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Fed program could slow foreclosures (10/09/2008)Atlanta's housing prices edge up (10/09/2008)
Buyer beware when purchasing from bank (09/21/2008)
Why Buy Now? (09/01/2008)
Housing bailout act has help for more than just struggling owners (07/28/2008)
Fed program could slow foreclosures
Posted: 10/09/2008By Julia Malone
Cox Washington Bureau
Thursday, October 09, 2008
Washington —- Georgians and others who are on the brink of losing their homes in the current financial meltdown should find some relief in emergency programs just passed by Congress, U.S. Rep. David Scott said Wednesday.
“There will be a slowing down of foreclosures,” predicted Scott, an Atlanta Democrat who helped draft the $700 billion financial rescue bill, aimed more generally at stabilizing the nation's credit markets.
Scott, a member of the House Financial Services Committee, said more steps probably would be needed to combat home foreclosures, which are occurring at a rate of 6,300 daily nationwide.
The congressman had objected to the lack of homeowners assistance when he voted against the $700 billion “bailout” measure the first time the House took it up.
But Scott said Wednesday that he was reassured after learning Friday that the Treasury secretary would be authorized and instructed to modify mortgages so that more owners could keep their homes.
Scott is urging his own rescue plan. He and University of Texas economist James Galbraith want to revive the Home Loan Corp. from the Depression era, rewriting mortgages with terms that would allow families to stay in their homes.
In the meantime, Scott said, those who fall behind on their house payments should immediately call their lenders and try to work out a solution; call the U.S. Housing and Urban Development counseling program at 1-800-569-4287; and check out the Federal Housing Authority's “frequently asked questions” on the Internet at www.fha.gov.
Scott also urged Georgia homeowners who face losing their homes to call their congressman and ask for guidance in using new federal tools.
These include HOPE for Homeowners, a program that went into effect Oct. 1 to renegotiate mortgage terms if both lender and borrower agree. Rewritten mortgages would be guaranteed by the FHA.
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Atlanta's housing prices edge up
Posted: 10/09/2008Though rise may be a seasonal uptick, metro area's market is faring better than others in the nation.
By Kevin Duffy
The Atlanta Journal-Constitution
Wednesday, October 01, 2008
Have Atlanta's home prices hit bottom or are a series of small gains just a reflection of the season?
For three months now, resale prices of single-family homes in the metro area have been inching up, according to new data from a Standard & Poor's/Case-Shiller Home Price Index.
“Atlanta, Dallas, Minneapolis and Tampa showed improvements in their annual and monthly returns, but all four are still too close to their recent lows to determine if the markets have stabilized,” according to an S&P release.
Meanwhile, the Case-Shiller indices of 10 and 20 cities show record one-year price declines through July, although the rate of decline is slowing. The indices are down 17.5 percent and 16.3 percent, respectively.
Metro Atlanta's 1.3 percent price increase over three months is more likely a seasonal uptick than a true turnaround, local real estate experts say. Sales are traditionally higher in the summer than other times of the year.
“I really think we're experiencing a little bit of that,” said Eugene James, director of housing research for Metrostudy in Atlanta. “There are too many unknown factors at this point in time.”
One factor is metro Atlanta's elevated inventory in the resale market, which is keeping prices down. It's about seven months above what it should be based on current sales, according to Dick Hearin, senior vice president of Coldwell Banker's Builder Developer Services. Hearin compiles Multiple Listing Service and First Multiple Listing Service data.
Another factor is buyer trepidation. “We are at levels of the 1990s in terms of closings,” when there were fewer people, said Steve Palm, president of the real estate research company SmartNumbers.
“Our prices right now are below 2003,” Palm said. “Our median price in July was over $20,000 less than in 2007. We are decimated.”
Those willing to buy are having difficulty getting loans. “My concern is the credit markets,” James said. “The lending institutions are out of cash.”
Over a year's time, prices in metro Atlanta are down 8.2 percent, about half as bad as the 20-city average, according to the S&P release.
“In Atlanta, we never saw home prices get that frothy,” so the dropoff has not been as steep, said Mercer University economist Roger Tutterow.
The pace of price decline nationally has cooled a bit. From May to June, home prices fell 2.2 percent; from February to April, the drop was 6 percent, according to the S&P release.
“There are signs of a slowdown in the rate of decline across the metro areas, but no evidence of a bottom,” said David Blitzer, chairman of S&P's index committee.
Home prices around the country peaked in June 2006. Las Vegas, Phoenix and Miami have been the worst performers over the past 12 months. Prices have fallen 28 to 30 percent in those cities.
Atlanta's June to July change was an increase of 0.4 percent, following 0.3 percent and 0.6 percent increases.
“I do think we're quite close to the bottom for home prices in Atlanta,” Tutterow said.
But Palm said with politicians wrangling over a $700 billion bailout of financial companies and Wall Street on a seesaw, demand for housing in metro Atlanta will remain muted.
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Buyer beware when purchasing from bank
Posted: 09/21/2008Buyer beware when purchasing from bank
Bargains can be had, but watch for pitfalls of real estate owned property.
By John Adams
Contributor
Sunday, September 21, 2008
Last week we talked about the flood of bank-owned homeson the residential resale market both nationally and locally. These post-foreclosure houses are the harvest of the exotic financing instruments and the loose lending guidelines of recent years.
In many cases, buyers were overwhelmed by dramatic jumps in interest rates as their adjustable loans reset and their payments skyrocketed.
Unable to pay the required sums monthly, these owners may have tried to sell. But with little or no equity in the homes, their efforts were in vain.
After a meaningless foreclosure auction where no investors even attended, these homes were deeded back to the lenders, who list them with local real estate professionals for sale. Banks call these houses REO properties, which stands for real estate owned.
Yes, the savvy real estate buyer can pick up a bargain, but it's important to be cautious when shopping for these bank-owned homes.
Here are some questions I am often asked:
Q What's the difference between making an offer on a “bank-owned” house as opposed to a typical resale home?
A The primary difference involves recognizing the challenges of dealing with an institutional seller. For starters, a traditional seller would first get their house in clean, ready-to-sell condition. Only then would they open the doors to the public. Furthermore, most sellers expect a buyer to request a comprehensive inspection, and are not surprised when a buyer requests compensation for needed repairs.
In contrast, banks expect to sell their REO properties as is, and they almost never agree to make repairs or put the property in any condition other than the way it is.
The bank will likely grant your request for an inspection, but will almost certainly decline any request for improvements.
Are all these REO houses in extremely poor condition?
Some are in almost perfect condition, while others are completely unfit for human habitation. In addition to being poor sellers of real estate, banks have a bad habit of being poor property managers during their period of ownership.
Because the house is vacant, it attracts vagrants who move in and semi-occupy the house.
In cold weather, these occupants may build fires in the fireplace to keep warm, and they sometimes break up kitchen cabinets to use as firewood.
In addition, as time goes by, these homes often sink into much worse condition. Thieves steal copper pipes and wiring to sell for recycling, and air conditioning compressors disappear overnight.
Even so, the banks hope to sell these homes as is.
How do I go about making an offer on one of these houses?
Here is the next hurdle. When looking at a typical resale house, you can expect the seller to respond to your written offer in hours.
They may counter, but today's seller takes every offer seriously, hoping for an eventual meeting of the minds. Banks do things differently.
When you submit a written offer to a bank, it frequently will demand proof from your bank that you have sufficient funds to close the transaction. This must be submitted before the bank will even look at your offer.
Another frequent requirement is acceptance of multipage addenda freeing the bank from any liability for the condition of the property involved.
Even after all that, my experience is that most banks have trouble finding anyone with the actual authority to make a decision on selling the house. While some lenders are better than others, it is not unusual for offers to sit on the table for a week or more before someone at the bank gets around to responding.
Any other pitfalls to watch out for when buying from lenders?
First, know that this seller is unwilling to give you a General Warranty Deed for the property when you buy.
They will insist on delivering title by Limited Warranty Deed, thus preventing you from involving the bank in future title problems.
To remedy this shortcoming, it is especially important that you purchase the optional owners title insurance from the closing attorney.
Also, when selling REO houses, most lenders insist that you pay for settlement costs, and further require that the closing take place in the office of the seller's attorney.
If you want legal representation (and you do), you will have to pay for your own attorney to review all your documents and advise you directly.
In my view, it's money well spent.
John Adams is a broker and investor. For more real estate information or to make a comment, visit www.money99.com.
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Why Buy Now?
Posted: 09/01/2008Purchasing a home in the next six months might be the smartest thing you've done all year
By Seth Weissman
September 2008
atlantalifemag.com
Bottoms of real estate markets never announce themselves with fanfare. Economists generally only determine the exact bottom long after the market has sharply rebounded. My prediction is that when the dust finally settles, the experts will look back on the time period between now and the presidential election as the best time to have purchased a home. Why is this the case? There are several interrelated reasons. The first is that the housing market in the metropolitan Atlanta area is far healthier than most housing markets in the United States. We've seen some price reductions in housing but nothing comparable to other parts of the country. With our region's population increasing by 150,000 people per year, prices can only go so low because demand is constant. It's a nice cushion to have.
Second, for the moment, the Federal Reserve (Fed) is more concerned about encouraging growth than controlling inflation. Don't expect this to last. If inflation remains high, look for the Fed to start raising rates right after the presidential election. This, along with the turmoil in the secondary mortgage market, is likely to drive up mortgage interest rates. This will make the effective cost of housing much higher than it is now even if prices continue to fall somewhat or remain flat. Let's look at the following example to understand why this is the case. Let's say that a buyer gets a good deal on a property at $320,000 with a 30-year mortgage for 90 percent of the purchase price at an interest rate of 6.25 percent. The buyer's monthly mortgage payment will be $1,773.27. Now, let's say that the buyer gets a great deal on the same house at $300,000 but interest rates on the same 90-percent loan are now 7.25 percent. Even though the buyer is borrowing less, the monthly mortgage payment is $1,841.88. In other words, the buyer who waited for the great price actually ended up paying more for the property than the buyer who paid a little more but got a better mortgage interest rate.
Rising mortgage interest rates could drive housing prices even lower. My bet, based on the above example, is that the effective increase in housing costs resulting from rising mortgage interest rates will not be offset by further decreases in property values. What does this all mean? The answer is that there is likely a short-term window of opportunity to get the best deal in this down cycle of the housing market.
Where are the best deals? Well, remember that the entire housing market is on sale right now. The houses that are most deeply discounted are foreclosed homes presently owned by various lending institutions. These are sometimes referred to as "REO" properties or real estate owned. It's not a bad place to start your search for a home. However, there is one major caveat to this suggestion: There is a big difference between price and value. The house that is the most deeply discounted from a price perspective is not always the best long-term housing value. If a house is functionally obsolete, in a less than ideal location and/or in a mediocre school district, the long-term value of the house may not be as good as a higher priced home where these things are not an issue. For buyers interested in value, focus on the following four factors:
1. Location
Buyers want to be close to work, shopping centers, healthcare and recreation. This is even more true with the rising cost of gas.
2. School district
Quality public schools always have been a huge factor for most buyers.
3. Quality
Buyers want a well-built house.
4. Design and functionality
Many houses become functionally obsolete because of a lack of closets, size of bathrooms, layout of kitchens, height of ceilings or architectural design.
If the house is being bought for investment purposes, the price point of the house is far more important than when the house is being purchased to live in. Look for lower priced homes that will appeal to a broad rental market.
If you have been sitting on the fence, it is finally time to move!
Seth Weissman is a senior partner in the real estate and litigation law firm of Weissman, Nowack, Curry & Wilco, P.C. He can be reached at seth@wncwlaw.com.
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Housing bailout act has help for more than just struggling owners
Posted: 07/28/20087/28/2008
By Sandra Block
Are you planning to buy a house this year? Are you frustrated because you can't deduct property taxes? Are you a retired homeowner who needs extra cash?
If you answered "yes" to any of those questions, keep reading.
Over the weekend, the Senate approved housing bailout legislation that's primarily designed to help troubled homeowners and slow the rate of foreclosures. But the legislation, which President Bush is expected to sign this week, also includes provisions that could help families who are in no danger of losing their homes.
Here's a look at some money-saving provisions tucked deep inside the housing bill:
Tax credit for first-time buyers.
First-time home buyers who purchase a primary residence between April 9, 2008, and July 1, 2009, will be eligible for a tax credit of $7,500 or 10% of the purchase price, whichever is less.
On the surface, this looks like a pretty good deal. A tax credit is a dollar-for-dollar reduction in your tax bill, which makes it more valuable than a deduction. And this tax credit is refundable, which means you'll qualify even if your federal tax bill is less than $7,500, says Bob Scharin, senior tax analyst for Thomson Reuters. For example, a first-time home buyer who owes the IRS $2,000 would receive a refund of $5,500.
But this provision includes a lot of caveats, including:
-You'll have to pay it back. While this break has been labeled a tax credit, it's really an interest-free loan. Home buyers who claim the credit will be required to pay it back in equal installments over 15 years, starting in the second year after the home is purchased. If you buy a house this year and claim a $7,500 credit on your 2008 tax return, you'll have to pay an additional $500 a year in taxes for 15 years, starting in 2010.
If you sell your house before the 15 years has elapsed, you'll have to repay the entire balance, unless you sell at a loss.
-If your income exceeds certain thresholds, you're ineligible for the credit. The tax credit phases out for single taxpayers with adjusted gross income of $75,000 to $95,000. For married couples who file jointly, the phaseout is $150,000 to $170,000.
Deduction for non-itemizers.
The legislation will allow homeowners who don't itemize to deduct up to $500 in property taxes a year, or $1,000 if they're married and file jointly. For 2008, joint filers who pay property taxes will be eligible for a standard deduction of up to $11,900, while single homeowners will be eligible for a standard deduction of up to $5,950, according to tax publisher CCH.
The amount of the property-tax deduction can't exceed the amount you pay in property taxes. For example, if you're single and paid $400 in property taxes this year, you'll only be allowed to deduct $400.
This deduction is limited to tax year 2008 unless Congress votes to extend it.
Changes for reverse mortgages.
A reverse mortgage is a loan against home equity that doesn't have to be repaid until you move, sell your home or die. To qualify, you must be 62 or older. If the home is owned jointly, both owners must be at least 62.
Reverse mortgages can provide much-needed income for retirees who have a lot of home equity but not much in savings, says David Certner, legislative policy director of AARP. The bill addresses two aspects of reverse mortgages that have made them unattractive to potential borrowers:
-Fees. Most borrowers pay hefty upfront fees for a reverse mortgage, which reduces the amount of money available to borrow.
The housing bill limits origination fees for federally insured reverse mortgages to 2% for up to $200,000 of a home's value, plus 1% for the amount that exceeds $200,000, up to a maximum of $6,000.
-Loan limits. The size of a reverse mortgage is based on the borrower's age, current interest rates and the home's value. In the past, however, the maximum home value for a federally insured reverse mortgage was capped at $200,160 to $362,790, depending on where the homeowner lived.
Those restrictions prevented homeowners in high-cost areas from getting the most out of the equity in their homes, says Peter Bell, president of the National Reverse Mortgage Lenders Association.
The legislation raises the maximum home value to $625,500, Certner says. As a result, he says, homeowners who live in high-cost areas will qualify for larger loans.
Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays.
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