Archive for the ‘General’ Category

Foreclosures have devastated house owners together with entire neighbourhoods. Now it is time for the tax department to feel the hard pinch. The treasury offices across the country are getting ready for the river of taxes to run dry.

Innumerable houses in Cleveland have been damaged by vandalism, fires and the weather to a point of no return. The lenders will now just walk away. Treasurer Rokakis of Cuyahoga County apprehends that the day is not far when the lenders will call on them saying that they just can’t fund demolition of the units and are going away. This trend will pick up in other places where foreclosures have teamed up with job losses to make the situation murkier.

The figures about vanishing taxes are already rolling in. Sun belt cities are top rankers in the foreclosure crisis. Here a conference of mayors forecast that there would be a reduction of $3 billion in property taxes in 2008. Cities had begun to count their dollars in advance relying on a continued growth. Now there is going to be a scramble to close the yawning gaps in revenue collection and expenditure.

The situation will not improve even if lenders manage to sell off some estates. The new owners will demand a revision of valuation of these damaged houses. Taxes will have to be lowered. Even the house owners not caught in the foreclosure net will demand re-assessment because of changed circumstances affecting the entire neighbourhood.
Rokakis claimed that already 14,000 requests for re-valuation have been noted in 2007. Next year the number is sure to rise to anything between 20,000 and 25,000.
The money coming from fees charged from property sale transactions is also going to slow down. The number of sale deeds has dropped by 40%. This has negatively impacted on state transfer fees as well as deed, mortgage and registration charges. All this will tell on the city governments. Anything touching the state trickles down to the local levels.

On the other hand cost of communal services continue to rise with the increase in demand for help. The small town of Shaker Heights in Ohio will spend $500,000 in the current year to maintain abandoned houses. Cleveland Heights will fund $75,000 only to keep gardens trimmed. Three years ago $6,000 had been sufficient. All the thanks for this topsy-turvy picture goes to the foreclosure crisis.

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The story of one family is the same as that of thousands of others across the country. The Greenes tired of being tenants grew confident that their joint income would enable them to become house owners by paying $1,000 per month towards mortgage. But their hopes turned to dust when spiralling living costs combined with mortgage increases left them stranded. Twice they have applied for bankruptcy in about ten months to keep home fires burning in their own house. This is just one instance of what is happening to many other families across Floyd County as well as nation wide.

According to reliable sources there has been 175 foreclosure notices at some stage or the other since May in the County. The different stages are default notices followed by auction and bank repossessions. In Georgia the situation is grim – 1:299. It is double that of the national average.
The culprit is the sub-prime market where interests shoot up after a honeymoon period of grace. Those with weak credit creditability had benefited from these loans during the last ten years. Through this route they had been able to own a house. Little or no down payment was required initially but later rates soared.

The crisis peaked this month when numerous lenders including jumbo ones like Homebanc Mortgage Corporation of Atlanta said quits to the mortgage business. It set off international tremors in the stock market. Investors withdrew cash from the markets causing available credit to dry up. The Federal Reserve had to quickly intervene to allow stocks to rebound on 17th August.

Locally Floyd County continues to stagger with the weight of foreclosed units. About four years ago the housing picture was rosy in this region. Low interest rates with high appreciation value of properties tempted investors and buyers to hope for high profits. Swayed by publicity they took the risk. Even longtime house owners fell for the trap and refinanced. Then came the shock! Suddenly interest rates began to skyrocket. It meant additional monthly payments. For others the prices of essentials began to soar; so too did medical expenses and coverage. Unemployment and shutdowns added to the woes. The net result was that people found it difficult to sell their properties and save themselves. The tightening of the mortgage industry has made it more difficult to avail of house loans. The circle is viscous.

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New Jersey realtors are now more accessible to clients – thanks to their turning more than never before to the Internet and like devices. This is on the basis of a survey started by National Association of Realtors, on behalf of New Jersey Association of Realtors (NJAR). The Survey reveals the activities and demographic leanings of the realtor group.

As elsewhere, the real estate industry too is constantly changing. Change means a shift in needs and expectations of clients. Realtors are swiftly adapting to the change by turning to the Internet and mobile phones. Users of web sites increased from 49% in 2005 to 84% in 2006. The use of the website of NAR, REALTOR.com has shot up from 52% in 2005 to 89% in 2006. 91% use e-mail showing an increase of 81% from 2005.
Cell phone usage has also increased and is up by 10%.
Realtors are going for advertising in newspapers in a big way. The numbers rose from 9% in 2005 to 28% in 2006.

About 93% of real estate firms (56% in New Jersey) have their own web sites. Most of them use the sites to host hot news on the community, its demographics, reports on schools, mortgages, and financial weather – making it a virtual tour. Most of the sites have links to state and local governments, lenders, mortgage and other real estate service providers.

New Jersey realtors work for about 40 hours per week and earn $41,200 on an average. This can be compared with the national number of $47,700. The typical New Jersey realtor has been at his job for nine years – this being two more than the national average. Most (about 95%) are confident that they will hold on with vigour for another two years.
According to the survey the realtors are very well educated. The NAR and its sister institutions award professional designation. To earn it the realtors are expected to complete courses, which will groom them to serve clients in a particular field of the real estate business in an improved manner.

These findings are on the base of a questionnaire, which NAR circulated via the mail on January 2007 to 70,000 realtors, picking at random. The same set was distributed to another 70,000 through the Internet. 10, 774 replies were received of which 147 were rejected. Thus the response rate was 4.9%.

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Mortgage disclosures keep many clauses carefully confused. This is the opinion of Federal Trade commission’s Bureau of Economics. With changes here and there borrowers could get a much better deal.

A serious study was made of 800 mortgages covering 12 areas across the country. Half were given current mortgage disclosure forms and half given other forms, which were easier to understand. Participants were queried on two hypothetical fixed rate mortgage loans regarding costs, terms and comparison. Approximately a 5^th of those who took the first set of forms could not pinpoint the annual percentage rate of the loan. This being the cornerstone of the issue how was it possible for them to compare? Another 5^th could not calculate the exact amount of cash due at the time of closing or even the monthly instalments. Questions about escrowing for taxes and insurances remained unanswered. About a quarter couldn’t be definite about the settlement amount charges and a third was confused about interest rates. A third of the participants remained ignorant that the loan was inclusive of a huge inflated payment or that the loaned amount also carried with it settlement charges. As many as half failed to spot the loan amount itself in the current forms. In the other set of forms mortgage costs were clearly outlined while less important or confusing trivialities were left out. The language was easy and borrowers were able to distinguish clearly the various segments in costing.
The results were electrifying and hopeful of a fresh start. It was an eye-opener into the endemic confusion reigning in both the prime and sub-prime borrowers. Only 61% could give a correct answer to those questions related to the current form. But 80% were successful in those connected with the prototype forms. In every way the second lot looked pointed to a hopeful future in the world of loans.

This survey apart, 36 interviews were taken of customers who had recently undertaken mortgages. Most of them were not clear about costs and terms. The scenario is not surprising considering the fact that forms in circulation had been introduced as far back as 30 ago! No wonder even simple loans are not understandable! These forms do not take into account the modern complexities of mortgages. Better forms might not totally solve the problem of frauds but it will go a long way to forewarn the borrowers about the pitfalls.

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Mortgage defaulters who are facing foreclosures are waiting for help from Washington. The authorities however have taken a wait and watch stand to the fallout resulting in years of lending practice without being backed by sufficient credibility.

The market is showing signs of self-recovery and the overall economy seems to remain untouched. At this point overreaction is uncalled for. Also encouraging are the indices showing solid consumer spending and low unemployment rates. The stocks too have hit records buoyed by corporate profits.

The Chairman of Federal Reserve opines that while on the one hand the authorities are obligated to end fraudulent lending, they have to be cautious about suppressing responsible lending

On the other hand the advocates for the affected consumers point out that this has come has a rare chance for the law to strengthen its lending rules. To substantiate their argument they point to foreclosure statistics.

The National Association of Realtors expects sales of present houses to fall by 4.6%. The home price median is anticipated to drop by 1.3%. The foreclosure rate is rising at a double rate annually all over the country.

The President of the National Community Reinvestment Coalition, John Taylor, representing the interests low-income people and minority groups, is skeptical of the outcome if the government fails to intervene.

The Mortgage Bankers Association however predicts that foreclosures among risky borrowers will amount to 0.25% of the country’s mortgages.

Democrat Senator Dodd is spearheading a movement to assist affected homeowners, with the help of big lenders – big names in the financial world like HSBC Holdings, Citigroup etc. They suggested modification of loan terms before hiking interest rates. Analyst Adeson, citing Dodd’s endeavours, warns that the housing market will suffer more if over enthusiastic banks arrange for loan workouts. He commented that lending money is not about being nice but it is all about business. He has cited the instance of Hedge Funds to prove his point.

Lawmakers are trying to work out a balancing trick between relief to borrowers and reining in of bad lending practices. Nobody wants to choke to death the sub-prime market. Senator Miller, a North Carolina Democrat has long been fighting predatory lending. He is confident of passing quickly a Bill in the House modeled after consumer protection laws in states like North Carolina and New Jersey, where reforms has not led to end of credit.

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Ohio reeling under foreclosures, ranking third nationwide, has started to sue realtors based in Ohio, California, Arizona and New York, for putting pressure on appraisers to inflate property values. In Ohio it is specifically illegal to do so. Under the hammer have come 7 mortgage brokers, two lenders and one appraiser. Alarm bells rang when foreclosure in Ohio increased by 135% from the previous year making the state run past the national average on the double. It has snowballed into a socio-economic problem. Many have welcomed the move.

The borrower gets a loan on his house on an inflated appraisal. The trouble starts if he falls behind repayment schedules. Actual value of the property will not enable him to sell it and clear his dues. The lawsuit claims that appraisals have been made even without seeing the property.

Some lenders are being termed as predators. A crackdown will help to protect consumers in the future. Repeatedly overt and covert pressures have been put on the appraisers. The catch is that house owners are reluctant to pay for getting their property valued. A proper valuation might negate the loan. The realtors offer services for free by putting the pressure on the appraisers to get the deal clinched.

Some firms are above board dealers. They do not push values but check them. Patricia Amidon, a member of Appraisal Institute’s Government Relations Committee says that those who value property without examining it automatically violate trade organizations ethics.

The accused are charging Ohio Attorney General’s office for heavy handedness. Some are declining to make comments. The lawsuits are claiming $250,000 as civil fines – that is $25,000 from each defendant. Injunction is also being sought barring repetitions of similar acts.

At the root is that house owners want to borrow as much as they can, mortgage brokers try to locate the bank willing to advance and in between the appraisers are under pressure because they are dependent on the brokers to keep their business running.

The Attorney General is even thinking of suing Wall Street because it is their bond sales that have enabled consumers to get mortgages, which they otherwise would not have got. It is not just the appraisers – the prosecutors are on the look out for all the players in the game. Democrat Dann is focusing on this foreclosure bubble.

New York and Colorado also are following the footsteps of Ohio.

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It is hard work to make a living out of taking phone calls. According to statistics if you make 100 calls you will get 5 appointments; out of that 5 you will get 1 listing. It is a hard way to count your pennies when only after 100 calls you will get a listing. People have to be pestered for three hours each day and one has to go on repeating if anyone is interested in buying or selling real estate.

But there is an easier way out. Without a license form the Colorado State’s Division of Real Estate one cannot be a recognized prospector. The problem was that the home and hearth fires have to keep steadily burning with or without a regular income. Standards one gets used to can’t be downsized overnight. The self-employed must have a steady stream of business. The target to survive is $50,000 per month. But how? It needs a special type of tolerance and skill to cold call and knock on a stranger. Survival and success depends on SOI or Sphere of Influence. This relates to 100% of self-employed person’s business. The return is more than generous. In fact the coffers overflow. Sometimes there is an odd client or two from the open field but most are known people – those coming under the category of SOI.

Being in the SOI zone means you are out of the number game. No more stifling yawns over endless calls. No more peering through real estate advertisements to track down next target. No more pinching yourself awake to keep your purse ready for both the basic bread and the luxurious spread of cream. One can’t do without either. You don’t need to hitch up a party to rope in 20 more clients – now just 2 or 3 will suffice. The SOI trail is good, loyal and fun business. The success statistics can go up from 50% to 75%. That is really cool.

The best part is that by keeping up the tempo for only a few years by keeping your SOI filled and fat you can glide through with ease the rest of your career in real estate. You don’t have to bother about prospecting. You do not require a market budget. No more will the nights be sleepless as you worry about the tomorrows. Who doesn’t care for such a lifestyle? All!

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Bankers are watching and waiting with uncertainty the snowballing effect of the sub-prime tsunami crisis.

Even though April provided a breather by a dip of 1% in foreclosure listing, it was still up by 62% compared to last year. Even then it will be far above the average of last year. Statistics pouring in show a worsening of the situation. No one knows the actual number of active sub-prime mortgages, its source of origin or refinancing procedures in Northeast Minnesota and Northwest Wisconsin.

Risky loans had triggered off this crisis. Some of the biggest sub-prime lenders like Ameriquest and New Century Financial are toppling down.

Some regions of the country have remained untouched by this virus – Wyoming, Vermont, North and South Dakota, Mississippi, Delaware and Washington D.C. Topping the list are 10 cities of which six are in California. These six ranks first among the group of notorious 10. Las Vegas comes first. Others claiming this dubious distinction are Nevada, Colorado, Connecticut, Florida, Arizona, Illinois, Michigan, Ohio and Georgia. As a result of this fall out Michigan, Minneapolis and Ohio are reeling under massive layoffs.

Big national financial services are practically non-existent in some important regions. Yet sub-prime activity has been typical with apprehended results. Real estate businesses having taken a U turn, lenders are tightening loan conditions thus putting marginal borrowers in a soup. Their rates of mortgage interest are rising while the value of their property continues to plummet.

The situation is so alarming that Lutheran Social Services have come forward to provide pre-bankruptcy counseling in Minnesota and Douglas County. The sub-prime lending has hit not only the borrowers but also local banks and communities. A ‘teaser’ rate tempts the borrower to fall into the net. Later the net closes in on the catch with disastrous consequences to all but the lender-agent nexus. Sub-prime lending essentially steals business from smaller entities.

Authorities have come forward and tightening the belt of the law – a grim reminder that playing around with lending will attract felony charges coupled with compensation and damages. However it applies only to current frauds and does not extend backwards. Thus primarily the focus is on prevention.

Wisconsin is the only state that has no limits on interest rates. Pay-day lending has been rampant which many regard as an unhealthy drain on the economy. The heat is on to find a solution and save the people.

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