Jessica Hosfeld’s Blog

The Obama administration is releasing details about its new programs aimed at helping millions of borrowers stay in their homes. Below are some answers to basic questions about a rescue plan.  

Which Americans can qualify for housing help?   

Q:  Why is the Obama administration coming out with the housing affordability plan?

A:  As many as 6 million families are expected to face foreclosure in coming years. The Obama administration in February unveiled a rescue plan designed to help up to 9 million Americans stay in their homes by refinancing loans or modifying them to more affordable terms. The price tag is estimated at $75 billion. Details about the plan were released Wednesday.  

Q:  How do I know if I qualify for refinancing under the plan?

A:  The program is designed to help homeowners who might not otherwise be able to refinance. Under current rules, most families who owe more than 80% of the value of their homes have a difficult time refinancing. (For example, if a borrower’s home was worth $200,000, he/she would have limited refinancing options if owing more than $160,000.)  If you have a loan owned or guaranteed by Freddie Mac or Fannie Mae, the plan will let those who qualify refinance through the two institutions. Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property.  

Q:  How would that lower my payments?

A:  Refinancing could reduce mortgage payments by thousands of dollars per year. For example, consider a family that took a 30-year fixed-rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has $200,000 remaining on its mortgage, but the value of that home has fallen 15% to $221,000 - making them ineligible for today’s low interest rates. Under the plan, that family could refinance to a rate near 5.16%. That would reduce their annual payments by over $2,300.  

Q:  My mortgage payments are too high. Can I get help now from my lender?

A:  As long as you meet eligibility requirements. But the program is especially geared toward those who are facing financial hardship or who are at risk, such as homeowners who owe more than their homes are worth and those who could fall behind on payments. Eligibility for the program will sunset at the end of three years.  One key element is that delinquency will not be a requirement for a modification. But all borrowers must document income, which includes providing information such as two most recent pay stubs and an affidavit of financial hardship, to avoid fraud and demonstrate need.  

Q:  What if I have a lot of other debt?

A:  You can still qualify. Specifically, homeowners with total debt payments (which include car loans and credit card debt) equal to 55% or more of their income will be required to agree to enter a federally certified counseling program as a condition for a modification.  

Q:  Who isn’t eligible for a modification?

A:  Only owner-occupied homes qualify; no home mortgages larger than the conforming limit of $729,750 are eligible.  

Q:  Where can I get more information?

A:  Go to financialstability.gov. There is no fee to apply. Borrowers are encouraged to contact lenders directly. Federal officials say borrowers should also contact their lenders to find out if their loans are held or guaranteed by Freddie or Fannie. The guidelines released Wednesday are detailed on the Treasury website.

This is a very interesting article I came across…         **NOW IS THE TIME TO BUY…..DON’T LET IT PASS YOU BY**

RISMEDIA, February 20, 2009-”Those who do not study history are condemned to repeat it.” So spoke Sir John Buchan, the First Baron of Tweedsmuir, back in the mists of time often referred to as “the good old days.”

Well, I may not be as old as the Baron, but I did live through President James Earl Carter, 21% prime interest rates, 20% inflation, Paul Volker and his attempt to strangle inflation by strangling the money supply, and that famous “WIN (Whip Inflation NOW!)” button the White House handed out. The period I am referring to was in the 1970s and early 1980s, and it effectively reduced the purchasing power and the true value of the dollar forever.

It wasn’t that long ago that we lived in a different economy altogether
Americans often affectionately remember the 50s, when Ike was president, America was the benefactor of the world, and life was so simple. Then, a man making $10,000 annually was quite successful. Then, a home might cost $13,000. A nice Ford or Chevy might cost $2,300; New and gleaming and using 22 cent-a-gallon gasoline.

But it was only in 1971 that I bought my first home for $33,690 in Chelmsford, MA; the same year I purchased a new 454 Corvette Roadster for $5,100 out the door. Then, $50,000 a year was the equal of my dad’s $10,000 in earning power.

I remember how excited I was when I finally had $100,000 in savings-I was wealthy, I thought, and my future seemed assured. When the pardon of Richard Nixon jolted America into changing administrations, the Peanut Farmer, James Earl Carter of Plains, Georgia, was elected to the Presidency of the United States. The wreckage his administration presided over made it possible for “The Great Communicator” to be elected in 1981; and by the time that happened, houses were $300,000 and cars cost about $30,000.

Personally, I wasn’t noticing the effects of inflation, yet-after all, we sold that original home and moved into a beautiful new home that cost $86,000 just as President Carter took office. Although I sold that home for north of $200,000 a mere five years later, it never occurred to me that our currency was being debased; no, I thought I was a brilliant investor!

Whatever happens, the stage is set for inflation to come back with a vengeance.
Discounts abound, but prices of durable goods are increasing.

In the 1970s those gurus of the Federal Reserve told us that “M1 (an arcane measurement referring to the ‘money supply’-the total number of dollars in circulation), was the most key statistic to watch, for if the money supply grew too quickly, inflation would persist and continue.” We then became a nation of M1 watchers, and the Fed attempted to control the most complex economy in the world by watching that one statistic and throttling the economy with interest rate surges that brought about disintermediation, the death of the savings bank industry and that set the stage for the rise of Merrill Lynch and Wall Street to replace banks and savings and loans as purveyors of the American mortgage.

Interest rates were so high banks couldn’t keep deposits because they were subject to interest rate restrictions. “Let them compete-take the shackles off the banking industry” Washington thundered, and so the Garn-St. Germaine banking act was passed, allowing the community bank ‘to compete’ with Merrill Lynch.
Predictably, Merrill Lynch won. King Pyrrhus couldn’t have put it better: “One more such ‘victory’ and I am undone.” We are all paying for that ‘victory’ today.

The savings and loan industry abandoned 50 years of thrift and sound banking practices and put insured deposits into junk bonds sold by that ever-smiling Michael Milliken and his henchmen instead of local mortgages. When the dust cleared, there was no mortgage expertise left, no savings and loan industry recognizable to anyone left, and Wall Street had achieved their goal of displacing the community bank and becoming the “one stop shop” for all things financial (See; Sanford Weil, Citigroup, et al).

In any case there can be no debate that the trillions of dollars about to be pumped into the economy-while they will save us-will also bring inflation back; unless-of course-all that stuff about M1 and the money supply, and all those pronouncements by Paul Volcker, then-Chairman of the Fed, were mistaken . Since Mr. Volcker has now returned in a quasi-official capacity to advise the President’s team, I’d guess we’re in for inflation, now, and part of his mission is to try to minimize it.

Good luck Tim Geithner.

Our new secretary of treasury is reportedly a brilliant man– perhaps a little forgetful about taxes, but nonetheless, brilliant, by all accounts. Together with the rest of the Obama team, he will need every bit of that intelligence and brilliance to help this great country of ours avert total meltdown, but I believe that the team will indeed accomplish that and we will make a recovery, led in part by housing. It’s never smart to bet against the United States of America.

But when the money supply is increased by an amount equivalent to 20 or 30% of Gross Domestic Product or more-naturally or unnaturally, inflation must result. That means that prices of all fixed assets rise to keep pace with the devaluation of the currency. We won’t be taking the wheelbarrow to the market full of dollar bills to buy a loaf of bread, as happened in Germany after WWI, but we will be going on a pretty thrilling ride for a while.

Now, what is going to happen to home prices over the next few years?

I am not as formally schooled in such matters as our current leaders are. I’m just a guy who has seen this movie, too. It is my belief that a side effect to saving America’s economy will be a robust increase in inflation. I believe that Inflation will regain all the “value” we lost in housing over the past two years, and that it will regain it in five years or less. Simply put, to put the brakes on inflation, government must inhibit the recovery. The people in power aren’t going to do that. Inflation is a necessary evil compared to a full scale depression and an acceptable trade off for most of us. (And oil won’t stay at about $40 a barrel too long, either!)

So, tell your clients the truth: Interest rates will never be this low again in their lifetimes. Home prices won’t be this low again in their lifetimes. This is the perfect storm economically, but it also the perfect time to buy a home; provided that you buy it as a home and not a piggy bank. It’s just a nice side benefit that five years from now, the home you bought today will have appreciated so much that you’ll be thinking (just like I did in 1979): “What a smart investor I am!”

This just happens to be the perfect confluence of opportunity and necessity: we must fix the economy and we’re going to, whatever it takes. Inflation is an unavoidable side effect. Buy that house this year!

About the Author: Mike Parker specializes in online marketing services for Realtors® and real estate professionals

*REAL ESTATE STIMULUS INFORMATION*

First Time Homebuyer Tax Credit:

The new law raises the current maximum $7,500 first-time homebuyer tax credit to $8,000, and extends it at that level through November 30, 2009. It also eliminates
any required repayment to the IRS after 36 months in the home. These enhancements apply to purchases of a principal residence by a first-time homebuyer after
December 31, 2008. Purchases on or after April 9, 2008, and before January 1, 2009, continue to be governed by the original first-time homebuyer credit enacted last
year. The credit phase-outs that start for taxpayers with AGI in excess of $75,000 ($150,000 for joint filers) continues to apply to both years.

Obama’s Rescue Plan for Failing Home Owners:

The rescue plan unveiled Wednesday 2/18/09 by President Barack Obama offers $75 billion in incentives for banks and investors to reduce struggling home borrowers’ interest rates and make other changes to loan terms. The money will come from the second half the $700 billion federal financial bailout. The goal is to keep 4 million homeowners out of foreclosure and halt free-falling home prices.

To qualify, lenders and mortgage investors would have to agree on a lower interest rate that would be designed to reduce the borrower’s mortgage payments to 38 percent of their pretax income. The government would then provide financing to bring that ratio down to 31 percent.
Another piece is designed to help borrowers who are still making their payments on time, but want to refinance into lower mortgage rates.

The big issue is…….not everyone sees this as fair?

Do you?

One of the most important things you can do when selling your home is to prepare your home to sell or “Stage” it. These few tips can help you be successful without having to spend a fortune.

1. Clean the clutter! LESS = MORE
   Remove as many personal items as possible. This provides the buyer with a blank canvas in which they can better imagine how it would look with their belongings.
2. Deep clean: Make your home sparkle and shine!
3. Make rooms seem as large as possible: Remove furniture and accessories that are not needed/used. If necessary, rent a small storage unit.
4. Touch up paint: Paint any areas with noticeable wear and tear. A little fresh paint goes a long way and can earn back its cost ten-fold.
5. What’s that smell? Make sure your home smells fresh. You might not notice it, but other’s will. A few dollars spent on some plug-ins and air freshners will go a long way!
6. Make repairs: Make any significant repairs necessary.
7. Curb appeal! Make sure your yard is mowed and clear of debris. Plant a few vibrant colored flowers to showcase the curb appeal of your home.

Here are a few tips to help you get started on your way to purchasing a new home!

1. Lender pre-approval:  Begin by getting pre-approved by a reputable lender. 
   • Your agent should recommend three lenders to you.
   • Find out what lender can offer you the best “package” to fit your needs.
   • Be aware of lender fees, closing costs, down payment, interest rate, discount points, etc.
2. Do independent research:  Know and understand your market and what you can afford, don’t over-extend yourself. Your agent and lender can help to guide you in the right direction.
3. Work with a reputable real estate agent:  Find that reputable Realtor who will guide and help you in the buying process from start to finish. Look for someone who:
   • Understands your wants and needs
   • Makes time for you, remember YOU are the customer!
   • Is technically savvy
   • Is willing to get the job done
4. Know your top 3 “must have’s”: Make sure your agent is aware of you must have’s (this is a helpful time saving tip). Be flexible and remember there is no perfect house.
5. MLS Prospecting System:  Make sure your agent sets you up on the MLS Prospecting System if you have internet access. This database will open you up to all the homes for sale within your specified search criteria. You will recieve automated email updates as new homes come onto the market. This will make things easier for both you and your realtor.
6. Major Repairs:  Be aware of major repairs or updates that are needed when looking at homes. These items will have a major impact on the purchase price.  Some examples:
   • Furnace/Air
   • Electrical issues
   • Pest infestations
   • Mold
   • Water damage
   • Roof
   • Plumbing
   • Structural issues and more

   Your agent can help to guide you on these issues and help find a local contractor to give estimates and/or treat the issues. 

7. Making an offer:When making an offer, your agent should run a market analysis of the area, street and similar home sales to help you set an offer price. The agent can also find out what repairs the sellers have done so that you understand what they have spent on the home.
8. Be open to negotiations!

Yes, many people do purchase homes in November and December even during the hustle and bustle of the holidays!  Friends outside of the real estate market say to me “I bet December is a slow month for you” and I say “NO”!  It seems that during the 4th quarter rates drop, sales prices drop and sellers start to negotiate more.  Buyers can also take advantage of issues that sellers might be dealing with.  People that list list their homes during the holiday months MUST sell, either they are losing their homes through foreclosure, they’ve been transferred or maybe testing the waters……which is not a good idea during this time of year.  Therefore, it’s a fabulous time to buy and usually you get a pretty good deal all around!  2007 has been a great year for buyers, but the 4th quarter seems to be even better!

Welcome to Jessica Hosfeld’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in Akron.