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Things that Make You Say Ummm

Today, there are several things that are going through my mind.  I was wondering where will the economical woes of this country lead?  Will just thinking outside the box be enough to put a bandage on the wounds or are we as a nation not as President, Congress, Senate, Democrat, Republican, but we as a nation able to heal from the financial struggles that all of us is experiencing in one fashion or another.

Let’s face it.  Financial wounds though it may not be physical hurt just the same.  The old adage “stick and stones break my bones but words will never hurt me” applies here.  Here is how.  Well, “the words” from that old adage are referring to the financial wounds.  The financial wounds that many of us is experiencing are not physical as the old adage implies, but the financial are battle scars that worrying does to the mind, body, and soul. 

At this crucial time in our nations history, we need to stop pointing fingers, calling names, or placing the blame.  We, as a nation, must stand up and be heard.    This country is free, but what is its freedom if we can not enjoy the basic necessity of shelter free of greed and injustice.  My question is: are we free if we can not live in our homes due to no jobs?   The answer is a resounding, NO.   Are we free from poverty?  The answer again is NO.    Can we be come free?  Yes, we can.  Once we as a nation realize that true freedom is giving a darn about what is really plaguing our nation, our ability to survive.  Our ability to survive will depend on the accountability that we give to companies that take their jobs overseas.  Our ability to survive will depend on the accountability that we give mortgage companies who do not hear homeowner stating, “I want to keep my home, but the adjustment in the rate is to much.” 

Remember that this time in our history has been compared to the “Great Depression”, and it is as equally important to remember that often times history has a way of repeating itself.

The Mortgage Forgiveness Act Expires

The Mortgage Forgiveness Act expires on the eve of the worst housing crisis since the Great Depression.

If you was fortunate enough to sell your home last year, but needed to sell it with the lender getting less than what they were owned; you may be taxed on the deficiency.  The bill, President Bush signed that gave tax exemptions on the deficiency created from the short sale is now taxable unless Congress extends the bill.

There is still time to ensure that the debt is forgiven by the lender if your property is sold after January 1, 2007 and before January 1, 2013.   The home must be your primary residence and the debt that is forgiven is debt from the first loan.  A secondary or HELOC is not eligible.

The tax form that allow you to take advantage of debt forgiveness is Tax Form 982.  You have to prove that you are insoverign and unable to pay the debt back.

Even Fannie Mae is Time Conscience

The number of homeowners in default has led Fannie Mae to experiment with a pre-approval process for a short sale prior to getting an offfer on the property.

If this test works, it will reduce the time necessary to get the short sale approved and make the concept of a short sale more attractive for the seller, Realtor, and more importantly the potential buyer.  Often times,  buyers have passed and not put offer in on homes that were subject to a short sale approval due in part to the longevidity of getting the offer approved.  I am sure that Fannie Mae may have discovered as many Realtor have that the longevidity contributes greatly to the attempted short sale often times going into foreclosure.  When this happens the lender now has the added risk of losing more money by the value being exposed to the downward trend in market value. 

This experiment is hoped to yield a closing process that is closer to that of a traditional conventional mortgage or FHA loan.  Both products can take up to 30 to 45 days to close were as the short sale have taken as long as eight weeks. 

Lastly, this new concept is being experimented upon in hopes to move the market to an upward trend by reducing the amount of properties that are on the market for sale.

A Low FICO Score Is a Challenge Not a Defeat

Credit is essential to acquiring a home, car, etc. especially if you do not have cash to purchase the item you desire or need.  It is equally as important to understand how credit can influence your ability to purchase.    Let’s examine.

The bank institutions Advantage Mortgage Lending use FICO score to determine the risk factor that will be assigned to your loan.  FICO is an acronym that stands for Fair Isaac Corporation.  Your FICO is determined by a mathematical model to determine the credit risk associated with your payment history, your level of debt, type of credit used, length of credit history, and any new credit that you may have.

According to Advantage Mortgage Lending your FICO credit scores are determine by the following levels:

• 760 to 850 (Excellent)
• 700 to 759 (Very Good)
• 660 to 699 (Good)
• 620 to 659 (Good)
• 580 to 619 (Average)
• 500 to 579 (Below Average)
• Below 500 (Poor/High Risk)

Understanding your credit is crucial in regaining your credit worthiness if your credit is below average.  There are several factors that influence your credit in a negative way that you can control.

One factor that influences your credit in a negative way is too many inquiries on your credit.  Avoid opening several credit cards all at once.  In other words, a lot of inquiries influence your credit in a negative way.

Another factor that influences your credit in a negative way is maxing out your credit cards.  It is recommended to have all card balances under 35% of the total credit limit available.  For example, if you have a credit limit of $2,000 per card, the balance carried on each card must be less than $700.00. 

Still yet another factor that influences your credit in a negative way is having collections on your credit. 

All of the above does not exclude you from getting a home or refinancing a home, but it does put your loan at a higher risk; and therefore, you will pay a higher application fee and interest rate.   It is recommended that before you accept a higher interest rate to do some investigation to ensure that the loan will help you reach your goal of obtaining “financial freedom” and is affordable for you.

Taylor-Brown’s Year End Interest Rate Review

January 2008  5.75%

February 2008  6.125%

March 2008 5.75%

April 2008 6.125%

May 2008 6.125%

June 2008 6.375%

July 2008 6.5%

August 2008 6.4%

September 2008 5.93%

October 2008 6.46%

November 2008  6.04%

December  5.53%

Whether the interest rate is from January to December or December to January, there is no denying it has been a turbulent year.  Let’s examine the turbulence.

In February, the interest rate surged and it may have been due to the economic stimulus package.

In March, though, there was a sudden drop in the interest rate.  It may be due to the turbulent on the political front. With President Elect Obama, then Candidate Obama explains his continued relationship with conversational Reverend Wright; to Candidate John McCain winning his nomination; to Secretary of Defense, then Candidate Hillary Clinton defending her claim that she was under sniper fire when she served as first lady.  Turbulent was turning into turmoil.

The month of March was topped by April revealing a new high to the interest rate that remained throughout May.  Further, April brought gasoline prices reaching an all time high of $4.00 a gallon.  Still yet, May reveal more disturbing news with Iran being found making active warheads.

June was another month the interest rates increased.  It may have been triggered by more the dismal news from Chrysler of a plan layoff of employees.  The month did have one bright moment when the nominatee for the Democratic ticket was final decided.

Another month of increased interest rates occurred in July. With headline news being Nominatee Obama being named chancellor for German and France surrending and Nominatee John McCain asking aides for assistance in picking running mate.

August was another month of converse with Nominatee Obama picking his running mate as Joe Biden.  Nominatee John McCain chooses his running mate, Sarah Palin. 

September was plagued with environmental woes with Hurricane Gustav and the Republican Party trying to keep the tragic of lack or little aid of Hurricane Katrina from becoming a reality again.

October reveal another attempt to stimulation the economy with the signing of the Emergency Stabilization Act of 2008.  As a result of this failed attempt, the political platforms for both candidates became about the economy and “Joe the Plumber” was the headliner. 

In November, Candidate Obama becomes the first African American president of the United States.  The news of his victory did not stop the stock market from plummeting with the Big Three announcing their need for assistance to keep them from suffering the same fate as the mortgage companies. 

December 2008 came in with the declaration of the US being in a recession and it also brought the discerning news of being in that recession since December 2007.

The turbulence of 2008 is just that for the year 2008, 2009 we have a President elect that wants to bring “change” and I think that American is going to embrace that with open arms.

Good News, Investors

The flipping rules have been relaxed until June 2009.  Until recently, an investor has to wait 90 days before the investor could resell a home to a FHA buyer.

The reason for this change was because investors are helping the economy by repairing the large number of foreclosed home thoughout the country.

According to the FHA, “under the revised policy the purchasers will have to be financed capable to handle the mortgage and underwriters will talke a hard look at the appraisal.”  As a result of the changes, the FHA will not be, or at least for the time being, turning down mortgages because the previous owner owned the property for less than three months.

Good Indication that You Need to File a Property Tax Appeal

It is often difficult to determine the indication of needing to file a property tax appeal, but there are signs.

The following are a few good indication that a property tax appeal is necessary:

• One indication is when the description of the property does not match.  An example of such an error is a town home being labeled as a single family home.
• Another indication is when similar homes in the area sell for less than the assessed value.  Incidentally, most states, including Indiana, use market value or some variation of market value to determine the assessed value.
• Still yet, another indication of a need for property tax appeal is changes in the environment.  Change in environment includes rezoning, heavy traffic, drainage problems, building of new industry, freeways, or toxic waste in the neighborhood.
• Another indicating factor is the condition of the property.  If the property is environmental obscene.  The obscenity includes the roof needing replacement, inefficient heating, structural cracking, deterioration , and/or chronic defects.

It is important to not that every year is not an assessed year, but that does not preclude you from filing a property tax appeal.

It is equally important to note that any time an economy is plagued with foreclosures, short sales, and homeowners seeking bail out of homeownership are all good intentions that your property tax bill need a review and may be an appeal.

Is Your State Doing Its Share to Help in This Housing Crisis?

For the state of Indiana, I would have to say that is a resounding, NO.

 

For the state of Illinois, I found the answer to be YES.

 

I found it interesting that the housing crisis is affecting all fifty states, but until recently only fourteen states have made legislative and program changes to help homeowners in their respectively states.  

 

The states that have passed legislation to regulate the cost of acquiring a loan are:

• Washington
• Connecticut
• Kentucky
• Maine
• Maryland
• Minnesota
• New York
• Pennsylvania

 

The latter states led the way for forty states to implementing a homeowner counseling campaigns.  This aspect has until recently only been done by a few concerned Realtors and mortgage brokers.

 

To curb foreclosures twenty one states are now intervening in the foreclosure process. With the state leading the way by not putting current paying tenants out on the street is Illinois.  Illinois were followed in their efforts of intervention is:

·         California

·         Michigan

·         New Jersey

 

Still other states have increase days before a default notice must be issued.  Those states are:

• California
• Colorado
• Connecticut
• Maryland
• Massachusetts
• New York
• North Carolina
• Pennsylvania
• Virginia

 

Some other states started their effort in helping homeowners is by creating foreclosure task forces.  The state that led the way is:

• Delaware
• Florida
• Texas

Now, there are seventeen states providing a foreclosure task force.

 

It is very important that the states have stepped up to help with the burden of foreclosure that is plaguing so many homeowners.  Let’s keep thinking outside the box and we will all may it through this challenge in the market and economy.

 

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