Top 10 Most Promising Housing Markets

Housing Predictor, which provides housing forecasts in 250 markets, has identified 10 markets where the regional economies are healthy and have strong potential for increasing prosperity.

These housing markets have bucked the national trend in 2008 and avoided the subprime crisis, the consultancy says.

Whatever the future holds for the housing market as a whole, Housing Predictor forecasts that these cities will continue to see steady, dependable growth.

Top cities and the percentage sales prices have increased so far in 2008.

• Biloxi, Miss., 4.9 percent


• Salem, Ore., 4.7 percent


• Bismarck, N.D., 4.6 percent


• Spokane, Wash., 4.4 percent


• Yakima, Wash., 4.1 percent


• Austin, Texas, 4.0 percent


• Grand Junction, Colo., 4.0 percent


• Fargo, N.D., 4.0 percent


• Mobile, Ala., 3.9 percent


• Albuquerque, N.M., 3.5 percent

Source: Housing Predictor (11/15/08)

How new bank deposit coverage may affect you

If the beaten-down stock market has got you seeking a haven for your cash, there's some good news.

The financial system bailout legislation enacted last month boosted limits on federal insurance for bank deposits, increasing the amount of cash you can stash in a bank account with every dollar fully insured by the government.

And the Federal Deposit Insurance Corp. has made it easier to structure your accounts in a way that maximizes your total coverage.

Here's a rundown of the changes:

What's different?

Until last month, the FDIC covered deposits of as much as $100,000 per owner per bank. For individual retirement accounts that hold bank deposits, the limit was $250,000 per owner.

The bailout legislation raised the insurance limit on nonretirement accounts to $250,000.

There are tricky but perfectly legal ways to significantly increase that coverage, however, even if you keep all your deposits in a single bank.

How do I raise my coverage?

The FDIC insures accounts based on their ownership status. For instance, you can have an individual account, a joint account, an IRA and a business account. Technically, each account has a different owner. If the accounts are set up properly, each is covered separately under its own insurance cap. Under the old limits, that would mean those four accounts could have as much as $550,000 in coverage (three at $100,000 each and the IRA at $250,000). Under the new limits, that maximum coverage rises to $250,000 per account, or a total of $1 million.

And there's a way to have even more deposits covered -- a whole lot more if you have many people you'd like to leave money to after you die.

What's that about inheritance?

Another form of ownership that the FDIC gives separate coverage to is a trust: an account for which you name one or more beneficiaries who will inherit the money after your death. Under FDIC rules, the account gets an additional $250,000 in coverage for each beneficiary named.

Until recently, the FDIC extended that extra coverage only for beneficiaries who were close relatives, such as a child, grandchild, parent or spouse. Now, the agency says any living person can be a qualified beneficiary.

"So Bill Gates could essentially set up an account, name every person in the country as equal beneficiaries, and his billions would be fully insured," said David Barr, an FDIC spokesman.

What's to stop me from naming all my friends as beneficiaries?

Nothing, if you really want to leave them the money. If you die while the beneficiary designations are in place, the assets in a pay-on-death account will go to the named beneficiaries no matter what other arrangements you might have made in your will.

Do I have to set up a "living trust" to name beneficiaries?

No. Banks can help you set up a simple trust through a "pay on death" account. In some ways, these are preferable to a living trust, with which you might be tempted to do something tricky -- such as give different beneficiaries varying portions of your assets -- that could have an effect on FDIC coverage.

Are these changes permanent?

Yes and no.

The relaxation of the rule governing trusts, which the FDIC did on its own, is permanent.

But the increase in the insurance limit per account owner to $250,000 from $100,000 is temporary. Under the bailout law, the higher caps expire at the end of 2009.

If you decide to take advantage of the higher limits, you'll need to set an alert in your electronic calendar or find another way to remind yourself to restructure your accounts before then.

What about business accounts? I heard a number of small businesses lost money when IndyMac Bank failed because their checking accounts used for payroll exceeded FDIC limits.

That's true. That issue is addressed by new -- but temporary -- FDIC rules. Until the end of 2009, "non-interest-bearing transaction accounts "-- essentially business checking accounts -- get unlimited FDIC coverage.

There are two important caveats, besides the expiration date, however. Banks must pay extra to provide this coverage, so some may opt out. If you want to make sure that your bank is included in the plan, check with the FDIC. The agency is keeping a list on its website of banks that have opted out.

The other caveat is that this extra coverage applies only to accounts that earn no interest. If your business checking account pays even a token amount of interest, it does not qualify.

Do I need to keep documentation to prove my accounts are fully insured?

It shouldn't be necessary, but it's never a bad idea to save the documents you got when you opened an account. These should clearly state the type of ownership on the account, such as individual, joint or pay-on-death. If your bank fails, those papers could come in handy.

What about people who lost money in a recent bank failure because some of their deposits were uninsured? Can they recoup their losses under the new, higher limits?

Unfortunately no. The rules are not retroactive.

Cities you love to hate!

Americans have a love-hate relationship with their largest cities, according to a survey of 2,500 employees and small business owners.

Human Capital Institute, a Washington-D.C.-based human resources think tank, asked employees and entrepreneurs to name the U.S. city where they'd be most eager to relocate.

The winner? New York City.

The loser? New York City.

Survey-takers who liked New York pointed to its entertainment options, readily available transportation and business opportunities. Survey-takers who panned it pointed out its high cost of living.

Here are the rest of the cities on the picks and pan lists. New York isn’t the only city to appear on both. Cities use the information in determining how to market themselves to attract out-of-town workers.

10 Favorite Cities to live and work:

• New York


• San Diego


• San Francisco


• Las Vegas


• Los Angeles


• Seattle


• Denver


• Phoenix


• Chicago


• Boston

10 Cities Workers Would Like to Avoid:

• New York


• Detroit


• Los Angeles


• New Orleans


• Chicago


• Washington DC


• Las Vegas


• Cleveland


• Dallas


• Miami

Source: Businessweek.com, Prashant Gopal (11/19/2008)

Modify Your Mortgage Scam...The Latest & Greatest!

How far would people go to get better terms on their mortgage?

Would you feign financial trouble to qualify for a loan-modification plan?

As the government and private lenders face more pressure to aid struggling borrowers in a worsening economy, they’ll inevitably have to deal with the "moral hazard" issue: They may be encouraging applications for help from people who could otherwise scrape by without assistance.

On Tuesday the Treasury announced a new loan-modification effort for mortgages held by Fannie Mae and Freddie Mac, which the government took over in September.

Basically, the plan would reduce a homeowner’s payment to no more than 38% of monthly gross income, by cutting the interest rate, deferring payments or extending the loan term.

To pre-qualify, a homeowner would have to miss at least three loan payments and must still be solvent, at least in theory (i.e., you can’t have filed for bankruptcy protection). Apparently, your loan would have to be for at least 90% of your home’s value.

As usual with these programs, the onus is on the borrower to contact the lender, to see what can be worked out.

Brian Montgomery, assistant secretary of Housing and Urban Development, insisted in a statement that loan modifications under the Fannie Mae/Freddie Mac program "are not a gift." A principal reduction on the front end of a loan, he said, would be repaid at the end of the loan. "This is not loan forgiveness; the loans will be paid, but under terms that are affordable to borrowers."

But if a loan's interest rate is reduced, the loan holder (in this case, Fannie or Freddie, and therefore taxpayers) would be forgiving part of the expected return on the mortgage, unless the interest savings were added to the loan principal.

Is there really a big moral-hazard risk in this plan?

If you believe that many people will try to cheat their way to a modification, you will be interested in the views of the well-known libertarian investment manager, Peter Schiff of Euro Pacific Capital.

Here’s his take, which he sent by email Tuesday:

"By offering to reduce mortgage payments to 38% of household income for home owners who are 90 days delinquent, the mortgage program announced today will spark a new wave of delinquencies. In a classic case of unintended consequences, the plan will encourage homeowners to re-arrange their finances to qualify for the benefit. Those who could conceivably economize to meet their existing obligations will now have a strong reason to forego such sacrifices."

"The intentional reduction of income is also a possibility. In many cases dual income families may decide to eliminate one job altogether as reduced mortgage payments combined with lower child care and other work related expenses, will likely exceed the after-tax value of the lost paycheck."

"It may also be tempting for some homeowners to temporarily quit high-paying jobs, or delay job searches, and accept low-paying jobs while the creditors consider their fate . Once their mortgage payments have been modified to fit their diminished incomes, these homeowners would then be free to pursue better-paying jobs. With mortgage payments reduced to a fraction of their prior payments, these workers will have much more employment flexibility than those foolishly struggling to meet non-modified mortgages."

Way too cynical a view?

And even if some people are going to cheat -- as some obviously did to qualify for their mortgage in the first place -- do lenders really have any choice but to get more aggressive with loan modifications rather than risk an even bigger wave of foreclosures?

2009 FHA Loan Limits Announced

Actually there are three sets of limits, a limit for homes in lower cost areas (the “floor”), limits in “higher-cost” areas and limits for areas outside the continental United States: The limits look like this:

Floor

• One-Unit — $271,050
• Two-Unit – $347,000
• Three-Unit — $419,400
• Four-Unit — $521,250

Higher-Cost Areas

• One-Unit — $625,500
• Two-Unit — $800,775
• Three-Unit — $967,950
• Four-Unit — $1,202,925

Alaska, Guam, Hawaii and the Virgin Islands

• One-Unit — $938,250
• Two-Unit — $1,201,150
• Three-Unit — $1,451,925
• Four-Unit — $1,804,375
  

The FHA loan limits are related to the conventional loan limit which is announced each year by Federal Housing Finance Agency. For 2009 the conventional loan limit will be $417,000, unchanged from 2008.

Which FHA loan limit applies to a property you want to finance or refinance? To answer that question check with a lender. Do not go house hunting until you’re certain which loan limit applies in your situation.

It’s important to check with lenders because the definition of a “high cost” area can change. That is, lenders in a lower-cost area can appeal to HUD to be redefined as a “high cost” housing area and thus qualify for larger FHA loans.

HUD does have an FHA loan limits page online, however borrowers will get far more information from lenders.

Tenant Screening Tips #4

When you take an application from a prospective tenant ask to see their drivers license. Make sure the picture is the same person and that the address listed on the license is the same one they wrote on the application. Professional bad tenants have other people rent for them.

Tenant Screening Tips #3

An anxious tenant needing an apartment NOW is a big RED FLAG. My experience is that tenants needing a place immediately either has recently been evicted or has some personal problems that will only get worse.