Keely's Broker Blog

4th of Jul-Ivar's No More

After 44 years of pyrotechnics every 4th of July, Ivar's has decided to forgo the show because of the increase in fireworks shows that have sprung up in the past years.  Ivars has decided instead to focus on other community work. 

Q&A: Who Qualifies for Housing Bailout?

Do I have to fall behind on my loan payments to be eligible for a loan modification?
No, but borrowers do have to demonstrate that they are in danger of staying current on their mortgage payments and that they don’t have enough income to make their mortgage payments. That could help borrowers whose interest rates are resetting or who have lost their jobs.

Who is eligible for a loan modification?
The program is open only to primary residences and homeowners who are paying more than 31% of their monthly gross income on mortgage payments. Jumbo loans, which exceed Fannie or Freddie loan limits, are not eligible. Final eligibility will be determined by your mortgage lender. (Some ineligible Americans are riled up.)

Can I modify a second mortgage?
No. Only first mortgages are eligible.

Is my lender required to participate?
No. Lenders participate on a voluntary basis, but the government is providing subsidies to encourage lenders and servicers to modify loans. Mortgage servicers, for example, receive $1,000 upfront for each loan modification and can receive an additional $1,000 annually for three years if the borrower stays current on the loan. (Plan is heavy on incentives to modify loans.)

Will the government reduce the size of my loan?
For those eligible for the government-subsidized loan modification, borrowers can receive a reduction in loan principal of $1,000 annually for five years if they stay current on their modified loan.

Borrowers who aren’t able to qualify for a loan modification because they aren’t in danger of defaulting on their loans may still be able to refinance their loans to take advantage of low interest rates.

Can I refinance my loan if I owe more than my property is worth?
Borrowers with little or no equity can refinance into a 30-year or 15-year fixed-rate mortgage at current rates as long as the amount owed on a first mortgage does not exceed 105% of their home’s current value. The refinance program is only open to borrowers with conforming loans that are owned or guaranteed by Fannie Mae or Freddie Mac. Borrowers must be able to demonstrate that they are current on mortgage payments and that they will be able to meet the new payment terms on the first mortgage.

How do I know if my mortgage is owned or guaranteed by Fannie or Freddie?
The White House will release full eligibility details on March 4, when the program begins, and it is recommending that borrowers contact their lender at that time to see if their mortgage is owned or guaranteed by Fannie or Freddie.

What happens if I have a second mortgage? Can I still refinance?
Borrowers with more than one mortgage may be eligible to refinance as long as they owe less than 105% the value of their property on the first mortgage. The second mortgage holder will have to agree to remain in a second position on the home.

Are jumbo loan holders eligible?

No. Only those who have mortgages owned or guaranteed by Fannie or Freddie can apply, and the government-held mortgage companies don’t guarantee jumbo loans.

Do You Qualify for a Mortgage Bailout?

President Obama and Treasury Secretary Geithner are spending $75 billion to help homeowners stay in their homes. Is there something in there for you?

The quickest answer can be found by looking at how much you earn, not how much you owe. If your total monthly home payments (interest, principal and taxes) are greater than 31% of your monthly, pre-tax income you may qualify. Even if your home is worth less today than what you owe, you may be able to refinance.

What if your payments aren’t higher than 31% of your income? The Administration has also proposed a way to help homeowners who aren’t at risk of default refinance, even if they owe more than what their house is worth. Normally it’s difficult to refinance if you owe more than 80% of what your home is worth. But under new rules you may be able to refinance up to 105% of the home’s value. Not all mortgages will be eligible. They have to be owned or insured by Fannie Mae, Freddie Mac or one of the other government-backed programs. High-value, “jumbo” loans may not meet the test.

The new loans apply to homeowners who are current in their payments.  The complete eligibility guidelines will be available March 4th and I'll be here to disseminate them!

Homebuyer Tax Credit

First and foremost, the tax credit, money back in your pocket for buying a place, is worded as follows:

Homebuyer Tax Credit. The bill provides for a $8,000 tax credit that would be available to first-time home buyers (those who haven't owned in at least three years) for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment for buyers who hold onto their property for at least three years. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

Recessions Part II

Recessions

Tonight after hearing Anne Coulter declare that recessions last 18 months, I did a little research online about recessions.  Here's some of what I learned:

There have been 11 recessions since WW2

In the first half of the 20th century, recessions were typically half as long as economic growth periods, meaning the average recession lasted a year and a half. The last two recessions, not including this one, have lasted only one-tenth as long as their corresponding expansions, making their length only eight months. I guess Anne was right on the 18th month timeline anyway.

What causes recessions?  Sometimes the economy just 'runs out of steam' and sometimes it gets a stomachache from overindulging, like it did with commercial real estate in the 80's, the tech sector in the 90's, and residential real estate in the 2000's.  Reductions in the availability of a key economic input - like oil- can cause the economy to falter too.

We usually look to the federal government to prevent recessions, but three problems make this goal difficult. One is simply how to know a recession is occurring or is about to occur. Second is deciding what to do about a recession. By its nature, public policy takes time to debate and formulate. Third is the time lag it takes for government actions to have an impact. Once any government policy is developed and agreed to, between six and 18 months may be needed for the "medicine" to work its wonders.

Recessions appear to be coming about once every eight to 10 years. This means each of us has to decide how to live through them until better days come.

 

Viaduct Tunnel, Uh. . .Wha?

Would you enter an underground 2 mile tunnel that lays along a major earthquake faultline?

Must Watch Video

Over 1 Million People Lost Their Homes in 2008, Worst is Behind Us. . .

Foreclosures.com came out with its latest numbers today, a 63 percent rise in foreclosures for 2008, with a total of about 1 million throughout the year. The foreclosure process was begun on 2 million during 2008.

Alexis McGee, president of Foreclosures.com, believes the worst is behind the housing market. She’s says housing affordability is better than it's been since 1994, when a mortgage on a median-price home equaled 18 percent of the median income. Dropping interest rates on mortgages have improved this even more. Plummenting housing construction and a growing US population ultimately mean an increased demand for housing. Unemployment, while rising sharply, is still below where it stood in the 1990-1991 recession and well below the highs of the early 1980s.

“Don’t expect another tidal wave of foreclosures this year, either, just because more adjustable rate mortgages are due to reset,” McGee says. “Current mortgage rates are at 30 year lows and dropping. Those who qualify will be able to refinance and enjoy lower monthly payments, not higher ones. Those that can’t will end up either selling their homes pre-foreclosure or losing them to foreclosure. But I am anticipating our market can absorb this inventory.”

Do I have to pay for Title Insurance?

Question: I'm refinancing my mortgage, and my lender tells me that I need to get a new title insurance policy, which will cost more than a thousand dollars. We haven't made any changes to our home, and there aren't any outstanding liens on the property. Is there any way around this fee?

Answer: There's no way to get out of paying for title insurance altogether. All lenders will require you to purchase a new policy when you refinance, since your current one is only in effect for the duration of that mortgage. This fee is normally 0.5% to 1% of your loan amount.

But if you ask title insurance providers the right questions and shop around for the best deal, you may be able to knock hundreds of dollars off the price.

If it has been less than 10 years since you got your original loan, contact your title search company and ask if you can have your title reissued (also known as a special refinance or substitution rate). This can cut the price by 40% to 70%, depending on whether you use the same lender or a new one and how long it's been since you last had a title search on the property.

Also ask about any other discounts they might provide, such as reduced fees for public service employees or seniors.

You can also ask a title search provider to perform a "quick" search, which mostly hunts down new lien problems that may have occurred since the most recent title search. A quick search could be about 40% cheaper than getting a new policy.

Finally, try buying directly from a title insurance company. Studies show that agent fees can account for about 70% of the cost of title insurance. You can find a list of local independent title insurance companies at the website of title industry trade group American Land Title Association (homeclosing101.org). Or see if your state is one of the 31 covered by new online title insurer EnTitleDirect.com, which sells directly to consumers.