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By Mark W. Simoff | Agent in Naples, FL
  • Rising Interest Rates...Lock in Your Rate!

    Posted Under: Home Buying in Naples, Home Selling in Naples, Financing in Naples  |  July 29, 2013 1:38 PM  |  336 views  |  1 comment
    WASHINGTON – July 29, 2013 – While federal guidelines dictate that lenders must lock in a borrower’s interest rate about three days before going to settlement, the recent escalation in mortgage costs is making rate locks popular again.

    Experts, noting that rates fluctuate several times each day, advise home buyers not to focus too heavily on the exact right moment to lock in the lowest rate.

    “If the rate looks good – if it meets your goals and meets your needs – lock it in,” says Ellen Davis of Corridor Mortgage in Columbia, Md. The lock-in agreement will protect the borrower from higher rates for 30 to 60 days, depending on the lender and type of loan.

    If the mortgage fails to close within that period, the lender may extend the lock at no cost if it is at fault for the delay; charge a fee to draw out the lock period if the borrowers are at fault; or refund the lock fee – if one was charged – in the event that the loan is not approved by underwriters.

    Many lenders don’t charge a fee for a basic lock; but others expect a few hundred dollars or a small percent of the mortgage amount, especially on longer locks or smaller loans.

    Source: Washington Post (07/27/13) P. 12; Elmer, Vickie

    Mark Simoff

  • New Hope for Some Who were Foreclosed

    Posted Under: Market Conditions in Naples, Home Buying in Naples, Financing in Naples  |  October 18, 2012 1:46 PM  |  284 views  |  No comments
    Families who lost their home to foreclosure following the housing crash are now re-emerging and looking to buy again, according to The Wall Street Journal.

    As Stuart Miller, chief executive of national homebuilder Lennar Corp., puts it: More people are “coming out of the penalty box.”

    Some builders have a growing interest in reaching out to these “boomerang” foreclosure buyers. For example, builders like K. Hovnanian are providing sales staff with fliers that detail mortgage eligibility rules for families who have undergone a foreclosure or bankruptcy.

    “The industry is saying, ‘Pay your dues and then get back into the market,’” says Dan Klinger, president of K. Hovnanian American Mortgage.

    In order to qualify for a mortgage backed by the Federal Housing Administration (FHA), families must wait three years or more to apply again following a foreclosure or short sale. Using that benchmark, about 729,000 households that were foreclosed on during the housing crash are now eligible to apply for an FHA mortgage – up from 285,000 a year ago, The Wall Street Journal reports.

    Fannie Mae and Freddie Mac require a much longer wait than FHA to qualify for a loan after a foreclosure or short sale, up to seven years.

    But just because “boomerang” families are allowed to apply again for financing for a home purchase doesn’t mean they’ll qualify for a loan, housing experts say. These families will still have to show a strong credit score and meet stringent underwriting standards.

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    Mark Simoff
    Downing-Frye Realty
  • Goodbye to the Mortgage Interest Deduction?

    Posted Under: Home Buying in Naples, Home Selling in Naples, Financing in Naples  |  October 18, 2012 1:26 PM  |  323 views  |  1 comment
    Panelists at a housing forum hosted by Zillow Inc. and the University of Southern California’s Lusk Center for Real Estate said changes to the mortgage interest tax deduction (MID) probably are on the horizon, given the large federal debt.

    “I think it’s entirely likely that something big is going to happen (with the MID) starting next year with either administration, said Jason Gold of the Progressive Policy Institute.

    Federal lawmakers are already looking to revamp the MID to alleviate the nation’s budget crisis. Panelists at the recent forum said current low interest rates make it a good time to reform the MID, with only a minimal impact on house prices.

    The panelists support phasing out the MID over time or replacing it with other incentives, such as tax credits that offset a portion of a buyer’s downpayment or a MID only for homeowners under age 35.

    The National Association of Realtors® – which opposes efforts to change the tax break – rolled out an e-mail consumer education campaign in July that stressed the value of homeownership and federal housing subsidies.

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    Mark Simoff    
    Downing-Frye Realty

  • Bankruptcy and Foreclosures

    Posted Under: Financing in Naples, Foreclosure in Naples, Credit Score in Naples  |  October 15, 2012 1:09 PM  |  386 views  |  No comments
    Real estate Q&A: Bankruptcy doesn’t stop foreclosure Question: I filed for bankruptcy over two years ago and included my primary and rental home loans in the bankruptcy. Even though the loans are not on my credit report, two recent foreclosures for those properties show up on the report. My finances are back on track, and my credit score is over 700, but I can’t get another home loan. I’ve been told I have to wait three more years until those foreclosure judgments disappear from my record. Is there anything that I can do? -Gina

    Answer: Here’s what happened: When you filed for bankruptcy and were relieved of having to pay back the loans, the bankruptcy trustee abandoned the properties and allowed your lenders to finish the foreclosures. That’s standard procedure. When your lenders finally got the foreclosure judgments, the judgments showed up on your credit report much later than your initial bankruptcy.

    The key here is that while the bankruptcy relieved you of the debt on your homes, it left you as the owner of the properties with the mortgage liens intact. In order for the banks to get their collateral back, they had to foreclose. The bankruptcy does not automatically transfer a house to the lender, even though it wipes away the responsibility of repaying the mortgage.

    Most lenders have underwriting guidelines that require several years to go by after a major negative event such as a bankruptcy or foreclosure. You have two options: Wait out the remaining time, or search for a lender with less stringent underwriting rules that will most likely charge you a higher interest rate.

    About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

    Copyright © 2012 Sun Sentinel

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    Mark W. Simoff         Downing-Frye Realty     239-839-7219
  • Attention Buyers - Interest Rates Won't Go Much Lower

    Posted Under: Market Conditions in Naples, Home Buying in Naples, Financing in Naples  |  October 15, 2012 12:59 PM  |  145 views  |  No comments
    With the Federal Reserve buying billions of dollars worth of mortgage-backed securities, you might think that mortgage rates are poised to fall even lower than the current rock-bottom levels. Maybe you should wait on that refinancing, you wonder, or delay purchasing a house until the market is even more favorable.

    Not so fast. The Fed’s purchase program certainly is expected to keep rates low for some time, but there’s no reason to think rates will fall much further, according to economists. In fact, looking at the past two Fed bond-buying programs, the market felt a stronger impact in the weeks immediately following the announcement – less so as time went by.

    That’s not to say that the Fed’s actions are immaterial to current and potential homeowners. Three key factors that affect housing values and mortgage rates include why the Fed decided to act, current real estate market conditions and what the future could hold, both for the level of rates and the capacity of the financial system to handle demand for mortgage applications.

    “The Fed wanted to give as much juice as possible to a piece of the economy that was starting to show some life,” said Liz Ann Sonders, chief investment strategist for San Francisco-based Charles Schwab & Co. “What is more important is the turn we’ve seen in prices.”

    A nudge for housing investment

    On Sept. 13, Fed Chairman Ben S. Bernanke announced that each month the Fed would buy as much as $40 billion of mortgage bonds to support the market and boost the economy, as well as $45 billion of Treasury securities. The central bank also promised to keep interest rates low through mid-2015, regardless of signs of economic recovery. That caused mortgage rates to fall to historic low levels.

    “The Fed is saying, ‘We stand ready to do what we have to do to keep long-term rates down,’” said Bob Walters, chief economist at Quicken Loans in Detroit.

    Investors face a long stretch ahead of low returns from such traditional financial instruments as bank deposits and bonds. The Fed’s hope is that they’ll be pushed into buying real estate and that this will further lift home prices, said Joseph Kalish, chief global macro strategist for Ned Davis Research, based in Venice, Fla.

    “You’re really coercing investors who are holding cash to get into something else,” Kalish said. “What Bernanke is hoping for is that some of that money ends up in real estate. … People are fed up with earning zero percent at the bank. They’re buying up these foreclosed properties.”

    About 11 million U.S. homeowners owe more on their mortgages than the home is worth, known as being “underwater.” For every 5 percent increase in home prices, another 2 million properties rise “above water.” So policymakers can be most effective in helping homeowners if they’re able to encourage prices to climb, Kalish said.

    The CoreLogic Home Price Index is up 2.5 percent from a year ago and the Federal Housing Finance Agency’s purchase-only index reached its highest level in nearly two years, after growing 3.7 percent from last year – the fastest pace since September 2006, according to Kalish.

    Prices start to rebound

    Indeed, the factor of home prices is key in understanding the Fed’s action. As much as the Fed has done to keep rates low during the past few years, it couldn’t overcome the fact that home prices were falling at double-digit rates. Now that National Association of Realtors data show home prices beginning to appreciate again, by as much as 10 percent, it’s finally profitable to buy a house again, Sonders said.

    “That is why housing is really starting to ramp,” she said. “Stocks and homes are the two biggest components of net worth, and they both are firing.”

    The Fed wanted to jump on the momentum of this new energy for the economy, in hopes of building on the new confidence that will need to continue if unemployment is to fall and healthy growth is to be restored. Residential investment has contributed to economic growth in each of the past five quarters, after six years of the economy getting little or nothing from housing, Kalish said.

    “We think the housing market has hit bottom in terms of activity and pricing, and we’re looking for these trends to continue for several years,” he said. “It’s about even between buyers and sellers; nobody has an advantage. This tighter market is helping to drive up prices. You hear (real estate agents) talking about a shortage of supply, even in Florida.”

    As prices rise and more homeowners have positive equity, it could make it easier for banks to loosen credit standards and solve some of the problems borrowers have had with credit approval, too-low appraisals and difficulty with short sales, Walters said.

    “A rising housing market starts to heal a lot of those things,” he said. “We’re seeing pretty significant evidence that housing has bottomed and is doing better than ever. It’s going to start to resolve a lot of the challenges in the marketplace.”

    A refinancing backlog

    Already, the Fed’s bond purchase program has boosted the number of refinancing applications to the highest level since April 2009, adding to an existing backlog. For homeowners who have been waiting months for a refinancing to process, that delay is unlikely to change substantially until after the election. There’s simply too much undecided about federal mortgage policy and the future of the budget and deficit debate, Kalish said.

    “The banks can see this increase in demand, and it may warrant some additional hiring, but they’re really reluctant to staff back up. They’re under tremendous pressure with leverage and costs,” he said. “They’re going to be pretty cautious.”

    Mortgage lending for home purchases is constrained even more, by a combination of borrowers’ difficulty obtaining mortgage insurance, higher servicing costs, more conservative appraisals, smaller lender staffing and the macroeconomic uncertainty. Even borrowers who obtain a new mortgage should expect continued lengthy approval timelines, extensive documentation and higher costs.

    “The real estate market is not a quick-fix market. It takes months to see changes,” Kalish said. “The banks went through a horrific time the last few years so they don’t want to take another risk with people with low FICO scores.”

    That said, lenders will probably resume hiring in force after a sustained period of rising prices and solid demand. The Fed’s support through its mortgage bond-buying program takes a big step in that direction.

    “The Fed has proven it’s going to do what it can, and what it wants is to keep long-term rates down,” Sonders said.

    But Sonders, Walters and Kalish cautioned that individual homeowners shouldn’t procrastinate on refinancing or purchase decisions just because rates should stay low for some time. Other factors, both personal finances and life stage, should be given greater weight.

    “When rates move, they can move rapidly and they don’t ring a bell when they’re about to move,” Walters said.

    Start Here to Find Your Naples Property

    Mark W. Simoff            Downing-Frye Realty           239-839-7219
  • Low Appraisals Still Causing Problems

    Posted Under: Home Buying in Naples, Home Selling in Naples, Financing in Naples  |  October 10, 2012 2:09 PM  |  147 views  |  No comments
    The real estate market is recovering but still faces hurdles, notable from tight mortgage credit, but the National Association of Realtors® (NAR) says problems with “a sizeable share of real estate appraisals” is also holding back home sales.

    While emphasizing the fact that most appraisers are competent and provide good valuations compliant with the Uniform Standards of Professional Appraisal Practice, NAR notes that appraisals generally lag market conditions.

    In addition, NAR says, changes to the appraisal process have caused problems in recent years, including the use of out-of-area valuators without local expertise. Fair appraisals have also been impacted by a lack of access to local data, inappropriate comparisons and excessive lender demands.

    While 65 percent of Realtors surveyed in September reported no contract problems related to a home appraisal over the previous three months, 11 percent said a contract was cancelled because an appraised value came in below the price negotiated between the buyer and seller, 9 percent reported a contract was delayed, and 15 percent said a contract was renegotiated to a lower sales price as a result of a low valuation. However, homes in many areas sell for less than replacement construction costs, according to NAR.

    NAR Chief Economist Lawrence Yun says there has been a steady level of appraisal issues for quite some time. “Though the real estate recovery is taking place, the combined issues of stringent mortgage lending requirements and appraisal frictions are hampering otherwise qualified buyers from purchasing a home in a timely fashion, and in some cases are preventing them from buying at all,” Yun says.

    Major appraisal problems reported by Realtors

    • Some appraisers use foreclosures, short sales and run-down properties as comparable homes without making adjustments for market conditions or the condition of the property. NAR data finds that the typical foreclosure sells for an average discount of 20 percent relative to traditional homes in good condition; the typical short sale is discounted 15 percent.

    • Appraised values do not reflect market conditions such as rising prices, the presence of multi-bidding and low inventory.

    • Appraised values are inconsistent and fluctuate widely.

    • Out-of-town appraisers, who are not familiar with the area or local market conditions, are being used.

    • Turn-around time by both appraisers and banks is slow, which delays closings.

    A large concern is that some appraisers working for an Appraisal Management Company (AMC) operate under strict and limited guidelines due to bank lending criteria, which appears to be related to banking regulations or lender’s desire to limit risk. NAR says unreasonable “put back” risks imposed by Fannie Mae and Freddie Mac could also cause banks to set unrealistic requirements for appraisers.

    NAR President Moe Veissi, broker-owner of Veissi & Associates Inc. in Miami, says some appraisal practices lack common sense. “Our long-standing policy is that all appraisals should be done by licensed or certified professionals with local expertise, which also is what Fannie Mae and Freddie Mac recommend – but clearly this isn’t practiced universally,” Veissi says.

    NAR backs an independent appraisal process and enhanced education. However, appraisers have faced undue pressure – whether from a lender or an AMC – to complete appraisals using distressed sales as comps, to complete an appraisal in an unacceptably short timeframe, and to complete a scope of work not justified by their fee, it says.

    In addition, some appraisers must provide as many as eight to 10 comparable sales, which almost guarantees the use of distressed properties as comps. Previously, three comparable homes were the norm for most appraisals.

    “In short, there has been an inconsistent appraisal process, leading to disruptive delays for home buyers and sellers,” Veissi says. “All home valuations should be made without undue pressure from any source. Even so, buyers, sellers and agents are free to ask appraisers to consider additional data and to correct errors, or discuss unique aspects of the home, the neighborhood or properties used as comps.”

    The appraisal industry has made strides, NAR says, suggesting many remaining problems are tied to appraisals made through AMCs.

    Fortunately, the level of distressed sales is trending down – they accounted for about one-third of all sales in 2011 but averaged roughly a quarter of sales in recent months. By 2013, NAR expects the distressed market share to decline to about 10 to 15 percent. As distressed inventory is cleared from the market over the next two years, it should help to correct ongoing problems.

    “In the meantime, buyers, sellers and real estate agents need to be aware that there are problems with some real estate appraisals – but also be aware of their rights to communicate with appraisers and lenders about errors or concerns with individual valuations,” Veissi says. “In some cases, a second appraisal may be justified.”

    © 2012 Florida Realtors®

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    Mark W. Simoff
    Downing Frye Realty
  • Read this Before You Co-Sign for a Loan

    Posted Under: Home Buying in Naples, Home Selling in Naples, Financing in Naples  |  October 4, 2012 1:20 PM  |  122 views  |  No comments
    Ask the Experts: Family financial help can be complex

    SACRAMENTO, Calif. – Oct. 1, 2012 – In tough times, getting financial help from family members can be a lifesaver. But there are some caveats.

    This week, certified financial planner Walt Romatowski of Castellan Financial Advisors in Roseville, Calif., answers a reader’s question on that topic.

    Question: Ten years ago, my wife and I bought a three-bedroom home. We’re both in our late 30s and recently became unemployed. We owe $90,000 on the house and pay $900 per month, including insurance and taxes. We’re thinking of refinancing to see if our monthly payment could be reduced. What is the refinance process? Is it better to pay insurance/taxes separately?

    Both of our parents are willing to co-sign if necessary, since I’m not working. They have also offered to pay off the full amount; then we would pay them back with very low interest. Some other friends are in similar situations, so any advice would definitely help us.

    Answer: I’m sorry about your employment situation. Hopefully, things will improve for you on that front soon.

    The refinancing process is similar to what you went through when obtaining your original mortgage. You will be required to provide documentation – pay stubs, bank statements, etc. – of your ability to repay the loan and the lender will review your credit history. In most cases, you will also need to have the house appraised to confirm its value.

    Unless you are borrowing 80 percent or less of the appraised value of the home, lenders generally require borrowers to include taxes and insurance premiums in their monthly mortgage payments.

    If your parents co-sign on the mortgage loan, it’s likely that the lender will require them to be on the deed as a co-owner.

    Co-signing on your loan will become a part of their credit profile, which could adversely affect their ability to secure future financing for major items, such as buying a vacation home.

    If your parents decide to help you by paying off your mortgage, your obligation to them should be documented, so that everyone is clear on the terms of the loan.

    In order to avoid gift tax issues, they must charge you at least the minimum interest rate set by the U.S. Treasury Department. A new rate is announced each month on the Internal Revenue Service website, IRS.gov.

    Because the calculations can get complicated, you should probably seek professional help to draw up the loan documents.

    The interest portion of the payments you make to your parents must be reported as income on their tax return, and may be deducted as an interest expense on your tax return.

    Even though everyone starts with the best of intentions, mixing family and finances sometimes leads to strained relations. All of you should give this a lot of thought before proceeding.

    Copyright © 2012 The Sacramento Bee
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