Arm's Resets Threaten Home Owners-Help is Here

The problem is that many home owners that got into their property with teaser rates are now facing large monthly increase as the ARM mortgage rates reset to market rates. The Govet has begun its program for those who have good credit and were timely with mortgage payments, but now cannot make the new higher monthly.

According to the HUID site "HUD's Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing."

To qualify: eligible homeowners must meet the following five criteria:

1. A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
2. Interest rates must have or will reset between June 2005 and December 2008;
3. Three percent cash or equity in the home;
4. A sustained history of employment; and
5. Sufficient income to make the mortgage payment.

For more information: Call 1-800-CALL-FHA or visit FHA or HUD. For a list of your local homeownership center or a HUD-approved housing counseling center.

Thanks for Reading
Howard Bell
Your Property Path

Rates Drop a Half Point: Who Will it Help

The Federal Reserve slashed the federal funds rate, by one-half a percentage point to 4.75 percent. The Fed Funds rate is the rate that banks charge banks for overnight loans to keep their loan ratios intact. A half point move is a big reduction and it indicates the Fed is taking the mortgage mess and the credit problems its created very seriously. This is a welcome move that will help the overall economy remain buoyant in the face of a real estate recession. It will help owners and borrowers quite a bit.

Lets take a look at who benefits. All loans tied to short term indexes will feel almost immediate relief:

Credit Card Holders: The rate reduction should show up on your next statement, reducing rates considerably

Variable Home Equity Lines of Credit: These rates are tied to short term rates and will see immediate reductions

Mortgages

Variable Mortgages/ARMs: The ARMs that are resetting now will not go up quite as much due to the recent reduction, but the increase may not be significant enough to everyone facing steep monthly increases.

Variables tied to short term increase such a ten year treasuries may see a help. Variable tied to the "LIBOR" or London Interbank rate will see little help. because it recently jumped sharply above the Fed funds rate because of the continuing credit crunch in the markets. "If Libor doesn't come down, there is no relief" for many mortgage borrowers, says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago.

Fixed Rate Mortgages: New fixed rates will be slightly lower

Credit Cards: Almost immediate reductions in credit card interest rate charges.

The Fed hopes to help reduce the flood of foreclosures by helping lower the reset increases and to stimulate the economy by reducing the cost of credit. The next step is the consumers...they want us to spend and spend to help keep the housing recession from becoming a total economic slowdown. Although interest rates will be lower, the full extent of whether this will result in more home sales remains to be seen. Cheaper money will be offset by tighter credit rules and how that plays out is still an unknown.

Your Property Path

Section 8 Housing: A Reasonable Choice

HUD administers the section 8 Program; it is the federal government's major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. But the program is administered locally and not from the national level by public housing agencies (PHAs).

A housing subsidy is paid to the landlord directly by the PHA on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. Under certain circumstances, if authorized by the PHA, a family may use its voucher to purchase a modest home.

Eligibility

In general, the family's income may not exceed 50% of the median income for the county or metropolitan area in which the family chooses to live. By law, a PHA must provide 75 percent of its voucher to applicants whose incomes do not exceed 30 percent of the area median income.

Section 8 families must:

1. Meet Govt. income guidelines

2. Pass a criminal background check

3. Have at least one family member who is a U.S. Citizen or has eligible Immigration status

Their are pros and cons to using section 8 applicants to help fill your vacancies. The main thing to understand is to dispel the myth that section 8 eligible applicants are criminal or something to be afraid of. Following is a bullet list of some of the reasons why and the complications that come along with a Government subsidized program of any kind....You have a relationship with a bureaucracy as well as your tenant.

Advantages:

* Owners get rent security

* Yearly inspections of the unit

* Fair market rental rates

* Strict renter responsibilities defined in the lease addendum

* On-time payments

* Tenants can be removed from the program for damages to the unit or failure to pay rent.

* Waiting list of tenants provides landlord with a stream of eligible renters

Disadvantages:

* Two Contracts: Your standard lease and a Govt contract with HUD.

* Govt is another party to the tenant landlord relationship

* Rules may be different: California Civil Code statue provides in pertinent part as follows: Where an owner terminates or fails to renew a contract or recorded agreement with a governmental agency that provides for rent limitations to a qualified tenant, the tenant or tenants who were the beneficiaries of the contract or recorded agreement shall be given at least 90 days' written notice of the effective date of the termination and shall not be obligated to pay more than the tenant's portion of the rent.

* Annual Govt inspections of the unit by Govt inspectors to assure quality housing

* Fair Market Rent is the cap the Govt imposes on what it will pay for your rental unit - you may feel you can get more for the unit

Howard Bell for Your Property Path

Existing Homes Sales: The Good, The Bad and the Ugly

The Good

Sales are increasing in Some Areas

According to Lawrence Yun the NAR senior economist, Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months. So if we hadnt had the bubble excesses of the sub prime meltdown we would see some increase in sales.

The NAR economist goes on to say: “The rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is promising because this was the first region that underwent sales and price weakness after the boom. Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path.”

Now we all know that NAR is the rosy picture, but still it is notable that the downtrend is not consistently gloomy and that there are bright spots....When trends are choppy and some areas are doing better and some of the reasons for the downturn are changing (mortgage money is now available), its is easier to see that its not all hell in a hand basket.

The Bad

According to Freddie Mac, The existing home median price was down only .06% in July 2007 relative to July 2006. Seems to me a livable drop....that would be about 7.2% annual annualized drop in price, nationally.

The Ugly

Housing Starts: NAR slashes forecasts for home sales and construction. Tighter credit conditions, results of the mortgage industries loose loan policy, will certainly put off any speedy recovery, according Lawrence Yun, senior economist for the real estate trade group. Housing starts are expected to fall 24% this year and an additional 8% next year to 1.26 million.

In summary,

1. Some areas appear to be in a partial recovery

2. Tight credit will slow this recovery at least into 2008

3. New homes seem to be suffering the most

4. As I mentioned in my last blog, the apartment sector is doing well due to increased rents

Thanks for Reading

Howard Bell for yourpropertypath.com

Finding Money: The Hunt for a Mortgage

There was a very good article on Marketwatch yesterday. It had to do with finding money for a buy or a refi today. I know a mortgage banker in San Francisco that has not had money for new home sales for almost ten days...I mean totally dry.

The author of this article pointed out two very interesting facts:
1. Shop the Credit Unions. They are flush with cash and did not participate in some of the easy lending practices of their bigger brothers. In order to have a credit union consider your business, you must belong to the group or industry they serve. They are considered non-profits because they provide loans and other services at lower rates than their commercial counterparts.
2. The authors, Gail Liberman and Alan Lavine point out that the best loan availability will come from "portfolio Lenders". These are institutions that keep most of the loans they originate rather than sell them in the primary market. Presumably, they are more prudent and have made stronger loans, since they are not so quick to repackage them and sell them off.

In your search for a new loan or a refi it helps to know the terms of the profession. Its much easier to be sure you are getting what you expect if you can read the contract.

Thanks for Reading

Howard Bell for Your Property Path

Housing Markets: When do Buyers Come Back

Of course no one has the answer, but generally when assets bust after an extended boom, certain things must take place for the perception to shift. In real estate, the first caveat is that everything is local. Even Greenspan said that since there is no national real estate market, real estate cannot go down everywheres at the same time

Well....it did! Housing has just had its first national decline in price.

Some general rules about busts

1.The markets that didnt participate will be the safest and may even increase as people see safety and reasonable prices in those markets.

2. Markets that participated the most in the boom, generally feel the most pain when the correction comes.

3. When people see this kind of large loss taking place, they will freeze and not buy unless they have to. So, even when things have stabilized we have to wait for peoples perceptions to change

4. Journalism has a lot to do with perception. Headlines will ride things up/down and emphasize the trend. When the headlines are no longer doom and gloom and begin to cautiously express a little hope, then the turn around is coming.

What Will it Take?

1. Time

2. reform of the mortgage markets in the same ways that the S&L crises reformed banking

3. Lower Prices

4. A shift in the perception that real estate is is probably a good bargain

5. Cheap money or low stable housing prices

6. A strong job market. The few markets still holding up are Portland and Seattle and I do think that is due to the strong job growth of the new 2.0 surge in Internet business's like active rain.

Thanks for Reading

Howard Bell for yourpropertypath.com

Buying and Managing a Vacation Home

Buying a Share in a Vacation Home When You Can't Go It Alone

By Jennifer Openshaw From MarketWatch

Advantages of shared ownership. It isn't hard to see the advantages.

* Affordability. As an example, a one-fourth share in a four-bedroom Tahoe view home goes for $299,000, obviously far less than you'd pay outright. See sample listing on Dreamslice.com.

* Shared costs. Taxes, maintenance, insurance, snow removal, financing costs. The agency manages these things so you don't have to.

* Deeded ownership. As with all fractionals, you own something that can be bought, sold, borrowed against, or transferred to your heirs.

* Business relationship. No arguing with your in-laws about whether your mounted deer trophy can go over the fireplace, or whether they paid their share of the snow-removal costs.

* Flexibility. You can sell whenever you want, or you can buy out your common tenants as time goes by. Shared ownership can be a great way to get your foot in the door.

* Expanded possibilities. If you've got more to spend, consider owning more than one share in different homes in different places. You can get more than one vacation home experience for less than the price of one.

Naturally, there are downsides. Like other fractional developments, you can't decorate as you please. You can store some stuff, but not as much as if you owned outright. Shared ownership doesn't usually offer the country-club style amenities you might get with some fractional arrangements. And everything you do to the place -- or in it -- is governed by some kind of agreement.

Wall Street Journal

Imagine having a serious structural problem, like 40 gallons of water under pressure leaking and no ones home for hours or even days. I wrote an article I wanted to share. The entire article is located at Your Property Path

Do you need it

Absolutely. I have a friend with a second home in Idaho. They have a beautiful home on a small ranch that is for Christmas and summers. Its a short hop from northern California and its a beautiful state with inexpensive land values. They got a lot of land, great views and space for a very affordable price....at least to us Californians!

After being away from the ranch for most of the winter, the family arrived only to find that there had been a leak in the kitchen which had dripped for many months. Well, you can imagine the damage. The leak had wended its way from the P trap below the kitchen sink to flood the lino floors. It then slowly worked its way into the hallway and the floor boards of the first bathroom. The damage was extensive.

The Cure

Get a property manager. There are companies that offer management for vacation homes. They do manage a little differently, because they are vacant for long periods and therefore they must be visited. Property management firms in rural or vacation areas have services designed to deal with the vacation homes special needs. In addition to all the general property management needs all properties require
1. Find one that will visit the property bi weekly
2. Be sure they will visit before and after all major storms to be sure the house is shuttered and that any damage can be assessed and taken care of immediately.
3. Repairs: Be sure to have a cap on all repairs. Any major expenses should be approved and you should be sent receipts for any work done above the allowed amount. Try to keep the amount that does not need your approval below $750.00
3.Vacation Home Rentals: Vacation home property managers will manage holiday or off season rentals by the week or weekend. Some are set up to book rentals for you. You can expect some kind of revenue share or flat fee service, but it may be worth it.
4.Be sure they will provide cleaning services and schedule maintenance

Thanks For Reading

Howard Bell for yourpropertypath.com