Down with Fannie and Freddie?

May 1, 2011 By

With the US bailing out Fannie and Freddie in 2008 to the tune of some $250 billion, adding to the $40 trillion+ net worth of the country, many would like to see these quasi government entities done away with all together.  But what consequences and repercussions would that have on the housing market, and the American way of life for that matter?

What do Freddie Mac and Fannie Mae actually do?  Their purpose lies in creating a secondary mortgage market, in its simplest terms, so that that loan originators do not have to carry loans on their own books, freeing them up to extend loans to others.

In a recent Fortune magazine article entitled Fixing the Mortgage Mess, Wells Fargo CEO John Stumpf articulates that if we were to do away with Fannie and Freddie, we’d be transported back to to 1976 when he first purchased a home, struggling to find a mortgage because banks did not have ample deposits on hand to provide loans.    There are approximately 76 million homes in the US today, and of those, 51 million have mortgages, which aggregates to approximately $11 trillion.  Banks simply don’t have the ability to burden that level of debt on their own, and therein lies the need for a secondary market facilitated by Fannie and Freddie.

While it’s a fact that a secondary mortgage market must exist for borrowing to be feasible and somewhat affordable for the masses (granted, it could be argued that lending to the masses is not an ideal we should strive for), that shouldn’t come without reasonable boundaries put in place to protect us from the same meltdown that occurred several years ago.  That is where Stumpf inserts what appear to be reasonable guidelines that might help right the ship so to speak.

First, all parties having financial skin the game.  With loan originators often not holding loans on their own books and exploiting the secondary market, this leaves the overall lending system exposed.  Some consequences of this may be higher down payments, and minimums for how much of a loan should be maintained in a lender’s portfolio.  Second, additional transparency and explicit clarity is needed in how any quasi government agencies operate, which would in turn lead to bolstered confidence and market liquidity.  And the third guideline that Stumpf highlights is uniform and consistent underwriting standard across the industry.  This latter point seems terribly obvious should we want to maintain any sort of health in the system on a long term basis as over time constituency groups tend to shirk responsibilities and test the boundaries.

So, should we aim to down Fannie and Freddie?  To support home ownership for a large percentage of the population, a secondary mortgage market in some form must exist, is it in Fannie and Freddie, that’s to be debated.

Filed Under: Lending Markets

Protect Your Pipes from Extreme Cold

April 26, 2011 By

Many homeowners don’t know how much damage extremely cold weather can put on their plumbing systems until it is too late.  Following a harsh winter in most parts of the country where heavy snowfall and low temperatures were somewhat never-ending, some of our readers have horror stories to share about pipes in their home, which turn into lessons learned for other readers.  When you are in a particularly bad winter, you need to take preemptive measures to make sure that you protect your pipes from cracking or rupturing.  A few dollars and a few minutes of your time in a proactive and preemptive way can potentially save you tens of thousands of dollars down the road.

The first step is to protect your most exposed pipes.  These are the ones that are most likely to be damaged.  Simply wrapping them with cloth or plastic will help keep them warm.  If you can put foam around them that will be even better.  Just do everything you can to reduce their exposure to cold.

Make sure that you have drained any water sources that you aren’t running.  I take it you aren’t using your swimming pool when it is 20 degrees below freezing.  Drain the circulation system for the pool so that you don’t have to worry about the water freezing while it circulates.  Make sure that your sprinkler systems have been thoroughly drained as well.

You also need to be watch your daily routine and be mindful about how it may affect your house.  Many people get into bad habits because they think they will be saving money.  First of all, don’t turn your thermostat off just to save money on heat.  You may think there is no point turning the thermostat on when you aren’t around, but you need to keep your house heated a little in order to prevent damage to your pipes.  You may also try to save a little money on your water bill by making sure your faucets don’t drip, but it is actually better for your pipes if you leave them alone.

If you are going to be gone for extended periods of time (i.e. more than a few days) you may want to think about turning off the water.  All you have to do is make sure that you turn the shut-off valve after turning the faucets off.

No matter what precautions they take, homeowners may still face the possibility of their pipes freezing.  Before it has a chance to burst, thaw it out with a warm heating source.  Something as simple as a towel soaked in hot water may be all you need.  Slowly move towards the coldest part of the pipe and be careful not to focus all your attention on one spot.  Sudden heating and cooling is traumatic and can cause a pipe to shatter.

If your pipes do burst, turn off the water and call a plumber immediately.  The last thing you want to do is cause thousands of dollars in water damage on top of what is already going to be an expensive project.  You can consider replacing the pipes yourself, but I personally recommend leaving that up to the professionals.

Extreme weather can be a huge problem for homeowners.  Make sure that you know the risks to your pipes and take appropriate precautions.  Plumbers will charge a lot of money for their services and the material costs alone can be devastating.  Your best solution is to keep your pipes warm and focus your attention on the pipes that are most likely to be exposed to the elements.  And now…onto summer 2011!

Kalen Smith writes about insurance, finance, home improvement and similar topics for Homeowners Insurance.

Filed Under: Condo Energy Efficiency

How to Check Your Home for Energy Efficiency

April 24, 2011 By

If you are concerned with the energy efficiency of your home, you can quickly and easily conduct your own energy assessment to check for potential issues. By locating problem areas, you can make the necessary repairs, which will save you money on monthly utility bills and increase your home’s energy efficiency, getting your home closer to the efficiency you’ll find in many of today’s new homes.

To begin your home energy efficiency assessment, grab a pen and paper and begin at one end of your house. Carefully walk through each room and make a detailed list of any air leaks/drafts you encounter. Leaking air can cause your home to be up to 30% less energy efficient, resulting in a hard hit on both the environment and your wallet. You need to look carefully for both indoor and outdoor air leaks, even in some of the unlikeliest of places—baseboards and electrical outlets are just as likely to leak air as window frames and door frames. Write down any leaks you find, so that they can be repaired.

Next, inspect the insulation in your attic. Insulation requirements and recommendations have changed drastically over the years, so your home, particularly if it’s older, may lack adequate amounts of insulation. Research the recommended insulation levels for your area and compare them to the insulation present in your home. You may need to hire a professional to check the insulation levels in your walls, as adding intra-wall insulation is a more complicated process that should not be attempted if you are unfamiliar with construction and electrical wiring.

Inspecting your heating and cooling units is another key step in your energy usage audit. It is recommended that HVAC units over 15 years old be replaced, as newer models are much more efficient. Make sure the unit is functioning properly and is clean. You should hire a professional to clean your furnace once per year to maximize its functionality. Make sure to also replace the unit’s filters regularly, which keep the unit running more efficiently.

Lastly, check all of the light bulbs in your home to ensure you’re using the correct size and wattage for each light. Trade out the bulbs in your house until you’re sure all lights are using the recommended wattage, and consider investing in CFL or LED bulbs. These light bulbs last longer and use less energy than traditional incandescent lights.

Did you know?

“If every American home replaced just one light with a light that’s earned the ENERGY STAR, we would save enough energy to light 3 million homes for a year, save about $600 million in annual energy costs, and prevent 9 billion pounds of greenhouse gas emissions per year, equivalent to those from about 800,000 cars.” source www.energystar.gov.

Filed Under: Condo Energy Efficiency

Home Buying Considerations

April 10, 2011 By

Nothing can be as rewarding as buying a home. Whether one is a seasoned buyer or a first time homebuyer, the feeling of excitement cannot be duplicated. To purchase a home is an excellent decision, and is a step ahead in the right direction. Because purchasing a home is the single most important decision and most emotional decision in which one will make in their lifetime, therefore it is wise to think about the kind of lifestyle in which one desires, what type and design of home is preferred, what location is desirable, and a home is a reflection of the homebuyer and their family. It could be a condominium, a Gulf-front home, brand new construction, a fixer-upper, or a traditional home in a large community. When considering purchasing a home, there are a few helpful tips that one should ensue.

Keeping in mind the price range that one can afford is imperative, not swaying from that range. Being realistic and cautious, understanding what one can afford to pay monthly, what expenses the property will entail, if one can cover any emergency expenses as well as what household expenses can be expected monthly is significant. Remembering to have the financial means to cover these expenses is fundamental. Secondly, make a list of wants and needs. Writing down what one must have when looking to buy a home and what one truly needs will help to keep things into perspective. Discussing this list with a real estate professional is a good idea as a real estate agent can search for a home based upon the needs and wants making it possible in finding a home that offers both.

Now think about how many rooms are important, size of rooms, square footage of the home, how much storage space there is, and if there is ample and adequate closet space. Specifying items such as these can really narrow down a list of homes if there are several in which are on the market that are of interest.

Evaluate and examine finances and get approved for a mortgage. Now is not the time to drag one’s feet by shying away from the realities of one’s financial situation. Again, be cautious, realistic, open and honest with your real estate professional as they will work diligently in finding the right home based on the financial information that is disclosed. Additionally, knowing where one stands credit-wise will determine what type mortgage one can qualify for and what homes are available based on that information.

Pay attention to every detail when looking to purchase a home. This includes finding the best and most trustworthy real estate professional that offers the experience, knowledge and is qualified to best represent one in this major purchase. Finding a real estate professional that makes one feel at ease and comfortable is also vital. Real estate agents that are familiar with the best selection of homes can save lots of time and money, and puts the homebuyer at a great advantage in that the real estate agent can negotiate effectively with the seller or the seller’s agent.

Some great tips when looking for a home to purchase are to check out the community in which the home is located in; is it safe, close to schools, close to public transportation, shopping, place of business? Also when choosing a home to purchase, check the inside as well as the outside very carefully and be sure to hire a licensed home inspector who can identify potential problems if any. Some common issues that could arise may be related to the A/C, roof, foundation, etc.

Once the final decision to purchase a home has been made, be sure not to rush the process but at the same time don’t waste any time. Now that the real estate market is on the upswing, it is possible that multiple offers could come in on the home so make the move to purchase quickly and efficiently.

After the contract has been accepted, one can look forward in anticipation to move into the home of their dreams. Following these tips only assures a smooth transaction, and proves that the more prepared one is when purchasing a home the less overwhelming and chaotic the buying process can be.

Filed Under: Buyer Advice

20% Down Payment Required Reality?

April 8, 2011 By

In an attempt to prevent a recurrence of the lax mortgage lending culture of years past, there is now a push among government agencies and officials for regulations that would require a down payment of at least 20% for lower risk classified loans.

The Federal Reserve, along with the FDIC and the Office of the Comptroller of the Currency, is on board with a proposal that will require home buyers to make a down payment of 20% of a home’s sales price in order to be categorized as a qualified residential mortgage borrower. Another proposal would demand that a borrower keep a 75% loan-to-value ratio for refinances and 70% for cash out refinances where a borrower is granted a larger loan.

The proposals must be signed off on by six federal agencies, including the Federal Reserve, FDIC, and the Office of the Comptroller of the Currency, as well as the Exchange Commission, Department of Housing and Urban Development, and the Federal Housing Finance Agency. Once the proposal has been passed by all agencies, it will be released to the public for review.

The proposals being considered are ultimately aimed at improving home financing standards, subjecting non-qualified residential mortgages to strict risk retention rules, which will force banks to maintain five percent of the value of a mortgage on their books. The rule is meant to force lenders into a vested interest in their lending decisions, instead of leaving them free to lend to unqualified individuals and then package those loans into securities that are sold to third-party investors.

Filed Under: Mortgage Information

Ten Inexpensive Home Upgrades

March 26, 2011 By

Today’s consumer is smart and savvy, thrifty and well-educated and knows that when it comes time to sell their home, there is no need to spend major bucks on upgrades.

The top ten inexpensive upgrades that are essential when it comes time to make those mini changes prior to listing a home are really quite simple and the most obvious to prospective buyers.

1. Make that kitchen sizzle. Add a new faucet, snazzy cabinet door handles, fun and fresh light fixtures that use energy efficient bulbs, resurface cabinet doors and countertops if need be, add contrasting paint colors to walls, hang food-themed vintage pictures or unique culinary wall art on a blank wall.

2. Upgrade old appliances. Not only is this pleasing to a potential buyer and an expense they won’t have to deal with in the future, upgrading to Energy Star energy efficient appliances means a lower electric bill and that you, the seller are into being ‘green’.

3. Spruce up the bath. By adding a fresh coat of paint, a nostalgic pedestal sink and faucet, new seat for the commode, and new shower curtain can make all the difference. Replace chipped ceramic tiles in the shower and if necessary a complete prefabricated and professionally installed shower can be less expensive than re-tiling and entire tub and shower combo.

4. Don’t forget the flooring. Be sure to check out the floor in which one walks upon. Whether it be ceramic tile, hardwood or laminate flooring, or carpeting it is imperative that the floor is cleaned by the homeowner or by a professional when it comes to carpeting prior to listing. It’s not necessary to replace the entire flooring unless it is hideous and recommended by your real estate professional.

5. Clean it up. Nothing can be worse than a realtor showing a property that has dirty clothes lying on the floor, a filthy bathroom and kitchen with dishes piled in the sink. Make your home sparkle and display it as though it were a model home.

6. Turn it up. Lighting creates a mood and adds ambiance. In addition having fixtures that accentuate this can create an essence of drama especially if wanting to emphasize a particular area in a room or if wanting to draw the eye using light to a sculpture or piece of art.

7. Space. Do you have enough? Closet space is essential and often there is not enough room to store items. By adding shelving to existing closets and pantry’s makes spaces more functional and appears to the potential buyer as though it were customized.

8. Call the plumber. Call the electrician. Leaky faucets? Tripped outlets? These items need to be addressed as well and can be checked for a minimal fee.

9. Check the front door. Does it need to be spiffed up a bit with a coat of paint, stain, or varnish? Does the trim need a coat as well? Or worse, are there dents in the frame, the door itself that indicate a need for replacement? If so, now’s the time to do so. Adding large planters with inviting and colorful plants on either side of the door are pleasing to a buyer and are part of the curb appeal.

10. You only get one chance. To make that first impression, that is. Curb appeal is what attracts potential buyers to your property. By having a nicely manicured lawn, with a few tailored shrubs and plants can really impact a person’s perception of a property and of the community that surrounds.

Filed Under: USA Real Estate

Tips on Making Your Move Stress Free

March 24, 2011 By

Absolutely nothing can be more stressful than moving from one home to another. A high rate of emotions are involved when it comes to moving, which starts from the reality of the sale of a home filled with fond memories to the packing of items that held a special place inside. As tempting as it may be to hire a professional mover, moving can be a most expensive venture and one that truly is not as necessary as it may seem. Moving interstate can cost anywhere from $3,500 to $4,500 with in-state moves costing almost the same, between $2,500 to $3,500. There are choices, and it’s imperative to choose which moving option is best for you and your family. If moving in-state, going it alone is the least expensive alternative with up front charges such as the price of the truck, fuel charges, and packing materials. Full-service movers charge by the hour, whether moving in state or out of state. In addition full-service movers charge weight and mileage when traveling across different states.

If it’s necessary to hire a professional mover, do your homework. Get at least three different quotes from separate moving companies, and research the companies that you choose making sure they have an excellent reputation, and provide you, the client a written estimate which is gold.

When packing to move, be sure to declutter and discard items that have not been used in more than two years. It is wise to take those items to a donation center, or to sell or recycle the items if possible. Items that you choose to bring with you to your new home, in order to save money pack them in suitcases, laundry baskets, plastic containers, and drawers. Items that are breakable should be wrapped in pillow cases, towels and sheets to protect them from possible breakage or damage. Be sure to get the proper supplies in the event that the listed items are not available or you run out. Bubble wrap, boxes, packing tape, plastic sheets, and felt tip pens are a must when moving items yourself.

If moving out of state, ask the movers if it is possible to consolidate, meaning if you can move your belongings with other people’s belongings that are moving in the direction that you are going. Most homeowners can’t fill an entire moving van so your belongings will be welcome and it’s possible that the cost will be slightly less if sharing the expense of a moving van.

A wise thing to do is to make sure your belongings are insured prior to the move. Review your homeowner’s insurance policy to see if your policy provides insurance coverage while your personal items are in transit. Be sure that you are covered for full-replacement value insurance which reimburses the policy holder the cost of what it would be to replace the item if broken and needs to be replaced. Keep in mind that full-replacement cost is only applicable if one hires a professional moving company as opposed to packing personal items themselves.

In short, yes moving is one of the most aggravating and stressful moments in one’s life. The real key to a successful and stress-free move is to be organized, know your options, and to view moving as a project and one that is a temporary situation that will take you from one stage of your life to the next.

Filed Under: USA Real Estate

Toll Brothers Pinehills South Shore

March 21, 2011 By

We had the pleasure of touring the Toll Brothers model home at the Pinehills recently. The home was beautiful, well appointed, and tastefully decorated; all of which one would expect from the builder that touts itself as America’s Luxury Home Builder. The real strength of this particular model; however, was just how warm and livable the home felt.

Toll Brothers Pinehills

Pinehills South Shore Homes

Sure it was a model home with countless premium upgrades (e.g., tray ceilings, wainscoting, hardwood floors, and premium cabinetry just to name a few), but the floorplan and quality of the finishes throughout the home stole the show. At just over 2,000 square feet the Bayhill (pictured above) has a floorplan that is cozy without sacrificing its sense of openness that homebuyers have come to demand.

Toll Brother’s Bayhill model also offers single level living with the kitchen (pictured above), master bedroom (pictured below), den, family room, dining room, and guest room all located on the first floor of these single level homes. Fans of two story homes can opt for the loft upgrade. Moreover, each of the homes within the Toll Brothers at the Pinehills development includes a basement, which can be finished (as an upgrade of course!) complete with an additional bedroom, bath, and game/bonus room.

Pinehills South Shore Homes

My only criticism of the Toll Brother’s model at the Pinehills is that the builder chose to only feature one (1) of its five (5) available floorplans. Having said that, if you are in the market for a south shore home, take the drive down Route 3 to the Pinehills and tour this gorgeous model. Just don’t forget to bring your Buyer’s Agent with you!

Filed Under: South Shore Homes

Loan Modifications: Who Really Qualifies?

March 15, 2011 By

More American’s today are in dire straits when it comes to their mortgages, are either facing foreclosure, are in foreclosure or are having difficulty in making their mortgage loan payments in a timely manner. Because of the mortgage crisis and issues that arose around the mortgage crisis, many homeowners have had no place to turn. Mortgage lenders were typically not lenient with borrowers or showed much empathy as they were in deep water themselves. Therefore provisions for loan modifications were put into practice by The Making Home Affordable Program which was created and established by the Financial Stability Act in 2009. Part of The Making Home Affordable Program was created and called the Home Affordable Modification Program which assisted those struggling financially that were on the brink of foreclosure. Today, over one-hundred ten renowned lenders have teamed up with The Making Home Affordable Program and work with potential applicants deciding if they qualify for the loan modification program.

So what is a loan modification? A loan modification simply means that the mortgage loan is modified outside the original terms of the contract been the mortgagor and the mortgagee. Loan modifications offer different types of modifications to include: changes in the terms of the loan, reducing the principal amount of the loan, lower monthly mortgage payments or interest rate, lengthening the terms of the loan, and reduce penalties. The loan modification program does not discriminate based on the status of the mortgage therefore at the time a borrower applies for a loan modification, mortgagees can be either current with their mortgage payments, late, in default and even in foreclosure.

Who qualifies for the Home Affordable Modification Program? There are several prerequisites and eligibility requirements for those who seek to modify their mortgage loan through the Home Affordable Modification Program: loans must have originated on or before January 1st of 2009, first lien loans on owner occupied residences must have an unpaid principal balance of $729,750, all potential borrowers must document their income and sign an affidavit of financial hardship, property owner verification will be verified, and modifications can only be done once until December 31st of 2012.

The Making Home Affordable Program is a compliant and legitimate program offered through the U.S. Goverment; however there are warnings and scams to take heed to. After the crash of the mortgage crisis, many mortgage companies created separate divisions calling them ‘mortgage foreclosure rescue services’ which promised borrowers that they would work on their behalf (for quite a fee, no less) to beg and plea with their lender to modify the loan. Many desperate borrows have fallen for this trap, as the Home Affordable Modification Program would never operate as such. Borrowers must be aware of the several modification scams that are ravaging throughout the country, and borrowers must beware. It’s imperative to remember that scammers offer false promises and often tell the borrower to stop making mortgage payments to their lender as they will become the liaison between the mortgagor and mortgagee. In addition scammers ask for fees upfront requesting that they be wired or mailed overnight and only accept payment through a cashier’s check or money order.

The U.S. Government hosts a number of resources at no charge offering homeowners the tools that they need to get for more information on loan modifications through The Making Home Affordable Program. HUD.gov and HUG.org are excellent sites to obtain the information with HUD approved counselors available by phone as well to answer any questions.

Education on the home loan modification process is truly the key when researching options. With the vast amount of resources provided to borrowers through their lenders and The Making Home Affordable Program, many have been able to keep their homes by modifying their mortgage loans, saving them from foreclosure.

Filed Under: Mortgage Information

Top 45 Real Estate Blog Award

March 8, 2011 By

We were excited to learn recently that the Boston Real Estate Observer was ranked by Apartment Talk as one of the most useful and entertaining blogs about the real estate and apartment industry in 2011.

Top 45 Blog Winner

We sincerely appreciate the recognition, and credit it to the quality content that our staff and contributors are focused on publishing on a daily basis!

We are currently seeking authors in all areas of real estate, including commercial, residential, lending, real estate law, and ancillary real estate services. For more information on becoming a regular contributor to the Boston Real Estate Observer, contact us using the link at the top of this page.

Filed Under: Boston
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