CONSUMERS WERE TOO OPTIMISTIC? REALLY?

The last few years have brought some significant changes to the real estate world.  If you’ve been watching the media coverage, by now you probably think there was only one possible cause to this mess….. the evil mortgage companies taking advantage of consumers!

Well, a recent study (yes, apparently they really needed a study for this, they could of just called me, I would have told them!) by the New York Federal Reserve found that consumer confidence that made people think they could afford higher housing prices, not easy mortgage money.  The study concluded that all the way until 2007, when the economic conditions started convincing people otherwise, that consumers believed the “good times” would continue and their paychecks would increase as they had.  It appears that the lax lending standards may have come about because of the optimism by consumers, simply put, because people were buying, lenders put forth more products to help them buy.

Now don’t get me wrong, there was some predatory lending, there were people taken advantage of and lenders are partly to blame but seriously, the amount of “damage” being done to the real estate markets by foreclosures nationwide didn’t all come from lenders.  Also, if you are in foreclosure right now, I don’t want to be unsympathetic, it is a horrible thing to go through and I would not want anyone to be homeless.  But seriously, sometimes, consumers are too blame to.  Yes, that’s right, I said it. Sometimes, it really is your fault.

No one wants to hear this, let alone say it, not politicians, they want someone to blame so they can score political points, not mortgage companies, they would look even worse if they blamed consumers and certainly not the consumers themselves.  In our current culture, where Governors can abandon their duties (yes Sanford, I’m talking about you), disappear for a whole week without telling anyone where they are going (I guess when you leave the country to cheat on your wife you don’t want to tell anyone, imagine that!) and then hold a press conference embarrassing themselves (and their family, and their state, of and the ENTIRE COUNTRY) in which they apologize for their adventure and then expect everything to be just fine, in this culture, NO ONE can accept the blame they deserve.  It is never their fault.

In good ole Sanford’s case, he was a helpless, star crossed romantic, unable to resist the call of fate and his true love.  In the real estate world, it is the mortgage companies fault, they made it so easy, the deals were just so good, we couldn’t resist! It can’t be their fault, it couldn’t be a poor decision on their part, it had to have been the lenders!

I could come up with tons of other examples, examples of adults making poor choices then blaming the companies that provided those services (tobacco, alcohol, McDonald’s,any of those fit the argument here?), but everyone seems to forget that these bad mortgages were selected by adults, no one forced them to make a bad decision.  No one said they had to trade up their 3 bed, 2 bath,  2000 sq ft home worth $200,000 for a 3 bed, 2 bath, 2000 sq ft home in a fancier gated community selling for $400,000.  They didn’t have to do it.  But they did.  Not all of the folks saddled with bad mortgages are in this predicament, but let’s go back a minute and look closer at the point raised by this study, the fact that consumer confidence bears part of the blame.

A lot of the people who took out risky mortgages shouldn’t have done it, but in their defense they were lulled into thinking they could swing those payments by a “irrational exuberance”, by the optimism everyone had, by thinking the good times would keep on trucking because they had for so long.  Many of them expected that when the time came for their adjustable rate mortgage to adjust, they would have gotten that raise or promotion they were expecting (instead they got a pink slip) or that worst case scenario they could sell if they couldn’t afford it, because 2005 brought some people 10-30% appreciation, and that would save them (instead they found a slower market where in some areas people lost value instead of appreciating).  What they found, is that the one thing they counted on to save them, the one reason that made them place their bets and gamble, our solid economy, wasn’t there when they needed it to be.  They knew what they were doing.  They gambled.  They lost.

We can find plenty of places to lay blame for this, but consumers need to realize that they had just as much of a part in creating this mess as did the builders, lenders, politicians, agents, everyone.  This “crisis”, this issue, doesn’t tie up into a tidy little package, there is no one “bad guy” to prosecute and make it all better.  The time to put it all on Red number 6 and spin the wheel for your payday is long gone.  Consumers cannot sit back and wait for someone else to fix this, lamenting all that has gone wrong, blaming everyone but themselves.  Don’t get me wrong, the system is flawed, there are still numerous problems, still many things wrong, but consumers need to step up, take their medicine, sell if they have to sell, buy if they have to buy and make smart, rational decisions based on fact.  Once we start doing that, once we stop letting emotion (whether it is fear or exuberance) guide our financial decisions, we can begin the process of re-building what we once had, a solid foundation of home ownership supporting the country.

As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this page!

Your Friend in Real Estate,
Jason

Search for Lancaster County Homes for sale by clicking here!

Want to see local real estate values and home prices?  Go to www.RealEstateCrystalBall.com !

WEICHERT FINANCIAL PROVIDES ACCESS TO THE FIRST TIME BUYER TAX CREDIT BEFORE SETTLEMENT TO USE AS CLOSING COST $$

Weichert Financial is pleased to announce the release of the Pennsylvania Housing Finance Agency’s Tax Credit Advance Loan Program (TCA) now available throughout Pennsylvania.  TCA provides an interest free loan of up to $6,000 (for newly constructed homes and $5,000 for existing homes, with a minimum loan amount of $500) to use towards down payment and/or closing costs.

TCA Product Highlights:

• Buyer must invest a minimum of $1,000 of their own funds for conventional loans.
• If TCA is repaid by June 30, 2010, the borrower pays no interest for the loan.
• Any portion of the TCA not repaid by June 30, 2010, becomes a ten year loan at the same interest rate as the PHFA first mortgage; with monthly payments beginning on August 1, 2010.
• You must be a first-time homebuyer.
• You must fall within the Federal First Time Homebuyer Tax Credit income guidelines and PHFA s income and purchase price limits.
• Cannot be combined with other PHFA down payment and closing cost assistance programs.
• The homebuyer files for the Federal First Time Homebuyer Tax Credit with their 2009 federal income tax return and uses their tax refund to repay the Tax Credit Advance Loan.
• Loan must close prior to December 1, 2009 (and be occupied, in the case of custom construction).
• Funding is limited; therefore, loan availability is on a first come, first served basis.
• For underwriting purposes, the lender must include the tax credit advance loan payment in the borrower’s housing to income (front end) ratio. The payment is calculated using the full amount of the advance at the same interest rate as the first mortgage and with a ten year term.
• At closing, the lender is to disburse funds only for the actual amount of credit needed to pay for the minimum required down payment and/or closing costs.
• A second Mortgage and Note/TIL are to be completed at closing. The Mortgage is to be recorded at the same time as the PHFA first mortgage.

Please feel free to contact Laura Weidner with any mortgage questions you may have, here is her contact info: Laura Weidner, Weichert Financial Services Gold Services Manager Cell:  (717) 808-3656         eFax:  (973) 630-3574                 Email: LWeidner@WeichertFinancial.com

Great News for first time buyers who may be short on cash to close, if you want to know how to structure this program into your home purchase, as always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me at Jason@JasonsHomes.com or send me a text message using the tool to the right of this post!

Your Friend in Real Estate,
Jason

Search for Lancaster County Homes for sale by clicking here!

Want to see local real estate values and home prices?  Go to www.RealEstateCrystalBall.com !

HAVOC! OH, I APOLOGIZE, I MEANT HVCC!

Recently, the fine folks in the government implemented a new set of rules called the Home Valuation Code of Conduct (HVCC). The purpose was to protect consumers and lenders from buying or lending for over-valued properties. The problem was that in some cases, in a few areas in our nation, lenders were “forcing” appraisers into inflating property values higher than they should be to make loans. If for example a loan application had a purchase price of $200,000 and the property only appraised for $190,000, then either the buyer and seller agreed to lower the price or the deal never happened. In some cases, some very bad lenders got together with some very bad appraisers and bumped the prices up so that magically, the home appraised, thereby “saving” the loan and making more money for the lender. This is obviously a huge problem if it happens, because home owners are then stuck with properties that were not worth what they thought they were.

Being as we can all agree that this is not a good thing, the government decided they needed to solve the problem. Rather than simply investigating and prosecuting (which in the government’s defense some prosecution did happen, which generated these rules) and then setting up an oversight system where they could make sure the existing ethics rules and laws were actually obeyed (which 99.5% of the time they are), they decided that the best way to solve this problem was to set up a system where lenders were simply never allowed to talk to appraisers, the theory being that if lenders could never talk to appraisers then they could not influence values, thereby protecting consumers from purchasing over valued homes. No one talks to anyone, so no one can do anything bad, sounds good, right?

Now, you know me, I never like to be negative, but this is absolutely a case of a few bad apples spoiling the bunch. The old system wasn’t broken, what happened was simple, some criminals defrauded the system and broke the law. Implementing the HVCC rules to solve this issue is, in my opinion, overkill. Similar to this: someone breaks a window at your house, climbs in and robs you. Rather than fixing the window and installing a new lock, maybe investing in better security, you decide the answer is to just buy a new house somewhere else and start over. That is a bit of an over reaction, wouldn’t you say?

So, why specifically is HVCC a problem? Well, the new HVCC rules are causing numerous issues all through out our industry and while the intention of the rules were good, the solution set forth in these rules has caused way more harm than good and the rules need to be re-evaluated to address specific problems such as:

1. Appraisals now cost anywhere from $150 to $200 MORE than before.
2. Transactions are taking LONGER to close, 45-60 days instead of 30.
3. There is absolutely no accountability in the process at all, if the appraisal is late, holding up settlement, done improperly, etc, the lender has no ability to even talk to the appraiser to straighten out the issue, as the simple act of lenders talking to appraisers is outlawed under this new rule.
4. Experienced appraisers are being forced out of the business by the “system” and inexperienced appraisers are taking their place, leading to improperly done appraisals that we have no recourse in correcting, as outlined in #3.
5. These issues are costing consumers across the country millions of dollars in excess fees and some transactions are simply falling apart.

If you would like some more insight into the problem, the link below has a video that thoroughly explains our industry’s frustrations right now:

https://www.thinkbigworksmall.com/public/showArchiveVideo/1/4916

Until such a time as this issue is corrected, we will continue to have problems. There are a few solutions we real estate professionals can pursue until then:

1. Be realistic, set appropriate timeframes for your settlements. 30 day settlements are probably not realistic for you. Plan on increased closing costs as well, these appraisal prices are heading up, not down.

2. The complete impact of these new rules still has not been felt. Never assume that the parties involved, consumers, agents, lenders, know everything you know. If they are telling you it is fine, don’t worry, then I would suggest you dig a little deeper, pay attention and understand the process. Do not assume it will be fine unless you are taking steps to make it fine.

3. Use local lenders. Out of area lenders are more likely to end up with out of area appraisers. If they don’t know your market, can they really give you an accurate appraisal?

4. This is the most important :COMMUNICATE! All parties involved must understand that this is critical, while lenders can’t talk to appraisers anymore agents CAN. Make sure you know who is doing the appraisal, their name, number and company name. Keep it on file to refer to in the future if needed. Talk to each other, be realistic and work together. If you have a chain of 3 transactions all depending on one another to close, talk to all of the agents involved, not just the one on your end of the deal. Remember, it only takes one deal delaying closing or even worse falling apart, to break your chain and cause trouble for everyone.

So, stay informed, pay attention and guide consumers through this new maze competently and your transactions should be fine. Ignore the warning signs at your own risk or these rules will reek havoc on your business.

HVCC is a problem simply because it harms consumers. But it can be fixed. We can do better, we can protect consumers without harming them or costing them money. If you agree with me that there is a problem here, please go to the link below and sign the petition to have this misguided program reviewed and corrected, home buyers and sellers deserve better than this.

http://www.hvccpetition.com/

VIDEOS POSTED BY STEVE HARNEY: HOW TO COUNSEL BUYERS THAT INTEREST RATES ARE A REASON TO BUY NOW

Take a few minutes to watch this excellent discussion of interest rate trends by Steve Harney of www.KeepingCurrentMatters.com .  Steve offers a well thought out and easy to understand analysis of interest rate trends and explains very simply why NOW is the time to buy and waiting for a better rate is not advisable.  Click the video and take a look!

As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me atJason@JasonsHomes.com or send me a text message using the tool to the right of this post!

Your Friend in Real Estate,
Jason Burkholder

HELP FOR OUR SERVICE MEN AND WOMEN AFFECTED BY POOR HOUSING MARKETS

The US Department of Defense, in conjunction with the Army Corps of Engineers, recently announced the Homeowner Assistance Program (HAP).  The program is designed to “assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.”  The program can benefit civilian personnel in some cases as well.  Here are some of the basics taken directly from the website established as a resource for affected individuals:

PRIVATE SALE

Eligible applicants may be compensated for the difference between 95% of the appraised fair market value of the property prior to the announcement date, and the appraised value of the property at the time of sale, or the sales price, whichever is greater. Closing costs are reimbursed for private sales.

GOVERNMENT PURCHASE

An eligible applicant may elect to sell the property to the government and receive, as the purchase price, an amount not to exceed 75% of the appraised fair market value prior to the date of the announcement, or the current total amount of outstanding mortgages, whichever is greater.

FORECLOSURE ASSISTANCE

If foreclosure proceedings have commenced, an applicant may elect to receive foreclosure benefits or private sale benefits. Foreclosure benefits may be paid directly to the applicant to reimburse for foreclosure costs paid by the applicant, or paid to third parties on the applicant’s behalf. NOTE: Eligible HAP applicants who work at overseas installations announced for closure or realignment may receive only private sale benefits. Government purchase benefits are not available at overseas installations.

HOW HAP ASSISTS YOU

HAP provides assistance in four ways. For eligible applicants, the Government may:

1. Reimburse you for part of your loss from selling your home.
2. Assist you, if you don’t have funds from the sale of your home to pay-off your mortgage.
3. Purchase your home by paying off the mortgage.
4. Help, if you default on your mortgage.

For more information on this program visit http://hap.usace.army.mil/homepage.html

As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me atJason@JasonsHomes.com or send me a text message using the tool to the right of this post!

Your Friend in Real Estate,
Jason

Search for Lancaster County Homes for sale by clicking here!

IF IT SOUNDS TO GOOD TO BE TRUE……

I was perusing some online info the other day and came across this article on the new York Daily News Site:

RADIO ‘FORECLOSURE SPECIALIST’ LAVETTE BILLS HELD IN $800G MORTGAGE CON

BY Melissa Grace and Edgar Sandoval
DAILY NEWS STAFF WRITERS  Thursday, March 19th 2009, 10:16 PM

A Bronx real estate broker who hosted a radio show on WBLS and WLIB inviting distressed homeowners to contact her for help was charged Thursday with ripping them off instead.  Lavette Bills, head of MTC Real Estate, was charged along with Kirk Lacey, a Jamaican who lives in Florida, in a brazen $800,000 mortgage fraud scheme that allegedly preyed on people fearful of foreclosure.  In one case, Bills, 36, persuaded a Bronx homeowner who had called the show for help to put Bills’ name on the deed to her house on Tinton Ave. by promising to get the homeowner a loan to pay off the $38,000 mortgage. Bills sold the home to a straw buyer, according to the U.S. attorney’s office and the FBI. Bills allegedly made $150,000 on the crooked deal, including taking a $50,000 broker’s fee for the bogus sale. The homeowner, who just wanted to pay off the small mortgage, is now in foreclosure. Thanks to Bills, the new mortgage on the house totals $337,500, prosecutors said.  Antoine Brown, 34, the homeowner’s grandson, said he was unaware of the pair’s arrest, but was glad other people would not fall victim to their scheme. He first learned about the pair in a radio commercial. Bills’ business cards describe her as a “foreclosure specialist,” and she hosted a program on WBLS (107.5 FM) and WLIB (1190 AM) in 2007 on which she discussed mortgages and foreclosures, prosecutors said. Her Web site warns customers who go elsewhere “you have a right to feel cheated.” Bills and Lacey, 36, were each charged with conspiracy to commit bank fraud and face 30 years in prison and $1 million in fines. At an arraignment in federal court, Bills was freed on $250,000 bond. Lacey was freed on $150,000 bond and was ordered to surrender his passport and handgun.

Interesting article, eh?  Just proves the point that if it sounds to good to be true it is.  There is an entire industry of investors and scammers out there who focus on “distressed” homeowners for the sole purpose of separating a homeowner from their equity.  I had a case once where one of these “investors” offered the seller a great deal, they would catch up her mortgage payments and when they found a buyer pay her $1,000 and she got to walk away clean (oh, and she got to live in the house till it sold).  She thought it was awesome, until I did a CMA and marketing plan and at the end of my efforts to sell she walked away with about $12,000.  So, this so called investor who was going to save her was actually just taking away $11,000 of her money.  See all those handwritten signs and ads that say something like “we buy houses”?  Why do you think they are buying houses?  It is to make a profit, not for the goodness of their souls,

Don’t get me wrong, these people are not all evil and there is nothing wrong with making a profit.  I just believe payments for services rendered do not have to include taking advantage of poorly educated homeowners in distress.  Here’s what to do if you are behind on your mortgage and thinking of selling:  Call up a reputable real estate agent.  As a matter of fact, call 3 or 4 of them.  Get competing opinions.  Compare their service, compare their ideas, compare their estimates of the market value of your house.  If you want to, call up those investors to.  Some of them actually do a nice job, with a positive resolution for the homeowner.  Above all else, COMPARE and GET SECOND OPINIONS!  Remember, the activities of real estate agents are regulated by law, by ethics rules, by broker policies, etc.  Who is regulating the investors preying on the distressed homeowner?

As always, you can call me Direct at 717-371-0557 or at the Office 717-490-8999, email me atJason@JasonsHomes.com or send me a text message using the tool to the right of this post!

Your Friend in Real Estate,
Jason

Search for Lancaster County Homes for sale by clicking here!