real/diaBlog - because real estate needs to change

Underwater Mortgages - An Interview on Nightly Business Report

A  story that has been getting alot of media attention lately is the impact on homeowners of owing more on there homes than the home is worth.  Usually referred to as being "underwater", this financial situation is becoming a serious problem throughout the country. 

It has led directly to the explosion of short sales and voluntary foreclosures and indirectly to the drop in consumer sentiment and a pull back in the American consumer's appetite for spending.  

I was lucky enough to interviewed by Stephanie Dhue of Nightly Business Report yesterday and the segment ran yesterday on PBS nationwide.  It is the second segment in this video.

Here are several stories regarding underwater mortgages.

The report from Deutsche Bank thatunderwater mortgages will hit 48%.  This was quoted in the NBR report.

An in depth report on the effect of underwater mortgages and foreclosures by CoreLogic.

Report that currently 1 out of every 4 mortgages in America is underwater.

Real Estate News and Blog Post Aggregation - Realdiggity

As some of you already know, I have been working on a site that people can use to get all the news about real estate in one place.  I orginally set it up using drupal but it was too cumbersome and bug ridden.  I have found another site called slinkset and now I have it up and running on that platform.  

Here is the new Realdiggity.

I have added a lot of rss feeds from the best of the real estate blogs and websites.  But if there are some that you want me to add let me know. Or you can sign up and add ones that you feel are worthy of inclusion.

Also, there is a widget you can add to your blog or website that will feed the stories directly to your site so your visitors can see the headlines.  I have it in my sidebar so you can check it out.

You can use the site to rank the stories you feel are the best much like social bookmarking sites like digg and reddit.  You can add a story from a non-real estate site that has a real estate specific story by using the submit button.  You can also add a bookmarklet that will automate the submit function and fill in the title and link automatically.

I would like this site to be free of all advertising of homes for sale.  There are many other sites already available for that.

Please use this site as a resource when dealing with topics regarding real estate.  This includes tips on buying, selling, loans, interest rates, foreclosures, short sales, statistics, etc.  You don't have to sign up, but that would be cool too.

Feet Dragging by Banks Leads to Murder

Over the past weekend a murder occurred in the Lowes Island subdivision of Sterling.  This is the same Lowes Island subdivision that is home to the golf course that Donald Trump recently purchased.  A teenager was killed at a house party at 2:30 in the morning on Sunday (Saturday night).  Buried in the end of the story was this piece of information that in my opinion was the real story:

Neighbors report that the house where the party occurred is in the foreclosure process and the couple who owned the house have already moved out and were allowing their college age son to live there.

And the very last paragraph had even more information regarding the owners of the house where the party and the murder took place:

Further research into public records show that the listed residents of this house, Jose and Wilma Vargas, also owned another house in Sterling – located on 104 Almey Ct. The bank has already foreclosed on this house and it is for sale by United American Realty.

I am not saying that the banks are directly responsible for the murder of the teenager but it could be argued that their failure to secure a property that has obviously been abandoned by the homeowners and used as a frat house by the college son was a very crucial contributing factor in this tragedy.

One bank was able to foreclose on the same couple and secure their other house over 2 months ago.  Why not this property?  Where is this bank? 

Most of the time we hear about foreclosures and abandoned properties in a neighborhood leading to decreased values, perhaps squatters occupying vacant houses and other public nuisances.

But this story shows just how much damage the banks are doing to our neighborhoods.  Their indifference has become a problem for all Americans.  Their reluctance to take over abandoned properties and foreclose on homeowners that have no intention of keeping their homes is an epidemic.  

We need to force these banks to do the responsible thing and do it now.  We can't wait for the banks to clean up their balance sheets so they can take over these properties without become illiquid.  We need to come up with a solution that takes the  properties from these reluctant property owners and prevents further damage to our neighborhoods, towns and count.

Is Congress Trying to Undermine a Real Estate Recovery?

Maybe it is just me but if I was a buyer in today's real estate market and I heard that Congress was trying to increase the $8,000 first time buyer tax credit to $15,000 and include all home buyers, I would seriously consider holding off on making a purchase.  Why you ask?  Well, there are many different reasons and they all stem from the uncertainty of what Congress will eventually do, if anything.  

Congress is notorious for floating out many different versions of a bill and then watering down one of them in order to get it passed by both the Senate and the House of Representatives and then get signed by the President.  This causes many great ideas and sound solutions to become ineffective and a waste of time.  

We don't have to look any further than the current $8,000 tax credit.  At one point it was a $15,000 credit that would have been available to all buyers.  But that bold, decisive bill that would have had a tremendously larger impact on home sales was weakened and become the current credit that has already had one major change and is set to expire on December 1st.  And there is no sign that the credit has done anything to improve the housing market.

So now they are considering either extending the current credit for another year, increasing the size to $15,000, adding a $3,000 credit for refinances and/or letting all home buyers get the credit.  And there is no indication of whether or not the new limits and credits will be retroactive and how far back they will go.  

The last credit was retroactive to Jan 1st when it was signed into law as part of the stimulus package in the middle of February.  How far back they make the next credit is anyones guess.  And that is the problem.  What if they pass the bill and don't make it retroactive?  What if the actually bill gets debated and changed and watered down again and doesn't get passed until the fall?  What then?

What should a prospective buyer do if they want the full $15,000 credit and want to be guaranteed they get it if in fact that is what Congress passes?  They have to wait and see.  That is the only way to guarantee you get the credit because no one knows what will happen.  The people that bought a home last year have to pay back their tax credit because they didn't wait.

Congress cannot make swift, decisive moves that will help the economy.  Congress doesn't do what is right, they do what will get them re-elected.  They need to answer to special interests, not constituents because special interests give them the money to get re-eleted.  Congress can't make hard decisions and instead they have partisan battles and pass bills with partial solutions that are ineffective.  

And this latest battle over the tax credit will showcase Congress at its finest, working to confuse the public, change the rules, cut some people out and create another finger pointing debacle.  Much like the TARP that didn't buy any toxic assets and a stimulus bill that doesn't stimulate.

I ask again, is Congress trying to undermine a real estate recovery?  I say yes.

UPDATE:  I will be at a function this Friday with Rep. Frank Wolf (R), the congressman for my district here in Northern Virginia.  I will try and corner him and ask him some pointed questions regarding the tax credit and efforts to help the housing recovery instead of continuing to create indecision in the minds of the public.

As Goes California, So Goes the United States

A wise man once told me "As goes the California economy, So goes the US economy".  With California such a large part of our economy, it only makes sense that until that state gets its act together, the country will continue to languish.  And by the looks of it, that isn't going to happen for quite some time.  And it also looks like the federal government is in no hurry to help out.

That same wise man also said that "As housing goes, so goes the economy".  That is another reason why this recession/depression will continue as long as President Obama wastes time on issues such as health care and green energy.

Think about it.  What is our biggest expense every single month?  Housing.  What is the biggest concern that most people have every day?  Housing.  What is the one area that has been the biggest drag on our economy for 3 years.  Housing.  And the biggest drain on consumer confidence?  The price of our houses going down with no end in sight.  

Yet Obama continues to push for national health care and green energy.  Does that matter if you are facing foreclosure?  When you are selling your house short to move into a tiny apartment?  When you have no more equity in your house and no hope for every getting back to zero?  When the majority of baby boomers are going to work until they die because the equity in their homes and retirement accounts are at zero.  How are they going to afford nationalized insurance and an electric car.

Am I missing something?

Quick Hit List - Citi, DR Horton, Peter Schiff, Twitter

Twitter Rejects Offer from Facebook.

Citibank is another joke of a company that taxpayers have to bail it out twice.

DR Horton reports lost of $800 Million

Peter Schiff had it right.  You gotta Watch the video.

New Website Unveiled for Dulles Area Association of REALTORS

During the past six months, the Technology Committee of the Dulles Area Association of REALTORS has been working on a new website design that incorporates RE 2.0.  Ben Lizik of DAAR has been busy programming the site and the staff has been instumental in getting all the information on the old site converted to the new site.

We wanted a clean design that appealled to members of the association as well as the general public.  A built-in content management system will allow updates to the site to occur as they happen.  Visitors are able to provide feedback on the site and are encouraged to do so.  We hope that the site will be a valuable resource for real estate news and information in the Dulles Corridor which includes all or part of Loudoun, Fairfax and Prince William counties. 

Additions to the website will be added in the coming months that will add to the website's 2.0 functionality and reach.

We would love to know what you think of the new site and encourage any feedback.

Banks Still Choosing to Foreclose Instead of Sell Short

I submitted an offer on a home that is "For Sale" for a client of mine.  It turns out, the house isn't for sale.  Here is the response from the agent:

Tony,
     The lender just called me and they are not taking your offer or any offers because they rather go through the foreclosure process.

Seems that some banks aren't willing to work with owners.  All the press and all the government programs still don't help.  Banks suck.

Negative Press about Real Estate a Worldwide Problem

I just ran across this article about the real estate industry in New Zealand.  It seems that the industry is upset over negative articles being written by Big Media. 

Supposedly, they are threatening to pull advertising if newspapers don't cooperate.  And the Government is not happy with the tactics.  Sound familiar?

HUD Proposes Changes To RESPA, But Misses Key Points

The Department of Housing and Urban Development (HUD) rolled out proposed changes to RESPA including changes to Good Faith Estimates (see the proposed changes). HUD claims that the proposed changes will make it easier for borrowers to see the true costs associated with getting a loan and will allow them to do a better job "shopping around." HUD estimates that "shopping around" will save each buyer an average of $668 at settlement.

But they don't address some key points. Currently, there is no law that protects consumers from lenders that "bait and switch" by showing "X" dollar amount on the Good Faith Estimate, but end up charging "Y" (aka higher) amount come settlement, much to the dismay of the borrower.

Since the financing contingency has typically been removed well before settlement date, the buyer has the choice of either paying the higher amount or not settling. If the buyer doesn't want to move forward with settlement, they will most likely be in default and lose their earnest money deposit, etc. Therefore, they really don't have a choice and just end up paying the higher fees.

Personally, I don't understand how mechanics are required to contact people when the repairs deviate from the initial estimate by more than 10 percent, but there is no such rule for lenders. Saving consumers $668 is a drop in the bucket compared to the amount that some lenders increase their closing costs by at the last minute.

HUD has also proposed changes to the HUD-1 Settlement Statement (see proposed changes). But the HUD-1 Settlement Statement repeats much of the same information listed on the Good Faith Estimate. They should worry about changing the laws surrounding holding lenders accountable to their Good Faith Estimates rather than spending time changing the HUD-1.

Plus, the HUD-1 Settlement Statement is not ready until the day before or the day of settlement. By that time, there's very little a buyer/borrower can do to make changes to their loan or "shop around" for better terms or a new lender.

Though consumers surely appreciate what HUD is trying to do, they will not be protected much, if any more than they are today. Personally, I'd rather pay the $668 and have a guarantee that the loan will close on time and that the lender fees will be the same as listed on the Good Faith Estimate.