Judy Newton Used My Blog Title!

Why Buy A Home Now?

by The KCM Crew

 

Despite what appears to be a non-stop wave of tough news regarding real estate, four major media players have come out this month with the same advice: It Is Time to Buy a Home! Here are the four articles and a breakdown as to why the advice makes sense.

The Wall Street Journal: Why It’s Time to Buy 

CBS Money Watch: Why the Time to Buy is Now

Forbes Magazine: 9 Reasons to Buy a House Now

National Public Radio: For Many, It’s Still a Good Time to Buy a Home

With prices continuing to depreciate in most regions of the country, some may wonder why these four entities are suggesting to their readership that now is the time to buy. Each organization realizes that PRICE is not as important as COST. The cost of a home can go up even if prices continue to fall. Unless you are an all cash buyer, you must take into consideration the expense of mortgaging when calculating the full cost of a home. Here is some information to consider.

Interest Rates

Currently, interest rates sit at historic lows. However, Fannie Mae, Freddie Mac, PMI and the National Association of Realtors are all projecting approximately a 1% increase in mortgage rates over the next year. A one percent increase in rate negates a ten percent fall in prices.

Lending Standards

The government has proposed a tightening of lending standards called Quality Residential Mortgage (QRM). If accepted as proposed two things will happen:

1. The qualification process for loans will become more difficult
2. The cost of a loan will increase

Bottom Line

There is a reason more and more financial organizations are suggesting to their followers that now is the time to buy a home: because the cost of purchasing a home is about to increase (even if prices continue to fall).

 

Short Sale Scam Cheats Banks, Sellers

Banks and distressed home sellers stand to lose more than $375 million this year from a short sale scam that has sellers and banks agreeing to sell homes at very undervalued prices, according to a new study by CoreLogic.

In discovering the short sale fraud scam, CoreLogic analyzed 450,000 nationwide short-sale transactions in the last two years.

Here’s how the scam often works: Borrowers who are underwater or in financial distress are approached, often by an investment group, and persuaded to sell the property in a short sale at a low price. Soon after the bank accepts the lowball offer, the investment group then resells the house to legitimate buyers at a higher price.

Sixty-five percent of short sales resold within six months that net profits of 40 percent or higher were flagged “suspicious,” which means there is a high likelihood that the lender accepted a low offer, according to the CoreLogic study. These transactions often go undetected by banks, too.

Source: “A Short Way to Short-Sale Fraud,” The Real Deal (June 3, 2011)

Banks Rush to Revamp Foreclosure Rules

Daily Real Estate News  |  April 29, 2011  |    The rush is on for banks to meet a mid-June deadline in offering up plans on how they plan to meet a set of guidelines by U.S. regulators to clean up their foreclosure procedures. The banks will have another 60 days after that deadline to implement the changes. As part of the rules set by U.S. regulators, 14 financial institutions will be required to provide a single point of contact to borrowers trying to modify a loan or in the foreclosure process as well as set “appropriate deadlines” for deciding whether borrowers can get a loan workout. Regulators are also requiring banks to ensure their staffing levels are on par to handle the flood of foreclosures and loan modifications.  Several banks have already taken steps to implement the changes.  For example, J.P. Morgan says it’s developing a software program to make it easier for employees and borrowers to track loan modification requests. It also has started providing borrowers with a “relationship manager” to help navigate the loan modification or foreclosure process.  Citigroup, which already provides a single point of contact, says in the next few months it'll debut a “concierge" system that will provide a small team of employees to guide delinquent borrowers and home owners at risk of default. Banks are also making efforts to speed up their loan modifications, after customers have complained of long delays from banks in responding to requests. For example, Los Angeles Neighborhood Housing Services says it takes an average of 141 days for its borrowers to get an answer on an initial loan modification request. Wells Fargo was found to have the fastest turnaround: Initial reviews averaged 79 days. But the bank says now 60 percent of its borrowers receive a decision five days after the company receives the request.  Banks are also increasing their staffing. J.P. Morgan has announced it’ll add up to 3,000 new home-lending jobs, and Bank of America plans to hire about 3,000 employees to focus on its troubled mortgages.  New Incentives From Fannie, Freddie Banks and mortgage servicers also must meet new guidelines from Fannie Mae and Freddie Mac, announced this week, that aim for more loan modifications and prevent foreclosures from taking too long.  Mortgage servicers will be required to approach borrowers earlier, making contact frequently after just one missed payment.  The GSEs are also offering incentives: They’ll pay $1,600 in incentives depending on how quickly servicers complete a loan workout. They also will impose a $500 compensatory fee on servicers who do not complete loan modification applications within six months after the loan goes delinquent. The changes will go into effect in the second quarter. Source: “Banks Rush to Improve Foreclosure Practices,” The Wall Street Journal (April 29, 2011)

 

More Borrowers Have 'Strategy' to Defaulting

Daily Real Estate News  |  April 22, 2011  |  More borrowers who can afford their mortgage payments are opting to stop making payments and walk away from their homes. But new research sets out to help lenders pinpoint the behavior that makes up these strategic defaulters. According to research by FICO, these strategic defaulters pay their bills on time, rarely exceed their credit card limits, hardly use retail credit cards, have a reputable credit score, and tend to have a short occupancy in their current home.  "These are savvy people who organize themselves," says Andrew Jennings, FICO's chief analytics officer. "This is a planned activity, not an impulse activity. Since they know their credit scores will be badly hit after they default, they even tend to open up new credit cards in advance to prepare, according to the FICO study. "Mortgage payment patterns have shifted, and some borrowers are intentionally defaulting on their mortgages because they believe it is in their best financial interest, and because they believe the consequences will be minimal," Jennings says. Most borrowers who strategically default owe much more on their home than it is currently worth.  But "before mortgage servicers can work effectively with potential strategic defaulters, they must first be able to identify them," Jennings says. That’s why FICO is releasing a new technology tool that will help lenders predict the probability of strategic default based on a borrower’s credit score.  "Our new research shows it is possible for servicers to find those at greatest risk of strategic default, both to prevent losses and to prevent borrowers from making a decision that will damage their credit future," Jennings says. How Many Are Out There? Just how many home owners are “strategically” defaulting on their mortgage is difficult to estimate since "strategic defaulters have all the incentive to disguise themselves as people who cannot afford to pay," according to researchers from the European University Institute, Northwestern University, and the University of Chicago. Yet, researchers have estimated about 35 percent of the defaults in September may have been strategic, up from 26 percent in March 2009.  As defaulters continue to weigh on the industry, housing experts say the real estate market will take even longer to recover since foreclosures drag home prices down.  Source: “‘Strategic Defaulters’ Pay Bills on Time and Plan Ahead, Study Finds,” The Washington Post (April 22, 2011) and “New FICO Technology Predicts Strategic Default,” HousingWire (April 20, 2011)

 

Winnetka's affordable housing debate opens to packed house

By John P. Huston, Tribune reporter

10:43 p.m. CDT, April 12, 2011

Winnetka's village president asked residents to remain "respectful and courteous" as trustees embarked Tuesday night on a discussion over a proposed affordable housing plan.

The issue has bitterly divided residents of the North Shore suburb in recent months, resulting in name-calling and playing a significant role in the outcome of the April 5 trustee election.

More than 120 residents filled every seat, sat on the floor in the aisles and stood in the doorways of Winnetka's Council Chamber as the plan was presented to trustees.

Village President Jessica Tucker said the plan is intended to provide housing options so that Winnetka doesn't lose out on whole age groups of residents, such as seniors and young families.

"I don't want us to become another suburb made up of McMansions who are only here for the time it takes to put their kids through school and then leave," Tucker said.

Rick McQuet, a Winnetka resident, said at the meeting that the affordable housing plan is intended to help young families and recent college graduates.

"That young family was me about 15 years ago, a new degree in hand and aspirations of becoming a member of a truly great community," he said.

Northfield resident June O'Donoghue received applause after she said she opposes the proposal because it interferes with the housing market.

"Housing is affordable to the people who can afford it. That is a simple thing," O'Donoghue said. "I think you need a referendum for people to vote to see if they want to go through all this social engineering."

In recent weeks, the plan's opponents have said it amounts to "hand-outs" for people with lower income that could result in Section 8 housing, decreased property values and increased crime. Supporters have lashed out at the opposition as bigoted, arguing that the plan would allow teachers, clergy and other employees to live in the community in which they work.

The North Shore community of 12,000 reported a median home price last year of $1.1 million, while median household income is $201,650, according to data.

The proposed plan would apply to new developments, in which 15 percent of owner-occupied units must be affordable to households earning at least $75,000 per year, while 15 percent of rental units would be affordable to those earning at least $45,000.

Current residents and senior citizens would receive priority, the plan says.

It also recommends preserving and recapturing former rental housing in downtown apartments as well as coach houses.

 

A Good Idea:

What’s a Short Re-fi?

from REALTOR.com® Blogs by Lisa Lyons

 

What is a short re-fi?

Antioch, CA Realtor Rick Fuller explains what it is and if you should consider it to save your home.

“Here is the idea. Your mortgage payment has now reached an amount that is no longer manageable, perhaps your property (like most of us in Northern California) is worth a fraction of what you paid for it; and because interest rates are begining to climb, so is your payment and its time to do something. You decide to do what is known as a short refinance or short re-fi.

A “short refinance” is a transaction in which your bank agrees to pay off your existing mortgage and replace it with new a loan with a reduced balance, helping you avoid foreclosure. It benefits both the bank and the homeowner, as the bank generally loses less than they would in a foreclosure, and the homeowner gets to keep the home.

What is the catch? It is simply this…they are not being approved by the lender. Take, for example, an FHA short refinance. In the past 6 months, only 44 FHA Short Sale re-fi’s have been completed through out the nation.

A loan modification or short sale is a far more viable option than a short re-fi for most Americans…”

Click here to read more blog posts by Rick Fuller.

 

Opinion: Support Affordable Housing In Winnetka (affordable for a family of 4 with an income between $45k - $105k)

From Winnetka-Glencoe Patch.com

 I want to speak out strongly in support of affordable housing in Winnetka.  Some residents feel that those who want affordable housing don’t work “hard enough” or might be riff-raff who would lower property values.  Far from it. 

The truth is:  many hard-working people work in and around Winnetka, and given the opportunity, would not only be able to pay their bills, but would make a significant addition to our community.  Some of those who want affordable housing are already residents who can’t afford to live here any longer. 

Numerous groups -- from Habitat for Humanity to think tanks at Harvard have studied the relationships between affordable housing and property values.  They found that well-maintainted developments enhance the community and its values.  For a comprehensive set of links, check out the National Association of Realtors site:http://www.realtor.org/library/library/fg504.

People also erroneously assume we’ll have increased taxes. The units are being built at the developer’s expense, and require no public support from the Village.

Actually, affordable housing allows us to bring MORE real life benefits to our children by having a diverse community.  For many years, when my sons were small, I was the Chairman of the Crow Island Diversity Committee.  As a Jewish mom, I was considered one of the “diverse” minorities so I did what I could to share our heritage.  With the help of a few other moms, we also honored Black History month, created a Japanese-American program, and brought in diversity speakers. Everyone was pleased… but those efforts weren’t enough. 

One day, I learned about the drawback of living in our segregated community.  I discovered our younger son was embarrassed by the smaller size of our home, and stood across the street when being picked up by an acquaintance.  He wanted this acquaintance to believe that “his” home was the bigger one across the street.

What was the “Winnetka value” he picked up from this community? After participating in programs like Amigos International, our son has a different value system – based on the inner spirit within each person, not their outer circumstances.  He appreciates doing service on our family’s healthcare missions to Ecuador through Causes For Change International, and enjoys friendships with people of different races and religions. 

I was told by a former Winnetka senior resident that many years ago, when she first moved here, her garbage was not initially picked up because she was Jewish.  It took effort and time to right that wrong. 

If people are given the opportunity to live here through affordable housing, are we able to overcome our economic prejudices?

I strongly encourage everyone to support the Plan Commission’s Housing report and recommendations.

Sincerely,
Lynn Sanders
Winnetka resident

 

At the December 15 Plan Commission meeting, residents saw the Commission discuss and agree upon a proposed definition of affordability for Winnetka (ranging from $45,000 to $105,000 in annual income for a family of four) ... 

Winnetka Debates Affordable Housing

Winnetka voted for home-rule 6 years ago. They are exempt from state mandated affordable housing rules.  

April 12th the Village will discuss a plan that would require developers to set aside affordable units. Affordable defined as: Owner-occupied units would have to be affordable to households earning $75,000 or more, and make rentals units affordable for those who make $45,000 or more, the Tribune reported.

The median income in Winnetka is more than $200,000, and the median home price is over $1 million.

The plan is deemed “un-American” by the Winnetka Homeowners Association, which claims it would lower property values, draw crime, and subsidize those who are dependent on “handouts,” the Tribune reported.

The newspaper quoted Homeowners Association chairman Carry Buck as saying there are plenty of affordable housing options in other communities in the area, and she characterized the affordable housing plan as a government overreach in a community she called mostly conservative.

The report said Winnetka “has always had a supply of diverse housing,” and that coach houses and apartments above downtown storefronts have been among the options.

 Pro affordable housing post tomorrow.

 

Angry squirrel terrorizes Vermont town

A neighborhood in Bennington, Vt., is under siege following a series of attacks carried out by a gray squirrel.

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A gray squirrel similar to the one in this picture is believed to be responsible for a series of attacks on residents of Bennington, Vt.

By Eoin O'Carroll, CSMonitor.com / March 16, 2011

Bennington, Vt.

At least three people have been victims of unprovoked attacks by a gray squirrel on a street in Bennington, Vt., over the past few weeks, leaving many residents of the formerly placid southeastern Vermont town wondering if they might be next.

Bennington Banner reporter Keith Whitcomb, Jr.,interviewed East St. resident and squirrel-mauling victim Kevin McDonald, who said he was shoveling snow outside of his house, when he felt the animal's razor-sharp claws tearing into his back and shoulders. McDonald managed fend off the squirrel and flee into his house, but not before the the ill-tempered rodent lunged at him twice more.

The following day, McDonald saw his neighbor across the street battling the squirrel with a metal pole and a blanket. Later that day, he learned of another woman on his street that, like he, had been attacked from behind. That woman is being treated for rabies.

The Associated Press quotes Vermont Public Health Veterinarian Robert Johnson, who said that there has never been a case of a squirrel passing rabies to a human. Instead, Johnson speculates that the squirrel was tamed by humans.

"They've lost their fear of people and they go ballistic (when they encounter a person) because it's not their human," Johnson told the AP.