Real Estate Info

This sweeping legislation is Congress' most comprehensive attempt yet to address foreclosures in the housing market. The bill includes versions of H.R. 5830, H.R. 1852, H.R. 1427, H.R. 5579, and amendments to Preserving the American Dream for Our Nation's Veterans. The plan is projected to help roughly 500,000 borrowers at a cost of $2.7 billion over five years.

It's important to note that these measures were not voted into law and still await Senate action. If passed by the Senate, it would still need the approval of the President who has reportedly threatened to veto both bills.

To learn more about this legislation, here is a summary from the House Committee on Financial Services.

Cash Advances – The convenience of getting cash is very expensive when it comes to some credit cards. Many credit cards not only charge an upfront fee of up to 4% of the advance, they also carry higher interest rates than other charges on the same card, and have no grace period whatsoever. But here's the sneaky part: many credit card companies will require that balances for regular purchases be paid off before you begin paying off the balance of the cash-advance, which is often hit with a much higher interest rate.

Killer Fees – When it comes to fees, no one is more innovative than credit card companies. Here are just a few: account set-up fee, program participation fee, account maintenance fee, authorized user fee, credit limit increase fee, Internet participation fee. But, the trickiest credit card fee for consumers who are looking to improve their credit scores is the annual fee. Forced to keep the account open to demonstrate a history of good payments to the credit bureaus, consumers end up paying annually for that privilege.

Universal Default Clause – The universal default clause is an egregious provision that allows credit card companies to tack on an exorbitant "penalty" interest rate if a consumer is late on any of his or her bills, including items like utility bills.  According to the advocacy group, Consumer Action, most default interest rates hover around 30%, but it's not uncommon to see a penalty rate of up to 35%. Some analysts have even reported rates in excess of 40%!

Binding Arbitration – Some credit companies have a binding arbitration clause. By signing this agreement, you have waived your right to a jury trial if a dispute arises between you and the company. Your case must be settled by an arbitrator. And the arbitrator is often chosen and hired by the credit card company.

Changing Terms – The terms and conditions of credit cards can be easily amended by the lender with a simple written notification. This notice usually accompanies the monthly statement. Some reports suggest that many consumers simply end up trashing the important notification, along with the usual pile of unwanted marketing material also enclosed in the envelopes, without ever reading it. Don't this happen to you or to your clients.

The average commute time in America is about 24 minutes each way, according to recent reports from the Census Bureau. That means Americans spend about 48 minutes travelling to and from work each day. And, if we work about 245 days a year, that adds up to a total of 196 hours a year! That means, on average, we spend more than 8 full days just sitting in our cars each year. Imagine what you could accomplish if you could only get half of this time back.  Of course, no one can turn back the clock, but almost everyone can make more of the time we have, even during our commutes. Here are a few ideas for making the most of your time on the road:

Don't just fill up the tank. Fill up your brain too – Audio books are becoming more and more popular, and almost every publisher is taking advantage of this trend. Not only can you find your favorite novels on CD, business books and other non-fiction publications are available as well. Even some magazines, like The Economist, have audio versions of their publications.

Put yourself in the driver's seat – What if you got to work and a list of everything you had to do that day was there waiting for you, typed out and sitting on your desk? Well, with services like CopyTalk and Jot Spot, this is possible.  Using your hands-free cell phone, call one of these mobile scribe companies while you're in the car and everything you say will be typed and emailed to you by the time you get to work. Plus, by getting all of your nagging to-dos out of your head, you'll be more able to focus on your audio books. This is also a great, and much safer way, to brainstorm and work out the finer details of those amazing ideas that only seem to come to you while you're in the car. If you don't want to pay for this service, you could just call your voicemail directly with the same information. Do this on the way home and you could keep a detailed record of your day and free your mind for the drive home.

Get the right balance – Another great use of your time in the car is to focus on your work/life balance. Now that you've recorded your day and freed your mind of work, why not use this time to focus on the important people in your life. A lot of us tend to wait until we get home before we "unwind" and to create that all important separation of our work and home lives – but we can just as easily do this in the car. What if you called your spouse or your children on your way home and asked about their day? You could also call your parents or siblings or catch up with old and new friends. Do this frequently and, suddenly, creating the right work/life balance will become much easier, and so will your commute.

According to CNNMoney.com, "The House on Thursday passed a contentious foreclosure-prevention package, which still faces a veto threat from the White House and an uncertain fate in the Senate.

In a 266-154 vote - with 39 Republicans voting in favor - lawmakers approved a proposal, sponsored by House Financial Services Chairman Barney Frank, D-Mass., to let the Federal Housing Administration (FHA) insure up to $300 billion in new loans over four years if lenders agree to reduce the mortgage principal.

To qualify, the lender would have to cut the debt to no more than 85% of a home's current appraised value. If the FHA-refinanced loans went into default, the FHA would pay the lender the remaining principal owed.

While 1.4 million loans are likely to be eligible for such a program, the Congressional Budget Office estimates such a measure would end up insuring 500,000 borrowers. The CBO estimates the FHA expansion program would cost taxpayers $1.7 billion.

"This bill is very time limited and limited in specifics to a subset of mortgages and meant to mitigate a market failure," Frank said during the floor debate on Thursday.

Opponents of the FHA expansion contend it's a bailout for lenders, investors and "speculators" who took on imprudent risk. And because participation in the program would be voluntary on the part of lenders, critics contend lenders would only unload their riskiest loans into the federally backed program.

Supporters note that the program is limited to loans for owner-occupied residents, not speculators. They also make the case that lenders and investors would be taking a loss on every loan, and that the borrower would be paying higher-than-usual premiums to the FHA to insure the loan and would share equity in their home with the government.

"No borrower who goes through this process will say at the end of it, 'Boy, that was fun. Where do I buy a ticket to get back on Space Mountain?" Frank said.

Supporters also say if the borrower still can't afford the loan when it's written down to 85% of appraised value, their loan won't qualify for the program. If the bill is a bailout for anyone, they say, it's a bailout for communities across the country, which suffer when home values and property taxes go down because of foreclosures.

Earlier on Thursday, the House passed a bill that would send states $15 billion to buy and fix up foreclosed properties - a measure the White House also opposes.

Frank's bill also includes elements intended to attract the support of Senate Republicans and the White House. Two key ones: modernization of FHA guidelines - for which both the House and Senate have already passed their own bills - and more stringent oversight of Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that guarantee the purchase and sale of home mortgages in the secondary market.

Nevertheless, late Tuesday, the White House issued a statement threatening to veto the bill in its current form. Analysts see the move as a tactical one intended to give Republicans more leverage in the negotiations.

That leverage is seen in the Senate, where Banking Committee Chairman Christopher Dodd, D-Conn., and ranking minority member Richard Shelby, R-Ala. are negotiating a housing package that could include GSE reform, FHA reform, and a Dodd FHA rescue proposal similar to Frank's."

The S&P Case/Shiller Home Price Index, which tracks 20 of the largest housing markets, showed prices plummeting by 12.7% in the 12 months ending February. That's the biggest fall since the index began tracking prices in 2000.

Meanwhile, foreclosure filings more than doubled in the first three months of 2008, spiking 112%. So far this year 156,463 families have lost their homes to repossessions. Many markets won't hit bottom till late 2009 or even 2010.

Pity the residents of Stockton, Calif., whose homes are likely to lose more than half of their 2006 value. But if you happen to live in Texas, congratulations: The housing tornado passed you by."

The Fed reported Monday that the percentage of banks reporting tighter lending standards was near historic highs for nearly all loan categories.

The survey, conducted in April, found that nearly two-thirds of banks surveyed had tightened lending standards on traditional home mortgages with 15% saying those standards had been tightened considerably.

The current credit crisis began last year with rising defaults in the market for subprime loans, loans extended to borrowers with weak credit histories. Many of those subprime loans were packaged into mortgage-backed securities and sold to investors around the world.

Those investors, however, have pulled back from the subprime market and from other types of credit as losses have soared with the rising mortgage defaults.

As losses have mounted, more and more banks have grown reluctant to make loans and have been tightening up on standards. The Fed has been pumping billions of dollars into the banking system in an effort to encourage banks to keep lending to guard against the threat that the tighter credit could push the country into a deep recession.

The latest Fed survey found that banks tightened their lending standards on not just prime or traditional mortgages, but also on nontraditional mortgages such as "Alt-A" loans given to people who supplied only limited income verification. The survey found that about 32% of the banks responding to the survey had tightened "considerably" their standards for nontraditional mortgages and another 43% had tightened standards in this category "somewhat."

The survey found that only nine banks are currently making loans in the subprime category, and of that group, seven had tightened lending standards either considerably or somewhat." 

What does this mean for you?  Whether you are considering a purchase or a refinance, NOW is the time to take action.  Rates are still at an all time low and while banks tighten up their mortgage standards for lending, it is a great time to obtain a complimentary review of your mortgage to determine if you are eligible to lower your interest rate or to qualify for a purchase of a new home!  Call me today at (858) 455-6700.