Wednesday, December 31, 2008

Maintenance Tips

Conduct a yearly walkthrough of all units. I notify my tenants that I will be conducting a quick walk through of their unit. I can tell you some real scary stories I've witnessed myself!

Monday, December 29, 2008

Mortgage rates at 37-year low

WASHINGTON — Rates on 30-year-fixed mortgages dropped this week to their lowest levels in at least 37 years, as the Federal Reserve pledged to pour money into the mortgage market in an effor spur the moribund U.S. housing market.

Freddie Mac, the mortgage company, reported today that average rates on 30-year fixed-rate mortgages dropped to 5.19 percent, down from the year's previous low of 5.47 percent, set last week.

The rate is the lowest since Freddie Mac's weekly mortgage rate survey began in April 1971.

Mortgage rates started falling after the Federal Reserve launched a sweeping new effort in late November to aid the U.S. housing market by purchasing up to $600 billion of mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

A daily survey found that the national average rate fell even lower Wednesday. Rates on 30-year, fixed mortgages was 5.06 percent, according to financial publisher HSH Associates, the lowest since the 1960s and down from 5.3 percent Tuesday.

It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage because only borrowers with stellar credit can qualify.

"It's a call to action for homeowners looking to get out of adjustable-rate mortgages," said Greg McBride, senior financial analyst at "Unfortunately, it's not an equal-opportunity party."

Faced with a dramatic surge in defaults, both Freddie and its sibling company, Fannie Mae, are stepping up efforts to prevent foreclosures.

The federal agency that regulates the two companies anticipates they will modify about 75,000 troubled loans next year, up from about 60,000 this year. The program applies only to borrowers who have missed three months of payments and have not filed for bankruptcy and still live in their homes.

Most of the increase is expected result from of a mass loan modification program for loans owned by Fannie or Freddie that was launched this week. Loan servicing companies, which collect mortgage payments for Fannie and Freddie, are expected to send out thousands of letters to eligible borrowers in the coming weeks.

But for borrowers who are current on their mortgages, they can take advantage lower interest rates, refinance and save money.

The average rate on a 15-year fixed-rate mortgage dropped to 4.92 percent from 5.2 percent last week, Freddie Mac said.

Rates on five-year, adjustable-rate mortgages fell to 5.6 percent, compared with 5.82 percent last week. Rates on one-year, adjustable-rate mortgages dropped to 4.94 percent, from 5.09 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.7 point last week. The fee on five-year, adjustable-rate mortgages averaged 0.6 point, while the fee on one-year adjustable-rate mortgages averaged 0.5 point.

Mortgage application volume jumped last week, fueled by borrowers seizing on lower rates to refinance home loans, the Mortgage Bankers Association said Wednesday.

The trade group's seasonally adjusted application index rose 2.9 percent for the week ended Dec 12.

The Federal Reserve, aiming to free up lending and jolt the economy back to life, on Tuesday cut the federal funds rate from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.

Mortgage brokers are already reporting a surge of calls from borrowers trying to take advantage of the Federal Reserve's extraordinary actions.

On Wednesday, some mortgage brokers were quoting interest rates of close to 4.5 percent for people with strong credit and hefty down payments.

Falling interest rates mean Americans could suddenly find billions of extra dollars in their pockets at a time when consumers have sharply cut back on spending in the face of rising unemployment and declining household wealth. But many experts believe that the interest rate cuts alone won't be enough to jump-start the economy.

Source: Associated Press, Alan Zibel, (12/18/08)

Prescription for a Loan and Free Credit Report!

Bad credit can ruin a deal.

Bad credit translates into financing rejections, prohibitively high loan rates, and failed deals. That's why real estate professionals need to educate themselves about the credit system and show prospective buyers the value of repairing their credit, if necessary, in order to qualify for a mortgage.

Unfortunately for borrowers, most credit reports contain inaccurate information. A June 2004 study performed by the U.S. Public Interest Research Group, a consumer advocacy group, showed that 23 percent of consumers had mistakes on their credit reports serious enough to result in the denial of credit. All told, an amazing 79 percent of consumers had some mistake.

Fortunately, consumers' rights are protected under the Fair Credit Reporting Act. The FCRA gives consumers the ability to correct, update, amend, and take action regarding the contents of a credit report. It also guarantees consumers accuracy, fairness, and privacy in their credit reports.

The Act protects consumers only if they take action, however. Credit bureaus report the information they are given by creditors; they don't verify it. If an error occurs, the burden of discovering and correcting it rests on the consumer. Here's what your customers should do before they apply for a mortgage to make sure their credit reports are accurate.

Find out what's in their file. Every U.S. consumer is now entitled to one free credit report annually from each of the three credit bureaus: Experian, Equifax, and TransUnion. The easiest (and free) way to get a copy of your report is to go to the government-mandated Web site Also note that if consumers are denied a mortgage or other credit, the lender must tell them whether information in their credit report played a role in the denial.

Dispute inaccurate information. If your customer determines that something is incorrect on a credit report, the next step is to correct the inaccuracy. If consumers obtained their credit reports at, they can dispute errors online. Another option is to write a letter to all three credit bureaus detailing the dispute. (Some states require one agency to notify the other two, but why risk it?) The letter should include documentation such as a cancelled check showing payment, a discharge from bankruptcy, or the like. Remember, banks typically use the middle of the three credit scores when assessing a loan application. If one report showing a high score is correct but the other two are not, the buyers may still be denied credit or forced into less-favorable terms.

Dispute inaccurate items at the source. Consumers will also want to contact the credit card company or other source of the inaccurate information. For example, if a payment is credited incorrectly, it may be easier to resolve the error by contacting the credit company than a collection agency.

Excise outdated information. By law, credit bureaus are supposed to remove information pertaining to the credit score—such as a late payment or collection—that is more than seven years old. Neutral information such as employment history does not have to be removed since it does not affect credit scores. Consumers should ensure that the credit bureau removes older information since it can still negatively affect a credit score.

Protect credit identity. The Fair Credit Reporting Act makes it a federal crime to knowingly and willfully obtain a person's credit report without consent or under false pretenses. If consumers feel that their credit has been compromised, they can request that a credit agency put a “fraud alert” on their account. Consumers can take an even more aggressive step to protect their credit from identity thieves by paying credit bureaus to put a security freeze on their credit. Consumers can temporarily lift the freeze when they apply for a mortgage.

Ensure that your credit is intact before you begin the buying process this will make it easier for you-and I.

Source: Realtor Magazine, Ritchie, (January 2009)

Tuesday, December 23, 2008

Bear market Definition

A prolonged period in which investment prices fall, accompanied by widespread pessimism. If the period of falling stock prices is short and immediately follows a period of rising stock prices, it is instead called a correction. Bear markets usually occur when the economy is in a recession and unemployment is high, or when inflation is rising quickly. The most famous bear market in U.S. history was the Great Depression of the 1930s. The term "bear" has been used in a financial context since at least the early 18th century. While its origins are unclear, the term may have originated from traders who sold bear skins with the expectations that prices would fall in the future. Opposite of bull market.

Friday, December 19, 2008

6 things to know about the Fed rate cut!

The Federal Reserve on Tuesday cut its federal funds target rate by more than three-quarters of a percentage point to a range of between 0 and .25 percent. The decision signals that Fed Chief Ben Bernanke is more concerned with the rapidly deteriorating economy--which has been mired in a recession since December of last year--than the prospect of stoking inflation. “Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined,” the rate-setting Federal Open Market Committee said in its statement. “Financial markets remain quite strained and credit conditions tight.”

Here’s how the Fed’s actions affect you:

1. Fixed mortgage rates: Today’s rate cut will have little if any impact on 30-year fixed mortgage rates, which are determined by factors that operate largely outside of the Federal Open Market Committee’s reach, says Keith Gumbinger of HSH Associates. “Any change in the rate has little to do with long-term mortgage rates,” he says. But in its statement the Fed said it could expand a recently announced program to buy up debt and mortgage-backed securities from Fannie Mae and Freddie Mac that has already driven mortgage rates down to a very attractive 5.28 percent, according to HSH Associates. It also reiterated that it was looking at the possibility of buying long-term Treasury bonds. Both of these announcements could work to bring rates even lower.

2. Prime rate: The real impact of today's cut will be felt by consumers with products that are tied to the prime rate, a benchmark rate that typically moves in lock step with the federal funds rate. "The only place where you would see a concrete impact at the consumer level would be things that are directly tied to prime," says Mike Larson, a real estate analyst at Weiss Research. Many home-equity lines of credit and certain credit cards with variable interest rates are tied to prime rate. As such, borrowers with these products could see their interest rates decline.

3. Home-equity savings: Home-equity lines of credit averaged 5.5 percent in October but dropped to 5.26 percent in November following the Fed's half-point cut. Gumbinger says he expects average rates on home-equity lines of credit to experience similar declines this time around--but not everyone will be able to take advantage of them. That's because many of the interest rates on these products are already at their minimums and are contractually prohibited to go any lower. So check the terms of your home-equity line of credit to see if you are eligible to cash in on the decline.

4. Target vs. effective: When credit markets are functioning normally, Fed rate cuts reduce banks’ cost of funding, which allows them to widen profit margins and pass along savings to consumers in the form of lower interest rates. But today’s credit conditions have changed all that. Although the Fed’s target rate stood at 1 percent before today’s cut, such funds were actually being traded in the market at much less than that--just 0.18 percent as of yesterday before the Fed’s action. Although the Fed can usually control the effective rate by buying and selling government securities, the credit crisis has eroded its ability to do so. “Any juice that you would get from a funds rate cut in a normally functioning market, you’re not really going to get that here,” Larson says. “It’s not going to lower the banking industry’s cost of funds, because the banking industry’s cost of funds is already below the target rate anyway.” That means that interest rates tied to the federal funds rate won’t decline as much as they otherwise would have.

5. Now what? Nariman Behravesh, chief economist at IHS Global Insight, expects rates to go all the way to zero in a matter of weeks. “The Fed has already cut the federal funds rate to 1 percent and is likely to take it all the way to zero by the end of January,” Behravesh said in a recent report, issued before today’s announcement. “Once the overnight rate is at zero, the Fed may have to engage in ‘quantitative easing’ [direct purchases of long-term Treasuries].” Even if it doesn’t bring rates all the way to zero, the Fed signaled Tuesday that it’s not about to push rates higher anytime soon. “The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the Fed said in the statement.

6. Expect more unexpectedness. With only less than a quarter of a percentage point left to cut, look for the Fed to get even more creative in its efforts to revive the financial markets. New programs to support different corners of the credit market could certainly be introduced in 2009. “The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity,” the Fed said in the statement.

Source: U.S News, Luke Mullins (December 16, 2008 )

Tenant Leasing Tip #3

Landlord Tip: Your lease agreement should state how many people will be occupying the unit.

Sunday, December 14, 2008

More than half of Modified Loans Delinquent within Six Months!

New data shows that more than half of loans modified in the first quarter of 2008 fell delinquent within six months.

"After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent," said U.S. Comptroller of the Currency John C. Dugan. A report scheduled to be published later this month will show continued increasing delinquencies and foreclosures in process for all first-lien mortgages held by the largest national banks and federally-regulated thrifts, Dugan said. However, new foreclosures decreased by 2.6 percent from the second quarter.

The mortgage metrics report covers nearly 35 million loans worth more than $6.1 trillion, or about 60 percent of all first-lien mortgages in the United States. The quarterly reports are unique in that they are not merely surveys, but instead consist of validated, loan level data using standardized definitions for prime, Alt-A, and subprime mortgages, and standardized definitions for loan modifications.

30-Year Rates at Lowest in 4 Years

Freddie Mac reports a decline in the 30-year fixed mortgage rate to 5.47 percent during the week ended Dec. 11 from 5.53 percent last week and 6.11 percent a year ago.

Some lenders are locking in even lower rates as they build on momentum started when the Federal Reserve announced plans last month to purchase a substantial number of mortgage-backed securities. HSH Associates and Inside Mortgage Finance are reporting interest on 30-year fixed loans at 5.33 percent and 5.09 percent, respectively.

Freddie Mac chief economist Frank Nothaft says mortgage rates also were driven downward by the recession and rising unemployment.

Source: The Washington Post, Dina ElBoghdady (12/12/08)

Tuesday, December 9, 2008

U.S. in Official Recession as of December 2007!

The National Bureau of Economic Research on Monday determined that a peak in economic activity occurred in the U.S. in December 2007, and declared the U.S. economy officially in recession since that time. The December 2007 peak marked the end of the expansion that began in November 2001 and lasted 73 months; the previous expansion of the 1990s lasted 120 months.

A recession, as defined by the National Bureau of Economic Research, is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion. Because a recession is a broad contraction of the economy, not confined to one sector, the National Bureau of Economic Research emphasizes economy-wide measures of economic activity when determining a recession.

"It's more accurate to say that a recession -- the way we use the word -- is a period of diminishing activity rather than diminished activity," the National Bureau of Economic Research said in a prepared statement.

Tenant Leasing Tip #2

Don't be afraid to enforce the lease agreement. You can use a "Notice to comply with lease agreement" form to put your tenants on notice.

Tenant Leasing Tips #1

It's your property. You set the rules! Attach a list of your rules to the lease agreement and have the tenant initial a copy for your files. This will be invaluable if you end up in small claims court.

Mortgage Interest Rate History And a Change for the Best?

Today's economy is very dependent upon mortgage interest rates. Right now the interest rates are very low. This, of course, is good. Today, a 30-year mortgage can be obtained for about 6%, maybe less. At 6%, a $200,000 mortgage for 30 years would result in a monthly payment of $1,199.10.

What would happen if mortgage rates suddenly went up to 10%? Well, this same mortgage would require a monthly payment of $1,755.14. It doesn't take much imagination to see that this would have a negative effect on the overall economy. Someone requiring a $200,000 mortgage to buy a home, would need to be able pay $550 more per month to qualify for the same loan.

To the economy, this is wasted money. If a person was required to come up with $550 more per month to buy the house because the price was that much higher, it would be negated by the fact the seller would have made more money by selling the house.

If the seller happened to be an entrepreneur, this extra money would end up creating more jobs. In any event, the extra money would be put to some use in our economy, even if it were just put into a savings account. However, paying a higher price because interest rates are higher means no one gains anything. This, in itself, would cause an economic slowdown.

However, interest rates are good and have been for quite some time. So, you may ask how do these interest rates compare with other rates throughout history?

Fannie Mae and interest rate stability

In 1938, Fannie Mae was instituted. This put mortgage rates into a particular market. Before this time, mortgage rates varied wildly from lender to lender and between different areas of the country. With Fannie Mae, loans could be sold between different institutions. Having more people involved in a market tends to stabilize the price of the underlying commodity.

Back in 1938, there wasn't a lot of money around. Because of this, mortgage rates were very low, as low as even 3%. In the '40s mortgage rates stayed low in part because during wartime most of the economy was regulated and buying a house was very difficult. So, there wasn't a lot of demand for mortgage money.

The early mortgage rates

In the '50s and right up until the mid '60s mortgage rates hovered around 5% to 5.5%. This is very close to where mortgage rates are now. However, starting in 1971, mortgage rates started to increase. In fact by the late '70s, they had become out of reach. People who didn't enjoy a top credit rating were asked to pay as much as 23% for a mortgage. This of course, was devastating to the overall economy, so much so, a misery index was even created to gauge how bad consumer sentiment was.

Controlling the price of oil is not a new idea

Part of the reason interest rates were skyrocketing during the '70s, was the fact price controls were tied to oil prices. This had a very negative effect on the overall economy. It made gas unavailable to consumers and disrupted the normal American way of life.

Starting in the early '80s, Reagan-omics started interest rates falling once again. This trend, which started in about 1983, has not ended yet. The interest rates of the '90s ranged between 7% and 9%. Since about 2001, they have been between 5% and 7%. All in all, for the last 20 years we've enjoyed moderate interest rates.

Now that we're a closing in on a 50-year low for mortgage rates, it makes us wonder if this downward trend is ending and if mortgage rates will once again head upward. When I think of the possibilities, I must say I am petrified!

Is anybody for a change?

In this presidential election year, I hear many people say they're looking for a change. To me, this means interest rates being low is not what these people are looking for. Perhaps they would like interest rates at 15 to 20%. In their quest for change it would mean they would have to give up on the war against terrorism. This is a war we are winning, but change would mean they're looking to lose it.

Though the economy is no longer screaming along as it did for most of the last 23 years, the economy is not in a recession. In fact, it's not really close. But change would mean a recession. A profound change would mean a depression.

In our current economy the unemployment rate is about 5.2%. Not long ago, full employment was considered an unemployment rate of 6%. Within the last two years the unemployment rate reached an all-time low of 4.5%. However, people are looking for change. Perhaps the German-French style 13% unemployment rate is what they desire!

During the last 20 years, we've made many trade agreements with other countries. This has resulted in lower prices to consumers and lower prices to small businesses. This has been healthy for our economy because it has allowed the small businesses to expand and create. It has also allowed people to save and invest.

Those looking for change want to do away with our trade agreements with other countries. They have bought into the notion that free trade exports jobs. However, without free trade the common PC would cost about $15,000. This would be a change!

In 2003, our income tax rates were lowered. This has been very healthy for our economy. One of the changes some are looking for is to raise those income taxes again.

Worst of all, another one of the changes would be following those who want to put price controls on oil again. This would do the trick! It would indeed, mean change. Are you ready for 23% mortgage rates?