Author Archives: Michael Kodsi

5 New Year’s resolutions for homeowners

When you make your list of New Year’s resolutions this year, don’t forget to include a few items related to your home and finances. An annual evaluation will help you make sure you’re taking care of your property properly.

5 New Year’s resolutions

No. 1: Check up on your homeowners insurance.
Check the limits of your coverage to make sure you’ll have enough insurance to repair or replace your home, if needed, especially if you’ve made home improvements in the past year that added finished space to your property, says Mark Galante, senior vice president and chief marketing officer of PURE Group of Insurance Companies in White Plains, N.Y.

He also recommends checking your insurance coverage for other structures on your property, since many homeowners don’t realize they need extra insurance for a detached garage, a fence or a pool. If you have a basement, he recommends optional sewer and drain backup insurance.

“Check to see if you should buy flood insurance,” says Michael Kodsi, CEO of Choice Mortgage Bank in Boca Raton, Fla. “It’s not very costly if you don’t live in a flood zone and it covers you for floods caused by storms.”

Galante also recommends reviewing your personal property or contents insurance. “Items like jewelry or furs or art may need special insurance coverage.”

No. 2: Evaluate a refinance.
“Compare your current mortgage rates and term to see if you can secure a lower rate to save on your monthly payments,” says Robert Lund, vice president for residential mortgage lending for Bethpage Federal Credit Union in Bethpage, N.Y.

Lund suggests using a mortgage calculator to compare payments on a shorter loan term. He says homeowners should consider how long they plan to stay in their home to determine whether refinancing makes sense because it can take several years to recoup the costs of a refinance.

“Look at your mortgage bill to see if you’re paying private mortgage insurance,” says Kodsi. “If you have enough equity you might be able to eliminate the PMI, which will lower your payments even if you don’t refinance.”

No. 3: Consider prepaying.
If your mortgage rate or term is already low, Lund says it could make more sense to prepay your mortgage rather than refinance.

“You can shave years off your mortgage by setting up biweekly payments, making one extra payment each year or rounding up your monthly payment every month. The difference prepayment makes depends on your loan balance, your loan term and interest rate and how much extra you pay,” he says.

Utilize a prepayment calculator to analyze the benefits for your individual circumstances.

“Before you decide to prepay your loan, find out whether your home is appreciating or depreciating,” says Kodsi. “You might find that it’s better to use a bonus or other extra cash for other investments.”

No. 4: Maintain and repair.
Your home, just like your body, needs an annual physical to make sure your systems are running right.

Start on the outside, looking at your trees to see if they need to be trimmed, then your roof, flashing and gutters, says Galante. Inside, he suggests testing your sump pump, alarm system and smoke detectors. You can find out the average life expectancy of your appliances from the National Association of Certified Home Inspectors so you can budget for repairs or replacements.

No. 5: Check your HELOC terms.
If you have expensive repairs to make, you may want to tap into a home equity line of credit, but make sure you understand how it works. Unlike home equity loans, which are typically fixed-rate loans for a specific term, HELOCs generally have an adjustable rate, says Lund.

“You should check to see if you’re in an introductory, interest-only payment phase and check the caps to see what your maximum rate adjustment will be,” says Lund. “If you think your payment will be too high when the loan adjusts, contact your lender to see if you can refinance both your first and second loans into one fixed-rate loan.”

Kodsi says some lenders offer a convertibility option that will allow you to convert your loan to a fixed rate for a small fee. He also says that refinancing your first mortgage to a lower rate and payment could free up funds for your HELOC payments.

Most of these resolutions can be accomplished relatively quickly yet provide big savings during the new year.

 

Housing market to see boost from boomerang buyers?

Millions of banned borrowers reportedly will be eligible for mortgages this year.

UPITER, Fla. — Some housing experts are trumpeting changes that allow foreclosure sufferers to buy back into the American Dream sooner than they probably imagined, calling 2014 the year of the “boomerang buyer.”

Revisions made over the summer to Federal Housing Administration guidelines and technical updates in November to Fannie Mae loan approval systems have opened the door for some former homeowners to buy again just one year after foreclosure.

Founders of the San Diego-based companyAfterForeclosure.com said last month that millions of banned borrowers nationwide will be eligible for a mortgage this year, while Jupiter mortgage broker Skip McDonough said his firm is already doing deals with homebuyers who were forced into default during the housing bust.

“The old-fashioned way of doing it was a seven-year waiting period,” said McDonough, president of Family Mortgage. “That’s changed, and people who don’t believe they can qualify are qualifying.”

McDonough and Jon Maddux, co-founder of AfterForeclosure.com, said the boomerang buyers are necessary to maintain a growing economy as other drivers fade.

Investors, who bolstered home sales during the real estate recovery, will reduce purchases as prices climb. Recent college graduates with student debt might not have the means to buy. And underwater homeowners are still stuck in a holding pattern — unable to sell so they can move up and buy anew.

“People who are primed to buy are the ones who qualify on all levels but had a short sale or foreclosure on their record,” Maddux said. “The refinance boom is over and lenders are looking for a way to capture more business.”

Under the Federal Housing Administration’s “Back to Work” program, it will approve certain borrowers for a home loan just one year after a foreclosure, short sale, deed in lieu of foreclosure or bankruptcy. FHA’s previous time line was three years for a short sale and foreclosure and two years for a bankruptcy.

Federal mortgage backer Fannie Mae has previously allowed homebuyers who completed a short sale to buy again after two years if they put 10 percent down, but an automatic underwriting system couldn’t differentiate a short sale from a foreclosure and would spit out a denial. The application could then be referred for a manual review. But those were often denied based on the computer’s refusal, Maddux said.

Eligibility for a loan fast-track hinges on whether borrowers suffered a specific financial event during the recession that, through no fault of their own, caused them to lose their home. Also, the foreclosure or short sale should be the only blemish on a credit report. For an FHA mortgage, the homebuyer must take a housing counseling class.

People who walked away simply because their house was underwater likely won’t qualify.

Michael Kodsi, chief executive officer of Choice Mortgage Bank, Inc. in Boca Raton, Fla., said he’s had three inquiries recently from boomerang buyers.

“They’ve been taught a lesson. They want their house payment to be affordable,” Kodsi said. “The people I’ve dealt with are more excited than ever to own their own home and are sick of renting.”

But there is a reality check. People who can get a loan might not always be able to find a house. They’re coming into a market with historically low interest rates, but also low inventory. And because they have a default on their record, they may not qualify for the amount of loan they want.

“A lot of people who did a short sale for a low price are getting back in the market and have sticker shock,” said Realtor Shannon Brink, with RE/MAX Prestige Realty in West Palm Beach, Fla. “The prices are higher and financing is a challenge.”

Still, it’s happening. McDonough had a client buy a $515,000 Jupiter home this fall, less than three years after a short sale on his previous property. The short sale reduced his credit to below 600, but two years of good payment history helped it shoot up to 740.

Former North Palm Beach, Fla., homeowner John Lebeau battled through a nasty — and he says fraudulent — foreclosure for years before it ended in an October eviction. He said he’s having trouble finding a place to rent because his credit is shredded, but is eager to buy again when he can.

Lebeau said it makes more financial sense to own, especially with today’s lower interest rates and if the plan is to stay in the home five years or more.

There are other reasons, too.

“These are people who believe in the American Dream and believe homeownership is the way to go,” McDonough said.

Despite Low Mortgage Interest Rates, the Market Faces Difficulty

Both fixed and adjustable mortgage loan interest rates dropped at least 15 basis points this week, according to rate reports supplied by loans.org.

During the week ending on Oct. 24, 2013, the 30-year fixed rate mortgage averaged 3.96 percent. This was a decrease from 4.11 percent reported last week. The 30-year rate has not dipped below four percent since the week ending on June 13, 2013.

The second mortgage loan interest rate, the 15-year FRM, decreased from 3.14 percent to 2.98 percent.

Finally, the 5/1 adjustable-rate mortgage dropped from 2.84 percent to 2.68 percent.

Mortgage loan interest rates have improved and lowered due to September’s lackluster employment report, according to Michael Kodsi, CEO of Choice Mortgage Bank, Inc..

Last month only added 148,000 jobs, the lowest rate seen since November 2008.

The low employment, coupled with the lagging uncertainty caused by the government shutdown, could create negative housing reports in the coming weeks, Kodsi said. Although he hopes he is wrong, mortgage default rates will likely rise.

The biggest concern from the shutdown is that when people are unemployed or furloughed, they focus mainly on the essentials. These bills include gas, cellphone payments, food and electricity. For many households without a consistent paycheck, the mortgage loan payment comes in second.

Kodsi said this exact trend occurred during the housing meltdown.

“If you don’t have a paycheck coming in, how do you make a mortgage payment?” he questioned.

Despite the lower rates this week, Jorge Newbery, CEO of American Homeowner Preservation, believes the housing market is still struggling.

He said during the summer, the market turned positive after “what had been a tough market for several years.” Unfortunately, this improvement has lessened in the past few months. Properties that would have received multiple offers during the summer are now remaining on the market with no offers.

“It’s something we are used to but it’s certainly a comedown from the highs of a few months ago,” Newbery said.

Impoverished neighborhoods in Chicago that dealt heavily with short-sales, foreclosures and underwater properties are still struggling. The national upswing this past spring and summer was not seen in these areas. Newbery’s company has loans on homes below $50,000 and $75,000 price ranges. The company even bought loans that have balances of $300,000 that are secured by homes valued at a dismal $10,000.

This occurred because of fraud or over-optimistic mortgage loan brokers. Newbery said the shady lending practices which occurred in the past remain today.

“There are a lot of challenges in the immediate and foreseeable future,” he said. “To say the housing crisis is over or the market is returning to normalcy, I think we are far from that.”

New mortgage available one year after foreclosure under rule change in Florida

Thousands of blacklisted Florida borrowers who lost a home to foreclosure can get back into the housing market more quickly under a rule change that reduces the wait time for getting a new mortgage.

The Federal Housing Administration will approve certain borrowers for a home loan just one year after a foreclosure, short sale, deed-in-lieu of foreclosure or bankruptcy. FHA’s previous timeline was three years for a short sale and foreclosure, and two years for a bankruptcy.

Foreclosures up on luxe homes

Mansion repossessions are on the rise nationwide, with South Florida topping the charts for luxury-home foreclosures.

After years of decreases in bank take-backs on homes in the $5 million-plus range, foreclosure activity picked up 61 percent nationally in 2013 with 192 filings, including 47 in Palm Beach, Broward and Miami-Dade counties. Last year, the tri-co

New foreclosures in November down slightly from last month

WEST PALM BEACH —

The number of new foreclosures in Palm Beach County remains significantly lower than the previous year, according to statistics released Wednesday from the Clerk & Comptroller of Palm Beach County.

There were 643 foreclosures filed in November, a 2.7 percent decrease from 661 foreclosures in October and a 46.7 percent decrease from 1,207 cases filed in November 2012.

As a comparison, there were 2,198 foreclosures in November 2009 – the year when Palm Beach County foreclosure filings reached a high of 31,678.

“If current trends hold, Palm Beach County will see approximately one-third fewer foreclosures filed this year than were filed in 2012,” Bock said in a statement. “There is a combination of factors driving this change, but I believe the improving real estate market is a key component.”

Mortgages/deeds recorded

Palm Beach County saw an increase in the number of deeds recorded in November compared with the previous year, while the number of mortgages recorded declined.

There were 5,310 deeds recorded in Palm Beach County during November, a 22.3 percent increase from the 4,343 deeds recorded in November 2012, but a 16.8 percent decrease from 6,384 deeds recorded in October 2013.

There also were 2,484 mortgages recorded in November, a 20.7 decrease from 3,134 mortgages recorded in October, and a 13.3 percent decrease from 2,866 decrease in mortgages recorded in November 2012.

Foreclosure sales results

There were 793 properties sold during November’s online foreclosure auctions, according to statistics from Grant Street Group, the facilitator of ClerkAuction. Of those, 620 were sold back to the plaintiff – typically a bank or mortgage company – in the foreclosure proceeding, and 173 were sold to a third party.

There were 483 sales canceled in November, out of 1,277 scheduled for sale. The cancellation rate was 37.8 percent, compared with 35.6 percent in October.

FHA to make changes to programs in 2014

The Federal Housing Administration, for years the only viable mortgage source for many buyers and refinancers, is making several changes to its programs that will make it tougher for some to get a loan.

DEAR MR. MYERS: The mortgage broker that is handling our refinancing with an FHA loan is pushing us to close the deal by the end of this year, claiming that the agency is about to institute tougher requirements for borrowers. Is this true, or is he simply anxious to collect his loan commission?

ANSWER: The Federal Housing Administration is indeed tightening its mortgage-eligibility requirements for borrowers. A key change, which will take effect Jan. 10, involves a borrower’s so-called debt-to-income ratio.

There actually are two kinds of debt-to-income ratios, often referred to as DTIs, and they’re both scrutinized by lenders when reviewing a consumer’s mortgage application. The first, called the front-end ratio, measures the percentage of the borrower’s income necessary to cover the proposed mortgage payments and related housing expenses, such as property taxes and insurance premiums. The second, called the back-end ratio, measures what percentage of income would be needed to pay those housing expenses and all other recurring debt, including credit-card accounts, car payments and student loans.

Under current rules, applicants with good credit scores can have a back-end ratio as high as 55 percent and still qualify for a mortgage. But in a few weeks, that maximum will be slashed to 43 percent — a change that will have a disproportionately negative impact on those seeking relatively large loans, have fairly modest incomes or a lot of pre-existing debt.

The FHA also is reducing the size of the loans that will insure in about 650 counties across the U.S. The maximum loan amount in the nation’s highest-priced markets — including many parts of the Northeast and in California — will drop to $625,500 from $729,950.

The new rules will compound problems caused by changes that the FHA made a few months ago. Those included a new requirement that a lender raise the ratio for any applicant with at least $2,000 in collections accounts (medical bills are excepted), because paying those debts could hurt the borrower’s ability to make the mortgage payments.

Such accounts don’t necessarily have to be paid off to qualify for an FHA loan, but any existing court-ordered judgments do.

If any of these changes would impact your chances of gaining mortgage approval, follow your broker’s advice and try to close the transaction by the end of this year. As a bonus, you’d bolster your housing-related deductions on the 2013 income-tax return that you must file by April, rather than having to wait an extra year to claim them.

DEAR MR. MYERS: Is it true that Fannie Mae and Freddie Mac have stopped evicting homeowners who are in foreclosure?

ANSWER: Yes, but only temporarily. The two mortgage giants, which together own about half of all home loans in the United States, both agreed to halt evictions between Dec. 18 and Jan. 3 so homeowners who are in default could spend one last holiday season in their property.

DEAR MR. MYERS: I already own my own home, but now I would like to begin investing in rental properties because prices have been picking up and the economy seems to be getting better. I don’t have a lot of cash, so I was thinking about buying a small piece of land. Is raw land a good investment?

ANSWER: Usually not. For starters, raw land doesn’t generate any rental income to help offset a buyer’s mortgage payments and property-tax bills. Your letter states that you “don’t have a lot of cash,” so you can imagine the pickle that you would find yourself in if the monthly bills start piling up but you didn’t have the money to pay them.

In addition, raw land cannot be depreciated — an important tax benefit that only investors can use if their property provides at least a modicum amount of rental income.

Buying raw land is also a risky proposition because the resale market for such properties is typically thin: You won’t make much money, but could lose a lot of it if sellers outnumber buyers when you eventually put the property back up for sale.

You probably should postpone your real-estate investment plans until you have saved enough to make a down-payment on a rental house, duplex or small apartment building that will create some monthly cash rather than buying an undeveloped parcel that likely will leave your wallet or bank account barer than the raw land that you want to purchase.

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Our booklet “Straight Talk about Living Trusts” explains how most homeowners can now reap the same benefits that creating an inexpensive trust once provided only to the wealthiest families. For a copy, send $4 and a self-addressed, stamped envelope to D. Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405. Net proceeds will be donated to the American Red Cross.

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Boomerang buyers may boost housing market

JUPITER —

South Florida housing experts are trumpeting changes that allow foreclosure sufferers to buy back into the American Dream sooner than they probably imagined, calling 2014 the year of the “boomerang buyer.”

Revisions made over the summer to Federal Housing Administration guidelines and technical updates in November to Fannie Mae loan approval systems have opened the door for some former homeowners to buy again just one year after foreclosure.