Refi plan would target 8 million underwater borrowers

Treasury Secretary Timothy Geithner says he likes the design of a plan proposed by an Oregon senator to establish a temporary government-backed trust that would allow about 8 million underwater borrowers to refinance at a lower interest rate at no cost to taxpayers.

The plan, proposed by Sen. Jeff Merkley, D-Ore., would be available to borrowers current on their payments who meet basic underwriting criteria -- regardless of whether their mortgages are currently guaranteed by the federal government.

The plan is designed to either lower monthly payments for underwater borrowers who owe more on their mortgages than their homes are worth or allow them to regain equity at a faster pace.

"Four years ago, the U.S. government acted quickly and boldly to rescue major financial institutions," Merkley said in a statement. "However, we have not done nearly enough for American families who are struggling with the downturn in the housing market."

Merkley said "millions of Americans are trapped in high-interest mortgages ... and it's a huge anchor on our economy. A bold solution to help these families refinance is the fastest way to get our economy back on track."

The plan calls for establishing a Rebuilding American Homeownership Trust through the Federal Housing Administration (FHA), Federal Home Loan Banks, or the Federal Reserve.

The trust would buy mortgages that meet the plan's standards from private lenders with revenue from government bonds sold to investors. The program is expected to turn a profit for the U.S. Treasury over its lifetime due to a roughly 2 percent interest spread between the borrowing costs on the bonds and the interest charged to homeowners, according to the proposal.

Borrowers would have three years to refinance into one of three options:

• a 15-year mortgage with a 4 percent interest rate, which would allow borrowers to rebuild equity at a faster rate;
• a 30-year mortgage with a 5 percent interest rate, which would lower a borrower's monthly payments; or
• a two-part mortgage with a first mortgage worth 95 percent of the home's value and a "soft" second mortgage for the balance. The second mortgage would not accrue interest or require payments for five years, thereby lowering a borrower's monthly payments.

While rising home prices helped more than 700,000 homeowners regain equity in their homes during first quarter, 11.4 million borrowers still owed more on their mortgage than their homes were worth, according to data aggregator CoreLogic. Because negative equity prevents homeowners from selling their homes, the available inventory of for-sale homes has seen double-digit declines this spring.

While restricted supply has shored up home prices, it has also constrained home sales, according to the National Association of Realtors.

In a statement, NAR said it "applauds and supports" Merkley's proposal, calling it, "exactly the innovative approach that our nation must take to ensure a sustained housing recovery."

Merkley called for a pilot program to test the proposal immediately, which he said would not require legislative action from Congress.

He suggested state and federal foreclosure prevention funds could be used to fund the program -- the federal Home Affordable Modification Program (HAMP), he noted, has used only $3.4 billion of the $29.9 billion allocated to it in the three years the program has been operational.

While current law prohibits using funds from HAMP and FHA's Short Refinance Program to establish new programs, Merkley claims in his proposal that "there are many common elements" between those two programs and the proposed program, which could be considered a modification of the current programs.

At a Senate Banking Committee hearing Thursday, Treasury Secretary Timothy Geithner agreed to look into launching pilot programs to implement Merkley's proposal, HousingWire reported.

"We like the way you designed it," Geithner told Merkley, who serves on the Senate Banking Committee. "It would help reduce the remaining pressures that housing has on the economy. It doesn't leave the taxpayer to pay for it."

For your real estate needs at the lake please contact the Spouses Selling Houses team. Until next time! Ebbie :).

Homeowner Scams Abound

Homeowners beware. The Consumer Federation of America has released its 2011 Consumer Complaint Survey Report, and one of the top five fastest growing consumer complaints is home improvement scams, which remains No. 3 on the top 10 list after automobile and debt-related scams.  Other real estate problems (timeshares, retirement communities) are new to the top 10 list this year.

Think you’re too smart to be a victim? The report includes eye-opening anecdotes of scams from among the 38 state, county and city agencies in 22 states that contributed to the report, with tips on how to avoid being scammed. They recovered more than $147 million on behalf of wronged consumers last year alone. So if you have a problem, don’t be shy about calling one of the consumer protection agencies listed on the Federal Citizen Information Center’s Consumer Action website.

Homeowners beware. The Consumer Federation of America has released its 2011 Consumer Complaint Survey Report, and one of the top five fastest growing consumer complaints is home improvement scams, which remains No. 3 on the top 10 list after automobile and debt-related scams.  Other real estate problems (timeshares, retirement communities) are new to the top 10 list this year.

Think you’re too smart to be a victim? The report includes eye-opening anecdotes of scams from among the 38 state, county and city agencies in 22 states that contributed to the report, with tips on how to avoid being scammed. They recovered more than $147 million on behalf of wronged consumers last year alone. So if you have a problem, don’t be shy about calling one of the consumer protection agencies listed on the Federal Citizen Information Center’s Consumer Action website.

Home security alarm scams
A 95-year-old Florida woman was convinced to sign a 5-year alarm system contract, although she already had an alarm system with another company. The Hillsborough County Consumer Protection Agency intervened; the alarm company canceled the $3,300 contract and refunded the money the woman had already paid.

Advice: Under federal law you have the right to cancel door-to-door purchases of $25 or more within three business days. If you’re not given notice of this right, the cancellation period continues.

Home furnishings never delivered
The Somerset County Division of Consumer Protection received 21 complaints from consumers who had paid more than $60,000 altogether at a New Jersey furniture store where the owner embezzled the money and never delivered the furniture. The business filed for bankruptcy offering little recompense for the consumers.

Advice: Pay with a credit card, which gives you the right to dispute the charges if the goods never arrive. Debit cards don’t necessarily offer this protection.

Retirement community fees
When a Pennsylvania woman moved into an assisted living facility, she paid an upfront fee of $170,100 with the assurance that 85 percent would be refunded if she moved out, but when she moved out, the facility said she wouldn’t get a refund until someone else bought her unit. The Bucks County Consumer Protection, Weights & Measures Office intervened, and she got back $168,644. The office found that in some cases, former residents’ units were being used as models, holding up refunds.

Advice: Review the assisted living or retirement community contract carefully, including how the entry fee is handled — before you sign it.

Timeshare troubles
The Louisiana Attorney General’s office is working on a multi-state action to get restitution and cancel timeshare contracts for consumers against Festiva, a timeshare company based in North Carolina but operating out of New Orleans. Consumers complained that they never received promised “prizes” and that “free” cruises ended up costing hundreds of dollars in fees. Consumer advocates are also reigning in folks who prey on people who already have timeshares, pressuring them to pay thousands of dollars to resell their unwanted timeshares, and yet another group that offers to recover fees that consumers have paid to timeshare resellers who have gotten no results. They take a fee and the consumer never hears from them again. An Ohio woman who paid $10,000 to timeshare reseller and resale recovery fee service got help from the Summit County Office Of Consumer Affairs to recover $3,000.

Advice: Don’t be pressured into buying a timeshare especially if the salesman says you have to decide immediately. Got a timeshare and want out? Talk to the company that manages the timeshare or a licensed realtor.

Rental rip-offs
The Orange County (Florida) Consumer Fraud Unit found scammers posing as owners of foreclosed properties, advertising the properties for rent and taking deposits of $2,500 on average from would-be tenants.

Advice: Rent through a licensed realtor, or check county records (a call to the tax assessor works) to make sure you’re dealing with the property owner.

For property at the Lake of the Ozarks,contact the Spouses Selling Houses team at lakeozarkforsale.com. Until next time! Ebbie :)

Housing Recovery Moves Up

Evidence is mounting that the steadily strengthening housing recovery is moving beyond lower priced homes, where the lack of inventory is greatest, into mid-tier and even luxury housing, according to the first market report on July sales.

ClearCapital reported today that national median home prices in July picked up the pace of growth over both the rolling quarter and year, with Western markets leading the way, where growth is shifting to higher priced market segments.

“July home price trends continued to show promise at a time when the strength of the broader economy is in question on many fronts,” said Dr. Alex Villacorta, Director of Research and Analytics at ClearCapital. “The national housing market defied the drag of a softening economy with increasing gains of 2.0 percent over the last rolling quarter. Housing gains in the West continued to lead the nation, and more importantly, for the second month in a row, the price rebound has broken out of the low price tier segments into higher priced homes. As the pool of buyers expands, the West continues to position for the next phase of recovery.

Western price gains broke out of the lower priced segment ($140,000 and less) and into higher priced homes (sales greater than $347,000). The migration of price gains indicates the emergence of a more broad-based demand, which will ultimately be necessary for a more mature recovery.

Most price growth has come in lower tiers where inventory is tightest. Demand among first-time buyers and investors is greater and supplies have been limited by higher levels of negative equity and continued slow processing of foreclosures. 

Villacorta said gains in the West appear to have moved beyond the first phase of the recovery. Initially, low price tier homes led the downturn, accumulating yearly losses of 36.5 percent by March 2009. Subsequently the low tier segment was the first to shake off losses in March 2012, as investors started capitalizing on discounted deals with attractive cash flow potential. Over the last six months, low tier momentum strengthened, and as of July, prices had been bolstered by 10.0 percent growth year-over-year.

Yearly growth for the broader national market expanded to 2.2 percent in July, 0.5 percentage points higher than June. Boosting growth at the national level, the West saw home prices roll up an impressive 6.2 percent over the previous year. The South and the Northeast also contributed to national price growth, with 1.8 percent and 1.6 percent yearly gains, respectively. While the Midwest has yet to post long term growth, the slight decline of 0.1 percent improved over last month’s yearly losses of 0.6 percent.

July marked the third consecutive month of national yearly gains, with longer term price trends at the national level last seen this strong in September 2010, when the First-Time Homebuyer Tax Credit temporarily drove prices higher. Without external stimulus driving demand, this latest round of gains is particularly encouraging. Strengthening fundamentals have finally allowed prices to move beyond stability and into a seemingly sustainable growth mode, providing reason for consumers to feel more confidence in housing overall.

Overall, the top 15 metros came in strong for July on both a quarterly and yearly basis, with average returns of 7.8 percent and 8.3 percent, respectively. Five of the top 15 metros rolled up double digit growth over the last year, a solid indication of a rebound well under way in many top markets. Phoenix continued its impressive run as the leader in annual gains for four consecutive months, with the highest yearly growth of 23.8 percent.

Confidence in housing will be key to future progress, giving buyers a reason to get off the sidelines, resulting in higher demand that could feed additional gains, and creating a positive feedback loop. Certainly the alternative is still possible, where a hiccup in consumers’ outlook could stall progress, further diminishing the willingness of a homebuyer to make a purchase, Villacorta said.

“While significant risks remain at large, housing now has the potential to enter a positive feedback loop. Price increases could lead to increased confidence. This could motivate buyers, propelling the recovery in spite of the potential economic slowdown outside the housing market. Of course it’s still possible that housing could experience a pull back if contagion from other economic sectors bleeds through, but right now there appears to be a healthy level of resilience,” he said.

If you are in the market for a home at the lake, please contact the Spouses Selling Houses team. Until next time. Ebbie :)

Why Buying Is A Good Idea

"The large numbers attached to a real estate purchase can often overwhelm first-time home buyers, so they continue to rent as a result," says Dan Auito, a Kodiak, Alaska-based real estate consultant and the author of "Magic Bullets in Real Estate." But, he adds, "the advantages far outweigh the risk or effort required in obtaining and maintaining one's own personal residence."

Those perks are both financial and feel-good. According to the National Association of Realtors, record numbers of Americans have purchased a home in recent years. U.S. Census data show a total of 68.3 percent of Americans are homeowners.

Here are six significant reasons to grab that hefty piece of the ownership data pie:

• Tax deductions: Although they're the stuff that bill-paying grumbles are made of, mortgage interest and property tax obligations are a homeowner's best friend come April 15. For both federal and state income taxes, these payments are usually fully deductible. And in the first years after a home purchase, most of the money paid toward those mortgage payments represents interest. Think of it as a government subsidy on the purchase. In addition, many closing costs, such as points paid and fees for your loan application and appraisal, may be deductible, either immediately or down the line when you plant that "For Sale" sign in your lawn.
• Appreciation: We're talking about the financial kind. Homes are considered a safe, steady investment, with values that rise while debt amount drops. The national median home price has risen every year --even during recessions and periods of sales declines -- since 1968, when the NAR began tracking it. Typically, the values appreciate at the rate of inflation, plus 1 or 2 percentage points. Sometimes it's a greater increase. In 2004, for instance, the median price went up by 9.4 percent. A long-term investment? Yes. Harvard University's Joint Center for Housing Studies found a dramatic increase in the rate of return on housing the longer it's held. For example, a buyer who makes a 10 percent cash down payment with an annual home appreciation rate of 5 percent could expect a 94 percent return on the cash after three years of homeownership . After five years, the return increases to 225 percent, and after 10 years, a whopping 623 percent. 

Equity: The portion of property that's actually owned, or equity, also rises over time. "Owning a home allows you to build the equity that accompanies appreciation," explains Timothy Spangler, CEO of a real estate investment company and author of "From the Rat Race to Real Estate." He adds, "You can't build equity if you are a renter." Moira Cotlier of New Haven, Conn., is a good example. "We paid rent to landlords for nine years before buying our house. Nine years," she says. "Do you know how many tens of thousands of dollars that was for places we had no stake in? What a waste!" Since 2001, she and her husband, Keith, have been paying themselves instead. Mary and Rich Hallahan, who own a Madison, N.J., home, think of the investment this way: "You are forcing yourself to save by investing in an asset over time," she says. Their home, purchased in 2002, has appreciated by about 10 percent since then. What's more, a first home often leads to a better second home. Equity buildup and appreciation in a first home help in the transition to a second. According to the NAR, first-time home buyers' median down payment is 3 percent; repeat buyers, meanwhile, put down 22 percent.

Borrowing power: For owners who opt to stay put, equity still comes in handy. It can be used to secure a loan or obtain a line of credit, meaning "more buying power to fund home improvements or to assist with the purchasing of investment property," Spangler says. Cash for emergencies or big-ticket items is also an option.

Stability: Renters generally have no idea what they'll be paying a few years down the line. Home owners with fixed-rate mortgages, however, essentially have the same payment for up to 30 years. Even those with adjustable rates have a cap and can figure out their maximum potential mortgage payment. The stability also comes from the sense homeowners get of being anchored to their community. "It gives you a little more leverage when it comes to community issues and activism," Cotlier says. "When you own your home, and you're paying taxes on it, you might have your voice a little better heard when it comes time to speak up about neighborhood or community issues."

Freedom: Speaking up within your home is also much easier when you own it. No need to worry about "the downstairs neighbors complaining you're too loud, or the upstairs neighbor stomping around at 1 a.m.," says Sandy O'Keefe, who rented for about eight years before purchasing a Mansfield, Mass., home with her husband, Rob, in 2004. O'Keefe also appreciates the decision-making autonomy. "You ... pick every paint color [and] won't get fined for scratches on the wall," she says. The decision-making extends to the yard as well. Cotlier sums up the homeownership benefits in one word: roots. "You can plant perennials and enjoy them forever. You can plant a tree and watch it grow and grow. You can plant a family and watch it blossom.

                                                                                                                                                                                                                        

If a home at the lake is in your future, contact the Spouses Selling Houses team. Until next time!! Ebbie :)

Mortgage rates lower than last record

Mortgage rates fell again, smashing previous record lows, according to a regular weekly release from mortgage giant Freddie Mac.

The rate for a 30-year, fixed-rate loan, the most popular mortgage product, dropped to 3.62% from 3.66% last week. The rate has matched or hit a new low for 10 of the past 11 weeks, Freddie Mac said. Meanwhile, the 15-year fixed rate fell to 2.89%, down from 2.94%.

"Recent economic data releases of less consumer spending and a contraction in the manufacturing industry drove long-term Treasury bond yields lower over the week, and allowed fixed mortgage rates to hit new all-time record lows," said Frank Nothaft, Freddie Mac's chief economist.

The 15-year fixed-rate mortgage is popular among homeowners who are seeking to refinance or to trade-up and minimize their total interest payments. At the current rate, a borrower financing $200,000 would pay $1,370 a month and spend a total of just under $47,000 in interest over the 15-year span of the mortgage.

Related: Where home prices are rising fastest

Buyers who want to minimize their monthly payments by opting for a 30-year loan would have payments of just $911 a month on a $200,000 loan. But they would pay $128,000 in interest over the life of the loan.

One year ago, the same 30-year loan would have carried a 4.6% rate and cost about $100 more a month.

Rates will probably stay low for a while, according to Keith Gumbinger of HSH.com, a mortgage information provider.

He pointed out that the spread between Treasury yields and interest rates is still wider than usual, with a full two percentage points separating them. More typical is a spread of about 1.7 percentage points.

That means mortgage rates could have even further to fall if Treasury yields drop or even hold steady.

If you are in the market for a new home at the lake, please contact the Spouses Selling Houses team. Until next time! Ebbie :)

Numbers are up and prices are down!

The good news is that the real estate market at the Lake of the Ozarks continues.
Sales volume in terms of units and dollars is up, and foreclosures are down.

There was cautious optimism after the first quarter of the year when sales continued a trend seen last year. Total units sold at the lake in the first quarter were up about 11 percent, and are now up about 13 percent from the previous year as of July 8.

This information is from the BDAR Multiple Listing Service.

The market at the lake has trended up in sales of units for the last three years. Everyone wants to know if we have reached the bottom of the market, and based on the reports the bottom was in 2010. The problem in determining the bottom is that you can only know when that has occurred when the bottom has already passed.

Sales volume
Sales volume for all types of properties as of July 8 was $182,761,641. That compares to $156,452,696 for the same six-month period of 2011, an increase of $26,308,945 or 14.3 percent.
Reflecting the increase is sales volume is the number of total units sold, which went from 889 through July 8 of last year to 1,026 for this year.

Consistent with the trend, lakefront homes are up 18 percent in units and resale condos are up 27 percent in units sold compared to the same period last year.

Despite the improving overall market, there are some parts of the market that have remained flat such as commercial and non-lakefront land.

Waterfront lots

Long a difficult segment of the market to show signs of life, waterfront lots have started to sell. The units sold are up slightly from last year, but Realtors have seen the average sale price jump by $47,924 to $174,557. That’s an increase of more than 27 percent.

As of early July this year, 23 lakefront lots had sold compared to 18 a year ago for the first six months.

Building has picked up nationwide, and it appears that the lake will follow. Offshore homes are up 6 percent in units sold compared to last year’s numbers with days on market increasing to 150 from 161. There were 348 offshore homes sold through July 8 this year compared to 328 

Foreclosures down

Foreclosure sales at the lake are down in units 14 percent from last year from 199 last year to 174 this year. Condos were only market segments that saw an increase in foreclosures. New condominiums (original sale) jumped from no foreclosures a year ago through July 8 to 4 this year; re-sale condominiums edge up one from 18 a year ago to 19 this year.

It is almost impossible to find a lakefront foreclosure now. Buyers come into the market place obviously wanting a deal and ask Realtors for foreclosures. It is difficult to make them accept that we were never a foreclosure market with less than 1/2 percent listing being in foreclosure.

Buyers wanting a foreclosure often expand to owner sales that are motivated and get the type of property that they are interested in at as good of a price without the uncertainty of the foreclosure property.

The future

Of course, the wild card is always the election. But, with the attractive interest rate and consumer confidence building nationwide, we don't expect to see any significant negative effect regardless of the election results.

On the market

Market Time for lakefront homes has increased slightly to 181 days on the market but, the list-to-sale price ratio has improved to 93.3 percent from 91.6 percent last year.

The average sale price in lakefront homes is down to $291,853 which is reflective of buyers rushing in to snatch up the deals.

Condo units on the market is flat at 183 days. The list-to-sale price for condos has increased to 94.8 percent from last year same time period of 93.8 percent.
 

If you are in the market for a home at the lake, please contact the Spouses Selling Houses team. Until next time! Ebbie :)

How Much Home Can I Afford?

If you are looking to purchase a home, you might be wondering “how much house can I afford to buy?” With the mortgage rates at their all-time lows and the housing market still favoring buyers, this may be a good time to buy. But how could you tell how much house you can really afford and that you’ll be ready for homeownership? This article will cover various methods that you can use to determine how big a mortgage you can take on.

20% Down Payment + 10 Years

Personally consider these as the conditions that you must meet before you even think about buying a house. You should be able to pay the 20% down payment from your savings, and plan to stay in the house for at least 10 years. If you can pay the 20% down payment from your savings, it shows that you have healthy positive cash flow, which allowed you to save up the money in the first place. If you do not have the pre-requisite savings, you should consider cutting your expenses and increasing your income to save up for the down payment before plunging into homeownership.

The 10 years portion is simply to help increase the likelihood that you will come out financially ahead after factoring in the costs of buying, selling, and living in your home. If you are planning to stay in your house for less than 10 years, you should consider renting instead.

3 Rules of Thumb

Up to 3 Times Your Annual Gross Household Income

The first rule of thumb is to take your annual gross household income — basically, the money you and your spouse make in a year before taxes — and multiply that by 3. For example, if you earn $40,000 a year and your wife earns $50,000 a year, your household income is $90,000 and you can afford up to a $270,000 home.

This is a quick way of calculating, but the main problem with this rule is that it doesn’t take into account your other debts.

Housing Related Payments Less Than 28% of Your Monthly Gross Household Income

The second rule of thumb is that your monthly housing related expenses (i.e., mortgage payment (principal + interest), real estate taxes, and homeowner insurances) should be less than 28% of your monthly household income. From the example above, your monthly income is $90,000 divided by 12, or $7,500 per month. Therefore your monthly housing expenses should be less than $2,100 ($7,500 x 28%).

Using a mortgage amortization calculator, $2,100 a month will buy you a $300,000 home at 5% 30-year fixed mortgage rate, assuming your real estate taxes and homeowner insurance is less than 2% of the purchase price, e.g., $6,000 per year.

Total Debt Payment Less Than 36% of Your Monthly Gross Household Income

The third rule of thumb is similar to the one above, but this rule takes into account all of your debt obligations such as student loan payment, credit card debt payment, and any other debt that you may have. From the example above, 36% of $7,500 is $2,700.

The rule is a nice way to double check other rules. For instance, if you are making a $500 car loan payment a month, $250 student loan payment a month, and another $750 payment toward credit card debt; then you only have $1,200 left for house payment — this means you can only afford a $170,000 house and not the $300,000 house from the previous example.

This is why it is important to limit the amount of debt with respect to your income before adding more debt — i.e., a mortgage — to your budget.

Mortgage Pre-Qualification

A second method of determining how much house you can afford is to go directly to the lender and ask for a loan pre-qualification. Many lenders have online application that you can fill out in less than 10 minutes. After you fill out the pre-qualification application, a representative will call you for addition information and verification. Usually, you will find out the same day the following information (1) the amount of loan that you are qualified for, (2) the estimated interest rate (this rate is “floating”, meaning it is subject to change), and (3) the estimated closing cost. Also note that this process will cause a hard pull and will likely lower your credit score for about 3 months.

The pre-qualification is usually good for 90 days, however, the final loan approval is subject to sufficient proof of income and asset.

Simulate Your Mortgage Payment Experience

The problem with all the methods mentioned above is that they do not take your financial habits into account. So what is the best way to answer this question: How much house can I afford?

The best answer is to simulate your home ownership experience — test drive it! For example, let’s say you’re paying $1,300 a month in rent today, and you’re looking at a $1,500 monthly mortgage payment. To be conservative, we’re going to add a 20% premium on top of the mortgage to account for homeowner’s insurance, real estate taxes, private mortgage insurance (PMI), maintenance, and additional utility costs, for a total of $1,800.

Are you ready for a test drive?

It’s easy. Since you’re paying $1,300 in rent, all you have to do is save the $500 difference each month. The best way to do this is to put the money into a separate savings account that pays a decent interest rate. You should do this for at least a few months to see if you can adjust to the new lifestyle.

• If you have no problem with the extra savings — That great! You’re financially ready and the extra money saved can go toward your down payment or emergency fund.
• If you find yourself making compromises to hit the savings goal — Then you are going to be "house poor". You should look for a less expensive house, find more ways to trim your expenses, or look for ways to increase your income. You don’t want your house to become a financial barrier to achieving your other goals.
• If you are struggling to consistently save the difference – Then you should reevaluate your homeownership goal and financial priorities. May be a less expensive house, or a more frugal lifestyle is the solution, may be not.

Buying and owning a home is an exciting experience, but it’s not always the right choice for everyone. For home ownership to be rewarding the house should be both physically and financially comfortable.

If you find that you are in the market for a new home at the lake, please contact the Spouses Selling Houses team and let us go to work for you. Until next time!! Ebbie :)