by David Bach

On Aug. 31, while many of us were getting ready for a long holiday weekend, President Bush addressed the nation about the mounting concerns in the housing market. His speech took place exactly one month before we’ll see a record-breaking $50 billion in mortgages reset to a new rate.

That’s right, in the month of October alone, many homeowners will be forced to pay higher monthly mortgage payments than they can reasonably afford. And while this number is staggering, it’s not exactly new information — it’s been known for two years that the crisis was coming.

The Associated Press reports that, in all, 2 million homeowners have adjustable rate mortgages scheduled to reset by the end of 2008. Of those, the Federal Housing Administration (FHA) estimates that 500,000 could experience foreclosure.

Is Bush’s Proposal Enough?

In my opinion, the president’s proposal is an excellent start — but will it offer enough help to those half-million families at risk of losing their homes?

Bush isn’t proposing a direct bailout for homeowners who knowingly overextended themselves. Nor will the government be rescuing irresponsible lenders and speculative investors who bought homes to flip for a profit. As the president acknowledged, that would only encourage the problem to occur again.

Instead, Bush’s proposal strikes a balance by offering:

• Temporary tax relief to ensure that cancelled mortgage debt on a refinanced mortgage isn’t counted as income

• A foreclosure-avoidance initiative through homeowner education and outreach

• Ways to help responsible homeowners refinance through FHA loans offering a lower interest rate and lower monthly payments

Help for Those in Trouble

Among the president’s new initiatives is the immediate introduction of a refinancing product called FHASecure. This product will now be offered through the FHA and offers help to homeowners who are already in default of their primary residence mortgage loans. Previously, the FHA would not insure refinanced loans from borrowers delinquent or in default, so this is a significant change.

There are specific criteria that must be met in order to qualify:

1. First and foremost, you must have a history of on-time mortgage payments before your teaser rate expired — which means you must have a decent credit history.

2. Your interest rate must have reset after June 2005 but before December 2009.

3. You must have at least 3 percent cash or equity in your home.

4. You must have a sustained history of employment.

5. You must have sufficient income to make your mortgage payments.

Beefing Up the FHA

Since 1934, the FHA has helped more than 34 million people become homeowners — not by lending them money directly, but by guaranteeing their loans. This reassures lenders who might otherwise be reluctant to make loans to buyers who don’t have a lot of money. Borrowers have always paid a set price for this insurance.

The president’s proposal seeks to introduce risk-based pricing, which will give borrowers with weaker credit more access to FHA loans. Rather than being denied an FHA loan, underserved borrowers will instead pay a slightly higher fee. This will allow them to refinance at a lower interest rate with more affordable monthly payments.

President Bush is also asking Congress to pass new legislation that would modernize the FHA. These proposed changes — including lower down payment requirements and higher maximum loan limits — would also help borrowers with weaker credit and lower incomes. Hopefully, Congress will act quickly.

Can the Fed Help?

Echoing the sentiments of President Bush, Federal Reserve Chairman Ben Bernanke also weighed in on the situation on Aug. 31. He stated that it’s not the responsibility of the Fed to protect lenders and investors from the consequences of their actions.

However, he also acknowledged that developments in certain financial markets, including those currently emerging with mortgages, could have broad economic effects. As a result, the Federal Reserve will take those effects into account when determining policy.

Many believe the odds are growing that the Fed will cut the federal funds rate, now at 5.25 percent, by at least one-quarter percentage point on or before Sept. 18, its next regularly scheduled meeting. The Fed hasn’t lowered this rate in four years.

That could be good news if you currently have an adjustable rate mortgage. Even a mild rate cut of .25 percent might mean a slightly lower payment for you now. A cut of .75 percent would create significant breathing room for those on a tight budget, and could potentially send the stock market on a tear. My prediction is that the rate will get cut between 25 and 50 basis points.

Other encouraging news came on the Tuesday after Labor Day, when the Fed put added pressure on loan-servicing companies to modify loan terms or defer payments for borrowers having trouble making their mortgage payments and facing default.

Take Action Now

With the combination of new and current programs, the FHA estimates that it will be able to help 240,000 American families avoid foreclosure.

Only lenders approved by the Federal Housing Administration can process an FHA loan for you. If your adjustable rate mortgage has reset or is about to reset, call your lender and ask if they offer FHA loans and find out whether you qualify. The FHA web site offers loads of additional information, and includes a search feature to find an approved lender in your area.

In two previous columns (”Adjusting to Higher Mortgage Payments” and “Six Steps to Avoiding Foreclosure“), I advised those of you with an adjustable rate mortgage that’ll reset this year to call your broker and find out about refinancing options. Have you reviewed your mortgage documents and made that phone call yet?

Access Granted

516.216.1727…..What can we do for YOU !!!

August 31, 2007

Each city has blocks that everyone knows; and not by their street address but by nicknames like “Billionaires row” or by the number of film and Wall Street stars that live there.

They often are the most expensive block in their respective city.

Usually the block orients around the city’s defining feature. In New York, it’s on Central Park; in San Francisco it has views of the bay; in Seattle it sits on Lake Washington; and in Miami it’s on the water.

In Pictures: The Most Expensive Blocks In The U.S.

For the first time ever Forbes.com has generated a list of the most expensive blocks in 10 cities across the country. To do so, we created an index with California-based data provider Reply! of the 100 most expensive properties in each city, mapped them geographically and then measured home values and the concentration of high-priced home values in each particular cluster.

Reply!’s data is an amalgam of property records, tax records and an algorithm that calculates a market value for a home based on neighborhood trends, to effectively measure homes that haven’t been appraised or sold recently. We then confirmed the data findings with luxury brokers in each city to see if the data findings reflected their experience in the upper echelon of the real estate market.

One way for a block to vault to the top was on the back of recent buying activity. Prudential Douglas Elliman broker Dolly Lenz credits “a flurry of recent sales,” on New York’s top block–Fifth Avenue between 69th and 70th–for its top billing, adding that “it’s hard to be expensive if there are no trades.” In that part of town, a 50-foot-wide townhouse next to the Frick Museum is available for $28 million.

Other cities’ top blocks came from established gated communities, like in Miami where the most expensive block can be found on Leucadendra Drive, north of the Arvida Parkway. Nelson Gonzalez, a broker with Esslinger Wooten Maxwell points out that this block is “in Gable Estates, which is a high-end area in Miami.”

Waterfront homes in Gables Estates don’t come on the market too often, but there are a couple of elegant, Mediterranean-style homes available for an affordable $6.3 million and $8.9 million.

Recent construction and expansion projects can also tip the balance. In Chicago, there are several blocks in close competition for the title of most expensive, but the block between Willow, Howe, Burling and Orchard notched the top spot due to top Chicago families combining lots.

“People have been able to combine as many as seven city lots to build massive new homes,” says Deborah Fischer, a broker at Koenig & Strey. This once low-key area in Chicago, known more for its small Victorians, now features Richard Parrillo’s seven-lot home, Penny Pritzker’s five-lot home and Sara Crown Star’s three-lot home.

In San Francisco it’s the block where Broadway runs into the Presidio, between Vallejo, Lyon and Broderick. The roll call of residents that includes Gordon Getty, Larry Ellison and Peter Sperlings. Would you like to buy in? 2845 Broadway is listed for $65 million and 2901 Broadway asks $55 million.

Oftentimes the picturesque cityscapes most familiar to tourists for architecture and prestige are not the most expensive blocks in town. Take Washington, D.C., where the Georgetown blocks filled with colonial townhouses, cobbled streets and gas light lanterns are home to senators, congressmen and foreign dignitaries.

Expensive though they may be, they pale in price comparison to the large mansions on Rock Creek Park, near the Naval Observatory. The block on Woodland Drive, between McGill Terrace and the park–right in the backyard of the vice president’s mansion–is the district’s most expensive stretch. Until Vice President Dick Cheney’s Naval Observatory digs become available in November 2008, the most impressive home on this stretch runs $8.75 million.

Most of the cities on our list are very geographically confined, so places where homeowners can nab a large plot of land and build big house are rare. A good example is the most expensive block in Seattle, which falls on Lake Washington Boulevard between East Denny Laine Place and Howell Place. That stretch of Lake Washington is bounded by large city parks and as a result there are fewer than 50 waterfront homes in the prime neighborhood of Madison Park.

“Combined with the close proximity to downtown, it is very desirable and expensive,” says Jane Powers, a broker at Ewing and Clark. Not surprisingly, like most of the top blocks around the country, she says, “many of the region’s big names reside there, in addition to many of the Old Guard.”

In Pictures: The Most Expensive Blocks In The U.S.

McLEAN, VA — Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.45 percent with an average 0.5 point for the week ending August 30, 2007, down from last week when it averaged 6.52. Last year at this time, the 30-year FRM averaged 6.44 percent.

The 15-year FRM this week averaged 6.12 percent with an average 0.5 point, down from last week when it averaged 6.18 percent. A year ago, the 15-year FRM averaged 6.14 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.35 percent this week, with an average 0.6 point, up slightly from last week when it averaged 6.34 percent. A year ago, the 5-year ARM averaged 6.11 percent.

One-year Treasury-indexed ARMs averaged 5.84 percent this week with an average 0.8 point, up from last week when it averaged 5.60 percent. At this time last year, the 1-year ARM averaged 5.59 percent.

“Interest rates on conforming long-term fixed-rate mortgages declined slightly, while rates on one-year adjustable rate mortgages increased by about a quarter of a percent,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The increase in ARM rates is consistent with movement of the yields on short-term Treasury securities, which have exhibited higher volatility recently due to market uncertainties.”

“In other news, new home sales defied consensus expectations and rose in July to 870 thousand units, led by a 22 percent increase in the Western region. Existing home sales fell, however, though by less than the market had forecasted, to 5.75 million units, with the decline limited to the Midwest region.”

by M. Anthony Carr

One of the most problematic pieces of the property-buying process these days is the financing contingency. Basically, this contingency says to the seller the buyer will buy his house contingent on the purchasers’ ability to get a loan to finance it.

The financing contingency paragraph may give 7 to 14 days for the buyer to remove the contingency. If the buyer is successful, then the transaction moves toward closing. If not, the seller could have a null and void contract or he could be looking at a buyer in default.

The financing contingency paragraph (FCP) is very important. It’s fraught with deadlines and I’ve seen a lot of agents get buyers and sellers wrapped around the axle on this one by mistake and cause some to lose money and others file lawsuits. It can be used as a means to hold the buyer to the contract, but it can also be used as a means by which the buyer can get out of a contract.

The FCP involves the buyer, seller and loan officer — and possibly more parties depending on what type mortgage product you’re looking over. If the house being sold is involved in a short-sale or foreclosure, the FCP may need to be accepted by a third party, not just the seller, before the contract is ratified.

In most contracts, the buyer puts up an earnest money deposit — usually about 1 percent of the sales price of the house, but it could be more or less depending on the customary amount in your area. Nevertheless, if the buyer defaults on the contract (which could happen in various ways), the seller may have a right to keep the earnest money deposit. Again, this could be thousands of dollars.

One way the default could happen is through the FCP. So here are a few steps to keep in mind in removing this contingency and keeping your deposit safe and the transaction on track.

by Diane Kennedy

On the face of it, foreclosures, short sales and REOs look like the same thing: someone can’t pay their mortgage and is losing the property to the lender. They are attractive for investors looking to pick up a property for less than market value, and may well represent the next “it” thing in real estate investing.

However, it’s not quite as easy as it seems. If you walk into the investor market wanting to “do foreclosures,” without understanding the entire process, you could wind up in trouble. For example, while all short sales are foreclosures, not all foreclosures are short sales, and while REOs are not short sales, some short sales can wind up as REOs.

Let’s start at the beginning, then, with three basic definitions:

1. What is a Foreclosure?

When a property is in foreclosure, the owner has stopped making payments, and the lender has given the borrower a written Notice of Default that the payments must be brought up to date or the property will be sold off. The notice is a public document (which is why so many websites offer foreclosure lists). It normally takes about two missed payments for a lender to issue a Notice of Default, but not always.

If the owner doesn’t respond to the Notice of Default or make the payments needed to reinstate the mortgage, the lender can apply to the courts to take back the title the property so it can then be auctioned off or otherwise disposed of. This doesn’t happen right away, though. Each state has a different time period during which the former owners can still rescue the property.

Foreclosure auctions are usually public — in fact in Reno, NV, foreclosure auctions are still done on the front steps of the Courthouse once a week.

2. What is a Short Sale?

A short sale happens once a home is in foreclosure, but before the property goes to public auction. Short sales are attractive to investors, because lenders often agree to take less than what is owed on the property. The idea here is that you are saving the lender time and money by stopping the legal foreclosure process and taking the property off the lender’s hands.

But there are pitfalls to short sales. For example, if multiple mortgages are involved an investor must strike a deal with all lenders. That may leave little, if any, profit margin, depending on how heavily the property is mortgaged. And, even if a lender does agree to an offer up front, they can still change their mind. A real estate agent I spoke with recently told me that in her area, one lender was refusing to close on short sales at the last minute — wasting time and money for everyone involved.

3. What are REOs (or Real Estate Owned)?

If no-one bids high enough to meet the lender’s price at auction, the foreclosure completes and title transfers to the lender. Real Estate Owned means the property is owned by the lender.

Some investors see REO homes as the best way to buy property because there are no emotions involved: it’s strictly business between the investor, their agent, the lender, and its agent. And because most lenders aren’t landlords (nor do they want to be), investors can often get a very reduced price.

But not always. Sometimes there are hidden fees, like unpaid taxes, penalties, etc., to contend with. Other times lenders aren’t willing to negotiate the price down from market, or close to market. This is especially true in areas where home values have fallen further than lenders want to acknowledge.

As with any other kind of investing, education and experience will be crucial. Where foreclosure investing is involved, you may be wise to keep them in that order.

Diane Kennedy, the nation’s pre-eminent tax strategist, is owner of Diane Kennedy & Associates, a leading tax strategy and accounting firm and founder of TaxLoopholes. She is the author of The Wall Street Journal and Business Week bestsellers, Loopholes of the Rich and Real Estate Loopholes, and co-author of The Insider’s Guide to Real Estate Investing Loopholes, The Insider’s Guide to Making Money in Real Estate, and TaxLoopholes for eBay Sellers.

Register for free Tax Strategy updates and e-Newsletters delivered via email from TaxLoopholes.com. You will be updated on current tax law changes as well as proactive tax strategies the wealthy use plus news regarding Diane Kennedy.

by David Reed

Leveraging yourself by means of putting little or nothing down on your mortgage is not a new concept, but over the past couple of years it’s morphed itself away from those who don’t have any down payment money or for those qualified for a VA loan — to those who have down payment money but don’t want to use it.

They want to invest it instead in things such as stocks or mutual funds or something similar. Books touting this new idea seem to sprouting up like mushrooms, with perhaps the first relevant book on the topic was one written by Doug Andrew called, “Missed Fortune 101″ (Business Plus 2005), and tells people how they shouldn’t put anything down and provides a path to wealth. Doug says you can do this by taking the money you would have otherwise used as down payment and invest those same funds somewhere else.

There’s even a formula that shows at what point a down payment-turned-investment would surpass the original mortgage in terms of value. It’s a well-written book and makes a lot of sense. The math always works when you compare investing money and compound interest and such and had been so popular it has spawned other books just hitting bookshelves promoting the same idea just in different formats.

There are even special courses that mortgage loan officers can spend money on to learn how they work and how to present them to their clients. Again, it can make for an impressive presentation and makes the loan office appear to be more financially “savvy” than their competitors.

I agree with the concept, but I couldn’t disagree more with the author’s assertion that this program works for everybody, because two key components of this mortgage strategy are:

1. No Money Down
2. Payment Option ARMs

Heard those terms lately? Lenders over the past couple of years have pushed no money down loans as ways to get people into homes that otherwise wouldn’t qualify. Lenders also have pushed Payment Option ARMs as a way to help people feel more comfortable with mortgage payments each month.

As in 1 percent interest and negative amortization.

These books teach people to pay an interest-only payment or a low “pay” rate of 1 percent or so instead of the fully-indexed payment where part of the house payment goes to the principal and part goes to interest. The difference between the interest only and a fully amortized one should go to a mutual fund.

It works out okay if the stars are aligned correctly but sometimes they aren’t. As in right now. If people in fact put their money in a liquid investment and if they get in trouble they can always tap into that money to help out with bills and stuff.

But what if they don’t have the discipline to do that each and every month? And what if they have to pull some money out of their original investment? Or worse, what if they never had an original investment in the first place?

And what if they had to refinance to avoid a hybrid reset but couldn’t because … (drum roll, please) … there was no equity in the property?

Using your mortgage as a financial planning tool is a good thing, please don’t get me wrong here. But this program is not for everybody by any stretch. They’re for those who follow the plan exactly. But for those who can’t, for whatever reason, could find themselves in some trouble.

  David Reed, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can’t Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won’t Tell You, is a Columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.

by M. Anthony Carr

When you’re sitting right in the middle of a buyers market, or at least an equitable market (neither a buyer nor seller market), this is the time when buyers should start asking for the moon. If you don’t ask, you’ll never get what you want.

I’ve talked with many agents who entered the real estate market back in the day — in the day when buyers meekly came to the door with their little contracts in their hands like some Dickens character asking, “Please sir, may I pay you some more,” but during the whole exercise expecting a rap on the head for even asking. Thus these agents are still stained by the time of buyer pays for everything, seller get’s everything.

Folks, those days are over. Ask for it all. “Please sir, may I have some more. May I take your house for 5 percent less than your asking price, you give me 3 percent closing on top of that, then throw in new carpet, fresh paint, new cabinets and the car parked in the garage?”

Instead, I hear agents say, “Well, I’m asking for so much in closing I thought it might insult the seller to ask for (fill in the blank).” Trust me, let the seller be the judge of that. If an agent is a “buyer” agent and comes back without asking for a lot of stuff, then they’re not doing their job. The contract should come back marked up with a counter offer.

In a very limited survey I conducted in my area, 40 percent of the deals I looked over (more than 100) did not ask for closing costs — and this is in a market where the sellers are willing to pay for it. I wasn’t privy to the nuances of every paragraph on these contracts, but I can almost guarantee that if they didn’t get closing costs assistance, then they probably didn’t get a lot of other things like the items listed below.

Home inspection: If you’re not asking for this item in today’s sales environment, then you’re just not in the game. It’s almost expected. While the buyer traditionally pays for it, once defects are found, the seller is the one who usually has to get them fixed. Why buy a house today with a leaking air conditioner system, slow draining toilet or misfiring electrical outlets. The seller wants to sell and is willing to put in the money to get these items fixed. What s/he’s not willing to fix, s/he will tell you. But if you don’t ask … .

Radon inspection: In the 1980s and 1990s, this inspection was a given. Now, I can count on one hand how many of these inspections I’ve heard about in the last year. Radon is a tasteless, odorless gas that seeps from the ground and can cause cancer. About 20,000 people die each year in the U.S. from radon-induced lung cancer, according to the Environmental Protection Agency. Yet, the test to determine the levels of radon in a house cost less than $50. If you find levels too high, the recommended remediation system cost about $1,000.

Home warranty: Contracts that don’t ask for a home warranty from the seller just boggle my mind. Most sellers are about to come down on their price by thousands or tens of thousands of dollars, yet the buyer is “too embarrassed” to ask for a home warranty. It just amazes me. The buyer is willing to buy the house for $400,000, but not ask for a $400 home warranty to help protect the house over the next year. My advice: once the negotiation is over and let’s say you have a seller who just won’t pay for it — then up the price $400 and get the cash from the transaction to pay for the home warranty. Done deal.

Closing costs: Whatever you’re doing with the contract, at least ask for some sort of closing costs. The most effective closing cost item any buyer should ask for is a point for the mortgage. With this type of closing assistance, you’ll have lingering benefit from the cash at the table because the point paid at the table will result in a cheaper mortgage payment month after month.

Until housing inventory begins to shrink and houses start selling for more than asking price, buyers should take advantage of the current market and negotiate more from the seller. The buyers get what they want — assistance getting into the house. The sellers get what they want — their house sold.

Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony’s blog: commonsenserealestate.blogspot.com.