Adding Value by Dennis O'Hagan

More Than 95 Percent of Refinancing Borrowers Choose Fixed-Rate Mortgages

RISMEDIA, Friday, February 17, 2012— In the fourth quarter of 2011, fixed-rate loans accounted for more than 95 percent of refinance loans, based on the Freddie Mac (OTC: FMCC) Quarterly Product Transition Report released recently. Refinancing borrowers clearly preferred fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate.

An increasing share of refinancing borrowers chose to shorten their loan terms during the fourth quarter. Of borrowers who paid off a 30-year fixed-rate loan, 43 percent chose a 15- or 20-year loan, the highest such share since the first quarter of 2003.

Fifty-eight percent of borrowers who had a hybrid ARM transitioned to a fixed-rate loan during the fourth quarter, while the remaining 42 percent chose to refinance into the same type of product.

"Fixed mortgage rates averaged 4.00 percent for 30-year loans and 3.30 percent for 15-year product during the fourth quarter in Freddie Mac's Primary Mortgage Market Survey®, well below long-term average,” says Frank Nothaft, Freddie Mac vice president and chief economist.

“The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.2 percent during the fourth quarter of 2011. It's no wonder we continue to see strong refinance activity into fixed-rate loans. “

"For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term. Compared to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about 0.7 percentage points lower during the fourth quarter. And for borrowers who plan to remain in their current home for only a few years, the hybrid ARM allows for even a greater interest-rate savings. The initial interest rate on a 5/1 hybrid ARM was about 1.1 percentage points lower than on a 30-year fixed-rate loan."

For more information, visit www.freddiemac.com.

Do Homeowners owe a 3.8% tax on their home sale?

A rumor about a 3.8% federal tax on all home sales has again hit the in-boxes of Texas consumers and real estate agents. So, is there such a tax for all home sales? No.

The facts are that individuals with incomes over $200,000 a year ($250,000 for married couples) will be subject to a 3.8% tax on profits of more than $250,000 ($500,000 for couples) from the sale of a primary residence. So, a husband and wife who make more than $250,000 a year and sell their home for a $510,000 profit would pay $380.

Homeowners in HOAs now have a few more property rights...

Thanks to the last Texas Legislature and efforts by the Texas Association of REALTORS®, property owners in homeowners associations are now guaranteed the right to place religious displays on their front doors; fly the U.S., state, and military flags; and install rain barrels and solar panels on their property. Other recent legislative changes will make HOA meetings and records more accessible to all HOA members and will prevent HOAs from using nonjudicial foreclosures powers.

Texas Association of REALTORS® Vice President of Governmental Affairs Mark Lehman was quoted in a San Antonio Express-News article summarizing the changes.

Housing Crisis to End in 2012 as Banks Loosen Credit Standards...

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

Settlement provides $287 million in mortgage relief to Texans

As part of a settlement between 49 states and five of the nation’s largest banks, some struggling Texas homeowners will receive restructured loans with lower mortgage payments. Others who already went through foreclosures may get $2,000 checks.

The $25 billion deal, agreed to by all U.S. states except Oklahoma, stems from inappropriate handling of foreclosures by Ally/GMAC, Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo. Nine other institutions may become part of the agreement, pushing the national settlement total $5 billion higher.

Many mortgage lenders admitted to inappropriate activities in processing foreclosures, including failing to verify underlying documents, signing documents without reviewing them, and using fictitious names to sign documents.

The settlement prevents states from suing the mortgage lenders for these activities. However, it does not stop individual homeowners from pursuing legal remedies in civil court.

The fact that Texans will receive only about 1% of the total settlement despite the state’s large population may be a result of the low foreclosure rate in Texas … less than half the national average, according to Core Logic.

People eligible for the loan modifications or payments will receive letters over the next six to nine months. More information is available at NationalMortgageSettlement.com and from an FAQ by the Texas Attorney General’s Office.

2012 Tax Tips...

Tips for Homeowners

Tips for Home Sellers

Tips for Home Buyers

SAFETY - SMOKE DETECTORS...

According to Today's Texas Standards of Practice, smoke detectors should be installed near the ceiling in bedrooms and each adjacent hallway. There should also be one at each story of the home, one in the kitchen and one in the garage.

 

In newer homes, the smoke detectors are interconnected so that if one goes off, they all go off. Often in older homes, they are not interconnected and go off independently. 

 

Every smoke detector on the market today also has a battery backup. It is important to keep fresh batteries in smoke detectors so that when the electric service fails, your home's smoke detectors are still on the job. Batteries should be replaced at least annually.

 

Smoke detectors have a test button so that they can be tested insuring they work and that the battery backup is in good shape.

 

Smoke detectors are not expensive and are easily installed by most homeowners by following the manufacturers instructions. Prices range from about $12 to $30.

Don't Forget a Home Inspection with a New Construction Home...

RISMEDIA, Monday, February 06, 2012— Every home—whether it’s a resale or new—has some kind of an issue, and the reality is that there is no “perfect” house. Many homebuyers embark on their search for a home with the belief that new homes should be flawless, when this is never actually the case.

Problems are found in all homes, but the issues with new homes are totally different than the defects found in resale homes. When evaluating a resale home, most problems are often related to older systems that are near the end of their service life. On the other hand, problems in new homes typically involve incomplete work, damaged systems, missing pieces of key materials and imperfect workmanship.

Unfortunately, many people who purchase new construction homes put a lot of trust in their builder and opt not to perform a home inspection. REALTORS® can help their clients take a proactive approach to identifying underlying problems in new homes by recommending a reliable home inspection company that goes beyond the basics to provide thorough home inspections that catch even the smallest of problems. Hiring a home inspection company prior to the closing of a new home can help save homebuyers money and prevent headaches due to unexpected home repairs down the road.

New home construction problems primarily fall into four categories:

1. Incomplete work: Many new home construction projects aren’t completed properly. The incomplete work may be as simple as a layer of paint on a wall that was accidentally skipped, or a room that has no air ducting. In many cases, the unfinished or imperfect work isn’t detected until the homebuyer moves in. A home inspection company will uncover these issues prior to the move-in date.

2. Damaged systems and finishes: Homes often incur damage during construction as a result of rain, snow, impact damage and stacking and storage damage. An example of this is ducting that gets compacted under attic insulation.

3. Missing elements: Oversights during construction due to human error are more common than many REALTORS® and homebuyers think. For example, the construction team may have forgotten to install insulation in the attic. Taking a proactive approach to identify issues before moving in can prevent costly problems that could arise in the future.

4. Imperfect or sloppy workmanship: While perfect workmanship is ideal, it’s nearly impossible. In reality, any number of things can go wrong on the construction site of a new home. A contractor could get delayed by work on another site and has to hurry to finish the current home he’s working on; rain and other elements can damage a home before it’s closed in; tradesmen could be diverted to another site, etc.

Other common problems with new homes include interior and exterior finish issues, tile and floor damage, water damage, buckled siding, roofing issues and structural problems. All new homes should be inspected to uncover possible defects. Knowing upfront what issues might arise in the future can save homebuyers thousands of dollars in the long term. The most reliable way to uncover problems is by hiring an unbiased third-party home inspector.

Dan Steward is the president of Pillar to Post Home Inspections.

For more information, visit www.pillartopost.com.

A Little Valentine's Day Humor...

Mike walked into a post office just before Valentine's day, he couldn't help noticing a middle-aged, balding man standing in a corner sticking "Love" stamps on bright pink envelopes with hearts all over them.  Then the man got out a bottle of Channel perfume from his pocket and started spraying scent over the envelopes.

By now Mike's curiosity had got the better of him, and so I asked the man why he was sending all those cards.  The man replied, "I'm sending out 500 Valentine cards signed, 'Guess who?'"

"But why?" asked Mike.

"I'm a divorce lawyer," the man replied.

20 Tips for Showing Your Home...

Whether you are selling houses in Allen, TX or new homes in McKinney, TX here are "20 Tips for Showing Your Home" provided to us by Holly Bellomy from Dallas Real Estate Staging.  You can check out her work and more valuable information at www.DallasRealEStateStaging.com.

• Wash windows inside and out
• Sweep the porch
• Clean all appliances inside and out including the refrigerator
• Empty the dishwasher
• Turn on all lights (to brighten dark rooms replace light bulbs with GE Reveal bulbs)
• Open blinds and pull back drapes
• Put toilet lids down
• Pick up bath mats
• Empty trash cans and hide small trash cans in cabinets or closets
• Clear all closet and pantry floors
• remove family photos and anything with you name on it
• Play soft jazz music
• If you have surround sound in a room, turn on the TV
• Check corners of tall ceilings for cob webs
• Make sure all light fixtures are dust free
• Take the dog/cat with you when showing the house and hide the litter box
• Remove plug-ins and electric air fresheners before buyers arrive
• Leave one-two appliances on the kitchen counter
• Sweep the porch
• Hide prescription medications and extra keys