Ruth Roth's Blog

Avoid a Costly Mistake

Ruth Roth — Mon, 09 Feb 2009 19:47:00 GMT

LAS VEGAS, AVOID THIS COSTLY MISTAKE

If you've been following the financial news, you've probably heard that the Fed's been buying Mortgage Backed Securities and will continue to do so as needed. Unfortunately, some media outlets have picked up on the news and mistakenly reported that these purchases will continue to cause rates to drop lower into the summer. But is that really what it means? No. Bottom line: The Fed's purchase of higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates. The Problem Is...Many consumers are in situations where they can purchase or even refinance now and save hundreds of dollars a month on their mortgage payments. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save, in the hopes of gaining a few more dollars of savings per month if a lower rate came their way. Of course, while they're waiting, rates could turn higher - and this window of opportunity could pass them by entirely. Here’s the clincher: Even if consumers are ultimately able to time the market perfectly and save another few bucks per month, they could still end up losing. That's because while they delayed, they lost the savings each month they could have gained by taking action sooner. In other words, they may have lost hundreds of dollars for every month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting. I don't want anyone to miss an opportunity by either waiting or misunderstanding the media headline. Let's talk further on this. Call or email me, and let's discuss what this might mean for you.

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The Heat In on in Las Vegas

Ruth Roth — Mon, 09 Feb 2009 19:37:00 GMT

The Heat is on in Las Vegas

Las Vegas and Henderson Homes are on sale, sellers are motivated, and interest rates are at historic lows...but may not stay that way, which means it makes sense to get moving on that home purchase or refinance you've been contemplating. But if you are among the smart individuals who are going ahead and taking advantage of the low home loan rates to be had right now, there are a few things to be aware of.

With interest rates at record lows, all lenders in the US have recently seen a sharp increase in loan applications - right at the time that many lenders have cut headcount to save money in a challenging economy. This means that timeframes needed for underwriting, approvals and closing have become longer than normal. Some companies have chosen to actually raise rates just to slow down the volume to a manageable level. Sound crazy? No crazier than when you go to buy that hot new vehicle...only to find that there is no price negotiation. In fact, you wind up lucky to just pay the sticker price, as the demand usually allows the Dealer to add a markup to the price. And you don't get the car right away; you have to wait on a list for your turn to come up.

Right now, home loans are like that hot new car - but with the timer ticking on interest rates locks, there are a few things you can do to protect yourself. First, longer lock in time frames than might normally have been considered are a necessity, to ensure that the file has time to be processed, underwritten, approved and closed in time to protect the rate lock in this extremely volatile climate. And that longer, safer lock-in period may be a bit more costly - but it's money well spent. Overall, the mind set here should not be one of greed. Don't try to squeeze every last drop out of rates. If you are within a quarter percent of the lowest rates offered in the history of this country, you did very well. And rates always shoot up higher at a much faster pace than when then dip lower. So if the savings or opportunity makes sense - grab it. Next, responding quickly to requests for information or documentation is important - the faster the file is submitted and approved, the better off we are to keep that great interest rate protected.

Finally, be aware that it may be a smart idea to pay points to gain the best interest rate - and sometimes is even necessary in today's market. Giant mortgage buyers Fannie Mae and Freddie Mac have recently imposed more "risk-based pricing adjustments", meaning that even credit scores and loan to values which in the past would have been considered very low risk, may now be subject to mandated fees by Fannie and Freddie. And based on the way lenders have changed their rate sheets over time, there is now very little "premium pricing", which used to allow options for fees like these, points or other closing costs to be covered in return for a slightly higher interest rate. Right now is still an excellent time to act, before the great low rates of today get away from us. But let's be smart - call me for information on how we can get started right away.

Sincerely,

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Fed Leaves Rate Near Zero

Ruth Roth — Wed, 28 Jan 2009 20:11:00 GMT

Fed Leaves Rate near Zero:

The Federal Reserve kept its key interest rate near 0% Wednesday, and said it is prepared to take additional steps to try to fix the troubled U.S. economy and credit markets. The Fed said it stands ready to purchase longer-term Treasury’s if it determines that such a move will help get credit flowing once again. This may help lower the yield on the government bonds and further lower the rates on various types of loans tied to Treasury. While the Fed said there had been improvement in some financial markets, it is concerned that credit remains tight. The Fed also warned of a decline in prices that could further slow economic activity, a condition that is generally known as deflation. Deflation often prompts businesses to further cut production and consumers to delay purchases because they anticipate lower prices to come. Economists warn that deflation can have a more destructive impact on the economy than inflation. The deflationary threat is really the bottom line, and the Fed wants to do everything they can to minimize the risk.

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Range of Options for Banks

Ruth Roth — Wed, 28 Jan 2009 20:10:00 GMT

Geithner Says ‘Range of Options’ Considered for Bank:

U.S. Treasury Secretary Timothy Geithner said the department is considering a “range of options” for its financial rescue plan, with the goal of preserving the private banking system. “We are putting together what we hope will be a comprehensive plan for helping repair the financial system and bring recovery as a critical component to the president’s commitment to get growth going again and bring the economy back on track,” Geithner said. Under pressure from lawmakers and taxpayers, upset that the rescue plan shows few signs of lifting the economy, the Obama administration plans to overhaul the effort. In its rescue efforts so far, the Treasury has taken ownership stakes in more than 300 banks as a condition of receiving aid. Today Geithner said the Treasury will post contracts with TARP participants on the department’s Web site within days after deals are done. “That’ll give the American public a chance to see those, to look at the detailed terms and conditions, in a relatively short time period after they’re concluded,” Geithner said.

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Las Vegas Existing Home Sales

Ruth Roth — Wed, 28 Jan 2009 20:09:00 GMT

Las Vegas Existing-Home Sales Show Strong Gains In December

Existing-home sales rose unexpectedly while inventory declined due to a surge of sales in the West. Existing-home sales – including single-family, town homes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate¹ of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November. For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales. It appears some buyers are taking advantage of much lower home prices. The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future. With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look

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Higher Loan Limits Needed

Ruth Roth — Mon, 19 Jan 2009 21:10:00 GMT

Many Home Buyers Need Higher Loan Limits, Upper-End Stalled here in Las Vegas: The drop in mortgage loan limits for conventional financing at the end of 2008 is hurting home sales and trade-up activity in higher price ranges across the country. Outside of FHA, Fannie Mae and Freddie Mac, mortgages that do not have government backing are still experiencing a credit crunch. Buyers who need jumbo mortgages must pay interest rates that are nearly 2 percentage points higher than conventional financing; as a result, the high-end market is not moving. All consumers should have access to today’s historically low mortgage interest rates. It’s only fair that all hard-working, tax-paying, successful people who want to purchase a home have equal access to low interest rates regardless of where they live or where they want to buy. Every segment of the housing market needs a turnaround to spark an overall housing recovery, which will help the economy to begin to recover!

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Housing Recovery in Las Vegas

Ruth Roth — Mon, 19 Jan 2009 21:08:00 GMT

Keys to Housing Recovery in the Las Vegas Market: To move the country out of this economic crisis, Congress and the next administration must place significant emphasis on restoring confidence in the housing market. The housing sector is at the core of the current economic crisis. A renewed, revitalized and robust housing market is essential to generating commerce and helping families build wealth. To this end, Chairman Barney Frank, D-Mass., on H.R. 384, introduced the TARP Reform and Accountability Act, last week. The principle focus of the plan is to ensure that the Troubled Asset Relief Program does what it was originally intended to do – end the credit crisis and jumpstart mortgage lending. It is imperative to get TARP back on track by targeting funds for mortgage relief, which will help lower mortgage rates and reduce foreclosures. Low interest rates are only effective if people can get a loan. Every day even some home buyers with good credit are having trouble getting mortgage loans. We must unclog the housing and financial system; Congress needs to use current TARP dollars to help identify and fix operational issues that are preventing consumers from getting or modifying home loans. These are critical steps that must be undertaken quickly if we are to right our nation’s housing and financial markets.

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Helping Buyers Buy Your Home

Ruth Roth — Wed, 17 Dec 2008 20:40:00 GMT

Sellers can emphasize a number of advantages to the buyer:

Immediate occupancy, even though it's not being bought immediately.

The chance to build up a credit score over time and qualify for a better mortgage rate at the end of the lease.

Forced savings through the monthly rent credit. Wallace's company helps reinforce these positives for buyers through a monthly (and sometime more frequent) newsletter.

Still, it's important for sellers to be cautious in negotiations. First, if the market goes up, you could be locked into a too-low purchase price.

And the legalese is tricky. So be sure to hire a real-estate attorney to handle the paperwork. With a lease-purchase deal, definitely find a buyer who will likely be able to "get a mortgage down the road," says Patton. "Otherwise you will be suing them in court to buy your home" -- not a good experience.

3. If you've got the equity, offer financing yourself.

There are two ways to go:

Full financing.In this case, the seller would act as the lender and take a mortgage for the total amount owed after any down payment. This is typically the arrangement in such agreements as land contracts, trust deeds, contracts for deed, deeds of trust, notes and privately held mortgages.
With full financing, the deed may be passed along to the buyer upfront or once the contract is paid off. Two potential buyer types, according to Patton, are people who have relocated but not yet sold their old home (meaning they can't yet qualify for the mortgage) and those going through divorce whose existing home is tied up in the proceedings.

"We're seeing a resurgence" of seller financing, Wylie says.

For sellers in a position to do this, Christiansen says, "It's potentially a very quick transaction."

Patton adds that full financing is enticing to a buyer who will save in loan-origination fees and other closing costs.
- Partial financing.As the term implies, the seller provides a portion of the financing, typically in the form of seller carry-backs, seller holdbacks or second mortgages. A partial financing agreement might mean, for example, the bank lending 80% of the purchase price, the buyer contributing a 10% down payment and the remaining 10% being lent by the seller. "Seller carry-backs bridge the gap between conventional financing and more-creative seller financing," says Patton. "The seller is essentially acting as a bank offering an additional mortgage."
But would you want to become a lender? Say the buyer's payments stop. Unlike with a landlord relationship, you can't simply evict, Patton says. "You will either need to follow forfeiture procedures or foreclosure procedures, both of which cost more in time and money than a standard eviction."

And partial financing means being second in line should the buyer default. "Second position always loses out in a foreclosure," says Thomas Donnelly, a senior loan officer for Cross Country Lenders of Connecticut.

Wiley recommends scrutinizing the buyer's financial condition -- income, assets, credit scores, etc. -- and making an evaluation on the person's ability to repay. And get a copy of the person's pre-approval from a lender, mortgage-firm owner Lund adds.
For well-informed investors only

It's not a deal for the "average person off the street," says Donnelly. "In a down market you may benefit. But you have to be a savvy investor. I would recommend investment classes. And definitely talk to a really good real-estate attorney before going that route."

Most experts advise having a professional -- but not the buyer's loan officer -- handle the paperwork.

Others, such as Steve Hochman, the founder and president of Friendly Note Buyers, advocate writing the note yourself. His book, "How to Sell Your Real Estate When Real Estate Is Not Selling," offers advice on that front. Negotiable terms include everything from the interest rate and frequency of payments to whether the payments cover principal and interest or interest only. Balloon loans may also be worth considering.

"Typically, these loans are interest-only with a balloon due in five years," Wylie says, adding that the buyer would be hoping to obtain a favorable refinance at the end of the term.

When sellers carry back a second mortgage, as has been common in down markets, "this enables a buyer to qualify for a home in lieu of a large down payment," says Jody Davis, a past president of the Arizona Association of Mortgage Brokers. The seller can sell that note but will need to discount the note to sell it. This is basically like creating an annuity for the length of the note. Generally notes are amortized for 30 years, to keep the payment low, with a balloon due in five or 10 years. The balloon can't be less than five years or the buyer's lender likely will not allow the carry-back.

According to Christiansen, sellers interested in long-term cash flow "may elect to hold the note for a longer term without a balloon."

But having to wait for the total amount of cash is also a disadvantage, Donnelly says. There's the risk of future foreclosure if conventional bank financing can't be secured when the time arrives.

This article was reported and written by Melissa Ezarik for Bankrate.com.

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Helping Buyers Afford a Home

Ruth Roth — Wed, 17 Dec 2008 20:32:00 GMT

How to help buyers afford your home

Falling prices and interest rates ought to make your house easier to sell -- if only buyers could get fina

It's not easy to sell your home these days, but it's not all that easy to buy, either.

Here's the problem in a nutshell: There's an excess of homes on the market, but the buyers who normally would scoop them up (thanks to falling prices and low interest rates) can't get financing because the lenders have tightened up on whom they'll lend money to.

If stressed-out sellers and hard-to-qualify buyers could just join forces, they could both achieve their goals. The answer may lie in what's commonly called creative financing.

"This is the time to get creative," affirms real-estate expert Wendy Patton, a co-author of "Making Hard Cash in a Soft Real Estate Market."

"If you really want to sell your home, you need to expand your pool of buyers to include those people who want to buy a home but can't qualify for a standard mortgage at this time," she says. "This pool is actually much, much larger than the pool of buyers who can get a mortgage right now."

Or as management and marketing consultant Nan Andrews Amish puts it: "The goal is to make it easier for buyers to say yes. This means creating better value for the buyer or less risk or easier financing."

Scott Christiansen, the senior mortgage originator for WestCal Mortgage of Orange, Calif., agrees: "In this market people are getting much more excited about doing whatever they can to sell a property."

Every week since the subprime fallout, he says, new financing programs have been introduced.

3 major ways to do it

Ready to get creative about financing to entice buyers? There are three major options:

1. See if your lender will allow a mortgage assumption.

In this sort of agreement, the

"Lease-purchases are hairy-scary to me because you still may have the buyer walk, (and) the seller is still the owner," says Janice B. Leis, a Prudential Realtor covering Philadelphia and south Florida. "And usually both sides are too cheap to hire a real-estate attorney. Sellers need to stay away from those legal entanglements that may create more of a financial wrangle for them down the road."

But there are some good potential tenants today, says Stan Lund, the owner of a mortgage firm and 2007-08 president of the Arizona Association of Mortgage Brokers. "A lot of people have lost homes due to foreclosure. They're good people but just had some bad circumstances happen to them. They're good borrowers but maybe they got into the wrong loan, or they took a chance in risk and tried to (own too much) house."

Bobby Wallace, a South Carolina affiliate for 1800sellnow.com, compares lease-to-own deals to "selling someone a home with training wheels." His suggestion for sellers: "(Do) everything in your power to make the buyer truly realize that this is a tremendous opportunity to enhance their credit and not waste it."

buyer takes over payments on an existing mortgage. If that loan came with a low rate, assuming the loan could be advantageous. Not to mention, the buyer could save on higher closing costs associated with new mortgage debt.

Though banks have traditionally not allowed assumable mortgages and some mortgage experts don't see that changing, especially on 30-year, fixed-rate loans, others are seeing some cases of it.

"Most mortgages are nonassumable," says Patton, "(but) given the challenged market conditions many areas are experiencing, this may be negotiable with the lender."

With a homeowner in financial trouble, for example, the lender might prefer to allow the loan be assumed than to foreclose on the property, notes Jason R. Hanson, a real-estate investor.

Christiansen says a number of large banks do allow assumptions on certain new and existing adjustable-rate mortgages. "I wouldn't be surprised if more continue to do that," he says. "It's worth checking out."

When an assumable mortgage is available and favorable, it would certainly entice buyers.

Before promoting it, though, 40-year real-estate veteran Arnold Peck, the president and owner of ERA Property World in Milford, Conn., says he would make sure both the rate and terms -- such as pre-payment penalties -- made it desirable. "I just had a fellow with a $100,000 pre-payment penalty on a $300,000 loan."

For protection, any seller whose lender is allowing a mortgage assumption should obtain a written release from further liability. In other words, never take it for granted that just because the buyer qualified for the deal, he will pay each month.

Also check on whether the standard "due on sale" clause can be waived. Though Hanson and Patton point out that lenders would have no reason to call a loan due, provided payments were still being made on time (because foreclosure proceedings are costly), Christiansen says it's something to inquire about and that lenders might waive it.

By Bankrate.com .

It's also important to consult a real-estate attorney if this route is being considered. Mortgage assumptions are often confused with purchases that are "subject to a mortgage." Typically, subject-to deals are those in which the purchaser agrees to make monthly payments on an existing mortgage but the original borrower remains personally liable if the new buyer fails to make those payments. Because of that liability, the lender's consent is not required.

Besides being a seller risk -- think credit risk and foreclosure -- subject-to sales aren't legal, according to Paul Wylie, the founder and former CEO of Metrocities Mortgage in Southern California. In addition, Wylie adds, "A lender could find out about an unlawful assumption and call the loan due."

2. Help a buyer build a down payment through a lease-to-own deal.

The buyer acts as tenant for a set period of time (usually one to three years), with some of the rent getting socked away in an escrow-type account to later be applied toward a down payment. In a lease-option situation, the buyer can choose not to buy at the end of the option period but would generally lose that built-up cash. With a lease-purchase, the buyer must purchase the house in the end.

Either way, the buyer becomes a tenant for now. Only he doesn't "have the typical tenant mentality," notes Patton, because the intention is to one day buy the house.

Yes, these deals are risky.

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Ruth Roth's Blog

Avoid a Costly Mistake

LAS VEGAS, AVOID THIS COSTLY MISTAKE

The Heat In on in Las Vegas

The Heat is on in Las Vegas

Fed Leaves Rate Near Zero

Range of Options for Banks

Las Vegas Existing Home Sales

Higher Loan Limits Needed

Housing Recovery in Las Vegas

Helping Buyers Buy Your Home

For well-informed investors only

Helping Buyers Afford a Home

How to help buyers afford your home

3 major ways to do it