You didn’t really lose in Miami's housing free fall / Miami Real Estate 305-929-DEAN

Miami, Florida – Stan Smith has some news for longtime homeowners having a pity party over falling house prices in South Florida: New research shows that current home values are just about where they would have been if the real-estate bubble had never inflated and burst.

A long-term view of the market reveals that, even though prices rose and fell dramatically in recent years, they appear to have settled back into historic patterns, according to an analysis by Smith, a University of Central Florida finance professor.

“Most homeowners are within 6 percent of where they would have been had there not been a bubble. The people who have been here since before 2005, they should not have been hurt,” Smith said, though he added: “... A lot of people did buy in 2005 and 2006, and obviously they have been hurt significantly.”

For about a quarter-century, starting in the late 1970s, home prices in Metropolitan Orlando increased 4.7 percent a year on average, according to Smith’s analysis of data from a federal housing-price index. Then the bubble emerged, with prices rising 20 percent in 2005 and 32 percent the following year. Homeowners were elated about their fast-growing equity – at least until the bubble burst in mid-2007.

The sharp drop in prices since then – 22 percent from the 2007 high – may have left the impression that the bursting bubble set back even long-term homeowners for many years to come. Yet prices now are about where you would have expected them to be had the dramatic rise and fall never occurred.

Steve Shapiro, who is trying to sell his Lake Mary home, hadn’t really thought about it before but said it makes sense that the price he is asking for his home of 10 years tracks the area’s long-term pricing trends.

“I think I’m about where it should be with the price,” said the retiree, who has listed his house for $269,000 with Exit Realty Central agent Julie Elrod-Boyd – the same agent who helped him buy it in 1999 for $161,000. He estimated the house would have sold for more than $300,000 about 18 months ago, so the price has retreated 10 percent since then.

“It was nice to think it was worth so much a year and a half ago, but I felt like it was a little inflated,” he said. “All the homes were.”

Volusia County Property Appraiser Morgan Gilreath has obtained results similar to Smith’s in his county.

Gilreath recently plotted home prices from 1996 to the present and concluded they are not far below where they would have been without the bubble. The mid-point, or median, for home prices in Volusia in May was $124,900 – down about $20,000 from where they would have been if they had continued on their long-range trajectory rather than inflating and deflating in recent years, he said.

A year ago, the median in Volusia was about $50,000 above the historic trend line, he said; two years ago, it was flying about $100,000 above that line.

Gilreath said his analysis was not as thorough as Smith’s research at UCF, but both indicate the residential market is not likely to decline much further.

“The point that the charts are telling us is that we’re close to where we think the bottom is going to be,” he said. “The question is: When is it going to turn around? I have evidence that it is turning around here [in Volusia].”

Smith said prices in the region may continue to fall but are less likely to do so now that they are so near the long-term trend line – a “positive indicator” for coming months.

Les Simmonds, president of the Orlando Regional Realtor Association, said people generally measure their home’s current value against what it was worth a year ago – a short-term view of the market.” I feel strongly that, had we not had this bubble, that the median price of the properties would be a little better than they are now, because of the way they’ve been pushed down [in the post-bubble market] by ... [distressed] properties,” he said.

“I said to my wife last week that, when the market was really high, if we had sold then, we could have made four times what we paid for the house.” The problem, he added, is that most of the people who sold at the peak usually then bought near the top of the market. Shapiro said that, once he sells his Lake Mary house, he is ready to retire to a log cabin in north Georgia and forget about the whims of the real-estate market for a while.

The only thing that will rise and fall on his cabin, he said, will be the runners on his front-porch rocking chair.

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The Impact of Foreclosures on FICO Scores

The Impact of Foreclosures on FICO Scores

The Mortgage Banker Association recently estimated that 1 out of every 200 homes in the US will be foreclosed upon. With the increased number of foreclosures, come many questions about their impact on the FICO score.

There is no denying that a foreclosure is considered a very negative event by the FICO score. Many people believe that it is impossible to rebuild credit after such an event. However, if all other credit obligations remain in good standing, it is possible the FICO score could rebound in just 2 years. Just like any other negative item on the credit report, as time passes, the impact on the credit score will lessen.

Recently, several alternatives to foreclosures have become popular. Some of these include “short sales” and “deed-in-lieu of foreclosure”. It is important to know that as far as the FICO score is concerned, there is no difference between foreclosures and these other options. Each is considered and an account that was “not paid as agreed” will have the same negative impact on the score. However, the account status reported is ultimately the decision of the creditor.

It is important to remember that even though both foreclosure and bankruptcy are considered very negative items by the FICO score, a foreclosure can be isolated to a single account. Often bankruptcies involve multiple accounts that are classified as “not paid as agreed”, so the negative impact can be farther reaching. In most cases, it takes much longer to rebuild credit after a bankruptcy.

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New program allows subprime mortgages to become a fixed-rate FHA. Miami Real Estate 305-936-2489

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WASHINGTON – Oct. 2, 2008 – A new program rolled out by HUD yesterday could help more homeowners avoid foreclosure. Under the program, the lender of an existing subprime mortgage forgives part of the debt as if it’s a short sale, and the balance of the mortgage is rolled into a fixed-rate FHA mortgage. Unlike earlier programs, however, the HOPE for Homeowners program is aimed more at lenders than homeowners.

“For families struggling to keep up with their mortgage payments, this program will be another resource to refinance into a loan they can afford,” says HUD Secretary Steve Preston. “FHA remains a safe and affordable alternative to the high-priced mortgage loans that threaten homeowners’ ability to retain their homes. We strongly encourage borrowers to work with their lenders to determine if HOPE for Homeowners is the right program for them.”

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The Economic and Housing Recovery Act of 2008 authorized the HOPE for Homeowners program. The HOPE for Homeowners Board of Directors was charged with establishing underwriting standards to ensure borrowers, after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage.

The program began yesterday and ends Sept. 30, 2011. It’s available only to owner- occupants. In many cases, banks will have to write down the existing mortgage to 90 percent of the new appraised value of the home.

Borrower eligibility

Borrowers should contact their lender to determine eligibility. General requirements include:

• The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes.
• Their existing mortgage was originated on or before Jan. 1, 2008, and they have made at least six payments.
• They are not able to pay their existing mortgage without help.
• As of March 2008, their total monthly mortgage payments due were more than 31 percent of their gross monthly income.
• They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).

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How the program works

The Board expects homeowners will participate in the program primarily through their current lender. HOPE for Homeowners includes the following provisions:

• The loan amount may not exceed a maximum of $550,440.
• The new mortgage will be no more than 90 percent of the new appraised value including any financed upfront mortgage insurance premium.
• The upfront mortgage insurance premium is 3 percent and the annual mortgage insurance premium is 1.5 percent.
• The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
• The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.
• Existing subordinate lenders must release their outstanding mortgage liens.
• Standard FHA policy regarding closing costs applies.
• The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.
• The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.

The costs to the homeowner include the upfront and annual insurance premiums, as well as a share of the equity created by the write-down associated with the HOPE for Homeowners mortgage and any future appreciation in the value of the home. If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years.

The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation. This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.

Read more about HOPE for Homeowners at Hope For Home Owners

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Mortgage crisis cuts both ways Aventura Homes

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MIAMI – Oct. 1, 2008 – She was only 21 when she decided to become a mortgage broker. A newlywed, Michelle LaPiana felt that her own broker had misled her and her husband during the daunting purchase of their first home in Hialeah.

She claims she fell prey to a bait and switch. The closing costs were nearly double what the couple previously had been told. By the time they sat with a title agent to sign the loan documents, it was too late to walk away without losing thousands of dollars.

“The closing costs were $9,680,” recalled LaPiana, now 38 and divorced. “I remember everything. I even remember my closing agent’s name.”

The incident angered her but also motivated her to help other people navigate the potentially treacherous process. A graduate of Hialeah-Miami Lakes High, she skipped college, got her license and launched what was a rewarding and successful career in mortgage lending.

Now, 17 years later, the former president of the Miami chapter of the Florida Association of Mortgage Brokers and once-ambitious subprime account executive finds herself broke and in foreclosure.

The single mother of two insists her story is not one of the recklessness, greed or fraud that has plagued the mortgage business and sparked the credit crisis on Wall Street.

Instead, she says, she is part of the damage left behind by an investment frenzy and a wave of opportunists who hijacked her profession and ran it in into the ground in just a few short years.

“I feel I was a victim, but I feel government is not going to help people like me,” LaPiana said.

LaPiana says she cannot find work in South Florida because of a new stigma attached to having worked in the world of subprime lending. Reports of felons having flooded the business during the boom years have not helped.

“They look at me as if ‘because of her this is why the economy is the way it is,’” LaPiana said.

The stigma may be worse in South Florida – often described as ground zero for subprime loans, or high-cost loans extended to borrowers with poor credit. Mortgages requiring no proof of income or assets were also widely sold. The high default rate among these loans is blamed for sparking the credit crunch that began a little over a year ago. Lenders began restricting access to credit to prevent future losses, leading to an economic slowdown.

But LaPiana says her role was less direct because she never sold a home to a borrower who couldn’t afford it.

Brian Kettenring, a head organizer with Florida ACORN, the Association of Community Organizations for Reform Now, a national grass-roots community activist organization, agreed that many real estate professionals are being unfairly painted with the same brush.

“There was a fair amount of predatory lending by brokers and lenders, but there are a lot of good people who work in the industry and too many of them are being hurt in the destruction of the industry as a whole,” Kettenring said.

Wave of failures

The ripple effects of the credit crunch hit an apex in recent weeks with the failure of the venerable investment bank Lehman Brothers; the near-collapse of American International Group, the world’s largest insurance company, and Washington Mutual’s seizure by federal regulators and subsequent sale in the biggest bank failures in U.S. history.

LaPiana said nobody foresaw the impending catastrophe from their respective corners. She views herself as among the tiniest of conduits in the vast matrix of players wheeling and dealing in the era of cheap money that made the housing boom possible.

After more than a decade of selling traditional mortgages, LaPiana was swept up in the excitement of new, innovative loans that made homeownership possible for millions of Americans.

In 2001, she joined Fieldstone Mortgage’s subprime division as a wholesale account executive. She would hold the same position at a string of other wholesalers over the next six years, specializing in high-cost and highly profitably subprime mortgages.

Wholesale lenders deal with mortgage companies and brokers who make their cash available to home buyers by immediately funding their loans. They do not deal with borrowers. Once the loans are brokered, the wholesalers, typically thinly capitalized companies, sell the debt to commercial banks, other lenders or investment houses, like former brokerage Bear Stearns.

“Subprime loans were the hot commodity of Wall Street. That’s all everybody wanted,” LaPiana said.

As an account executive, her job was visiting brokers and selling the loan programs offered by her company. Wholesalers generally compensate account executives based on the volume of business they bring to the company. For each million dollars LaPiana sold, she earned a half percentage point, or $5,000. In the peak years of the boom, she says she did an average of five deals a day. Sometimes, her biweekly paychecks topped $20,000.

“I still have the pay stubs,” LaPiana said ruefully, adding she couldn’t toss them because she hopes to once again earn such a handsome income.

The high life

With her new wealth, LaPiana traveled – skiing in Colorado and visiting New York City. She bought a top-of-the-line Jeep Commander and, after her divorce, a “dream home” in Kendall where she would live comfortably with her two girls and mother.

“I didn’t go overboard,” LaPiana insisted, “I didn’t buy the two investment properties, the two condos on the beach, but I should have saved more.”

Even though she was making almost $200,000 a year, her competitors, who sold loans requiring no proof of income or assets, were making more. LaPiana said many of the loans she sold didn’t ask for proof, but did require a borrower to submit evidence that they had filed an income tax return with the IRS as self-employed.

Such loans have been dubbed “liar loans” in the industry because of the high rate of fraud later found in mortgage applications when the homes went into foreclosure.

It was enough to give her competitors an edge. While LaPiana was pounding the pavements making sales to mortgage companies, many of her competitors were able to do most of their business by phone from their homes, she said.

The subprime lenders they worked for were also among the first to bite the dust when borrowers began defaulting in droves in 2007, she said. Soon LaPiana was jumping from job to job as four successive employers declared bankruptcy or closed their subprime divisions between 2006 and 2007.

Peter Ticktin, a Deerfield Beach lawyer who practices foreclosure defense, said the self-deluded industry imploded because it believed property values would continue rising, eliminating the risk of losses. “What was going on was a systematic Ponzi scheme,” Ticktin said. “It wasn’t where you had one main character organizing it. It wasn’t a conspiracy.”

The final insult

LaPiana’s last position was with the CIT Group, based in New York, which told its account executives last September they were out of a job.

“That one really hurt because it was like, ‘Where do you go from here?’ I realized there was a major problem. It all went rolling down,” she said.

Almost as fast as the subprime industry itself, LaPiana’s life went into a tailspin. She went from making great money to collecting unemployment. Her savings were eaten up by an expensive adjustable-rate loan, a car payment and the cost of supporting a family of four.

Her problems mounted as she struggled to find a job. In July, she woke up one morning and found her Jeep Commander missing from the driveway. It had been repossessed. “I knew it was going to happen,” she said. LaPiana made her last mortgage payment in May. The lenders are hounding her out of her half-million-dollar dream. She’s had to borrow money from friends.

“When your daughters ask you for money to go to the movies and you tell them . . . I can’t. …” LaPiana started to cry. “I have no insurance. I make my daughters drink their vitamins in the morning because they know they can’t get sick. I teach them how not to get sick.”

How does she cope with the stress?

“I smoke and drink a lot of coffee. I don’t sleep,” she said, wiping tears away.

Kettenring, of ACORN, said his organization was accepting applications for foreclosure prevention counselors at their South Florida office, and most were coming from former brokers.

“It’s incredible the number of people who are applying for those positions that have worked in the industry for years,” Kettering said, “We’re seeing the near total collapse of the housing industry including the employment of people who worked in the industry.”

Despite the trials, LaPiana hasn’t given up.

Described by her friends as a self-starter and a fighter, she recently got a license to sell insurance and is trying to build a book of business.

She still stays involved with mortgage lending, keeping up with new regulations. Her brokers license remains valid.

For more information regarding the above web Blog, please call Dean or Bonnie Isenberg at 305-936-2489 / 800-819-5466 or visit them on-line at A-Realtor.Com

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Bush team, Congress negotiate $700B bailout

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Miami – The Bush administration asked Congress on Saturday for the power to buy $700 billion in toxic assets clogging the financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.

The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.

Democrats are pressing to require that the plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.

Congressional aides and administration officials are working through the weekend to fill in the details of the proposal. The White House hoped for a deal with Congress by the time markets opened Monday; top lawmakers say they would push to enact the plan as early as the coming week.

“We’re going to work with Congress to get a bill done quickly,” President Bush said at the White House. Without discussing specifics, he said, “This is a big package because it was a big problem.”

The proposal is a mere three pages long, but it gives sweeping powers to the government to dispense gigantic sums of taxpayer dollars in a program that would be sheltered from court review.

“It’s a rather brief bill with a lot of money,” said Sen. Chris Dodd, D-Conn., the Banking Committee chairman. “We understand the importance of the anticipation in the markets, but we also know that what we’re doing is going to have consequences for decades to come. There’s not a second act to this – we’ve got to get this right.”

Lawmakers digesting the eye-popping cost and searching for specifics voiced concerns that the proposal offers no help for struggling homeowners or safeguards for taxpayers’ money.

The government must stabilize the financial system “because if we don’t, it will have a tremendous impact on American consumers, homeowners, taxpayers and the rest,” House Speaker Nancy Pelosi, D-Calif., said in San Francisco.

But, she added, “We cannot deal with this unless this bailout helps families stay in their homes.”

Senate Majority Leader Harry Reid, D-Nev. said, “We cannot allow ourselves to be in denial about the threat now facing the world economy. From all indications, that threat is real, and the consequences of inaction could be catastrophic. Every single American has a stake in preventing a global financial meltdown.”

The proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.

“The American people are furious that we’re in this situation, and so am I,” the House’s top Republican, Ohio Rep. John A. Boehner, said in a statement. “We need to do everything possible to protect the taxpayers from the consequences of a broken Washington.”

Signaling what could erupt into a brutal fight with Democrats over add-on spending, Boehner said, “Efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve.”

Bush said he worried the financial troubles “could ripple throughout” the economy and affect average citizens. “The risk of doing nothing far outweighs the risk of the package. ... Over time, we’re going to get a lot of the money back.”

He added, “People are beginning to doubt our system, people were losing confidence and I understand it’s important to have confidence in our financial system.”

Neither presidential candidate took a position on the proposal. GOP nominee John McCain said he was awaiting specifics and any changes by Congress.

Democratic rival Barack Obama used the party’s weekly radio address to call for help for Main Street as well as Wall Street.

His language reflected a tricky balance that politicians in both parties are trying to strike, just six weeks before Election Day: Back a plan that doles out hundreds of billions to companies that made bad bets and still identify with the plight of middle-class voters.

Besides mortgage help and executive compensation limits, Democrats are considering attaching middle-class assistance to the legislation despite a request from Bush to avoid adding items that could delay action. An expansion of jobless benefits was one possibility.

Bush sidestepped questions about the chances of adding such items, saying that now was not the time for posturing. “I think most leaders would understand we need to get this done quickly, and you know, the cleaner the better,” he said about legislation being drafted.

Treasury officials met congressional staff for about two hours on Capitol Hill on Saturday. Discussions centered on how the plan would work, and Democrats proposed adding the executive compensation limits and new foreclosure-prevention measures. Details of those changes were not available Saturday. Bush and Treasury Secretary Henry Paulson conferred by phone for about 20 minutes in the afternoon, gauging how the negotiations were unfolding.

Among the key issues up for negotiation is which financial institutions would be eligible for the help. The proposed legislation doesn’t make it clear, leaving open the question of whether hedge funds or pension funds could qualify.

In a fact sheet released Saturday night, Treasury said it was seeking latitude for the secretary and the Federal Reserve chairman to expand the bailout to non-U.S. companies if they determined it was necessary to stabilize markets, but the original request sent to Congress is limited to firms headquartered in the United States, according to a copy obtained by The Associated Press.

The proposal does not require that the government receive anything from banks in return for unloading their bad assets. But it would allow Treasury to designate financial institutions as “agents of the government,” and mandate that they perform any “reasonable duties” that might entail.

The government could contract with private companies to manage the assets it purchased under the rescue.

Paulson says the government would in essence set up reverse auctions, putting up money for a class of distressed assets – such as loans that are delinquent but not in default – and financial institutions would compete for how little they would accept.

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