Blog :: 2011

FHA 203 (k) loan to Investors! Help Housing

Bring back FHA 203(k) loan to investors!

NAR pushes 5-point plan to expedite housing recovery

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Two years ago, the National Association of Realtors, the largest trade group in the nation with 1 million members, floated its idea of a housing solution to attendees at its annual convention.
NAR later presented Congress with a Four-Point Housing Stimulus Plan to help stabilize the housing and mortgage markets. The crux of the package suggested using $130 billion of the $700 federal billion bailout funds on housing, specifically earmarked for an interest-rate buydown and more tax credits.
That buydown idea did not happen. It would have been a one-percentage-point, interest-rate buydown on fixed-rate loans for all buyers. The reduction reportedly would have resulted in approximately 840,000 additional home sales and reduced the inventory of homes by as much as 20 percent.
What was adopted was an $8,000 first-time homebuyer tax credit and a new existing homeowner tax credit of $6,500. The first-time bonus was especially popular, even extended for an additional period.
This year, NAR crafted a five-point proposal, New Solutions for America's Housing Crisis, that really does not contain any new ideas at all, rather a restoration of old guidelines and programs.
While each "point" contains about five subtitles that could easily stand alone, the proposal focuses on higher lending limits, no reductions in the mortgage interest deduction, reinstatement of the FHA 203(k) program for investors, and relaxed mortgage guidelines for second homes.
The investor message came through loud and clear, particularly because Florida credits its rebound to investors and international second-home buyers. According to Moe Veissi, NAR president-elect, a 10-year supply of condominiums has been reduced to seven months due to cash transactions by investors looking to hold the properties for long-term rentals.
"Investors are not healthy to the market during bubble years, but they can help speed up the recovery in a down market," said Lawrence Yun, NAR's chief economist.
Owner-occupants continue to use popular 203(k) loans, which allow the borrower to finance both the purchase of the property and upgrades into one mortgage guaranteed by the government.
However, for the past 15 years, FHA has maintained a moratorium on allowing investors to use the 203(k) program because of past abuses in how the refurbished properties were appraised.
Most mortgage loans provide only permanent financing. Typically, the lender will not close the loan and release the money unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, the lender usually requires improvements to be finished before a long-term mortgage is granted.
When a buyer wants to purchase a house that needs repair or updating, the buyer usually has to obtain interim financing to purchase the dwelling, then additional financing to do the work. When the rehab is completed, a permanent mortgage -- which pays off the interim loans -- is made.
(Interim financing often involves relatively high interest rates and relatively short payback periods.)
The FHA 203(k) program was designed to roll all financing into one package. The borrower can take out one mortgage loan, at a long-term fixed or adjustable rate, to finance both the acquisition and the rehabilitation of the property. The mortgage amount is based on the "as will be" (projected) value of the property and takes into account the cost of the work.
FHA 203(k) loans are available for purchase or refinance. The refinance component can combine all existing loans plus provide the funds for needed repairs.
To minimize risk to the mortgage lender, the loan is eligible for endorsement by FHA as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At that point, the lender has a fully insured mortgage.
The FHA 203(k) loan can come in handy in a foreclosure sale -- and especially to investors around the country. In many cases, the previous owner has taken fixtures or the structure is in dire need of repair. Loan proceeds would provide for the updates and the permanent financing.
It's time to let investors back under the FHA 203(k) umbrella. It's past time to get vacant homes cleaned up and alive again with occupants.
Tom Kelly's new e-book, "Bargains Beyond the Border: Get Past the Blood and Drugs: Mexico's Lower Cost of Living Can Avert a Tearful Retirement," is available online at Apple's iBookstore, Amazon.com, Sony's Reader Store, Barnes & Noble, Kobo, Diesel eBook Store, and Google Editions. 

                                         

Village of Shelburne Falls, Mass is back in Action

It is so nice to see the Village come back alive since the flood that devastated so many shops and homes.  Ann Brauer quilts is opened and has relocated across Bridge Street next to the iron bridge.  JH Sherburne Framery is now open and ready for your business.  The West End Pub is back and a new antique shop/bakery is opening next door to our office on Bridge Street.   Lamson and Goodnow that has everything you could imagine for specialty Kitchen items.  I love my coffee maker!   Shop Local and Shop the West County Area.  There is something for everyone this holiday season.  

This is a very special community!  Just watch this video.

Storm Flooding (pt 1) from WGBY on Vimeo.

Winter Farmer's Market - Greenfield, Mass

Greenfield Winter Farmers' Market Starts December 3rd, 10am-1pm

Many of you have asked Greenfield Winter Fare to happen more often so this year we've decided to have a Greenfield Winter Farmers' Market the First Saturday of each month December - March (December 3rd, January 7th, February 4th and March 3rd).  The market will take place at the Second Congregational Church on Court Square (next to Town Hall) in Greenfield from 10 am - 1 pm.  We look forward to providing you with fresh locally grown vegetables including: salad greens, kale, spinach, root vegetables, sweet potatoes, cabbage, potatoes, bok choy, etc, fruit, apple cider, fresh eggs, goats milk and cows milk cheese, beef, pork, veal, lamb, sheep pies, maple syrup and honey.  There will also be processed food including: jam, pickles, salsa, cordials and sauces.  Support your local farmers.  Greenfield Farmer's Market Website!  

Artisans of Western Mass - Buy Handmade Shop Local

Shopping for handmade local gifts from the convenience of your home can now be done under one web site.   You can browse the different artisans sites and complete your holiday shopping all under one site.   You can sign up and receive updates of upcoming shows and be kept informed of ongoing specials.   Check it out - Artisans of WMASS

Real Estate Update - NAR Chief Economist



Lawrence YunStrange Days

By Lawrence Yun, NAR Chief Economist

These are strange times we live in. The economy has officially and statistically been out of recession for two years. Still, consumer confidence (as measured by The Conference Board) is at or near its lowest point ever. Consumer inflation - as reported by the Bureau of Labor Statistics - has reached four percent - the highest inflation rate in years. Yet the 10-year government borrowing rate is barely over two percent; that means that a creditor is in essence getting two percent more money next year to buy products that are four percent more expensive.

Then there's the bank and lending environment. Most of the qualified households with the highest credit scores are paying higher mortgage interest rates than most other borrowers (because of higher interest rates on jumbo mortgages). Perhaps most puzzling of all is this. The U.S. banking system has been healing nicely since its near-death experience in late 2008, and banks have seen their profits soaring to record heights in 2010 and will likely see profits just as high in 2011.Yet bank stock prices are in the tank and banks' abundant cash reserves and profits have not translated into more lending. It is doubly puzzling and frustrating for the real estate industry since mortgages originations since 2009 have been performing outstandingly with exceptionally low default rates. Those elevated default rates that the media love to report are not recent loans but simply the "legacy" toxic mortgages that were originated during the housing bubble years that are still moving through the pipeline.

One rationale for constrained lending that some of the banks invoke is lawsuit threats from robo-signing scandals. Another reason why they claim to need to hold on to their extra cash is the regulatory uncertainty from the Dodd-Frank legislation and how that will all play out (compliance costs money). But the extra cash holding could also be due to nice steady income stream that flows when there is a lack of competition in the marketplace. We've seen significant consolidation in the banking industry in the past few years. Economic textbooks say fewer firms mean easier tacit collusion to raise fees and interest rates for consumers.

Let's not, however, put all of this on the shoulders of the banks. Policymakers are also at fault for letting the conforming loan limit slide downward. That has forced more consumers to take out jumbo mortgages - especially in certain high cost markets -- which do not carry government backing from FHA, Fannie Mae, or Freddie Mac. As of this writing (early November), the average 30-year jumbo mortgage rate was near five percent. Compare that to the conforming mortgage loan rate of near four percent. On a $500,000 mortgage, the difference in those mortgage rates results in a significantly different monthly mortgage payment (principal and interest only) which could be $250 per month. In other words, people with highest credit scores - those who have demonstrated the highest ability of financial responsibility - are being forced to fork over extra money to the banks that are already flushed with cash. That is an absolute pity. Reinstating the loan limits to where they were so fewer people would have to take out jumbo mortgages should be an easy one for policymakers to support - particularly close to an election year. Apparently convoluted thinkers in Washington disagree.

Despite these strange days in which we find ourselves, let's not overlook some good developments. Several housing market indicators have shown stabilizing - although not yet definitive recovery - signs. Here's one that garnered little press. The U.S. homeownership rate rose a notch in the third quarter of 2011 - 66.1 percent of U.S. households owned their own home. That is an increase - albeit small - from the 66.0 percent homeownership rate in the prior quarter. The ownership rate matches the level back in 1998. Back then, there was no mention of a housing bubble or about unsustainability in the media or in the academic literature.

It's quite possible that the current homeownership rate of 66.1 percent may indeed be the right stabilizing level for the country. Remember - that still represents two thirds of American households. If the homeownership rate stabilizes at the current 66 percent or so level then the natural increases in population (three million a year) and households (about 1.1 million a year in normal times) in the U.S. will bring about 700,000 additional potential homeowners each year. That presents home sales and business opportunities for REALTORS®, not just from these entrants into the housing marketplace, but also from those resulting from a "turnover rate" among the existing 75 million home-owning families. That turnover rate had been exceptionally low in recent years due to the weak economy and from the many underwater homeowners who could not move without a short-sale approval from the banks.

Other housing data in recent months have also pointed to stabilization. Despite the ever present discussion and consumer perception of when home values will stop dropping, the Case-Shiller price index has actually been rising for five consecutive months. Furthermore, Case-Shiller's low point was set in 2009, two years ago. Since then there have been only low single-digit increases and decreases. In essence that says that home values have stabilized.

Home sales have also shown stabilizing patterns. Home sales rose five percent in 2009 nationally, then retreated five percent in 2010. Sales are expected to be roughly the same this year as in 2010. So again, it is only of some small single-digit percentage movements and nothing of cataclysmic changes. Housing starts have also been at 500,000 to 600,000 annualized pace for the past three straight years.

But perception is reality - in both "normal" as well as strange times. Many consumers have been pounded with messages from the media about the continuing sharp falls in home values, home sales, and housing starts. That is not a confidence builder for consumers or for the broader economy. Strange times, indeed. Looking at the real numbers - and what's behind them - shows us that things may actually be better than we think.

Great tips to Prevent Mold in Your House

10 Ways to Prevent Costly Mold Damage to Your Home

Published: March 16, 2011
Fixing mold damage is an expensive and time-consuming home repair. But you can save time and money by implementing these 10 ounces of prevention.
Mold spores are always present indoors, particularly in humid areas. You can minimize mold growth, however, by buying a humidity monitor, which helps you keep track of home moisture that lets these spores colonize.
Here are 10 more ways to control and combat mold in your home.
1. Eliminate clutter
Cast a critical eye on household clutter, and pare down your stuff. Clutter blocks airflow and prevents your HVAC system from circulating air. Furniture and draperies that block supply grilles cause condensation. All this moisture creates microclimates in your home that welcome and feed mold growth.
So throw out things you don't love or don't use. Push furniture away from vents and grilles to keep air circulating. On humid, still days, run a couple of fans to keep air moving.

2. Control indoor climate

Mold problems often emerge during hot, humid summers when you're tempted to play with the air conditioner. But set the thermostat too high, and the air conditioner won't dehumidify your air effectively; set it too low, and you create cold surfaces where water vapor can condense.

To prevent moisture problems, and maximize energy efficiency, set the thermostat at 78 degrees F.

3. Shut windows and doors when AC is on

When you open windows and doors, you let air conditioning escape, waste money, and invite humid air into your cooler home: This causes condensation, which mold loves. So keep doors and windows shut when the AC is humming.

Also, maintain your home at around 80 degrees when you're on vacation or at work. Too often, we bump the thermostat up to 85 degrees, or turn off the AC when we're away. This raises temperature and humidity, which creates the ideal home for mold.

4. Properly size your AC unit

Make sure your air conditioning unit is properly sized for your house. If it's too small, the unit will run constantly, elevating costs but not the temperature; too big, and the unit will constantly start and stop, which wastes energy, too.

Install an HVAC unit that is just right. For guidance, call an HVAC professional, or consult Energy Star's square footage/AC capacity chart. 

5. Monitor humidity

An indoor humidity monitor will help you keep track of moisture levels that, ideally, fall between 35% and 50% relative humidity; in very humid climates, at the height of summer, you may have to live with readings closer to 55%.
But if you reach 60% relative humidity, it's time to look for the source of the added moisture; above 70% relative humidity, certain species of mold can begin growing.
Indoor humidity monitors start at about $20; more sophisticated models that simultaneously and remotely track several rooms can climb to $300.

6. Evaluate your AC

If you get a high humidity reading, first make sure your air conditioning is doing its job.
  • Is it set to the proper temperature?
  • Is it cycling on and off periodically?
  • Does it blow cold air when it reaches the set point?
  • Are coils clean?
Inspect the condensate drain pipe (the narrow white pipe sticking out the side) to make sure it's dripping regularly. If it isn't, the pipe is blocked and water may be accumulating inside the unit--or on your floor. If you suspect a problem, call your HVAC professional.

7. Look for standing water

If the air conditioner isn't the issue, search for standing water or chronic dampness that is increasing indoor humidity and providing a lovely environment for mold.

Check for puddles or dampness around hot water tanks, sump pumps, freezers, refrigerators, basement doors, and windows. Inspect crawl spaces for ground water dampness or foundation leaks.

8. Cover crawl space

Ground water seeping into crawl spaces can add gallons of moisture vapor into your house every day. The simplest defense is to cover crawl space floors with a plastic vapor barrier--6 mil polyethylene (landscapers plastic)--that traps moisture in the ground.

If you crawl in your crawl space, use a heavier plastic that won't rip as easily: Some 20 milplastic coverings are on the market.

9. Add a dehumidifier

A dehumidifier removes excess moisture from the air.
You can buy a whole house dehumidifier ($1,100 to $1,800) that attaches to your furnace, treats air throughout the house, and connects to a drain so you never have to empty a tank. If you live in very humid areas, a whole-house system is the way to go.
If you have occasional bouts of dampness and musty smells, a portable dehumidifier will suffice ($150 to $200).
Most models have an auto shutoff that keeps the unit from overflowing when the storage tank is full. Some portables have a hose hookup that automatically sends water into a nearby floor drain.

10. Call a professional

If you can't find the moisture problem on your own, or you aren't sure how to correct a problem you do find, call a home inspector or indoor air quality consultant. Look for credentials from a respected industry organization, such as the American Society of Home Inspectors or the Indoor Air Quality Association. A house call will likely run $250 or more.
Mold remediation isn't necessarily covered by home owners insurance, which typically pays only if the problem results from a sudden emergency covered in your policy, such as a burst pipe. Insurance usually doesn't pay if the problem results from deferred maintenance or floodwaters (unless you have flood insurance).

Small Business Saturday - Shop Local in Franklin County, Mass

This Saturday is Small Business Saturday which promotes shopping at your local stores.  When you shop local you are helping the local community and it makes a huge different.   The holiday shopping season is now here so support your local merchants and shop local!   For a list of participating stores visit the Small Business Saturday website and enter your zip code.   Wishing you a wonderful holiday season!

http://smallbusinesssaturday.com/

Restoring Antique Windows featured This Old House

If your antique home has the original windows and they need work and the thought of replacing with modern day windows is something you don't want to do, read about this company who specializes in restoring old windows.  I love the name of this company "Window Woman of New England".  She was featured on "This Old House".   I was reading her web site and came across this bit of information about old windows and energy efficiency.  
 According to the Field Study of Energy Impacts of Window Rehab Choices conducted by the Vermont Energy Investment Corporation, the University of Vermont School of Civil and Environmental Engineering and the U.S. Army Cold Regions Research and Engineering laboratory the estimate first year energy savings between a restored wooden window with a good storm window vs. a replacement window was $0.60. Yup, less than a buck. In their conclusions section they noted "The decision to renovate or replace a window should not be based solely on energy considerations, as the difference in estimate first year savings between the upgrade options are small." Broken glass, failed glazing, no weather stripping - these small and repairable items are what really effect energy efficiency in windows.

Interesting . . . if you have interest in restoring your windows - check out her website!

U.S. Will Remain a Nation of Homeowners

The U.S. will not become a nation of renters; there are just too many benefits, both financial and otherwise, to own versus rent. That's according to the combined findings of several recent studies presented during the "Buyer or Renter Nation?" session today at the 2011 Realtors® Conference & Expo.
An analysis over a 31-year period across 23 metropolitan areas compared the ownership benefits in terms of appreciation and interest deductibility and the costs homeowners incur with downpayment, taxes, insurance and maintenance. When it was assumed that renters reinvested any savings in rent (versus a higher monthly mortgage payment), maintenance and downpayment, renters had a greater portfolio than buyers in 91 percent of the areas examined. However, when the model allowed renters to spend any savings rather than reinvest those savings, 84 percent of buyers came out ahead.
"We knew that homeowners, on average, accumulate more wealth than renters," said Ken Johnson, editor, Journal of Housing Research at Florida International University. Johnson spoke at the session and conducted the analysis with Eli Beracha. "These findings indicate that homeownership is a self-imposed savings plan. Not everyone should own a home, but from a financial perspective, people who are planning to stay in a property over the long term can benefit from buying."
According to the most recent data from the Federal Reserve Board, a homeowner's net worth is 45.9 times that of a renter's.
Another analysis conducted by Johnson, Beracha, Hilla Skiba and Mark Hirschey determined that housing affordability is at record levels. Twenty-three states are at 30-year record levels of affordability based on price-to-income ratios, and all 50 states are at 30-year record affordability levels based on mortgage payment-to-income ratios.
"Homeownership is more affordable today than at anytime over the last 30 years," said Johnson.
Beyond the financial advantages of homeownership, Johnson also cited several studies that have demonstrated how homeownership enhances civic pride, improves voter turnout, increases personal happiness, reduces crime, and provides a better familial environment.
"These findings are no surprise to Realtors®," said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. "We, like the nation's 75 million homeowners and many other who aspire to one day own a home, know homeownership is an investment in the future of our families, communities, and nation. That is why we will continue to fight for public policies that promote responsible, sustainable homeownership; we believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream."