Metro Atlanta area Property Taxes and Appeals

The Atlanta Journal-Constitution reported in December 2010 of some issues with Metro Atlanta property taxes in the major Metro Atlanta Counties. The major concern for property owners is the valuation of each residential property for tax purposes seems to be inflated in many cases. The AJC conducted a comparison between thousands of home sales prices (in 2009 and 2010) and each County's tax valuation of those properties and found some major discrepancies. Dekalb County reported about a 25% higher value than sales price on the average. Also, Dekalb County still has about 7,000-8,000 appeals waiting to be reviewed.

Section 5-2 of Georgia Senate Bill 346 (signed by Governor Perdue and became law effective 1-1-2011) required all Georgia Counties to use the actual sales price in the next year following the sale for valuation when calculating property taxes.

Look at your 2010 property tax bill. If you can’t lay your hands on it, you can look it up online. Many counties have searchable databases of residential property. (Web addresses for the five largest metro counties are below.)

Clayton: http://weba.co.clayton.ga.us/tcmsvr/htdocs/indextcm.shtml

Cobb: http://www.cobbtax.org/Search/?GenericSearch.aspx?mode=PARID

DeKalb: http://web.co.dekalb.ga.us/taxcommissioner/search.asp

Fulton: http://www.fultoncountytaxes.org/fultoniwr/11_depts_property_taxes.asp

Gwinnett: http://gwinnetttaxcommissioner.manatron.com/Tabs/ViewPayYourTaxes.aspx

What do you know about sales of other homes in your neighborhood? Do home values seem to be going down? If so, the county may have overvalued your house for tax purposes. If you think your house has been overvalued for tax purposes, you now have two options:


File a property tax return

(1) In the past, the best way to ensure you could appeal the county’s assessment of your property’s value was to file a form called a “property tax return,” which forced the assessor to send you a notice of your property value. Under new state law, assessors now must send a Notice of Current Assessment to all residential property owners. But in some cases, you may still want to file a return. To do so, download and print the one-page form found at: https://etax.dor.ga.gov/ptd/adm/forms/pt50r/LGS_TAXPAYERS_RETURN_OF_REAL_PROPERTY_PT50R.pdf.

(2) Section C of the form asks you to list last year’s “fair market value” on your land and your house. Then it asks you to list the value of the land and the house this year (as of Jan. 1, 2011). This is where you tell the county the value of your property has gone down. You must send the form to your county tax assessor between Jan. 1 and April 1, 2011.

(3) The assessor reviews your return and decides whether it reflects your property value. The county will respond with a Notice of Current Assessment between April and June.

(4) If the county turns you down, you have the right to appeal. But if the county agrees with your proposed value, it could save you the hassle of a formal appeal.


Appeal your appraisal

(1) Previously, you could appeal your property assessment only if you filed a property tax return or if the county changed the value of your property. Beginning this year, anyone can appeal.

(2) File your appeal within 45 days of the date on your notice (counties have different deadlines). First stop: the county board of assessors. Most appeals are worked out there.

(3) If you can’t reach agreement with the board of assessors, the next stop for residential taxpayers is (a) board of equalization, which is a panel of county residents that hears appeals unresolved at the assessor level, or (b) binding arbitration, which involves submitting a written private appraisal to an arbitrator appointed by the superior court clerk. You can appeal a board of equalization decision to your county superior court. Note that both arbitration and appealing to superior court carry fees. There is no fee for an appeal to a board of equalization.

More information on appeal:   https://etax.dor.ga.gov/ptd/adm/taxguide/appeals.aspx

Mortgage Servicers and Foreclosure Practices

The Securities and Exchange Commission (SEC) is investigating disclosure, misrepresentation, and omission issues.

Both the Federal Housing Finance Agency (FHFA) who regulates Fannie Mae and Freddie Mac and the Office of the US Controller of Currency have requested reviews of major banks.

HUD is also on the warpath and has the authority to fine or sanction banks.

Please go to this link to Cspan's excellent coverage of the Congressional investigations of the subject:  http://www.c-spanvideo.org/videoLibrary/search-results.php?keywords=mortgage+servicer+foreclosure+practices

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

States are modifying loans

In states where mediation of foreclosures through some fashion of legal assistance (not a non-Judicial foreclosure state like Georgia), the states are requiring banks to modify loans...About 20 states offer some form of foreclosure mediation.

Over 60% of the people in mediation have received permanent loan modifications.

Some borrowers have complained that the lender transfers them from person to person and the Congressional investigations on Cspan reveal some of the practices.

There was also a reported 1.5 million loan modifications made by the industry - But how many of those modifications were permanent and how many were just for the minimum 3 months to get their fees and setup for another loan modification?

Source: WSJ 12-31-2010, A4 -   http://online.wsj.com/article/SB10001424052748704543004576051843140821936.html?mod=djemRealEstate_h

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Seller Assisted Down Payment Programs are more risky?

YES- According to the General Accounting Office study  - GAO Report on Delinquencies of Down Payment Assistance Programs
 
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Dodd Frank law - truth or "unintended" consequences?

Apparently the federal limits of credit card issuers can adjust rates led to higher rates and limited product offerings driving borrowers to less conventional lenders including payday lenders, loan sharks, and pawn shop rates.

Also the 2009 CARD (Card Accountability Responsibility Disclosure) Act imposed limits on credit card interest rate adjustments and penalty fees.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

New Fannie Mae "WaysHome" Initiative

Fannie Mae has recently started its new WaysHome initiative to try and keep homeowners in their homes - no matter if they own them or not...

http://www.knowyouroptions.com/options-to-stay-in-your-home

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Where did all the jobs go?

Per an Associated Press article in the 12-29-2010 MDJ (A1), since sales in international markets are growing twice as fast as US domestic sales, demand overseas creates jobs overseas.  Reportedly 1,4 million jobs overseas compared with about 1 million here in the US.

This has resulted in all but 4 of the top 500 US corporations reported profit for 2010 and half the revenue for S&P 500 companies came from outside the US.
Also, it seems that the production of many products moved to overseas facilities aren't returning to the US.

China became the world's second largest economy.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Are tankless water heaters worth it?

Bottom line: Spend $2,500 to get $75/annual return?

That All depends...on your perspective of worth.

If you want instant hot water, don't want to waste a little gas or time warming the water, deplete the tank and run out of hot water often, and then it may be for you.
But if you think the tankless water heaters are expensive to install ($2,500 potential overall purchase and installation costs) and very long payback (25-30 years) even after any tax credits, then they may not be for you.

Here's some good information from consumer reports:
http://www.consumerreports.org/cro/appliances/heating-cooling-and-air/water-heaters/tankless-water-heaters/overview/tankless-water-heaters-ov.htm?view=Print


References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Electronic House Appraisals

Just when you thought there was enough confusion and dissension regarding appraisals, lenders are using electronic desktop computerized appraisals for preapprovals for mortgage refinancing; home equity loan approvals; loan modifications; and purchasing properties valued under $250,000.

The results of the computerized appraisals have been mixed - some higher, some lower than expected.  Obviously, when the appraisal isn't where the borrower wanted it to be, there are protests.  But in all frankness, sometimes the appraisals done by human appraisers have fallen short and caused consternation.

This may cost around $20 where human appraisals cost anywhere from $300 up to $1,000.

Source:  WSJ, 12-30-2010, C1

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Federal Bank Regulators Fail to do their Job

Update - 4-8-2011:  Senate Permanent Subcommittee on Investigations will release a report soon about revealing emails from securities firms that bet for and against subprime mortgages and mortgage related CDOs.  The subcommittee may prosecute./pursue further, but the report is supposed to expose financial vehicles used to caused problems including the Hudson Mezzanine Funding 2006-1 that made Morgan Stanley realize $9 B loss on investment. (WSJ, 4-2/3-2011, B1)

According to an April 2010 study released by the US Senate Subcommittee on Investigations, the Office of Thrift Supervision (who regulates banks) failed to properly oversee and enforce correction of issues at Washington Mutual (WaMu) regarding their mortgage lending and risk management problems dating back to 2002.  Senator Carl Levin stated thought it was a conflict of interest.  Apparently, WaMu was a large lender in subprime mortgages during 2002 to 2008. 

Wow, can you say "bigger Government is gooder"?

Source:  MDJ, 4-16-2010, 7B

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Sex Offenders in Georgia

There are a few websites that were designed to help locate sex offender living in Georgia.

As of 1/1/2011, Georgia had about 19,269 registered sex offenders.  But I understand that there may be many other unregistered sex offenders.

This is the Official Georgia website to search:  http://services.georgia.gov/gbi/gbisor/SORSearch.jsp

Another possible, but unofficial website:  http://www.familywatchdog.us/ShowMap.asp?frm=0
Here is the national sex offender website:  http://www.nsopw.gov/Core/PublicRegistrySites.aspx

As a potential resident in certain areas, you are obligated to perform due diligence to discover information about the areas you plan to live.  I hope his information answers some questions.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

More Federal Government stupidity regarding foreclosures?

Talk about Federal money with strings attached.

Only about half of the $4 Billion in Federal funds available to communities to redevelop foreclosed properties has been used.   As of 3-16-2010 about 40% has been committed. Some officials say the ever changing rules are to blame for their reluctance to participate as they are prevented from buying properties at less than 1% of appraised value.  With properties available for alot less, local communities are prohibited from purchasing the property at the reduced rate.  This is part of the Neighborhood Stabilization Program (NSP). If this is true, why are we doing that?  Does that make any sense whatsoever?

I understand that the Federal government wants to do something - but what can it do but to continue to screw up and cause everyone to stumble over each other in the attempt to move the economy forward.  I guess stumbling forward is considered successful?

Source:  MDJ, 4-2-2010, 5B

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Energy Star Program - Real or Fiction?

Apparently, manufacturers could make claims without establishing any proof through tests. (Now lab tests and results are required for review.)

The GAO (General Accounting Office) reported earlier in 2010 that they were able to get alot of "phony" products certified including a gasoline powered alarm clock.

Source:  Marietta Daily Journal, 4-15-2010, 7B

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Mortgage and Rates News

This blog post will be updated from time to time so check back to see what's happening.

7-6-2011: In some counties across the US, Fannie and Freddie loan limits will be lowered to $417,000 (which is about the limit of current loan limits in the Atlanta area) and about $271,050 for FHA loans which I think is less than the limit now used in the Atlanta metro area.  Source:  http://online.wsj.com/article/SB10001424052702303763404576420101788878440.html?mod=WSJ_RealEstate_LeftTopNews

3-11-2011:  Atlanta Business Chronicle reports (3/11-17/2011,15A) that about 42% of homeowners in Atlanta near or below negative equity. (About 34% are at negative equity.)

1-11-2011:  Apparently in 2010, cash in mortgage refinancing (i.e., loans to reduce mortgage balance or interest) rose to 33% and cash out refinance mortgages fell to 18%....Are we learning yet?

12-27-2010:  About 70% of fixed rate mortgages guaranteed by Fannie, Freddie, or FHA/VA is at least 1% above current rates (as of September 2010, but rates have risen since then.)

12-27-2010:  The mortgage industry is expected to issue $480 Billion of new purchase mortgages in 2010 and about $626 Billion in 2011.  Also, about $921 Billion in refinance mortgages in 2010 and estimated $370 Billion in 2011.

12-27-2010:  Old rule of thumb, every 1% rise in mortgage rates results in a 10% increase in home prices.

11-6-2010:  Rates fell for most programs except for a slight increase in the 30 year fixed rate to 4.24%.

10-22-2010:  Mortgage rates are still low by historical terms and may be remaining somewhat stable, but not many people buying or refinancing as much anymore for several reasons.  Concern about future employment; falling real estate prices; most people who were in a position to purchase due to non-refundable tax credit or refinance already have executed their transactions.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Cobb County Screwups

2-17-2011:  How about the Cobb County School Board - it seem to have a bunch of goofballs on the board who argue with themselves more than sticking to facts and voting for what is best for students - frankly, I am surprised the Cobb County School Board has not been placed on probation since their antics seem just as crucial as Clayton County's School Board. And David Banks keeps asking parents for input and put no fact on the table - just like a politician and not a leader!

Well, the 12-5-2010 AJC reported that Cobb County Water System spent tens of millions of dollars from the money collected by the water system on non water system related ways even after water rates have increased 60% since the 1990s.  An apparent "shell" game by moving the storm water management and solid waste management divisions into the water systems and using their bond money.

Another screwup - Cobb's compost facility.

Another screwup - the laptop fiasco from the County school board.

Another - inattention to underground storm water pipes.

Another - building an expensive courthouse to make life more comfortable for the courthouse workers - priceless.

Every time we give our hard earned money to our government, they will spend it for "their" needs first.  Courthouses are important, but who watches the cost and spends "only" enough as necessary to have a building with lights and heat and places to try criminals when we ignorantly hand over our sales tax revenue without any accountability?

Hey - we are in the middle of an ice storm/snow storm - at least they shut the County Government down - that means they can't screw up today!

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Allstate sues Countrywide over MBS considered "toxic"

According to the MDJ on 12-29-2010, Page B5, Allstate claims that beginning in 2003 , Countrywide failed to exercise adequate underwriting controls and didn't represent the securities it sold, especially the ones Allstate purchased (totalling $200 Million).

I wonder "who" really failed proper disclosure demands and their due diligence responsibilities?

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

HUD to release $73 million for housing needs

Nearly $73 million ($13 million, or 22 percent increase over last year’s funding level) in housing counseling grants will go  to more than 500 national, regional and local organizations.

Housing counseling grants will assist families in becoming first-time homeowners and remaining homeowners after their purchase. HUD-approved counseling agencies not only provide homeownership counseling, but also offer financial literacy training to renters and homeless individuals and families. 

Nearly $68 million will support the direct provision of housing counseling services by 24 national and regional organizations, 5 multi-state organizations, and 484 state and local housing counseling agencies. In addition, HUD is awarding more than $5 million to three national organizations to train approximately 4,500 counselors who will receive the instruction and certification necessary to effectively assist families with their housing needs.

Counseling agencies will use $9.5 million to help assist senior citizens seeking reverse mortgages or Home Equity Conversion Mortgages (HECM). These agencies will provide counseling for the rapidly growing number of elderly homeowners who seek to convert equity in their homes into income that can be used to pay for home improvements, medical costs, and other living expenses.

The organizations that provide housing counseling services help people become or remain homeowners or find rental housing, and assist homeless persons in finding the transitional housing they need to move toward a permanent place to live. Grant recipients also help homebuyers and homeowners realistically evaluate their readiness for a home purchase, understand their financing and downpayment options, and navigate what can be an extremely confusing and difficult process.

Source: http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2010/HUDNo.10-269

Note:  Would any of these funds for programs be necessary if the mortgage industry properly policed itself and there were plenty of reputable landlords of low income housing?  Of course, the tenant has to cooperate and treat the property with reasonable care...

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Georgia Security and Immigration Compliance Act (Georgia SB 529)

The 2006 drafted act requires the use of a Federal program (SAVE) to administer public benefits using a verification system.  However, not all Georgia agencies that administer public benefits use the system.

Currently, only Georgia public employers and their contractors "are required" to use the Federal E-Verify system (verification of legal immigration status).  Georgia House Bill HB1259 (Georgia Employer and Worker Protection Act) proposed in 2010 requires all employers to use the Federal E-Verify system to obtain or renew a business license.

Why am I writing this in a real estate blog - simple!

Jobs for Americans and legal immigrants can help strengthen our country and our real estate markets.

Does your State Representative and Senator support both SB529 and HB1259?

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Mega Bank News

This BLOG post will be updated on an ongoing basis to update you on news about large US banks and their behavior.  My guess is ... some of it won't be good behavior!

3-10-2012:  Bank of America agrees to cut down to market value and not just down to 120% LTV in Big Bank Settlement.  Source:  http://www.courant.com/business/hc-bank-of-america-mortgages-deal-20120309,0,5836235.story

10-20-2011: Possible plan to settle 50 US States Attorney General lawsuit over foreclosure action of many US banks would allow people underwater (owing more than home is valued) and current on monthly payments to refinance to a lower rate for only those mortgages owned by banks (about 20% of mortgages (which means about 80% are tied up in mortgage backed securities). Source: http://www.mortgagenewsdaily.com/10182011_ag_servicer_settlement.asp

9-3-2011:  Federal Housing Finance Agency (FHFA) "IS" (depending on Bill Clinton's definition of IS) suing 17 major US banks over Mortgage Meltdown...Source:  http://online.wsj.com/article/SB10001424053111904583204576546940630966016.html?mod=djemalertNEWS

9-2-2011:  Big banks are getting sued by Federal Government; over 1 million distressed/forecloed homes coming to a market near you soon; and Bank of America is receiving more attention.
Source: http://ftalphaville.ft.com/blog/2011/09/02/667926/us-government-attempts-bank-raid/

9-2-2011:  Federal Reserve asks Bank of America for contingency plans - including bankruptcy? Source:  http://www.bizjournals.com/sanjose/news/2011/09/02/fed-asks-bofa-for-contingency-plans.html

7-6-2011:  It may not affect just Mega Banks, but the majority of mortgage are used/held by the Mega Banks.  About 20% of mortgage portfolios at Mega Banks are delinquent.  Source:  http://online.wsj.com/article/SB10001424052702303763404576416090501569426.html?mod=googlenews_wsj

6-18-2011: HUD claims Bank of America (BOA) hindered investigations and didn't provide access to BOA personnel or data to investigators in a "timely manner".  Source:  http://agentgenius.com/real-estate-news-events/bank-of-america-stonewalling-mortgage-probe-says-hud/

3-15-2011:  Bank of America plans to write down mortgages on applicable loans by US soldiers on active duty. WSJ, 3-11-2011, C1.

3-11-2011:  Bank of America is thinking about closing about 6,000 banking locations due from electronic banking growing in popularity. Source: Bank of America may close some locations

3-8-2011:  Just to summarize - J.P. Morgan Chase bought Washington Mutual Bank; Bank of America bought Countrywide Home Loans; and Wells Fargo bought Wachovia.

3-7-2011:  Wells Fargo is now controlling about 25% of the mortgage loan market and B of A share has fallen to about 20%. (WSJ, 3/5-6/2011) (My personal thoughts - the mortgage market will probably continue to fall due to higher down payment requirements, fewer qualified applicants due to credit issues, and previous bank foreclosures of their real estate.)

3-7-2011:  Bank of America is leaving the reverse mortgage market (probably to focus on more profitable loans since we are in a declining value market).(WSJ, 3/5-6, 2011, B15)

1-10-2011:  Bank of America is expected to buy back only about $3 Billion of home loans (from Fannie Mae/Freddie Mac) due from their acquisition of Countrywide Mortgage, but some analysts expect private investor lawsuit settlements to range from $8-35 Billion ($6 Billion repurchase requests from private investors and insurers) ...Also, Ally Financial (part of GMAC that the Federal Government owns) agreed to pay Fannie Mae $462 million to cover purchase requests related to mortgages...The relative good news is that some estimates see total losses across the mortgage industry could be limited to $33 Billion. (WSJ, 1-4-2011, C10)

12-31-2010:  Bank of America (B OF A) settled with (paying $108 million to) the SEC from charges that Countrywide (who B of A acquired) improperly charged mortgage customers; settled with (paying $150 million to) the SEC due from failing to properly disclose information regarding their acquisition of Merrill Lynch; and settled with (paying $137 million to) the SEC related to steering government municipal bond sales to specific bidding agents.  (WSJ 12-8-2010, C8)

12-21-2010:  Wells Fargo agreed to provide $2.4 billion in loan modifications to settle claims of a California lawsuit - $33 million to reduce or prevent foreclosures and $32 million in restitution of "pick a Pay" (adjustable rate) loans.  Agreements between Wells Fargo and other states are in progress. (WSJ, 12-21-2010, C9)

12-16-2010: (WSJ 12-16-2010, C1) - Bank of America (BOA) is fighting allegations from 17 investors that 167 bond deals were improperly serviced and their subsequent requests to "buy back" those mortgages.  Total claims of $12.8 Billion in repurchase of mortgages.
.
11-16-2010: Bank of America has already paid $9 billion

11-6:  J.P. Morgan Chase plans to proceed with foreclosure filings.  It's been reported that Chase has been asked to repurchase $2.92 billion of loans in 2010 and $3 billion in 2009 out of a total requested $8-9 billion in each of these two years. (WSJ)...JPM has also said they converted 29% of the temporary loan modifications into permanent modifications (WSJ 11-6/7-2010).

10-27-2010:  Bank of America will focus more on retail mortgages directly to customers (22% of market last year) is exiting wholesaling of mortgage loans - might result in loss of 1,000 jobs.  May mean Wells Fargo becomes biggest wholesaler and can pick up the slack..maybe.  JP Morgan Chase doesn't plan to purchase loans from mortgage brokers.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Credit Default Swaps? - Oh boy, here we go again!

Credit Default Swaps (CDS's) (i.e., quasi Insurance Contract) require seller of the CDS's to pay the buyers of them some sort of compensation if the municipality misses an interest payment or restructures the debt...That's a nice way of saying, someone's betting that a municipality is and then isn't going to default...(Almost Harrisburg, PA??)

California is about to require disclosure of all their CDS transactions from several large banks so others can see their exposure and risk. 

The total muni CDS market is estimated to be about $50 billion.

Losses are more prone on development bonds and other non traditional debt.

Note:  I feel a big pain in my butt developing, but I just can't put a finger on who to call to help ease my pain!

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Build America Bonds (BABs) - Another scheme for more debt

These are federally subsidized bonds for local municipalities to raise money for light rail projects, sports or convention centers, or sometimes hotels...all money losers.

About $174 billion has been issued under the program...California issued about $30 billion.  The Federal Government already subsidizes $450 billion in municipal bonds through income tax deductions...Wall Street firms have pocketed about $1 billion in fees.

Municipalities hold about $2.8 trillion of outstanding debt and $3 trillion in unfunded pension and health care liabilities.

Why am I writing about this?

First, municipalities going into debt is terrible - but going into debt to build projects that lose money is criminal.

Second, when will we learn not to go into debt beyond our means?

Third, who is watching this massive debt?

Our economy is more fragile than some would admit and we must not toy with massive long term debt. 

Source:  WSJ, 12-8-2010, A22

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

What's the fate of Mortgage Interest as an Itemized Deduction?

There is discussion in US Congress that the tax deduction for mortgage interest may be eliminated.

Some proposals set a threshold of a certain maximum mortgage amount above which no deductions will be allowed, but also set a declining percentage of the total mortgage interest that is deductible, eventually running to zero, or non of the mortgage interest will be deductible.

The President's Debt Reduction Panel suggested a lifetime cap of 12% of the mortgage on a primary residential property up to $500,000 balance.

No word on whether the second home mortgage interest deduction will change or be eliminated, but don't count on it to remain as it is.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Zillow reports $9 Trillion loss in real estate values since 2006...and it ain't over yet

More sliding of values are expected in 2011...

However, I have been hearing that the bottom would hit around Summer 2011, but I have been hearing that about every past summer for 2 years....So in other words, NOBODY knows!

Source: http://www.thebradentontimes.com/news/2010/12/11/business_and_financial/zillow_puts_total_real_estate_losses_at_9_trillion_bleak_2011_forecast_for_florida_market/

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

When can you rent a home before buying another

According to a mortgage broker on Trulia.com, you may only convert an existing home to a rental home if you have at least 30% equity. If you do have 30% equity you will need to provide a fully executed lease and the existing mortgage payment will count toward your debt-to-income ratio - unless you are paying cash for your next purchase.

Anyone have experience.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Some States Plan to Raise Payroll Taxes in 2011

What do you get when your state is fiscally irresponsible?  You pay more for their bad decisions.

Apparently, 31 states are planning to borrow almost $50 billion from the Federal government to pay for unemployment insurance benefits.  To pay for this, they plan to increase state and federal payroll taxes.  This increase in payroll taxes will tend to reduce future employment plans and may result in more layoffs.

41 states already increased their 2010 payroll taxes by about 34%.

In 2008-09 states collected about $30 billion and paid out about $80 billion in benefits.

I like the statement in the article that eludes to Washington DC charging employers in states that aren't repaying the Federal loans - as if the employers-employees had anything to do with causing the problem or the state's spending.

Bottom line:  This will be an additional burden on states and businesses trying to come out of a recession.

Source:  WSJ - 11-20/21-2010, A5


References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Second home mortgage lenders - another fly in the ointment

More than 1/3 of all loans in the foreclosure process now have other junior liens (2nd mortgages).

Some lenders of 2nd mortgages are slow to cut deal because the loans are often current.  But when they do cut deals, they ask the borrower to agree to pay it back later - which still make the debt repayable. 

Note:  Isn't it peculiar that many of the first lienholders agree to forgive debt and the debt is not considered income (at least not until 2013 or thereabouts) for Federal Income Tax purposes, yet 2nd lienholders (with alot smaller balances) are trying to ensure they get paid back on a debt that was pretty risky to begin with?

Over 40% of the $1 trillion in outstanding 2nd mortgages are held by the nation's largest 4 banks:  Bank of America; Wells Fargo; J.P. Morgan Chase, and Citigroup.

Note:  I was disappointed that the author didn't explore or expose more to the 2nd mortgages than meets the eye - For instance, some 2nd lienholders may be holding out or more in private mortgage insurance payoff than what they would get as a payoff - but that's just a guess....;)

Souce:  WSJ, 11-27/28-2010, Page A5

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Major Real Estate Company in Atlanta charged with discrimination

The US Justice Department has settled with the parties involved who agreed to pay damages and civil penalties amounting to $60,000 for allegedly discriminating against families with children.

Unfortunately, a property was advertised as having a " no-child policy" here in Atlanta where the community wasn't an over 55+ community.  The local community itself is under investigation whether they have exercised policies that discriminated against families with children living or looking to purchase in the community.

This is a no-no UNLESS the community is specifically approved and designated for homeowner's over 55 years of age.

Source:  MDJ, 11-11-2010, Page 2B.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

General Service Administration (GSA) finds it harder to sell US Real Estate

The Republican members of the Transportation and Infrastructure Committee recently released a report titled "Sitting on Our Assets:  The Federal Government's Misuse of Taxpayer-Owned Assets".

Apparently the report has said the GSA doesn't dispose of property in a timely manner and fails to act as a prudent property owner.  Even Barack Obama directed federal agencies to accelerate the elimination of unneeded properties back in June 2010.

In all fairness, some of the properties include lighthouses and other odd properties and financing of unusual properties has dried up  - so it might not be entirely fair to criticize the GSA since it's an easy target.

Source:  WSJ, November 17, 2010, Page C12

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

HUD has a 90 day moratorium on Foreclosures in some states

Basically, as a result of the several state investigations of foreclosure activity, some states have requested the moratorium of all foreclosures including HUD (i.e., FHA mortgages). I am sure some similar moratorium provisions are effective on VA loan foreclosures (which are a very few) and quite probably, Fannie Mae and Freddie Mac foreclosures.

Official word from HUD was...

"The Department (HUD) has been advised that due to a recent change in State Laws or State mandated moratoriums, some foreclosures had to be cancelled or stopped and rescheduled to complete all of the new legislative requirements... A ninety (90) day extension to commence foreclosure is provided to those mortgagees where the initial legal action to commence foreclosure has been cancelled to comply with a new State legislation....This extension is provided under the authority of 24 CFR 203.355."   And the "extension" means it's "tacked onto" the existing moratorium laws in the appropriate state.

Here is a link to some answers to questions: http://www.hud.gov/offices/hsg/sfh/nsc/faqextns.cfm

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Ways to reduce your mortgage payment

First, there is always the option of making extra payments toward principal yourself.  But don't fall for some businesses that promise results by paying them...Just make the same payment to your loan servicer and ask them to apply the extra amount immediately.

Next, you can ask your lender if they can "recast" your loan.  In this fashion, for a small fee with your current lender/servicer, you can ask for a lower monthly payment without extra closing or appraisal costs.

Also, apparently recent changes in banking regulations have severely restricted lender who use prepayment penalties...but ask anyway.

Source:  WSJ 10-2/3-2010, B8

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Some online mortgage calculators

I found these on the web through different source and I am not sure how much use they will b or the simplest or you to use, but don't feel obligated to use any services advertised on this website.

US Government mortgage calculator from Ginnie Mae - http://www.ginniemae.gov/2_prequal/intro_questions.asp?section=YPTH.

Simple mortgage calculator from Kim Komando: http://amortizationloancalculator.net/index.php

Various mortgage calculators -  http://www.calculators4mortgages.com/
Determination to refinance an existing mortgage - http://www.bills.com/calculator-mortgage/

Domania.com offers calculators an recent home sales in your neighborhood - http://www.domania.com/Calculator/default.aspx

Helpful tips and mortgage calculator - http://www.mtgprofessor.com/home.aspx

Lending tree (careful - you may get alot of ads) - http://www.lendingtree.com/mortgage-loans/calculators/loan-payment-calculator/

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Your FICO score may drop without you doing a thing!

Even if you're on time with your payments on everything, your FICO credit score may suffer.

If the bank arbitrarily drops your available line of credit on your bank credit card, your credit score may take a hit for sudden change in balance.

The National Association of Realtors (NAR) wants to pressure Fair Issac to change this policy.

NAR also is requesting Fair Issac consider the impact on credit scores of homeowners who had received loan modifications approved under federally backed programs like HAMP.  Currently they treat them harshly as if the mortgage wasn't paid as originally agreed - this means a deeper drop in score.

Source:  http://www.latimes.com/business/realestate/la-fi-harney-20101121-7,0,6076482.story

Bottom line:  What can you do about it?  Write to the Fair Issac Company; write your congressional Representatives, or sit on your butt and continue to do nothing as usual.

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Georgia Residential Mortgage Act (GRMA) fee at closing

For a number of years, there was a little noticed fee on each closing statement (HUD-1) in Georgia. A $6.50 fee was charged for each new loan on a property.

You an see why the fee doesn't raise any interest because you normally focus on alot higher charges in closings and the fee goes to cover the costs for the Georgia Department of Banking and Finance (click here for GDBF website) to develop and administer rules and regulations, licensing and registration requirements, review of applications by prospective mortgage lenders in Georgia, and the review and enforcement of statues.

So why mention it? - That fee has now been raised to $10 (see form and notice of increase here). I hate it when fees are raised and no discussion is provided for the increase. Is this fee adequate to cover legitimate expenses? Does the Georgia Department of Banking and Finance deserve the fee? Do we have a "taxation without representation" situation here?

NOTE: When I called last year to mention the possibility of filing a complaint on a lender, they told me their budget was cut and didn't have money to investigate any more complaints...

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Atlanta Regional Commission - Fact, fiction or do they matter at all?

This post may be updated from time to time - depending on the importance of this commission.

According to Charles Krauter (ARC Director), the "PLAN 2040" (whatever anyone knows about 30 years from now...) is based on 2 requirements - A federal requirement to perform a long range transportation plan every six (6) years and a Georgia state requirement from the Department of Community Affairs to perform a regional development plan every 5 years (in other words, they are planning to plan).

This may be the first time the ARC is developing a comprehensive plan (oh yeah, what have they been doing so far - pocket pool?).  How much have the citizens of Georgia spent on the ARC and how many "solutions" have they presented to solve "real" problems.

ARC estimates that the 20 county metro Atlanta area will grow by 3 million people totalling about 8.3 m million.

The ARC outlines some challenges for the area like availability of water, aging population, 75% of the population have no other option to drive to other destinations, and the area needs more funds and better management of those funds.

Bottom line:  Watch out for the ARC to come to the conclusion we need to build more rail transportation...but between which two cities and who will profit from this construction?

Source:  Atlanta Business Chronicle, 11-5 thru 11, 2010, Page 4A.

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Are you or your remodelers "lead safe certified" to handle lead based paint?

6-14-2011:  EPAs website for more details about Lead Based Paint - http://www.epa.gov/ne/enforcement/leadpaint/index.html

Also, a little insight from John Adams, Real Estate Advisor about the final implementation date of 4-22-2010 and other effective dates. - http://money99.com/content/view/516/67/

Per the 3-27/28-2010 WSJ, Page A6, based on a regulation taking effect on 4-22-2010, if you hire a remodeler of a home built in 1978 or prior, they must be federally certified to handle lead based paint removal. Otherwise, your contractor (and maybe you based on your written contract with the contractor) will face a $37,000 daily fine. No waivers will be issued anymore to homeowners who verify there are no pregnant women or children under 6 years old - they closed that loophole.

And as you can guess, the federal government hasn't certified more than 135 businesses and less than 14,000 individuals of the nearly 212,000 firms and 236,000 individual contractors the EPA has estimated that are needed. There haven't been many training providers (job creation?) accredited to train the hundreds of thousand of contractors.

Can we call a South Park shenanigans yet?

Does this mean if you do it yourself, you don't have to be certified?

Does this mean more people will perform the remodeling work themselves and not hire a professional?

Does this mean work will come to a screeching halt because of the $37,000 daily fines of contractors who aren't certified?

6-14-2011 Note:  After April 22, 2010, property owners who perform these projects in pre-1978 rental housing or space rented by child-care facilities must be certified and must follow the lead-safe work practices required by EPA's Renovation, Repair and Remodeling rule. http://www.epa.gov/lead/pubs/renovation.htm
 
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Some homeowners stop paying mortgages - and stay in homes!

Yesterday: "You don't pay...You don't stay!

Today: "Don't pay, stay, and see what happens!"

You have a 1 in 5 chance of being kicked out of your house for non payment of your mortgage...

This NY Times article really blows the traditional lid off what you think of traditional foreclosures.

This is a quote from the article: "More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property..."

This may not be the most moral approach since the homebuyer agreed to pay one amount, but is now paying another amount or not at all, well...it amounts to fraud...in this case by the homeowners!

I can empathize if there is a major change in medical, employment, or income status - but even with the IRS forgiveness of the 1099 taxable income, the lender still has a note from the homeowner promising to pay.

Hence, this presents another "moral (fairness) hazard" (in addition to bailing out people who have overextended themselves to purchase a house) that once the homeowners who "are" paying their mortgages hear this, they will also say "why should I be paying my mortgage if others don't pay theirs and get to stay?".

Oh and I heard the other day that banks are now selling their deficiency judgments to debt collectors who will be hounding the homeowner for years down the road. Is this the kind of job growth that was promised over a year ago?

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

High Speed Rail - News and Projects

I know this doesn't directly relate to real estate, but the location of the rail lines will impact local real estate values.  Some property sellers will make some money...look at Sonny Perdue's gains after the recent Georgia interstate meandering through his property.

But my main concern is the wasteful spending by US Congress.  They are planning to spend $2.4 billion (of the $8 billion Pres. Obama set aside last year) in grants to study 54 high speed rail projects in 23 states ($4.1 to study rail transit between Atlanta and Charlotte).  The Federal Railroad Administration received 132 applications from 32 states.

I'm sorry, but let's just consider rail systems between two highly concentrated populations in which the termination points are within close proximity to residential and commercial workplaces.  In other words, why do I take a train to take a couple of buses to my final destination?  How much does it cost to move the person on a train, to other ground transportation, to their final destination?  And just because Europe and the rest of the world has high speed rail, look at their cultures and costs.  I bet they use it due to their limited geographic space (i.e., Japan) and low GDP (Pakistan/India).

Bottom line:  Pork and spreading the taxpayer's wealth!

Source of information:  Atlanta Business Chronicle - November 5-11, 2010, 25A

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Deficit Reduction Panel and Realtor Organizations

I think alot of real estate lobbyist groups ( a whole bunch of them) are going to pummel the doors of Congress to try and stop any hint of eliminating this deduction (as they have done so often before).

That's why I don't belong to any of them - they lobby Congress for stuff in "their" best interests.

If we enacted the Fair Tax and eliminated the need for income tax deductions, there would no longer be the false incentive to buy a house "to get the mortgage interest and property tax deductions" that I have heard some other agents profess is a golden goose reason to buy a house.  Sure, it's a side benefit of owning a home, but it shouldn't be so important.  Flexibility to resell, location, home that fits your lifestyle, and well within your budget should be much more important factors.

What I understand is that the plans were to combine the elimination of the mortgage deduction with a corresponding reduction of tax rate....which may in effect wash itself out.

But mark my words, there will be agents and brokers and heads of realtor associations whining about this for weeks to come.

Ah, the smell of stupidity....

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Private Transfer Fees

Definition:  A fee charged (normally 1% of sales price) for a period of years (usually 99) each time ownership of a real property is transferred.  Sometimes it's paid to homeowner's association for maintenance or capital improvements (roads, entrance, pools, tennis courts, clubhouse, etc,.).  Other times it's paid to the developer of a residential subdivision to be applied toward the developer's costs of creating the subdivision including grading, subdividing, roads, common area amenities, sewers, utility (street water, sewer, and electrical lines), and coordination with local businesses and code department to comply with codes and ordinances, and profit.

Many times, the developer's cost of developing the subdivision is included in the cost of each lot charged to builders who purchase the lots and build houses on them.

About 20 states have laws regulating the fees and a bill is in US Congress which calls for the prohibition of the fees.

The Federal Housing Finance Agency (FHFA) is proposing a regulation top prohibit Fannie Mae/Freddie Mac from buying mortgages on real properties that has these fees.  FHFA believes that the fees lower equity, depress home prices, and add a complicated the legal transfer of real estate.

Source: WSJ, 11-5-2010 C11

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HOA Reserve Fund or Special Assessment - Pick your poison

Homebuyer/homeowner Beware!

If there is a Homeowner’s Association (HOA) for a property you plan to purchase, there normally will be monthly/annual dues you will pay in addition to your mortgage. Be sure you inspect the financial stability of the HOA's budget and its reserve fund. In this economy, many homeowners are refusing to pay their homeowner's dues.

Every HOA has costs. In addition to the front subdivision entrance area and monument, if there are facilities like a pool, tennis court(s), clubhouse, playground, etc, there are costs to insure and maintain them. The standard approach is to collect monthly/annual dues from homeowners to pay for all these and other necessary expenditures. A portion of your HOA fees/dues may be in excess of current planned annual expenses and placed in the bank as “reserve funds” to be used for major or unexpected repair and replacement of facilities/amenities.

If the HOA does not have enough funds to pay for the extras like relining the pool, resurfacing the tennis court, or re-roofing the clubhouse (which all could cost several thousands more than normal expenditures), then depending on the HOA CCR’s (Conditions, Covenants, and Restrictions – i.e., HOA rules/regulations) the HOA needs to get the funds one of two ways:

(a) PAY NOW - Charge each house in subdivision a flat one-time fee (i.e., special assessment) to cover their share of expenses, or

(b) PAY LATER - Increase the annual HOA fee by an amount equal to finance the expenditure over a period of time.

Underwriters of many condominium loans (FHA, Fannie Mae, and Freddie Mac) may require a reserve study and proof that at least a minimum percentage of the annual budget is placed in reserve or may not get financing for the HOA expenditures.

The HOA can have a reserve study performed by a qualified reserve study provider. Members of Association of Professional Reserve Analysts.

Note:   Special assessments are the results of poor planning

Here is a good article on Homeowner's Associations

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Can we make serious mortgage foreclosure violations punishable by death?

I love the state/federal governments in this country...they complain of "serious errors and procedure violations" yet can't find any major errors...then in the same breath, they want foreclosures to start moving again - Here's an idea -  Get the h*** out of the way, stop making just the lawyers profit from multiple generic lawsuits, and investigate only those calls into your state offices! ...Oh, and make serious mortgage company violations punishable by death with choice of termination method by displaced homeowner!

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Mortgage Electronic Registration Systems (MERS)

7-28-2011:  MERS is out of the mortgage foreclosure business?  Maybe not for long...Just transfer into another lender name...then foreclose! Source:  http://www.dsnews.com/articles/mers-bows-out-of-foreclosure-and-bankruptcy-proceedings-2011-07-27

6-7-2011:Hard to believe these numbers $60-120 Billion in unpaid property recording fees alone?  Either California has excessive fees or they are suffering from PMS...Phuzzy Math Syndrome! Source:  http://realestate.bryanellis.com/4581/untangling-the-mers-mess-part-2/

6-6-2011:  Oregon, like Georgia, is a non-judicial foreclosure state meaning the bank/lending institution doesn't need to go to court to foreclose, however, a Federal Oregon judge just ruled the state requires banks to record the ownership history of the mortgage with local county governments and not loud the chain of title using MERS. The Mortgage Electronic Registration Systems (MERS) was created by the mortgage industry (including consensus by the Federal Government through Fannie Mae/Freddie Mac sanction) in the 1990s to record mortgages under "MERS" ownership but that got bundled and resold as securities.  However, MERS is under investigation for lots of property records that not only hid identity of current mortgage holder, but avoided recording fee revenue for local governments.
Source: http://blogs.wsj.com/developments/2011/05/26/oregon-judge-denies-foreclosure-challenges-mers/

5-10-2011:  Court cases involving MERS (founded in mid 90 by Fannie, Freddie and some large US banks) - retains control over about 60 million mortgage loans with respect to foreclosure action - think of how much money they save (and local governments lose) when MERS doesn't need to pay mortgage filing fees more than once.

Source:  http://hken.ibtimes.com/articles/143315/20110510/california-court-mortgage-foreclosure-new-york-times.htm

Update 1-3-2011:  Shell game of MERS - See 12-15-2010 House Judiciary Subcommittee - http://www.c-spanvideo.org/program/ForeclosureC

MERS, out of Reston VA, serves as a stand alone "place holder" of mortgage loans in the United States.It was created jointly almost 13 years ago between large banks, financial institutions, and Fannie/Freddie to expedite the process of recording change in ownership of mortgage loans.  Normally, each time a mortgage changes ownership, the change in ownership must be recorded in the public records of where the real property is located.  Each change in ownership is normally accompanied by a charge by the county to record the fee that covers the cost to maintain and record records in the system.  MERS currently controls about 65 million home loans.

Since several state budgets are tapped out and looking for new sources of revenue, this provides an "opportunity" for states to get some extra revenues by filing lawsuits (Nevada and California already) challenging MERS ability to actually have the authority to foreclose on a property and attempting to collect a fee for each change in ownership on a loan during MERS control.  Virginia AG is investigating whether MERS should have paid a fee each time the loan changed hands.

A Georgia attorney is trying to get MERS foreclosures nullified and properties returned to former homeowners.

Sources:  Atlanta Business Chronicle November 5-11, 2010 - 4A - WSJ 11-2-2010, C1

Note:  Remember my post earlier this year regarding the inability of Lender Processing Services (LPS) to identify the actual owner of the mortgage?  I smell a connection between LPS and MERS....

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Should we privatize the mortgage market?

About 90% of today's $14 Trillion in mortgage loans are controlled by the Federal Housing Authority (FHA), Department of Veterans Affairs, Fannie Mae or Freddie Mac. That's alot of risk concentrated on one source - the US taxpayers!

Even though the private market couldn't compete with government guarantees, or offer loans without a prepayment penalty, we certainly don't want to leave the taxpayer on the hook.

One step toward privatization suggested was to reduce the maximum amount of mortgage loan by $75,000 on a periodic basis which eventually would force more people out of the government loan and into a private loan.

Full disclosures - consumer protections - and reducing taxpayer exposure are goals.

Recourse -The right to seize the home owner's other personal assets, in addition to the real property, in payment of the loan. Proposals include using recourse to drive rates lower if borrower is willing to accept more risk to give up their personal assets

Note: Government National Mortgage Association - Ginnie Mae - securitizes the FHA loans now.

Source: For some information was WSJ 10-25-2010, A17

Also, if you want to watch a good summary of securitization analysis - here's a Cspan video library segment - but grab a pot of coffee - http://www.c-spanvideo.org/program/296226-1

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Does crime really pay?

The MDJ article on page 5B of the 6-24-2010 issue reports that 1,300 inmates in prison filed for a total of $9 million under the $8,000 first-time homebuyer tax credit.

It was reported that 14,100 tax filers wrongly received about $27 million in tax credits. Apparently, this number doesn't include the people who filed and received the tax credit in 2009 that never bought homes. (I wonder how much of that we'll recover?)

• One home was used more than 65 times to get the same credit.

• Some even got the credit for sales "prior to" the start of the effective date.

Total claims filed amounted to almost $19 Billion.

The National Association of Realtors (NAR) reported that about 1 million new homes were sold that probably wouldn't have if the tax credit wasn't available. (Don't really know how they got those figures. I would imagine that most would be sold anyway, just later in the year and not before the 4-30-2010 contract cutoff date.)

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Alternative to Foreclosure - Deed in Lieu of Foreclosure & Short Sales

Update 10-11-2011:  According to this FICO study, there's is little difference between foreclosure and short sale when it comes to a hit on your credit score, but shorter refresh period with short sales (about 3 years) than foreclosure (about 7 years).  Source:  http://massrealestatenews.com/credit-scoring-impacts-short-sale-vs-foreclosure/

It was sad to see a young couple with two children down the street from me that weren't able to sell their house on a short sale, so they wound up taking this action: Deed in Lieu of Foreclosure.

A Deed in lieu of foreclosure is a special deed that the homeowner/borrower uses to transfer ownership in a residential property (e.g., primary residence) to the mortgagee/lender to eliminate a loan that is in default (i.e., behind on payments) and thereby avoids a foreclosure.

Some reported advantages are: see wikipedia discussion here.

It immediately releases borrower from some portion (which means a possible deficiency judgment) or the entire mortgage and may be less impact as a foreclosure.

NOTE: I am trying to noodle this out and I'm not sure how this deficiency plays out, but I would recommend somewhere in the documentation that you sign in the DIL process would need to have the lender's agreement to "waive" their pursuit of a deficiency judgment.

Your lender is required to report a deficiency from a foreclosure or short sale to the IRS for tax purposes - so I assume this would be true if the lender also forgave a small portion of the loan under Deed in Lieu action. The lender sends you 1099A Form which reflects that the deficiency has "not" been forgiven/cancelled and the lender "can" come after you in future to collect the debt.

If the lender forgives the debt, you'll receive a Form 1099C. It suggests that the remainder of the debt has been cancelled and the lender will not come after you to collect the debt.

For income tax purposes in 2010, in both cases of the 1099A and 1099C Forms, I believe the "forgiveness" of these debts will need to be reported as income, but will subsequently be exempted from Income Taxes (per HR 3648 - the Mortgage Forgiveness Debt Relief Act, 2007).

Other benefits may include:

• Avoids the public (published in newspaper of record) notice of foreclosure situation;

• The borrower may get more generous terms than he/she would in a formal foreclosure.

• It probably will hurt the borrower's credit score and future ability to obtain credit (possibly more or less than a foreclosure);

• Advantages to a lender include a reduction in the time and cost of a repossession, lower risk of borrower revenge (theft and vandalism of the property before sheriff eviction), and additional advantages if the borrower subsequently files for bankruptcy.
I would think some disadvantages would be:

• It may not apply if you have more than one loan on the property.

• Negative impact on your credit score - perhaps worse than 120-150 points that foreclosures and short sales impact your credit score and maybe less than the 300-350 point drop in your credit score from a Bankruptcy.  (See this article for impact - http://www.ehow.com/about_7446137_effect-foreclosure-credit-rating.html)

• Losing a property in which you may have some equity but just couldn't afford to continue the payment.

• You may first be required to try to sell the property (as a short sale) for 60-90 days which often wastes your time, but delays the inevitable, since you may not receive an offer high enough to pay off the loan balance(s).

See a summary of advantages and disadvantages of Deeds in Lieu of Foreclosure at http://www.nolo.com/

or

Here at the HUD (Housing & Urban Development) website

Both the borrower (by voluntary action) and the lender have to agree on all terms. If possible, the written agreement must have total consideration (appraisal/fair market value of the property plus potential cash payment by borrower, if cash is available) at least equal to the loan balance. Otherwise, there will be loan forgiveness involved.

Before considering this action, please consult with a real estate attorney about the process and consequences.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Credit Unions - Sam's Club - will they be lending more to businesses?

This doesn't necessarily relate to residential real estate, but perhaps to commercial real estate and all business owners, regardless of where they operate their businesses - residential or non-residential locations.

HR 3380 (Promoting Lending to America's Small Businesses Act) proposed that credit unions may double (from 12.5% to 25% of its capital) the amount of funds available to lend to businesses. Credit unions may also be able to provide other services like business checking and business credit cards.

This really ticks off the commercial banks who traditionally lend to businesses….Obviously, it’s competition (duh!).

Side note: Our credit union just went video – the new branch they moved to, with respect to security, has a video screen to chat with teller and air tube system that transports your transaction to another part of the facility…There is no human contact with the teller, just through a video screen an camera…maybe they can offer a video game or cartoon too.

Article on Page 4B of July 7, 2010 of Marietta Daily Journal (MDJ), Sam's Club is now partnering with Superior Financial Group to make loans from $5,000 to $25,000 to small business members. Even with the small dollar amounts involved, I would suspect the Commercial Financial institutions will object to this and lobby against it.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

So how's HAMP (Home Affordable Modification Program) working out for you now?

4-15-2011:  Only about 25% of 2.7 million homeowners (opposed to the 3-4 million promised to be modified) have received permanent modifications, but we're not sure how many of that 25% have redefaulted. Source:  http://www.365days365plays.com/365-days-365-plays/7048

4-15-2011: HAMP was established with goal of mortgage relief for 3-4 million homeowners; 75% of homeowners receiving permanent modifications are expected to redefault (no wonder since debt-to-income ratios are about 63%); recent investigations revealed that 7% of 3 million homeowner applications through the five major loan servicers received permanent HAMP modifications; and $2 Billion has been allocated for US Treasury's Hardest Hit fund to help homeowners (some up to 12 months or $15K one time assistance such as in Alabama). Another $1 Billion HUD program will provide non-recourse loan(i.e., a percentage will be forgiven each year for x # of years)up to $50K to "distressed homeowners" in "targeted communities". Source: WSJ, 8-25-2010, A15.

3-1-2011:  About 25% (680,0000/2,700,000) of homeowners applying for HAMP (started in 2009) have received loan modifications.  WSJ 2-28-2011, A4.

NOTE:  Approximately 6.7 million homes were foreclosed between 2000 and 2010.

1-15-2011:  Only 170,000 of the 1.1 million homeowners who started the program have completed the loan modification.

11-20-2010:  Over 50% of the 1.4 million applicants for HAMP that were approved for temporary modifications didn't qualify for permanent modifications.  Neil Barofsky (inspector general overseeing TARP) thinks people were put into foreclosure that shouldn't have been; would have been better off had they never entered the program; and wrongly denied permanent loan modifications.

Update 10-27-2010:  Watch the hearing about HAMP's "in"effectiveness - http://www.c-spanvideo.org/program/id/236346

Apparently about 15% of borrowers (398,000/1.3 million) who applied for the HAMP got help...another 520,000 have dropped out and about 45% (234,000) may have received loan restructuring with their loan company...but 286,000 homeowners weren't helped.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

FHA Kiddie Condo Loan

This type of mortgage allows a person to co-borrow with a blood relative (eg. parent, grandparent, sibling, etc.) who helps qualify for the loan using their income or assets. Both borrowers take title to the property and sign for the loan.

There are three big advantages to using this type of loan.
1. A low down payment (as little as 3% of the purchase price).
2. A lower, owner-occupied interest rate on the mortgage Vs the higher investment property interest rate.
3. Helps the new borrower establish a solid credit rating.

With a Kiddie Condo loan program, at least one borrower must occupy the property as his/her primary residence, but extra bedrooms could be rented out to help cover the cost of the mortgage payments. This is a perfect way for a college student, recent graduate, or anyone unable to obtain a loan on his/her own to buy a condo or townhome or single family home with the help of a family member

The tax benefits, such as deducting mortgage interest and real estate taxes on a Federal Income Tax return, can be divided among the owners, according to who pays the expense. See your tax advisor for details.

Make sure you read the section on credit as both borrowers must qualify.  If the owner occupant has little or no credit you should review the "non traditional credit" section and pay particular attention to the information on the 2nd page.

Note that the property DOES NOT have to be a Condo. If it is a condo then you need to make sure that the project is approved or the that the property can get a "Spot approval".

Kiddie Condo Loan

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Commercial & Residential Real Estate (CRE) News & Updates

2-8-2011:  Now the news seems rosey about Commercial Real Estate according to this article - but it seem the rosiness is based on buying foreclosed/depressed sale of commercial properties and the specific market of these properties so my conclusion is still...it all depends on which end of the market you sit whether things are good or bad - http://www.businessweek.com/news/2011-02-04/u-s-commercial-property-recovery-spares-economy.html

2-7-2011:  WSJ, A2 - Office space vacancy rate is about 18%, delinquency rate of Commercial Mortgage Backed Securities (CMBS) is over 9%, and some think rental and occupancy rates will struggle along in the next 4 years.  Not all gloom news - some investors are bidding up property values due to good deals and low interest rates but the US Government is encouraging banks to modify existing loans as alternatives to foreclosures to help retard the fall of property values.

Commercial Indexes - Indexes (as different as night and day)

Green Street Advisors - Said Commercial Real Estate hit bottom in 2009 and is rising.  They track 47 REITS with $400 billion of assets.

Moody's Investors Service - Said commercial real estate hasn't hit bottom yet.  They track closed sales of at least $2.5 million.

Source:  WSJ 10-13-2010, C11

RESIDENTIAL INDEXES

S&P Case Shiller home price index - 3 month average of home prices in 10 major metropolitan areas.

Federal Housing Finance Agency index which covers sales and refinancings of conventional mortgages purchased or securitized by Fannie Mae/Freddie Mac (which omits jumbo and subprime loans).

Source:  WSJ 10-27-2010, A6

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Cobb County Restrictions on Parking...on the residential property

Cobb County Code (which complies with Georgia state OCGA 36-1-20) states that vehicles may not be parked on the grass or unimproved surface between the road and the home's front setback.  Parking in a residential area normally allows only one vehicle, one boat, and recreational vehicle or any combination totalling three (3) in the rear or side yard on a hardened surface (concrete, asphalt, or tar & gravel mix).  All tires must rest on a hardened surface.

Violations may result in jail not more than 60 days or fines from $100-1,000.

Visit www.cobbcounty.org/clerk for more details.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

NAR in Montana tries to BUY the removal of Transfer Taxes

UPDATE 10-27-2010:  Missouri (one of 13 states not charging transfer taxes) is voting to permanently prohibit transfer taxes - Many surrounding states take in millions of dollars, but nobody is saying what the money is spent on regarding real estate in the state...

Source:  http://www.columbiamissourian.com/stories/2010/10/26/surrounding-states-impose-forms-real-estate-transfer-taxes/

Apparently, money talks - especially when you want to change the constitution.

It is a noble effort for anyone to stand up and say "no more double taxation", but the NAR using money to buy the change is a little disconcerting.

Why wouldn't it be reconsidered and prohibited on its own merit? Ah, because it another "hidden source" of state tax revenue.  And in Georgia, "it's only $1 per thousand of sales price" which till amounts to double taxation UNLESS it specifically funds regulation and oversight of the Georgia Real Estate Commission, state regulators and other agencies directly related to the protection of real property rights.

So ask your State Representative and Senator "why is there a transfer tax and why can't we eliminate it?"

Source:  http://www.flatheadbeacon.com/articles/article/realtors_spend_2_million_on_real_estate_initiative/20243/

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

Fannie Mae & Freddie Mac News

This blog post will be updated from time to time.

2-20-2012:  Freddie Mac issues policy statement to mortgage servicers of Freddie Mac loans that unemployed homeowners (representing about 10% of Freddie Mac's mortgage delinquencies) can have up to 12 months of suspended mortgage payments. Source:  http://www.pe.com/business/business-headlines/20120106-real-estate-freddie-mac-extends-forbearance-for-jobless-borrowers.ece

2-19-2012:  Do you think Fannie, Freddie, or the Federal Housing Finance Agency is more interested in big bank welfare or taxpayer welfare by not getting a better settlement from the major banks?  My big question is:  What kind of due diligence did Fannie and Freddie perform when buying any toxic mortgage loans or securities?  Also, my question is:  Why ask the taxpayers for another effective bailout to drop the loan balances unless they are liens against future sales prices to recapture losses for the taxpayers?
Source:  http://www.huffingtonpost.com/peter-s-goodman/freddie-mac-report-_b_983412.html

3-14-2011:  The SEC is investigating whether Fannie & Freddie had properly & timely reported their exposure to subprime mortgage loans.  Also, Republicans in Congress are drafting proposals to eventually eliminate Fannie & Freddie - Fannie & Freddie have estimated combined portfolio of about $1.5 Trillion and guarantee about $5 Trillion of mortgage loans.

3-11-2011:  According to the Wall Street Journal (3-1-2011,C1) both Fannie Mae and Freddie Mac are borrowing money from the US Treasury to pay their preferred dividends..to the US Treasury...does this make sense?

3-7-2011:  The Securities and Exchange Commission (SEC) issued a Wells Notice to investigate Freddie whether the company violated federal securities laws.

(NOTE to the Insane:  Freddie wants to borrow $500 million from the Treasury to remain solvent after already paying the Treasury Department $1.6 Billion in dividends.  Fannie Mae may require $2.6 Billion to cover cost of dividend payments to the Treasury.  Is this a great country or what? WSJ, 2-25-2011, C7)

3-7-2011:  Interesting - Fannie & Freddie have total portfolio of $1.4 Trillion in home mortgages - They plan to reduce their portfolio by 10% each year. (WSJ, 2-9-2011, A4) (Comment:  I don't think that will happen - Who will buy the loans?  The loans better be good quality, but what is good quality today - may be crap tomorrow.)


2-15-11:  I don't believe Fannie and Freddie were as a large a problem (they were a big part but the private market was worse at times) as the securitization process was to push us into a big slide.  We all saw the writing on the wall that home prices were climbing faster than we could justify the price.  No matter which way we establish the mortgage market in the future, it's gonna take one mean mo-fo regulator to manage to watch every move and warn all involved that there's any problems that need correcting.  So which regulatory body in the US Government has done that good of a job in the past - I say the U.S. Marines, and they can "fire at will" once they contact the enemy!

1-11-2011:  However Fannie and Freddie are structured from ...now on, here's what they're faced with - in the current home price decline, there are 19 million subprime mortgages supported by the Federal Government (i..e., the taxpayer) - (12 million delinquent Fannie Mae/Freddie Mac foreclosures; 5 million FHA insured properties; 2.2 million mortgages held by banks under the Community Reinvestment Act (CRA) requirements.  NOTE:  About 8 million were securitize by various lenders. The Federal Housing Finance Agency (formerly part of the Office of Federal Housing Oversight Committee), the US Government Agency in charge of overseeing Fannie and Freddie, estimates the final cost of bailing Fannie/Freddie out is as high as $363 Billion (right now we're at at least $148 billion).

See the Financial Crisis Inquiry Commission on Cspan for more details.

12-29-2010:  Sounds like the Republicans (who were clamouring to Obama about restructure Fannie and Freddie during the Frank Dodd discussions in more privatization and fast) are now back tracking and saying that we should slow down and lose the Federal grip over time.  The House Financial Services Committee in the next Congressional session (112th Congress) is set to tackle the restructuring - and some suggest gradual lowering over time of limits insured by the Federal Government.

12-26-2010: How should Fannie Mae-Freddie Mac be structured in the future?  The Treasury Department has a January 2011 deadline to propose a revised system to Congress.  Should it be limited guarantees of loans?  No guarantees?  All or nothing?  Both Fannie and Freddie have announced increased risk based fees to lenders in 2011, raising the cost of loans to borrowers.  There maybe lower loan limits limiting exposure to taxpayers

Note:  Fannie and Freddie guarantee about 50% of the $10.6 trillion in home mortgages.
12-26-2010:  The Obama administration is pressuring Fannie and Freddie through their regulatory agency (Federal Housing Finance Agency (FHFA)) to accept a program run by the Federal Housing Authority (FHA) to write down mortgages and hand them to the FHA.  Only 3 loan modification out of 61 applications in the first 6 months.  Some say loan modifications aren't doing enough (no duh!).  Only 10 of 120,000 loans were modified by Fannie and Freddie in the first 6 months of 2010.  Fannie and Freddie are hesitant to reduce loan balances due to limitations of option to recoup losses later.  The FHA program is open to borrowers who "aren't" behind on their mortgage payments.  Also, banks were able to receive subsidies if they wrote down mortgages of borrowers who owed at least 15% more than their homes were worth.  Source: WSJ, 12-8-2010, A2.

Note: An estimated 11 million homeowners (about 23% of all homeowners) are under water (i.e., owe more than their homes are worth).
11-12-2010: An interesting OP-ED piece in the WSJ 11-11-2010 (A19) gave a plan of how Fannie and Freddie could be unleashed on a gradual basis during an 8 year period which may allow the private market to pick up the slack.  It's certainly going to be interesting if Fannie and Freddie ever become privatized or a piece held in US Government control.  I would hope privatization with strong oversight, but you know how that tune could play out - just as bad as it has before under Government control with Government oversight.  We definitely need a good watchdog and a Congress that responds.  And additional transparency wouldn't hurt either.

11-4-2010:  MDJ 11-4-2010, 6B - $4.1 billion loss for 3Q10 and requested an additional $100 million (less than the $1.8 billion last quarter) in federal assistance.

Fannie Mae and Freddie Mac (who owns or guarantees about 50% of all US mortgages) are planning to design an indemnification agreement (perhaps similar to the Bank of America - Fidelity National agreement covering clean foreclosures---but leaves B of A exposed to extra losses).



Fannie and Freddie may end up costing the US taxpayers $259 billion (currently has cost about $150 billion). (WSJ 10-23-2010, B2)...As a comparison, according to Treasury Department $50 billion was shelled out for financial and auto company bailouts.

Fannie May (in August 2010) notified loan servicers they could face fines if foreclosures became unreasonably long. (WSJ 10-230-2010, B2)

Federal Housing Finance Agency (FHFA Chief Edward DeMarco----Joseph A Smith Jr was just appointed per Op-Ed 11-15-2010, A16) is Fannie's and Freddie's regulator is seeking legal assistance in recovering billions in mortgage backed securities that have now foreclosed that were purchased from banks and financial institutions. (WSJ, 10-21-2010, C1)

Fannie & Freddie purchased privately issued securities (about $227) billion as investments backed by subprime and other riky loans in 2006 and 2007.

9-17-2010:  Fannie/Freddie taken over 191,000 homes as of 6-30-2010 and till taking them in faster than selling them; Fannie took a $13 Billion charge for carrying costs in 2Q10;  lenders are taking too long to reclaim homes shadow inventory around 4 million homes; Fannie & Freddie are trying not to dump as many homes on market at one time to lower values in a neighborhood; Fannie plans to test foreclosure rentals in Chicago; Fannie offers HomePath mortgages at 3% down payment - no PMI on their own foreclosed properties.

8-7-2010:  Rep.Spencer Bachus (R) has asked Rep Barney Frank for a hearing into the firing of Caroline Herron (former Fannie Mae Executive) ...Apparently, (according to the 8-7-10 AJC), she was fired after she criticized how the company was running a loan assistance program....She asked that the borrower provide proof of income and these requests were ignored....

Yeah, let's see if (a) Rep Frank holds a hearing and (b) if the real truth is told...I think I know the answer to both concerns...

8-6-2010:  Fannie Mae and and Freddie Mac tighten lending standards since 2008 and lo and behold, since then those loans are performing better than any loan in the past decade...well, duh!

8-6-2010:  So far, Fannie Mae & Freddie Mac have required $146 billion of taxpayer resources to cover losses ... so far.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.