings on a current real estate issue. Today is one of those times. – The KCM Crew

One of the things I often hear from people I meet is that real estate and mortgage professionals should have seen the current housing crisis coming and done something to prevent it. We should have realized that easing lending practices would lead to millions of families buying a home they could never afford. We should have warned our neighbors not to use their homes as ATMs. We should have realized that the economy could never withstand such growth and was about to crash.

Maybe these people are correct. Looking back, perhaps we could have been better stewards of the home buying process. We are committed to not making that same mistake again. Now, if we see a possible challenge in the future, we will speak up. That is what caused the writing of this blog post.


ALARM: Homeownership Percentage Has Dropped Dramatically!!, in an article entitled Housing Bust Worst Since Great Depression reported:
“The analysis by the Census Bureau found the homeownership rate fell to 65.1 percent last year… analysts say the U.S. may never return to its mid-decade housing boom peak in which nearly 70 percent of occupied households were owned by their residents.”

ALARM: People Are Losing Hope in the American Dream

In the same article, Patrick Newport, economist with IHS Global Insight is quoted saying:
“The changes now taking place are mind-boggling: the housing market has completely crashed and attitudes toward housing are shifting from owning to renting. While 10 years ago owning a home was the American Dream, I’m not sure a lot of people still think that way.”

ALARM: The Safety and Well Being of the Family Being Sacrificed

If we look at Fannie Mae’s quarterly National Home Survey, as far back as we can go, the top four reasons for buying a home are the same. The top four reasons people buy a home are:
  1. It means having a good place to raise children and provide them with a good education
  2. To have a physical structure where their family feels safe
  3. It allows for more space for their family
  4. It gives them control over what they do with their living space including renovations and updates.
Are children no longer important? Is safety less of a consideration today? Is the pride of homeownership soon to be forgotten? We must look at the long range consequences of being a renters’ society.

ALARM: Building Family Wealth Being Threatened

Let’s look at homeownership as an investment. The Federal Reserve does a survey every 3 years. In 1998 the average Homeowner’s net worth exceeded that of renters by 31 times. In 2001 it was 36 times and eventually in 2007 it was all the way up to 46 times that of renters. Now, homeownership isn’t about a guaranteed financial short-term return – the market goes up, down and back up again. We have to be prepared for the long-term and a key component to wealth is homeownership. Even in these toughest of times, the wealth of the homeowner is over 30 times that of renters.

At a time when we are discussing the gap in wealth between the top 1% and the other 99%, how does the less fortunate paying rent to pay off the mortgages of the more fortunate make any sense?

Bottom Line

Homeownership is important to the American family. If we lose this as a basic concept, what else do we lose? We didn’t realize the consequences when it was too easy to buy a house a few years ago and we are paying a price for that. We will pay an even larger price if we don’t realize the consequences of it being much too difficult for many to own a home today. SOUND THE ALARMS!

A Follow-up To Yesterday’s Blog

by The KCM Crew on October 13, 2011
Yesterday, Steve Harney expressed his thoughts on how homeownership is being impacted in this country. Some believed that Steve thought the American people where losing faith in the importance of owning a home. That is not the case. He just worries about how housing policies may impact our neighbors and our neighborhoods. Here is a blog we posted earlier this year on the issue. – The KCM Crew

Redistributing Wealth to the RICH?

Many people are placing the concept of homeownership under attack. There is more and more debate whether we should limit government assistance to homeowners. The administration just came out with their Reforming America’s Housing Finance Market: A Report to Congress. The report acknowledges the advantages of homeownership:
“…which has helped millions of middle class families build wealth and achieve the American Dream.”
The paper also talks about curtailing a century of government assistance for American homeownership (ex. the elimination of Fannie Mae and Freddie Mac):
“But our plan also dramatically transforms the role of government in the housing market. In the past, the government’s financial and tax policies encouraged housing purchases and real estate investment over other sectors of our economy, and ultimately left taxpayers responsible for much of the risk incurred by a poorly supervised housing finance market.
Going forward, the government’s primary role should be limited to robust oversight and consumer protection, targeted assistance for low- and moderate-income homeowners and renters.”
At the same time it speaks of increasing its support for rental housing:
“The Administration believes that we must continue to take the necessary steps to ensure that Americans have access to an adequate range of affordable housing options. This does not mean all Americans should become homeowners … we should ensure that there are a range of affordable options for the 100 million Americans who rent, whether they do so by choice or necessity.”
In a press release announcing the administration’s points, Housing and Urban Development Secretary Shaun Donovan is quoted:
“We must continue to take the necessary steps to ensure that Americans have access to quality housing they can afford. This involves rebalancing our housing priorities to support a range of affordable options, from promoting much-needed financing for quality, affordable rental homes to ensuring the availability of safe, and sustainable mortgage products for current and future homeowners.”
This is not just a matter of semantics. In his prepared testimony before the House Committee on Financial Services, Treasury Secretary Timothy Geithner said:
Our goal is not for every American to become a homeowner.”
The administration is taking a strong stance against government’s role in supporting homeownership. This would be a major change in policy. Assistance for homeownership has been important to America for a century. Many young people were able to attend college because their parents were willing and able to refinance their home to pay the tuition. Many American business owners got their start-up capital by taking an equity loan on their house. Renters won’t be able to ask their landlords to help pay their child’s college tuition. Renters can’t expect landlords to finance the development of the new product they discovered.
If we start to create a land with greater numbers of renters, those able to still purchase property will get wealthier collecting the rents from those who can no longer attain the American Dream. The administration calls for more support for these developers:
“The Administration will explore ways to provide greater support for rental housing. One option would be to do so by expanding FHA’s capacity to support lending to the multifamily market.”
This will lead to the redistribution of wealth in this country with the owners of the rental units building family wealth with profits generated by this real estate.
Diana Olick in an article for CNBC Realty Check quotes Democrat Melvin Watt of North Carolina:
“…there’s not going to be any home ownership at the low income level…Rich people will have home ownership and rich people will make money on apartment rentals, but we’ll be a renter nation for low-income people.”
We have to make sure this is the America we want.


Monday, October 10, 2011

Experience, Education, or Both?

Education, Experience, or Both?
by Ken H. Johnson on October 10, 2011 · 0 comments

Today, we are again honored to have Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research as our guest blogger. To view other research from FIU, visit - The KCM Crew

The Research

What role does education play in producing a successful real estate agent? This question has been debated for years. However, there has been very little scientific investigation to this point into the role of education and its influence on success in the industry. Anderson, Johnson and Jordan[1] are presently investigating this link, and though the results are preliminary, their findings strongly suggest that having an undergraduate college degree increases the likelihood of an agent being successful between 40% and 160%.

In its most basic form, the research’s statistical model defines success as an agent that produces more closed volume than 50% of all other brokers. The role of a college degree increases even more dramatically, when success is defined as an agent that produces more closed volume than all but 5% of all other brokers.

Implications for Practice

The result from Anderson, Johnson and Jordan clearly indicates that having an undergraduate college degree goes a long way towards creating a successful agent. The role of education, however, does not rule out or substitute for experience. From a personal perspective, experience wins out over education when the two are pitted against one another. On the other hand, combining experience with education produces the most capable agent — an agent who brings both their wealth of experience and the analytical ability to deal with new issues as they arise in the selling process.

Today, agents no longer have to choose between experience and education. There are now a number of alternatives ranging from local colleges and universities that offer real estate programs and degrees to Realtor® University, which is presently developing a real estate curriculum, among other alternatives. As a testimonial, I most strongly recommend higher education. While still in full-time practice, I obtained an M.B.A. (concentrating in Finance). After I graduated, my business volume jumped dramatically and a world of additional opportunities opened up for me.

Thursday, October 6, 2011

Tips to Present a Stronger Mortgage Application

Tips To Present a Stronger Mortgage Application

by Dean Hartman on October 6, 2011 ·

As underwriting guidelines for lenders become more stringent, we need to re-examine what a good mortgage application looks like. As home buyers begin their search for a home, there are a few items they should be aware of that they can do to help get their loans approved (with the best possible terms), and, at the same time, lessen some of the stress that goes along with the mortgage process.

1. Income documents

Most lenders want to see a full month of paystubs and two years’ complete Federal Tax Returns. Assembling them ahead of time and holding on to every paystub you get is a good idea even before you find a home and/or submit your mortgage application because it will save you time later. Moreover, looking at those documents and being prepared to explain any deductions that show up is crucial. Child support, alimony, garnishments, and Unreimbursed Employee Expenses are often crippling factors that, if explained and dealt with upfront, can make your loan approval smoother.

2. Asset documents

Most lenders will scour your bank accounts for the two months prior to going to contract. They are looking for large deposits because large deposits can signal a new loan that wouldn’t show up on your credit report yet. What’s a “large deposit”? Typically, any deposit that would represent more than your income can support. If you make $5000 a month, after taxes you likely net $3800 (or $1900 a bi-weekly pay period). Therefore, deposits in excess of that will need to be explained and documented. Sold a motorcycle? Have a paid receipt and motor vehicle documents in place. Received a gift? You will need a Gift Affidavit, proof of the donor’s ability and transfer of the funds. Any and all questions should be discussed with your loan officer.

3. Credit Score Optimization

Do your best to curtail your use of credit as it relates to your available credit lines. Target a cap of 30% of usage of available lines to get the best scores. Do NOT cancel credit cards. That will lower your amount of available credit, thereby raising your percentage of usage. That will damage your score. Do NOT shop for a car, explore life insurance, apply for a new credit card or increase the limits on your current cards because the running of your credit by people in other industries will also lower your credit score. Most importantly, don’t do anything that will require having your credit run without first discussing it with a mortgage professional who knows the impact it could have.

4. Appraisal Concerns

It’s unlikely you will make an offer to purchase without checking out comparable home sales. It’s also likely you received that type of data from the real estate agent you are working with. Make sure your agent prepares the same information for the appraiser. Data about similar sales, similar homes currently on the market and maybe even cost estimates for any repairs or improvements anticipated can preempt future problems with appraised values and conditions.
Overall, it is recommended that you hold onto copies of everything financial, think before allowing your credit to be run and work with an agent and loan officer who can use their experience to put your loan application in its best possible light…as soon as you start thinking about buying a home.

Wednesday, October 5, 2011

Picking the Right Agent

Picking the Right Agent is Crucial

by The KCM Crew on October 5, 2011

The National Association of Realtors (NAR) released their Existing Sales Report two weeks ago and in the report they discussed a troubling trend: cancelled contracts are increasing dramatically. NAR defined the issue:
“Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price.”
NAR explained that 18% of all contracts were cancelled in August. This compares to 16% last month and 9% in August of 2011.

The percentage of cancelled contracts has doubled in the past year!!

It is extremely important that both buyers and sellers pick the right real estate professional to assist them with their real estate needs.


Make sure your agent can not only help you find the home of your dreams but also find you professional assistance with all aspects of the transaction (mortgaging, title, etc.)


Realize that your agent must sell the home twice:
  1. to a qualified buyer
  2. to the bank (through the appraiser).

The second sale may be more difficult in this market than the first.

Bottom Line

It is imperative in this housing market that both buyers and sellers use a true real estate professional to guarantee that the deal will actually reach the closing table.

Tuesday, October 4, 2011

The Modern Day Conundrum: Short Sale vs. Foreclosure

Short Sale vs. Foreclosure: A Short Sale Always Wins

by Christopher Reale on October 4, 2011

Today’s ever changing real estate industry has brought upon some very challenging questions from our clients. We as counselors, want to put forth the best, non-emotional advice that we can, in hopes that we can help our clients and their families navigate the rough waters of the short sale process.
The most prevalent question and one that continues to permeate the industry is:
“Why should a seller go through the short sale process rather than letting their house be foreclosed upon?”
While we cannot speak to every client circumstance, we can say one thing with complete conviction. In almost all instances in which a potential seller is contemplating whether they should short sell their house or let it go through the foreclosure process, a short sale is the better option. The following are examples to consider:

Example A- Short Sale

Mr. Smith owns a home in which he has a mortgage balance of $220,000 and a current market value of $150,000. Mr. Smith has elected to short sell his property. His Realtor successfully obtains a buyer who puts forth an offer price of $120,000 (80% current market value according to Realty Trac Foreclosure Report 5/26/2011). After reviewing the buyers offer and the financial hardship information from Mr. Smith, Mr Smith’s bank agrees to accept the short payoff of $120,000 which would leave a deficiency balance of $100,000.
The transaction closes and is final. Mr. Smith then pulls his credit report 30 days after the transaction takes place. On the report he notices that the mortgage trade line states “Mortgage debt was settled for less than full” and the balance on the mortgage is $0. Mr. Smith is now on the road to financial recovery.

Example B- Foreclosure

For the ease of illustration we will use the same value and mortgage debt amounts as in Example A. However, Mr. Smith has elected to forgo the short sale process and let the bank foreclose on the property. The bank holding his mortgage facilitates the proper legal procedures to foreclose on the property, all of which are costly. Mr. Smith is notified and his property foreclosed upon of which is taken back by the bank to sell as an REO.
Six months later, the bank finally sells Mr. Smith’s home only they sell it for $90,000 (60% of current market value according to Realty Trac Foreclosure report dated 5/26/2011). Remember, as a short sale, the home would have sold for $120,000 keeping the deficiency to $100,000. In addition to the deficiency now being $130,000, the bank has elected to add on legal costs of $15,000 and asset preservation costs of another $5000 for a total deficiency liability of $150,000. Mr. Smith pulls his credit report 30 days after being notified that the bank has sold his property and of his liability.
On the report he notices that the mortgage trade line states “Foreclosure” and the balance is $150,000. Because of Mr Smith’s choice to choose foreclosure vs. short sale his road to financial recovery has taken a major detour. He not only has a foreclosure on his credit report but know has a much larger deficiency balance in which the bank, in most cases, will report on his credit report as a balance owed.

The Best Option is clear

While the financial and credit advantages are clear when choosing a short sale over a foreclosure, other advantages are sometimes overlooked. The most important of all of them is maintaining the seller’s dignity and peace of mind. We have heard too many stories of families having to leave their homes because of a Sheriffs order or some other type of legal action. The short sale process alleviates this negative social impact. The process puts the control back in the seller’s hands so that they can get back on the road to financial recovery and start providing for their families. In the battle of the two evils, a short sale always wins!!!

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