Crosby Finance

Well it finally happened. President George W. Bush stepped forward and said “our economy is in danger” and faces a “great challenge”. Where did all of this begin and where do we go from here?

The starting point could have been the beginning and escalation of the war in Iraq. The cost of the war has risen to $10,000,000,000.00 per month, which in and of itself is staggering. The Federal debt is now passed forward through at least three or four generations.

And, as I wrote in a previous article, each additional dollar which the Fed prints devalues each current dollar in circulation. What we have is a double whammy. Not only are we paying for the war, we are losing purchasing power because of the additional dollars in circulation - all ten billion - each month.

Then we have the extreme risks which were being taken by investors and investment bankers on Wall Street, especially in the mortgage industry. As the investors continued to take more and more risk by dropping the standards for home purchases, the default rates started to climb. Investors and Investment houses who had those mortgages in their portfolios were losing, and losing big. This was a year or so ago.

The irony is that those who created some of the largest losses, C.E.O.’s, were terminated or left on their own and were well compensated for doing so. Most received multimillion dollar packages. But the problems which were created continues to grow.

There are so many events which are coming together now, more powerful than we have faced, as a nation, in the past. Property values plummeted, and when it came time for most people to refinance existing mortgages from three or four years ago, most didn’t have money or equity in their homes to pay for their closing costs. And a lot couldn’t qualify - new higher requirements - even if they could afford the costs.

Without being able to take equity from their homes on a regular basis and convert it into cash - like a real estate ATM of sorts, spending for other items has been reduced. This has the effect of slowing the velocity of the dollars which are already in circulation. This has a ripple effect throughout the entire economy.

Most recently, the Federal Government stepped in to bailout the nation’s two largest mortgage purchasers, Fannie Mae and Freddie Mac. We’ve also seen well established Wall Street firms and some major banks fall. The Fed also bailed out AIG, a infinitely important insurance company for $85,000,000,000.00, and now we are facing a $700,000,000,000.00 bailout.

I’m curious about two things. One is have you seen this coming for as long as I have? The other is, have you made plans to secure your and your family’s financial future?

Loan officers and brokers are scrambling to adjust to today’s real estate market and close more loans. Besides declining markets, credit tightening, and the disappearance of loan programs, some markets are filled with foreclosed homes that have suffered from disrepair and neglect. The majority of the banks that own these foreclosed properties are unwilling to repair these homes. As such, many of these houses do not quality for traditional loan programs because the property itself does not meet the minimum standards in order to quality as acceptable collateral for most conventional loan programs.

Smart professionals take advantage of this situation to actually increase their mortgage business by offering borrowers what their competitors do not: a powerful and relatively underused loan program known as the 203(k). This rehabilitation loan is insured by the Federal Housing Agency (FHA).

This loan program provides the funds for both the renovation and purchase of a home. The maximum loan amount depends on HUD-determined loan limits which are set on a county by county basis. For example, on the low side, a single family home in New Mexico has a loan limit in most counties of $271,050; while in California, the maximum loan amount for a single family home is set at $729,750. You can find HUD county limits at https://entp.hud.gov/idapp/html/hicostlook.cfm.

Some loan officers or brokers might not want to deal with 203(k) loans due to the belief that they are hard and time consuming. While it’s true that more work is involved, that extra effort can translate into income you wouldn’t otherwise have. Also, most 203(k) loans can close within 30-60 days from start to finish.

Here are some of the potential benefits of a 203(k) loan:

* Low Down Payment.

* Increase maximum mortgage by up to 20% with the installation of qualified solar energy equipment.

* Up to 6 Months with NO PAYMENTS — Not to exceed time it takes to complete the construction.

If you are a real estate professional wanting to help more borrowers get into a home, the FHA 203(k) could be a key ingredient to your success.

Where are all my hard earned retirement dollars going? My philosophy has always been to work hard, work as much and as often as possible and put money into retirement. I was raised by a hard working man who loved and took good care of my mother until the day he died. He taught me to respect my wife, always be thankful for everything she does for me, work hard to support her and build up a secure future so she does not have to struggle to make ends meet when I pass away.

It started back in 2004 and 2005 when there was a trend in the liberal government types about forcing banks to give mortgages to almost anybody needing a home. That is the craziest thing I have ever heard. How can the government force a bank to give a loan that they feel is too much of a risk? It is not their money! Well, that is what happened and the pressure was increased to approve loans to anybody who wants a home, even if they do not have a job!

Why do people believe everybody deserves a home? What about a lazy, no good wife beater who refuses to keep a job? Does he deserve to have a home, if he refuses to work and pay for it? My philosophy if everybody is free to work and earn enough money to buy any home they can afford. That is freedom.

I am watching my retirement I have been building all my life get smaller and smaller. I know the money went in and if it does not come back to me, where did it go? Somebody got all my money and your money! I had put money into my 401k just like everybody else had done, just like a good little sheep, but no more!

I am tired of being just another sheep in the herd, being lead to the slaughter house. It is time for this sheep to take the momma sheep and our baby sheep and leave the herd. It is scary when you lose everything because of a few stupid shepherds with an agenda that makes them rich, by slaughter the sheep. What if all the sheep should leave the herd?

Here is my new retirement strategy I call it the “Self-Reliant Retirement Plan.” And, the key is Self-Reliance. Do anything and everything to free yourself from being forced to put your money at risk. Provide for your family as much as possible.

If I had taken this approach 20 years ago back when I first entered the work force I would already be self-reliant. If I had put the money into being free all these years, instead of into mutual funds that can be taken away, my family would be much better off.

My Self-Reliant Retirement Plan: a) Make my home use as little electricity as possible and then produce my own electricity via solar and or wind. b) Develop a side income where I can generate income from my home and it has to be something my wife can help with and continue when I pass on. c) Reduce as much as possible or eliminate the use of gasoline. d) Plant fruit trees that produce fruit in my climate. e) Plant a large efficient vegetable garden. f) Raise chickens for eggs and meat. g) Put up our own preserves (Veggies, fruit etc.) to last through the winter. h) Get used to watching broadcast television and save the money wasted on satellite or cable. i) Brew my own beer and make my own wine, because 200 gallon a year per household is more than enough.

I do not want to become a hermit and pull out of society. I just don’t want some bank to take my future away. I want to be able to take care of my family, just like my father taught me to.

There are steps you can take to save your house from foreclosure in this very volatile housing market. It has become easier to purchase a home with the increase as loan companies have become increasingly competitive, there are many mortgage options and government policies that support home ownership. With the increase in home ownership there has also been an increase in home foreclosure.

The foreclosure process can start after you miss only a few mortgage payments. Making your mortgage payments should be your top priority. You should prioritize your debt and put your mortgage in the top spot.

The penalties for missing mortgage payments versus other types of debt payments are much worse and much more difficult to fix. Foreclosure will cause your credit rating to plummet and it will take you many years to recover your credit standing.

If you are having a lot of financial difficulties then you should talk to a financial consult. They may be able to suggest options and ways to proceed to keep you out of financial difficulties and may produce some ways to get rid of your debt that you might not thought of.

You can also refinance your mortgage. If you can get lower interests then you currently have then you may be able to take a different mortgage and reduce your payments. You need to be clear on all the costs of refinancing as there will be closing costs, points and other additional fees. You should be very sure of the company you are refinancing with, as many companies are not there to help but to take your money.

If you do not want to refinance or get financial help you can see about selling your assets. By selling those things that you don’t absolutely need you may be able to temporarily create some cash to pay your debts. However this option does not really help you in the long run.

Selling some assets is a way to get some cash in hand if you are having immediate problems. Selling your assets will not really help in the long term but can bail you out right now. You need to make a budget and determine what you absolutely need to live and those things you can do without. You may be able to take the bus instead of your car and if you sell your car then you will not have to pay for car repair, gas or car insurance. You should put all extra money into paying your mortgage.

If all else fails you can see about selling your home. If even this is not a favorable option you should determine the price of your home as long as how long it would approximately take to sell. Your local real estate company will be able to provide you with this information. It also may not make sense for you to live in your home, as you may not be able to afford it. You can sell your home, buy a new more affordable home and still have money to spare.

A mortgage accelerator program is a plan that has been applied in Australia and England for over 20 years. It may assist home owners pay off their houses in under half the time. Nevertheless, before you choose to get such a kind of plan, you need to understand about the weaknesses associated with it and whether it is the adequate choice for you.

For example, mortgage accelerating programs cost somewhere between $300 and $3,600. The fee generally has to do with what the plan offers. They usually come with the software that allows you know when to transfer the money and some client support.

In this type of programs, property owners have to get a line of credit. However, the cost can normally be incorporated in the home equity line of credit and paid as a portion of the home mortgage with no up front expense to the owner.

With other plans, there is no initial cost associated with the plan but home owners need to refinance their mortgages. This is good only if they can get a better interest rate on the new home loan. Else, the savings that you may have with the mortgage accelerator program could be canceled by the additional interest.

Also, in order for the plan to work at its best, the person needs to have a little extra cash present. It does not naturally denote that the owner needs to pay any additional cash. However, having that extra cash in the line of credit helps decrease the amount of money that interest is charged over.

As with any other economical tool, commitment in the program is fundamental. For it to work, the home owner needs to be sure that they’ll follow up with it. If it is not so, it is just wasted money. It helps that these programs normally come with software which shows how quickly you’re paying off your home mortgage.

Obviously, to take full advantage of this kind of plans the home owner has to stay in the home for a few years. If you plan to move out of your home soon, it might not be a good idea for you to get one. Nevertheless, a few plans allow you use the program in up to three homes.

As with any financial tool, it is a very good idea to understand as much as you can about how it functions. That way, you can learn about the benefits and disadvantages associated with it, and choose on your own if a mortgage accelerator program is the right choice for you.

Financing any additional work on your home from a loft conversion to remodeling the master bedroom is going to be expensive and unless you have a large amount of money in savings you will need to arrange a home improvement loan. Home improvements can be costly, involving contractors, supplies, and tradesmen such as carpenters, plumbers, roofers, and electricians.

A home improvement loan is available to every homeowner to improve their property but remember that sometimes it will have to be a secured loan. The last responsibility a new homeowner wants is that of it being used as equity for a loan to improve it. The maximum period for finance without any form of equity can be up to fifteen years.

The only condition made on no equity finance is that the owners must have a joint income which is lower than the county limit where the property is but reaches the limit specified by the lender. The eligibility of the borrower, the property type and the improvements planned are all considered because this type of loan may only have minimal documentation and is relatively easy to process.

For people with small mortgages and high value homes, a home improvement loan that is secured is often a preferred method to finance remodeling costs. There are benefits to arranging a secured loan though as they generally have a lower rate of interest so reducing the monthly payments and although they are relatively hassle free, they are not another mortgage on the property.

The lender will only provide funds for a secured loan based on the current equity available in your property. The lender will work with you in determining the value of your home based on its current value, amount of outstanding mortgage, and other debts that you currently have.

The lenders will assess all this information before furnishing the homeowner with the amount they are prepared to lend them. Usually, finance companies will lend you a percentage of the assessed value of your house but some lenders can lend as high as 125 percent of your home’s equity.

Any loan secured on a property has a risk attached and that is especially true when the loan is large as payments can become difficult to make at which point the creditors can move in and take your home away. Home improvement loans can be a wonderful way to tidy up an aging home but remember that they need to be paid off and if you are likely to struggle, reduce the amount you want to borrow.

While the amount may not seem significant to some, every property owner knows that the tax deduction allowed for rental property can make a significant difference on the bottom line. Those who own rental property should be sure to take advantage of the tax benefits of being a landlord.

Some of the common expenses that can be deducted when figuring income taxes are:

Mortgage interest. Payments made to a lending institution for real estate loans usually include principal (part of the amount borrowed) and interest (charges for loaning the money). Rental-property owners can borrow to purchase property or to improve property. In addition, interest on credit card payments may be deductible if the purchase was strictly for the rental property. Rental-property owners should know, from the start, that interest expense must be at the top of the deductible list.

Owners of rental property should take care to reap the benefits of depreciation of property. In most cases, this deduction is available after the first year of ownership and generally continues for 27 years. Property owners should consult with a tax adviser to make sure that depreciation is handled correctly.

Rental-property owners know that keeping up with repairs is one of the major tasks of being a landlord. But repair costs are deductible for the year the costs are incurred. For example, if it is necessary to put new tile on the kitchen floor of a rental property, refinish the walls with new plaster or drywall, or replace old/broken windows, the labor and materials cost is deductible. This includes any tool rental such as acnc router or drills. These repairs must be necessary for the daily operation of the property and should not be improvements made to enhance value (capital improvements). Again, it would be wise to consult with a tax expert to make sure this deduction is taken properly.

Some rental-property owners forget about the travel expense of owning property and miss out on what can be a significant deduction. If the owner must travel to the rental property to meet with tenants or to make repairs, for example, the travel expense may be deductible. Travel expenses incurred for visits to plumbers, electricians and contractors can also be included in tax deduction calculations. If the visit to rental property involves travelling to another city, it may be possible to deduct airfares, hotel bills and some other costs.

Many rental-property owners conduct their business from their home, which allows them to deduct a portion of the home’s square footage for business purposes. Other expenses associated with this home office may be deductible as well (separate phone, office equipment etc.).

Property owners who work with a knowledgeable tax adviser also deduct losses such as flooding and fire damage. The amount allowed for deduction can depend on the insurance coverage terms, and the loss may be figured as partial or full. This brings up another key item in a successful rental-property business - insurance. Landlords are allowed to deduct insurance costs (premiums) for their rental property. Types of insurance include: landlord liability, theft, fire, flood etc.

Property owners should also keep track of fees paid in connection with the rental-property business. This category can include fees paid to real estate advisers, property management businesses, attorneys, accountants etc. Those who own rental property should be aware that some expenses are not deductible under current tax codes. If an apartment remains vacant, for example, the property owner cannot deduct loss of income. New appliances and room additions are not generally deductible. The advice of a good tax expert is essential to a successful rental-property business.

In startling news, people wake to a Monday where two of the behemoths of Wall Street and the financial world have gone down hard. The fate of Merrill Lynch and Lehman Brothers is scary and harbors the question of whether the mortgage market is dead?

The failure of Lehmans is scary. Formed in 1850, this was one of the biggest investment banks in the world. It made money in a wide variety of markets, but went bankrupt with an eye popping $613 billion in bad debt.

The collapse of Merrill Lynch is even more troubling. It has a lot of bad mortgage debt, but had huge assets it was planning to sell off to cover the expense. Something changed enough that Bank of America snagged it for a measly price of $29 a share, an outright steal.

These two failures should be a blaring warning sign. Two of the fundamental companies of finance have just crashed and burned. This means anything and anyone could be next. It also means the end of bad news is nowhere in sight.

The current financial market is an interesting one. We have never seen such a massive meltdown and yet so little a reaction to it. We are seeing events in the banking industry that have not occurred since the Great Depression and nobody seems to care.

How can this be? Ben Bernanke deserves a huge amount of credit. The Fed has been taking drastic action, but with a light touch. Many banks have been taken over, but it always happens over a weekend when media attention is low.

The end result is we have not lost faith in our banks. There has been no rush to get money out. This gives us a chance to fix the banks, but cannot help with a simple fact. The housing market is in for a long, brutal ride.

The big problem for the housing market is the perception of mortgage based securities. Simply put, they are viewed as insanely risky which means money is not coming back into the market to fund new loans.

If mortgage securities are viewed poorly, the housing market is in major trouble. With no new money coming in, loans are going to be hard to get. A lack of liquidity will drive prices down and it could get very ugly indeed.

So, are we headed for the second Great Depression? With major banks failing, how can the small guys remain afloat? With no money in mortgages, how will people get cash out of their homes? In short, is this the end of the consumer America?

If we are going down, we will go kicking and screaming. The Federal Reserve is fighting with all its might. The announcement that banks from around the world will pool 70 billion dollars to help stressed institutions is huge.

The financial world is a mess. Unlike the Great Depression, the Federal Reserve is working to drag us through the crisis. We may end up bruised and bloodied, but I believe we will make it out the other side.

You may know this debt “forgiveness” as a “short sale.” This occurs when a homeowner can sell only for a price lower than the debt balance and the lender accepts the lower amount as the mortgage balance.

Until the bill was passed, a homeowner’s tax liability to the IRS was the difference between the amount paid to lender and the total balance owed on the mortgage. This tax liability could be very difficult for the homeowner.

A $50,000 short sale, for example, could yield an additional $12,500 in taxes owed.After the bill’s passage, that tax liability is gone. No taxes will be owed on primary residence mortgage debt that is forgiven or written off by a mortgage lender.

The bill has two sides, though. In order to recover the estimated $650 million in tax revenue that will be lost, Congress has limited the amount of tax breaks available on the sale of second/vacation homes. That will be impactful on homeowners, too, of course.

Be sure to arrange to speak to your financial advisor if you believe that the Mortgage Forgiveness Debt Relief Act of 2007 will affect you.

The changes to the mortgage industry during the last couple of years have created turmoil at all points of the value chain, from the borrower to the secondary investors to the global economy. These changes have included credit tightening and the disappearance of loan programs. Part of that credit tightening has focused on collateral located in real estate markets that have been identified as “Declining Markets”. This article provides some suggestions for originating in such markets.

First, analyze your MSA (Metropolitan Statistical Area) and determine stable markets, i.e., pockets or neighborhoods that are not declining markets even though the surrounding MSA is considered a declining market. If you have data from the appraiser stating that the home is not in a declining area, your lender may underwrite the loan as though the property were not in a declining market.

Second, target borrowers within the stable markets that you have identified. Marketing campaigns can include traditional ideas such direct mail or telemarketing, or less conventional guerilla marketing. For example, you could set up a lemonade stand at ball games or crowded parks and offer lemonade in exchange for a quick mortgage analysis. During the winter, you can offer hot chocolate, peanuts, or popcorn.

Third, make sure you can provide government loans. FHA loans have been popular, and with the temporarily expanded loan limits and high-balance limits, more homes than ever are eligible for FHA loans. Become approved takes time, so it’s best to get started immediately.

Fourth, agency jumbos provide better pricing for more expensive homes than traditional non-conforming products. Their features include going go up to 125% of the median housing value, the absence of the MIP (mortgage insurance premium) found with FHA loans, and a higher allowable debt-to-income ratio than FHA loans.

You can help your files receive an “Accept” status with your lender by submitting appropriate appraisals. Appraisals that are older than 90 days or have outdated comparables represent a significant risk. Brokers should update appraisals prior to submitting the loan to underwriting. It is best to submit two (2) Comparables dated within 90 days AND two (2) Active listings (pending sales).

The market continues to change, but you can still be successful. Hopefully these ideas will help.