Mortgage Industry Changes: Look For Federal Government To Restructure Fannie And Freddie, Levy Heavy Fines On Industry For Violations, And “Explicitly Guarantee” Conforming Loans

31 08 2010

  • A cry for serious litigation. Certain panelists wanted everyone, including underwriters and originators, to know that they can be touched by the long arm of the law. Litigation is expensive, even for the government, but I suspect heavy fines in face of litigation will come a common practice.
  • Fannie Mae and Freddie Mac should be fundamentally restructured rather than abolished altogether. They may not even bear their current names, so I’ll refer to them as those government-sponsored mortgage entities (GSMEs). A majority of their worth was apparently held in the (free) implied government guarantee offered for anything they bought and sold into the secondary market — more specifically Wall Street. On Wall Street, the word implied is akin to ‘Exploit my loophole, please.’ Done and done.
  • An explicit government guarantee. Such a guarantee was stated and accepted as essential to keeping interest rates, underwriting standards, as well as the cost and accessibility of credit within reach of the relative many, specifically the “under-served borrower.” Major private sector investors dodged the responsibility of taking on any additional risk by making it clear that mortgages without such guarantees in some form will cause them to demand larger down payments and substantially higher rates, thereby limiting the size of the consumer pool to those relatively few wealthy, qualified individuals. Not an option for this or any future political administration.
  • Guarantee to be very limited in scope.  Nobody on Capitol Hill wants to be saying “So, what we had meant was…” a second time around. According to Tim Geithner: “We’re not going with a system where private gains are subsidized by taxpayer losses.” Read: The GSMEs drop their government/private hybrid model and go straight-up government for total control over the process.
    This actually kind of makes sense. The GSMEs, whatever their names end up being, may return to the role they were always meant to serve: to create affordable housing for the masses and mitigate risk on their behalf. They’re able to dictate policy across the housing finance market while claiming to better regulate Wall Street’s nefarious exploitation of people who live on Your Street — an obvious prerequisite to any policy the Fed presents Congress. A government guarantee will insure the actual security or mortgage and not the business entities that hold them, eliminating such an entity’s incentive to profit from homeowners’ losses.

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“” Landscaping Ideas: American Society Of Landscapte Architects Awarded Outstanding Residential Landscape Designs In 2009 (Video)

31 08 2010

American Society of Landscape Architects 2009 Residential Design Professional Awards, narrated by Susan Stamberg.

“Remodeling Nightmares”: Contractors That “Walk Away” From Home Remodeling Jobs Can Leave Thousands Of Dollars In Unpaid Subcontractor Work And Materials Owed To Homeowner

30 08 2010

Instead of living in their dream home, the Wrays are living a remodeling nightmare. They say they are owed thousands of dollars in work and materials by a contractor who has walked away. One unpaid subcontractor has filed a lien on their property, and others are threatening to do the same.

Unfinished work by contractors can jeopardize the safety and livability of the home. Thousands can be spent correcting poor workmanship.

When Peter Wray returned home one day this past December, he noticed something odd in the addition being built onto his Northwest Side home.  All the new windows had been installed. Except two.

The remodeler told him not to worry; the windows were on back order.

Now, in hindsight, Peter Wray and his wife, Teresa, realize the missing windows were a red flag that something was going wrong.

Today, a year after the Wrays started the remodeling, the bathroom has no fixtures, the living room and master bedroom suite are without flooring, two second-floor doors lead to thin air, and water pipes poke randomly out of the floor in the laundry room.

The $126,000 two-story addition that was designed to transform the home is, for the most part, unusable. Even formerly livable parts of the house, such as the walkout lower level, have been rendered useless by the half-finished addition.

“It’s like living in a trailer, with a kitchen, hallway, bathroom and bedroom,” said Wray, communications director with the American Ceramic Society.

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Remodeling Contractors: Don’t Always Go With The Lowest Bid And Demand That The Scope And Cost Of The Work Be Detailed Upfront

29 08 2010

“…homeowners ought to be doubly wary of choosing the lowest bidder, especially if there is a wide difference in price for what you think will be the same work, building contractors said…”

“The first (page of contract) is a summary page that includes base cost, what’s included in that, and allowance items,” Murphy said. “The second page is work order specifications that may include demolition, concrete, excavation, plumbing, electrical, HVAC (heating, air conditioning and ductwork), and any finishes that may be involved such as tile or paint work.”

“It starts out with the scope of the work,” said Mike Pudlik, owner of Legacy Design and Construction Inc. in St. Charles. “What the client thinks they’re getting and the scope of what the contractor is offering can be different.”

If one quote for a bathroom or kitchen redesign is $10,000 less, there’s probably a good reason for it. The first thing homeowners need to do is compare apples to apples, which means take the quotes for the proposed job and compare them thoroughly. Go through every line item and ask questions.

“Not every contractor details specifications, but what a contractor should detail is what’s included in the price,” said Bryan Sebring, owner of Sebring Services in Naperville. “If you ask them upfront and they don’t want to give you details, then they will never be honest with you.”

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“Fund My Remodel” Makes The FHA 203k Home Renovation Loan A “Kinder, Gentler Purchase Loan”

28 08 2010

Since the loan application process for 203(k) loans is complex, you definitely want to work with a lender who has experience with this specialty loan product.

  • Make Sure You Have Enough Cash
    As of early 2010, you only have to come up with a down payment of 3.5% of the home’s purchase price plus repair costs to buy a house with this type of loan. So if you were buying a house with an asking price of $150,000 and needed repairs of $15,000, you would need 3.5% of $165,000, or $5,775, as your down payment.
  • Make Sure You’re a Solid Loan Candidate
    Of course, you’ll also have to meet the usual borrower requirements for an FHA loan, like having a steady, verifiable income and a good credit score. But otherwise, as long as you can make the monthly payments on the property you want to purchase, there are no further special requirements to qualify for this loan. Just remember that it’s for owner-occupants only, not investors.
  • Pick the 203(k) Loan that Best Fits Your Situation
    Before you apply, determine which type of loan you’ll need. There are actually two types of FHA 203(k) mortgages: the first is called “regular,” and it’s meant for properties that need structural repairs. The second is called “streamlined” or “modified.” It’s designed for properties that need only non-structural repairs. Your real estate agent and/or lender can help you make this determination. Of course, if you don’t know the difference between structural and non-structural repairs, a rehab project might be way over your head.
  • Choose a Lender
    Any time you’re applying for a government-subsidized mortgage, whether it’s a VA loan, FHA loan, green mortgage or FHA 203(k) loan, your choice of lenders will be somewhat limited. FHA 203(k) loans in particular are not very common, so many lenders either won’t know how to process them or won’t want to deal with the extra paperwork and hassle involved. Since the loan application process for 203(k) loans is complex, you definitely want to work with a lender who has experience with this specialty loan product.
  • Not all lenders are approved to handle 203(k) loans. The FHA must grant lenders permission to offer them. To find an approved lender, see HUD’s approved lender search here. Make sure to check the box at the end of the page to limit your search to lenders who have done 203(k) loans in the last 12 months.
  • Create Your Rehab Proposal
    In addition to the usual mortgage loan application requirements, such as proof of income, proof of assets and credit reports, the 203(k) loan application requires the creation of a rehab proposal. Your proposal must describe the work to be done on the property and provide an itemized cost estimate for each repair or improvement. Architectural exhibits, such as a plot plan and proposed interior plan, are required for any structural repairs. HUD’s checklist, available here, will help guide you through the items your proposal should address. The checklist covers every area of the home that might need repairs, from gutters and driveways to flooring and windows.
  • You don’t have to hire professionals to do the repairs, but the FHA says that the work must be completed to professional standards and in a timely manner. Also, if you plan to do the repairs yourself, you can’t use the loan to pay yourself for your labor. You can only use the loan toward the cost of materials if you’ll be doing the work yourself. If this sounds like a bum deal, remember that borrowed money, even at a low interest rate, is not free money – it’s money that you’ll have to pay back, with interest. So as long as you know what you’re doing and can afford to spend the time on the project, you can come out ahead by doing the work yourself. Also, you may be able to use the money you save by not hiring contractors to make additional improvements to the property that you couldn’t otherwise afford.
  • Even if you are going to do the work yourself, your proposal must still include the cost of labor. Why? Because if something goes wrong and you have to hire professionals after all, the FHA wants you to have the money to hire them.
  • Get an Appraisal
    The home you want to buy must be appraised as it would be for any loan, except that the appraiser must estimate what the value of the home will be once the repairs and improvements are made. An as-is appraisal may also be required, but sometimes the purchase price can stand in for the as-is appraisal.
  • Hire Help
    Some people choose to hire a specialist called a 203(k) consultant to help them complete all the extra paperwork required for this type of loan, such as preparing architectural exhibits. The fee to hire such a consultant can be included in the mortgage, provided it does not exceed limits established by HUD. For example, for a home requiring $15,001 to $30,000 of repairs, HUD does not expect the consultant to charge more than $600. However, it is perfectly acceptable to complete all the paperwork yourself, though you’ll probably want some input from your potential contractors (if you’re hiring any).
  • Is It Worth the Trouble?
    The FHA 203(k) application process is a lot of work, to be sure. If it seems like too much trouble, you might be better off continuing to search for a home that’s closer to move-in ready or continuing to save until you can afford a nicer place. But if you have the time, energy and patience, the 203(k) loan is often the only way to finance the purchase a property needing significant repairs. Otherwise, you’ll need to have enough cash to pay for the property and the repairs outright.

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“Fund My Remodel” Radio: “How Wall Street Made The Crisis Worse” From NPR Describes How The Housing Crisis Was Made Worse (Audio)

27 08 2010

CLICK ON RADIO TO HEAR NPR's: "How Wall Street Made The Crisis Worse"

Award-Winning Green Homes: “The Sage” Is A Small, Ultra-Sustainable Demonstration Home In Eugene, Oregon (Video)

27 08 2010

Due to popular demand, we have combined all twenty videos into two segments of ten episodes each. This segment highlights the first 10 episodes.

Project Details

The Sage, Eugene, Ore. | Size: 1,447 square feet | Cost: $206 per square foot | Completed: June 2009 | Certification: LEED-Platinum | HERS Rating: 23 | Architect: Arbor South Architecture, Eugene | Builder: Arbor South Construction, Eugene | Verifier: Earth Advantage, Portland, Ore.

Green Highlights
Energy: R-32 and R-45 open-cell Demilec Agribalance spray-foam insulation / 2.1-kW solar system and solar hot water / U-0.27 Weathervane Vantage low-E windows with argon fill / CertainTeed Landmark Solaris solar-reflective asphalt roofing / Trane 16-SEER high-efficiency heat pump / high-efficiency fluorescent and LED lighting / KitchenAid Energy Star appliances / prewiring for electric vehicles | Resources: high fly-ash concrete foundation / locally produced lumber and floor joists / FSC-certified oak cabinets / Pioneer Millworks reclaimed wood flooring / Sustainable Flooring cork flooring | IAQ: zero-VOC paint / low-VOC floor finishes / Trane HRV | Water: drought-resistant xeriscaping / rainwater collection / Danze low-flow faucets and showerheads / Kohler dual-flush toilets