Investors are waiting in line for the opportunity to buy REO packages they can fix up to sell or rent out…but…Fannie Mae says there are no plans to offer them to these investors.  Put in the hands of investors, to sell or rent out, leads to more jobs.  Isn’t that a good idea?  Homes priced where first time buyers can get in a home, not a worthwhile idea?

And BOFA, with Buffet’s $5 billion infusion, after the enormous bank bail out…what are they up to?  Oh, payback for all the help?  Cutting 30,000 jobs…that’s the pay back?  You OK with that?

And Barney and the boys want to make the banks more accountable, offering them more ‘Regs’ that slow the whole process down and increase the cost to do business, screwing up the economy more yet…what the hay?  Barney wanted to “roll the dice a little longer,” back in 2003.  Apparently, the Fed and other powers did too?  A 30 page paper written by analyst, Josh Rosner, after his research of nearly a decade and after he read the study by Graham Fisher & Co., pointed out that the reckless underwriting at that time, would lead to a catastrophe of enormous proportion in the years ahead.  He wrote that this would lead to run-away prices in the housing market that would then lead to negative equity, most folks would not be able to withstand.  Did Barney and his cohorts take heed?  How about Fannie Mae, did anyone there take this seriously?  Well, at least one person read it.  But, then, she made an angry call to Graham Fisher & Company, harping that they were messed up and that they should have called her at Fannie (she is Jayne Shontell, and was head of investor relations at Fannie), before it got around.  She’s probably since then, made an apology call to them and commended them on their insight?  Yeah, right!

Care to know more? Read pages 219 - 237 of “Reckless Endangerment,” in fact, read the whole book, you’ll be glad you did!  Get the names of many of the other “Playa’s,” Playa’s that played with our money, not theirs, Playa;s that made big time money in the game, and it was a game!

I just read in the WSJ, that 500,000 foreclosures are sitting on the bank’s books now…and…it’s estimated that 4 to 5 million home owners are now more than 90 days delinquent.  What’s your best guess…how many of these home owners will pull it out, survive this financial dilemma? My best guess is 5% to 10%.  Ask any bank auditor what they think.

Have they learned from past mistakes?  FHA will now go as high as 52% for the debt to income ratio, used to underwrite a mortgage, provided, the applicant has good credit. You OK with that?  Let’s look at a scenario.  Take a couple with two kids, making a combined income of $75k/yr.  52% of that = $39k/yr.  But that’s on gross wages.  If they pay just 10% for Fed and State income taxes, they have $5,625/mo, less $2,925/mo for their mortgage payment and all other debt = $2,700 left over for all other living costs.  If their health and life Ins. is no more than $1k/mo, utilities no more than $200/mo, food for four no more than $800/mo (USDA moderate budget), $125/mo for auto Ins., they still have $575/mo left for; auto and home upkeep, clothes, school supplies and or tuition, entertainment, savings, vacation, emergencies…get the picture?

So, the game is still on…what were they thinking then, what are they thinking now?

There is some good news though; if you can buy real estate now, there is a huge inventory of “Super Deals” out there today, and will be for years to come.

What do you think?  We’d love to hear from you.

Ed

So much has been written about the housing market problem; who’s to blame, why’d it happen, on and on.  What we haven’t seen much of is the fact that during the “bubble,” mtge lenders were allowing a buyer to have a 61% debt to income ratio.  All their debts, added to the new mtge they were contemplating (mtge payment, interest, taxes and insurance), could be 61% of their gross income.

So, take a family of four, one spouse earning $15k and the other $45k, buying a home with a 61% ratio.

Total income is $60k, and with the new mtge, they have $36,600 of annual debt.  Well, they still have $23,400 left, right?  Oh no, the 61% is of gross income.  If they were lucky enough to have to pay only 10% of the gross income for Fed and State taxes ($6,000), that still leaves them with $17,400, or $1,450 per month, for everything else they need.

Let’s help them budget?  I mean, if the lender felt this approach was OK, who are we to question?

We need money for: utilities, trash service, hlth/life/auto insurance, food, clothes, school supplies, vacation and entertainment (?) and for emergencies.

Let’s use a conservative amount for all the insurance needed…say $650 per month, and use a utility number of $150 per month.  OK, we’ve still got $650 left for the rest of our budget.  Let ‘r snap, c’mon you financial guru’s out there, budget up now!

What you didn’t know is that the couple had a few grand in the bank, a little cushion, in case things got tight.  They have this money because they were provided with a “nothing down” mtge.  They were even allowed to roll the closing costs into the mtge.  No skin in the game here…just monthly mtge payments.

How’s the budget coming?  Did you have to pull out vacation and entertainment money?  Is there enough left after that?

Let’s take this family out a few years and see how they’re doing.  Whoops, the $15k earner lost their job.  Monthly income is now only $1,087 vs the $1,450 they had three yrs ago.  And geez, the savings are depleted as well.

So, the brain jobs that set this program up, the lenders, what did they do wrong?  I mean, let’s just go with basic math, let’s not bother the Actuaries, let’s go back to 6th grade math and try it again.

Today, as in the years before the “bubble,” the ratio used is 31% of gross income.  Whew, they’re on the right track now, ‘eh?  What a joke!  Unfortuneately, the joke is on “Joe the plumber.”  The lenders received bail out money for the errors they made.  Should they have? 

All these homes, homes that have 100% mortgages on them, homes that the buyers can’t pay for, or, realize their home is worth less than it was in 2000, all these (26%) of all US homes, what does it all mean…where and when will it all shake out?

Do you wonder how the banks represent these underwater monuments on their balance sheets?  Would their stock go right down the drain if they held them on their balance sheets at actual value?

I mean…if the bank holds a $600k mtge on a home that is now listed as a short sale, at $200k, is that what’s on the balance sheet?  Or, is it still there at $600k?  How about it bankers, send us the answer.

Well, there is some really good news to go with all this; if you can buy real estate now, you chance to be one of those people who can one day say: “I made my money in real estate!”  The bargains are super!  We’ve been putting our buyers into homes at huge savings.  Just got a single mom into a T/H that sold for over $200k a few yrs ago, for $105k.  A home that had  $925k against it just sold for $510k.  Another that has $4.5m against it, looks like it will get sold for $1.7m; the list goes on.

Today, as I write this post, in the four counties comprising the core Twin City area, there are 1,188 homes for sale for less than $100k, and 3,326 homes for sale in the $101k to $200k range.  If you can buy now, do it!  Rates are so low, we may not see anything like this again…ever.  Buy now and you’ll have bragging rights in 7 to 10 years.

And, if you’re one of the unfortunate home owners who have to sell, give us a call so we can tell you how a “Short Sale,” may help you…or…how to sell and get your equity out.

Do you have an opinion or story to share?  Please do, we love to hear from you even if your opinions differ from ours.

Ed

Tell me what you know about the housing market…are things getting better? Worse? The same?  If you don’t know, who does? 

We read about Fannie and Freddie coming to the rescue but we’re still rescuing both of them…with Freddie asking for another $10.6 billion the other day.  Sure Freddie, no problem, where should we send the check…and…let us know when you need some more.  We’ll be sending a check to Fannie too.

Perhaps you’ve read some of what I’ve been reading lately…that over 4.6 million homeowners are more than 60 days behind on their mtges.  Oh no, wait, another source says the number is over 6 million.  Maybe it’s worse than we’ve been told…think?  Most of these mortgages are backed by these two giant bunglers…what does that mean…we’ll need to write more checks?  But hey, I’m running short myself…are you?

And get this, in July, a new program will be kicked off by these two - to help homeowners who have to give up their homes in a short-sale, come back to the table in two years and buy again.  Huh…What?  Is anyone checking the checkbook?

Funny story in MoneyNews.com…a big guy at JP Morgan Chase, David Lowman, when at a congressional hearing not long ago, says to the question - who could mortgage borrowers turn to if they felt his bank’s employees were not helping them hold on to their homes - “Come to me!”  Well, 50 borrowers came forward from the audience, at this invitation, presenting him with a document alleging his bank reneged on a pledge to help struggling homeowners.  So what did our hero do?  “He ran like a dog with its tail between its legs,” said Bruce Marks of the Neighborhood Assistance Corporation of America (NACA), which helps homeowners avoid foreclosure.  Didja know about this organization?  I didn’t.  If you know someone who should know about them, please pass this along!

Not all banks are equal though and some are loosening up on the lending side.  The majority are still pretty tight though.  The Fed Reserve’s senior loan officer survey recently showed most banks kept credit tight in the first quarter and residential mortgages saw continued tightening in terms.  This according to an article by Sudeep Reddy in the WSJ.

Now you need a minimum credit score of 640 and 5% down for conventional or 3.5% down for FHA mortgage qualification.  Terms are getting tougher so if you’re in the market to buy a home, get busy before terms get even tougher and rates (rates that are still terrific today) go up.  You do know that rates will definitely go up…?

Where the short-sales and foreclosures will take home prices is still a guess but if you’re putting money on it, I’d go with continued price drops and amazing deals for the next 18 months or so.  If you can buy…buy now!

If you need cash to fix up a short-sale or foreclosure purchase, we have sources and programs that you can use to get it done…roofing, siding, windows, floors, even new appliances!  So call us today and we’ll fill you in.  Take advantage of the greatest buyer’s market in the history of Real Estate!

The amount of inventory leading to outstanding deals is enormous. 

We’ll e-mail a list to you today.  Just tell us where and what you’re looking for.

If you need help selling or buying, call us for more info today!

Can’t hurt to talk ‘eh?

Ed

http://www.dailywealth.com/1338/Another-Way-to-Profit-from-the-Coming-Plague-of-Busted-Banks

Picture this…main watering hole for the agents of  a large Brokerage office…”Happy Hour!”   The agents are having a drink and sharing their weekly  war stories.  Let’s listen in:

“So Freddie, didn’t I hear you nailed a ‘hogger’ this week?”  “Yeah baby, you heard right…I’m at the house, a $475,000 listing, putting up a rider on the sign that says ‘Great N’Hood,’ and a couple drives up and wants to see it.  Ms. Homeowner was just leaving to get groceries and told me to go ahead and show it, so I did.  They liked it and said to write up an offer.  I showed the offer to the sellers and they went with it.  So…I didn’t have to split the commission with another agent…got the whole 6%, $28,500 for myself…hogged that one!”

See, in a normal situation, the listing agent lists the house at 6% and when a different agent brings a buyer, the selling agent gets 2.7% ($12,825) and the listing agent gets 3.3% ($15,675). The listing agent is the one that covers the marketing expense of the house.  Only makes sense the listing agent should get more…to offset expenses , right? 

 The listing agent probably took pictures (no cost?), made brochures ($15. ?), provided copies of the disclosure document ($5.?), had a yard sign installed ($40.?), spent a couple hours working with the home sellers, before the listing was secured, showed the home a few times (4 more hours?), took calls from other agents who showed the home (two more total hours?), wrote the offer (another hour and a half?), and will attend the closing (another 2 hours?).  So, a total of 11.5 hours.  But I usually find an agent will spend about 20 hours per deal.  So lets say the agent worked 20 man hours and had total expenses of $60.  Landing the hogger means he made $28,500 - $60 = $28,440 divided by 20 man hours = $1,422 per hour.  Yeah baby, hog it up!

Most buyers don’t understand this whole process.  They’ll sometimes be working with their agent but attend an open house or call to see one from the info on a sign and the listing agent shows them the house, writes the deal and gets a “hogger” on it.  The agent the buyers has been working with, sometimes for months, gets absolutely nothing and the agent that wrote the deal…spent maybe, a couple hours with the buyers, gets the big reward.  Bad deal, this?

Agents are supposed to not only ask a potential buyer if they have an agent, they’re suipposed to defer to the other agent, if there is one.  Then, if there is no other agent, the listing agent is required to disclose to the potential buyers, on an “Agency” document, how the process works…and…have the buyers sign it.  But do they?  The Hoggers are in waiting…c’mon uninformed buyers…line up!

When you start working with an agent, if you’re happy with them, have them set up all showings and situations for you.  That’s the only way they can get paid.  Don’t hand over the pay to some agent you don’t even know, who hasn’t done a thing for you.  And, if you do look at a home while in the search process, if the showing agent does not ask you if you are represented by another agent, let your agent know about it…the showing agent is either derelict in their procedure or unethical or plain stupid?  Would you want to reward someone like that?

One more thing (I’ll bet many readers are wondering about this), If a listing agent was happy with the normal way home sales pay out…and…an unrepresented buyer comes along…and…the offer is less than the sellers want…why wouldn’t the listing agent offer up all or part of the 2.7% he wouldn’t have to pay out to another agent, to help his sellers?  We do here…we do even more…check us out?

Beware…the “Hogger” may come your way?

Next: How to get the best deal when qualifying for a mortgage!

Ed

Whether you’re downsizing, up-sizing, investing in real estate or buying your first home…buying now, right now…is the best time to buy in 40+ years!

With over 7 million home owners behind on their mortgages, the already huge inventory of homes will get even bigger.  The choices available are phenomenal!

We’ve recently looked at so many foreclosures and short-sale homes and find a good percentage are not beat up at all.  In addition, many are eligible for the super FHA 203k plan, whereby you can get the fix-up cash you need…and…it gets better, since most of these will be devoid of all appliances, this program will kick in cash for that as well.  Nice! 

One of our “pros” recently put his client in a home that sold in the $230k’s just a few years ago.  Now, our client is in a large 4 bedroom, 2 bath home on a large, fenced lot with landscaping, a very big - new asphalt drive, new interior fixtures, new bath fixtures, new electrical box and some wiring, new plumbing, some new carpet and all new - higher end appliances.  He’s on cloud nine, thanks to our pro being informed.

All this was financed through this terrific FHA product and the client has nearly a new home.  He’s in it for the $164,900 he paid, plus the $25k he didn’t have but the FHA plan provided.

If you care to know how this plan could work for you, give us a call and we’ll give you the details.  We have so many first time buyers that know they can get a good deal but just don’t have the money to make repairs.  Find out how this plan can get you in the home you want and put the cash in your hand that you need.

And by the way, for those of you that would like to stay in your home, vs. a short sale or letting it go into foreclosure, give us a call, we’ll help you get the info you need.  No worries, you don’t have to be selling or buying, this one’s on the house!

We come across so many people that don’t understand how the “HAMP” program works…or…they’ve called their mortgage company and get nowhere on the phone with them.  You have to know how to work with these birds and what the rules are because half the time, they don’t know themselves.  Let me share a success story with you:

another of our “pro’s” is talking with one of our clients; a single mom with a serious financial crisis…less hours and very reduced pay, no where near the child support money she needs and…increased mortgage payments from an adjusted rate mortgage plan.  What to do?  She calls her lender and is told they will have to see if she’s qualified to adjust her payment…they’ll get back to her.  Weeks go by, no call back. 

She calls again and gets the same story.  (Enter our guy.)  She tells him what’s going on and he tells her she is qualified and asks her to give him an authorization letter, where he will be allowed to talk with her lender on her behalf.  He called the lender and told them she was absolutely qualified, to read the mandates and get busy helping this lady.  Within days…new ball game.  The lender is cooperating and the mortgage will be adjusted to a comfort level for her.  The family can stay put!

                                                                   Dontchaloveit!

And don’t be embarrassed if you paid too much, have no equity and the bank is on your case. (Cute story,see theWSJ /2/8/2010 by JamesHagerty.)  

My interpretation: the MBA (mortgage bankers association), movers  and shakers…right(?)…paid $79 million for their newer headquarters in 2007.  They thought they might be better off to sell it now.  They have an offer and it looks like they’re going to take it.  They owe the bank $75 million but the offer is for less, only $41.3 million.  Oh shucks…looks like they’ll have to come to the close with the balance…right?  Oh, but some good luck, they may not have drawn the whole amount because the bldg. was under construction.  They’ve refused to be interviewed about their intentions.  Smell fishy to you too?  But wait..there’s more!

Their chief executive, John Courson, in an interview last year, said that people that were “under water” -borrowers owing more on their home than it was worth- should keep paying their loans if they could.  He went on to say defaults hurt by lowering property values and sent the wrong message to their kids.  Well guess what?  He refused to be interviewed about what his Association was going to do about the balance owed.  Can we guess what that means?  Funny stuff, this?  You should feel bad about your situation?

                        Call us, we’d be happy to help you end the financial pain!

Back to the “buy” side; rates we thought were going up are still in the 5% range and jumbo rates are still in the 5.5% range…hey…the time to buy is right now…remember…you make money in real estate “on the buy.”  Also, if you’re buying to occupy, there’s the $6.5k to $8.5k govt. tax credit, or, cash if you don’t owe taxes. But that will blow away if you aren’t under contract by the end of April and scheduled to close by June 29th of this year.  Doesn’t look like they’ll extend it either…so…latch on if you can! 

Next time: “The Hogger.”  (Don’t miss it, it’s pretty funny…pathetic…but funny.)

Ed