Anybody get excited when the news came out that there were 5 million mortgages in default because loans were issued to illegal aliens?

So the media does its thing. . . something like shouting “FIRE” in a theater and fear takes over.

That was last week. Today, last week is just a memory to the media . . . however . . .

I’m a fan of  John Hussman, President, Hussman Investment Trust, I think his news letter this week is worth sharing with you. Here are a few excerpts with a link to the entire article.

“The only thing we have to fear is the fearmongering of Wall Street itself.”

“Look - a few weeks ago, there was a $700 billion pile of money on the table, but the only way for Wall Street and bureaucrats to get their paws on it was to scare the public out of its collective gourd. They succeeded, but created the psychology that the U.S. was on the verge of depression if the bailout wasn’t passed. Having created that psychology, the crisis took on a life of its own. ”

“Property appreciation should be traded for mortgage reductions.”

“The proper way to address homeowner distress is not for the government to buy troubled mortgages and simply reduce the principal. That idea is utterly insane. If that policy was enacted, every homeowner in America would have an incentive to immediately go delinquent on their mortgage. Rather, Congress should provide for a relatively modest alteration in bankruptcy laws, allowing judges to write down mortgage principal but at the same time provide the mortgage lender with what I’d call a “Property Appreciation Right” (PAR) that would give the lender a claim on some amount of future price appreciation of property owned by the borrower. In that way, the mortgage lender would have the prospect of being made whole over time, homeowners who have faithfully made payments on their own mortgages would not be discriminated against, and homeowners in trouble would surrender some future price appreciation for immediate reduction in their monthly payment burden. ”

Read the entire article Four Magic Words: “We Are Providing Capital”

For all my Anheuser-Busch friends, clients and those Financial Planners helping them make the decision on whether or not to take the early retirement offer that has been sent to them.  If they are considering restructuring their debt or refinancing, they need to do that prior to accepting the early retirement.  Once they have accepted the package, their probability of continued employment has ended, even if they are going to be employed at the time the loan closes.  Any severance package that includes income, if the income is not going to continue for 3 or more years will not be used for qualification purposes when attempting to get approved for a loan.  In the current underwriting climate, underwriters are getting better at doing their job and with all of the news coverage of the proposed merger, I would hate for someone to have a loan denied because they did not plan ahead.

For questions or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Tags: St.+Louis+Real+Estate, Early+Retirement, severance+package, mortgage+news

Consider a Seller Concession…

Lowering the price of your home may sell it more quickly, however offering certain incentives can actually be much less expensive and may be more effective. Major impediments to home purchase include the lack of cash and lack of income to qualify. How can you help?

For example, if your home is listed for $300,000, you can offer…

Three percent towards the buyer’s closing costs. This will lessen the cash necessary for the purchase. For example, if they are obtaining an FHA mortgage, you may have just cut the cash requirement in half!

Three percent towards a temporary buy-down of the interest rate.  In this case you would be helping the purchaser pay a lower rate in the early years of the mortgage, without the long-term risks of an adjustable rate mortgage.  A “2-1” buy-down off of a thirty-year fixed rate at 6.0% would give the buyer a 4.0% rate in the first year and a 5.0% rate in the second year. The mortgage payment would be reduced by approximately $200 or more than 10% for the first 12 months. Now more buyers can “afford” your home.

It might seem that $9,000 to $18,000 of “concessions” are expensive and certainly they are. However, .compare these numbers to the cost of lowering the price by 10.0% ($30,000) to make the house sell faster. A well-placed concession could be less expensive and make the home sell faster.

The Brother Team
Jeff, Doug, Chip, & Rachel

Gorman & Gorman Home Loans

Direct Phone: (314)812-0374

jbrother@gorman-gorman.com

Tags: St.+Louis+Real+Estate, Home+Sellers, Seller+Concessions, Gorman+and+Gorman

A full building inspection for a house involved in a Real Estate transaction does not necessarily mean that a termite inspection is included. Inspectors must have a special license in the state of Missouri to inspect for termites. It is true that inspectors will call out wood structural components that have been damaged by termites, whether the damage is significant or just minor. However, observing and reporting termite presence will not generally occur if a full termite inspection is not included with the building inspection. Keep mind that when a buyer orders and schedules an inspection for a house they bought, their inspector will deliver them a report describing the conditions of the major structural and mechanical components of the house only.

When the buyers order a termite inspection as well, they should expect an additional fee, and a little more time for the inspector completing both the building and termite inspection. Having your home inspector provide you with the termite inspection is recommended for several reasons. Eliminating and coordinating two companies to provide you two separate inspections, a more objective report; the home inspector has no interest in treating the home for termites. The home inspector’s thinking is that if the home has termites, treatment is recommended. If no evidence of termites is found, there is no recommendation for treatment. Some pest control contractors may fudge just a little and say treatment is recommended when old or inactive evidence is present. Most home inspectors fee will be reasonable since they are there already doing a full building inspection.

Remember that a real estate transaction inspection is visual only. The same rules are applicable to termite inspections, remember, VISUAL ONLY!, no destructive testing or pulling walls apart. This does mean that termites can be present in your home and the inspector can give you a report saying that no termites were found. Don’t panic over this. Termites can be in your home for up to a year and do very little or minimal damage. Most times this damage does not require any repair at all. When termites stay in your house for any length of time, their colony expands and their numbers grow. The likely hood of trace evidence of termites during this time is high. Shelter tubes, fras, or droppings, and even runs in the dry wall begin to appear. Body parts and wings from swarm activity are found as well. Regular inspections are strongly recommended after you buy the house.

There are ways to ensure that it is highly unlikely that no termites at all are present when you buy your house. Destructive testing, bore scopes, termite sniffing dogs, and thermal imaging cameras are now used for termite detection. These inspections are very pricey and still can offer no absolute positive guarantee that no termites exist in your home, and are generally not recommended or even allowed for a real estate inspection. Remember, this is not your house yet and most owners are not going to allow inspectors to pull their house apart looking for termites.

The bottom line is this. Always get a termite inspection included in with your building inspection. Talk to your inspector about the current conditions of the house and if there are any conducive conditions that will attract termites to the house. Know all the available treatment options, and what to look for as a home owner during the year and seasons. And above all, don’t panic when you hear the words, TERMITE PRESENCE. The professionals will know how to deal with the problem.

Harry Morrell can be reached at harrymorrell@stlouisrealestatevoice.com

Clutter…
Too Much Furniture…
Personalized Wall Colors and Patterns…
Those Collectibles…

In this market, anything and everything needs to be done to give your house the edge, whether you are the Seller or the Listing Agent.

There is so much inventory out there, Buyers need not rush into anything until they find that special house….the one where they can visualize themselves living there, with their things.  The house that emits those warm fuzzies!  The house that makes them feel like they are at home!

How does your house become that home that they love?  Make sure it is staged! Whether it is a Staging Consultation Service for ideas and solutions, or Occupied Staging Services where the staging is completed for you with your belongings and budget, or Vacant Home Staging Services, with added furniture and accessories to define and accentuate….Houses that are Staged sell faster than Non-Staged houses, that is a fact!

Staging puts your house in its best possible apperance!  The MLS pictures will look great, attracting Buyers and their Realtors to make that appointment for a personal visit. 

Then when they get there…WOW!

Our staging team, We Stage St. Louis, has helped to sell over $7.6 Million in Homes within the Greater St. Louis Metropolitan Area, since January, 2007.  Our Staged properties sell in an average of 40 days, and we are helping to get our Sellers 98.1% of the LP at closing.  90% of our Staged properties have SOLD! 

Staging make a difference, especially in a more challenging housing market! 

Reduce your nice clutter and your not-so-nice clutter, neutralize your walls and other areas, and accentuate your house’s special features through staging…..Get your house Sold!

Accredited Staging Professionals (ASP Stagers) are available to help you get your house sold with ideas and solutions based on professional guidelines that have proven to be successful.

If you are planning to place your house on the market in the near future or if your house has been on the market for awhile, decide to have your house staged!  It is never too early or too late!

Make the decision TO STAGE….

Sue can be contacted at suerector@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, Home+Staging, ASP+Stagers

Credit for First-Time Home-buyers

The single largest provision in the Housing Act is a measure allowing taxpayers buying their first home to take a tax credit of up to $7,500 of the purchase price. Qualified home-buyers can subtract the credit amount from their federal income tax when they buy a home and even get a refund if the credit exceeds their tax. However, they are then required to pay the credit back over fifteen years. The result is that the credit resembles an interest-free loan that must be repaid to the government.

Here are the details of the new credit:

• The home must be located in the United States and must be the taxpayer’s principal residence. The taxpayer (and the taxpayer’s spouse if married) must not have owned another principal residence in the United States in the three-year period before purchasing the new home. Accordingly, the home does not literally have to be the taxpayer’s first home ever purchased in the United States.
• The home must be purchased between April 9, 2008 and June 30, 2009. Purchases from certain related persons and acquisitions by gift or inheritance do not qualify. A home constructed by the taxpayer does qualify if the taxpayer moves in between April 9, 2008 and June 30, 2009.
• There is also a special rule that allows taxpayers who purchase a qualifying principal residence in the first six months of 2009 to treat the purchase as if made on December 31, 2008. This allows the credit to be claimed on the taxpayer’s 2008 taxes rather than waiting to claim it on the taxpayer’s 2009 taxes.
• The credit is equal to ten percent of the price paid for the home, up to a maximum of $7,500. The $7,500 maximum credit applies both to individuals and married couples filing a joint return. A married individual filing separately can only claim a maximum credit of $3,750.
• The credit is phased out for individual taxpayers with modified adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of purchase. Taxpayers with modified AGI over $95,000 ($170,000 for joint filers) can’t claim the credit at all.
• The credit is refundable, which means that households with incomes too low to owe any income tax can still benefit as the excess credit available after applying to any income taxes will be refunded to the taxpayer.
• In the second year after purchase (note that the payback doesn’t immediately start in the subsequent tax year), taxpayers who took the credit must start paying back the credit in equal interest-free installments over fifteen years. For example, suppose a first-time home-buyer purchases a home for $100,000 in December 2008 and claims the maximum credit of $7,500 on his 2008 tax return. He would then be required to pay back $500 (one-fifteenth of the credit) on his tax return for 2010 and for each subsequent return for the following fourteen years, finishing in 2024.
• If the taxpayer sells the home (or the home ceases to be the principal residence of the taxpayer or the taxpayer’s spouse) before the complete repayment of the credit, any remaining credit is due on the tax return for the year in which the home is sold (or ceases to be the principal residence). If the home was sold at a loss to an unrelated person, repayment of the remaining credit is forgiven to the extent of the loss.
• No credit is allowed if certain conditions exist: the taxpayer was ever entitled to a District of Columbia homebuyer credit, the home purchase was financed through tax-exempt mortgage revenue bonds, the taxpayer is a nonresident alien, or the taxpayer disposes of the residence (or it ceases to be a principal residence) in the same year as it was purchased.

For a chart of the tax credit information, click here 

 For Questions or Comments, please contact Chris Scheer chrisscheer@stlouisrealestatevoice.com  

On July 30, 2008, President Bush signed into law the “Housing Assistance Tax Act of 2008” (the Housing Act).  It includes a $15.1 billion package of housing tax incentives.

Part One

Property Tax Deductions for Non-Itemizers

The Housing Act created a new, temporary property tax deduction for non-itemizers (i.e., for taxpayers who claim the standard deduction rather than itemizing their deductions).

Highlights include:

• The provision creates a new standard deduction for state and local real property taxes paid by non-itemizers. Since most homeowners who are paying on a mortgage have enough deductions (e.g., mortgage interest and property taxes) to justify itemizing them on their return, this new provision chiefly benefits homeowners who have paid off their homes.

• The deduction is currently only available for tax years that begin in 2008.

• The amount of deduction will be as much as $500 for single filers and $1,000 for joint filers. Since this is a deduction and not a credit (i.e., a dollar-for-dollar reduction in tax liability) the actual tax benefit will not be all that substantial.  For example, it only proves a maximum of $100 to a couple in the ten percent tax bracket and $150 to a couple in the fifteen percent bracket (and only $50 and $75, respectively, to singles in those brackets).  Granted, in this economy every little bit helps.

Part Two

Credit for First-Time Homebuyers (to be continued)

 Chris Scheer can be reached at chrisscheer@stlouisrealestatevoice.com

Here we go!

It is actually going to happen! 
The new rates for the 2008B are as follows:

CAL for Government loans 6.9%

NON CAL for Government loans 6.45%

CAL for Conventional loans 7.3%

NON CAL for Conventional loans 6.85%

The window for reservations will open at 8 am on Monday August 4th.  As soon as you have a confirmed reservation you may close loans.  All loans in this bond issue will be sold to the new master servicer US Bank.  Training with the master servicer will start on Tuesday August 5th in Columbia and on Wednesday August 6th in St. Louis.  I will go over the changes to the program in depth at the training but I will state the changes briefly in this email.

Rates
As you can see we will have 4 rates instead of 2 due to the conventional market.  Only Fannie Mae’s My Community Mortgage or Freddie Macs Home Possible programs can be used with this bond issue. There will be no charge of 1.25% for LLP and adverse market fee in this issue only.  However, there will have to be a $175 servicing fee charged to the borrower for the all CAL loans.

Down payment Assistance
As you can see I have changed the acronym from CAP to CAL.  This stands for Cash Assistance Loan and will help differentiate between the two programs.  The assistance will still be 3% of the loan amount but it will be in the form of a soft second mortgage that will be forgiven over a 5 year period.  The loan will actually diminish 1/60 per month over the 5 year period.  The borrower will then be given a 1099 every year for the amount that was forgiven that year and will have to claim that as income on the federal tax return.  If the borrower sells or refinances the loan in the first five years the remainder of the amount will have to be paid back. We have been discussing the just-enacted housing stimulus bill with FHA staff and they told us today that the just-enacted housing bill does not impose a 100% CLTV cap on FHA loans.  It imposes a 100% LTV cap on the FHA-insured first mortgage and requires the FHA mortgage insurance premium to be counted toward the LTV ratio for purposes of the 100% cap. HUD will continue to allow second liens from state housing agencies that result in CLTVs that exceed 100%.

Chris Scheer can be reached at chrisscheer@stlouisrealestatevocie.com

The wonderful thing about interest rates is that you never can truly predict what direction they are heading in.  For those of you that read my last post about rates going down, you at this point think I am a complete fool!  At some level you might be right; however the same pressures that existed when I wrote that article are still there.  They just have had some short term relief and the usual unpredictable influences that occur from time to time affect them.  Let’s talk about where we were, where we went and where we are now?

Two weeks ago today our 30 year fixed on a conventional loan was about 6.75%.  It was then that I started the article on rates dropping.  Throughout that week the rates started to fall, so much that on Friday morning of that week I locked in a purchase at 6.125% on a 30 year loan.  Around 1:00 that day it was announced that the Fed was stepping in and taking over Indy Mac bank. At that point our rates jumped up to 6.375%. 

The following Monday the market remained calm, and rates did not move.  Then on Tuesday oil prices started to drop and over the next two days oil fell over $10 a barrel.  All of a sudden Wall Street showed improvement in stock prices and the 6 week slide was halted.  That meant that money was flowing back into stocks and out of bonds.  Remember your economic lessons of previous posts, when the demand goes down the price goes down.  On bonds when the price goes down the yield (interest rate) goes up.  So by Friday of last week we were back to 6.75% on a 30 year loan. 

As we start the week, we have oil starting to climb again and one of our two Presidential Candidates trying to move troops to Afghanistan to fight the War on Terror.  As long as we are fighting Wars, we are going to have challenges controlling our markets.  These wars are costing us BILLIONS and we are paying for that with borrowed money.  Sooner or later that will have a negative effect on our economy and we will see rates come down.

For questions or comments about this please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Indy+Mac

Goodbye Countrywide and Goodbye to their step brother Indy Mac

The Federal Reserve stepped in and took over Indy Mac bank on Friday. 

This comes as no shock to members of the mortgage industry as recently Indy Mac announced it was ceasing its retail mortgage operations.

So why do I call Indy Mac Countrywide’s step brother? 

For years Indy Mac mirrored all the lending programs that Countrywide created, almost to the point where unless you looked at the login page when you were visiting their site, you could not tell the 2 companies apart.  There were times when Countrywide would announce a change in a program or guideline and within hours the same change would be announced at Indy Mac.  From an originators standpoint, it was comical how the two companies mirrored each other.

When Countrywide was hammered last year and the Fed stepped in to rescue them Indy Mac started to take on a life of their own.  They for the first time were the first of the two companies to change programs and products reducing their exposure and tightening their lending practices.  It was because of these efforts that they managed to last as long as they did.  If it were not for comments made by Senator Schumer  they may have managed to right their ship and avoid the Fed taking them over.

So why does the Fed rescue one company and take over another?  Stock penetration and price.  If Indy Mac would have had the numbers of shareholders that Countrywide had world wide or even Bear Stearns, they would have been rescued as opposed to taken over. 

For Questions or comments, please contact Chris Scheer at chrisscheer@stlouisrealestatevoice.com

Tags: St.+Louis+Real+Estate, St.+Louis+Mortgage+News, Indy+Mac, Countrywide