Author: Dan Krell

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Sustained economic growth is the solution to housing stagnation

If you haven’t yet heard the comparison of today’s housing market to depression era housing, the latest Zillow Home Value Index (ZHVI) has fallen 26% since its June 2006 peak. The June 10th ZHVI Report indicated an additional decline of national home values to an average of $177,412. Stan Humphries, Zillow Chief Economist, was keen to point out that the 53 month housing value decline of 26% has officially exceeded the housing value decline of the Great Depression (which is reported to be 25.9% from end-of-year 1928 to end-of-year 1933).

Although the ZHVI indicated that the Washington, DC regional data fared slightly better than the national data, foreclosures may not be a factor. The Zillow Home Value Index indicates that the national home value index declined 5.1% from the previous year, whereas the ZHVI for the Washington DC region declined 4.7%; while the national foreclosure rate for the same time was 0.094% compared to the Washington region’s foreclosure rate of 0.067%.

Zillow’s dramatic news was reported 11 days after the National Association of Realtors® release of the latest Pending Home Sale Index (PHSI) data (Realtor.org). Although the latest PHSI data indicated a 3.5% increase in pending home sales in November 2010 compared to October 2010, the data revealed a decrease in pending home sales compared to November 2009. Because the PHSI is a precursor measure of home sales, it is reasonable to conclude that the number of home sales also decreased from the same time last year.

Although past home value and home sale declines have been attributed to foreclosure and distressed property activity, the recent (albeit brief) decline in foreclosure activity may indicate that other factors are affecting the housing market. Foreclosure activity has recently decreased to resolve issues that arose from legal challenges to alleged lender procedural irregularities.

However, a recent article by Quinn Eddins entitled, “The Problem with Housing” (Mortgage Banking; Dec 2010; 71, 3) alleges that continued sale and value declines are due to excess foreclosure inventory and shadow inventory (homes in foreclosure but not yet foreclosed upon or released for sale). Eddins points out that slight increases in home buyer activity and slight home price increases in early 2010 were mostly due to short term interventions; he states “…The fundamental problem facing housing markets is one of supply. Even if the demand for homes… were to return to peak levels it would take years to absorb the current supply of homes for sale, in foreclosure and in the inventories of financial institutions. The longer it takes to reduce this supply, the longer home prices will languish.”

Eddins solution to the problem is to decrease the number of distressed home owners through equity sharing, which allows a lender to significantly reduce a home owner’s monthly mortgage payment by allowing a third party to invest in the loan in return for sharing in the home’s equity. The idea of equity sharing is not new; it has been incorporated in various home ownership programs and has even been introduced in the last two Congresses as a means to sustain FHA and support home ownership (most recently as H.R.6256: Strengthening FHA Through Shared Equity Homeownership Act of 2010 by Rep. Gary Mill [R-CA]).

Unfortunately, the reality is that regardless of interventions to sustain the housing market, stagnation will continue until there is sustained significant economic growth.

By Dan Krell
Copyright© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Is your home speaking to you: The sounds coming from your home

Are you familiar with the sounds of your home? While some of the most commonly heard house sounds are snaps, cracks, and pops, the sources are not always identified; house sounds can sometimes be mysterious as they are fleeting and horrible. Many house sounds are innocuous, and have explanations; while some sounds are startling and may be a signal for professional attention.

Are you familiar with the sounds of your home? While some of the most commonly heard house sounds are snaps, cracks, and pops, the sources are not always identified; house sounds can sometimes be mysterious as they are fleeting and horrible. Many house sounds are innocuous, and have explanations; while some sounds are startling and may be a signal for professional attention.

Many noises that are heard in a home often originate from the drywall, joists, and studs. Often attributed to nails popping from drywall, settlement of a home as well as temperature related expansion and contraction is often the source of the sounds emanating from these components. Although settlement is expected in a home’s early life, it is not uncommon for settlement noises to occur anytime throughout a home’s lifespan for various reasons. A structural engineer can determine if these noises are cause for alarm and/or repair.

A home’s plumbing system is another source of interesting sounds. Popping and thumping noises can occur when pipes are in use; these sounds can even mimic a leaking sound. These noises are often attributed to the expansion and contraction of pipes in use (water traveling through pipes can cause temperature shifts), as well as excess pressure within the plumbing system. Additionally, pipes can also vibrate and be the source of melodic or unpleasant tones. If the pipes are not well secured, they can bang against joists and drywall. A licensed plumber can inspect and repair some of these issues.

Another source of strange and sudden sounds is the furnace. As the air flows through the system to heat or cool a home, the temperature change can make the air ducts expand and contract causing bangs and dings to be projected throughout the home. Although flexible dampers attached to the ducts can minimize noise, these noises can still occur. However, excessive or irregular noise emanating from your furnace may indicate a problem and should be inspected by a licensed HVAC professional.

Creeks and moans can often be heard coming from floors and stairs where the boards have become loose and/or the boards are rubbing together. Loose floor boards can be repaired by shimming or securing the boards.

Arc faults (electrical discharges) can make popping and snapping sounds that are sometimes mistaken for settlement sounds. Experts consider arc faults to be dangerous and need to be inspected and repaired by a licensed electrician.

Sometimes, noises can also be heard coming from the attic. Although the source of these noises can typically be attributed to animals and wind, loud roof truss cracks and pops should be taken seriously and be inspected by a structural engineer. Animals that nest in the attic are typically nocturnal, so they will usually go bump and thump at night. Additionally, wind flowing through the attic can create a variety of noises that are due to loose material being moved around by the wind within the attic space.

Hearing unexplainable noises in your home may not necessarily mean it is haunted; but rather there is usually a rational explanation. Although some house noises could be harmless, others could be a signal that something serious is happening. Some noises should be taken seriously and be inspected by licensed professionals; not only to reduce some of the noise, but to also repair a potentially dangerous situation.

By Dan Krell
©2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Don’t give in to temptation: Mortgage fraud on the rise

There’s no getting around the fact that qualifying for a mortgage has become more difficult. Although most home buyers accept their mortgage fate handed to them by underwriters, some are tempted to embellish their mortgage application so as to appear more qualified to receive a loan. Even though you may be tempted to cross over the line, don’t give in to temptation just to buy a home.

If you think that mortgage fraud is only about taking part in some elaborate conspiracy with others for financial gain – think again. “Fraud for profit” typically involves “Gross misrepresentations concerning appraisals and loan documents…”; and is one of two categories of mortgage fraud described by the Federal Bureau of Investigation’s latest mortgage fraud report, titled “2009 Mortgage Fraud Report ‘Year in Review’”(FBI.gov).

The other category is “Fraud for property;” and entails the exaggeration of personal information that is included in a mortgage application (including providing false supporting documents) to buy a home. If you think that fudging a little on your mortgage application won’t hurt anyone because you intend to repay the loan, think again. The FBI states that mortgage fraud “is a material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan…”

Since the FBI reports that the usual suspects perpetrating mortgage fraud are typically “industry insiders” (such as lenders, appraisers, underwriters, real estate agents, settlement attorneys, etc.), it is possible that your loan officer or real estate agent might attempt to “recruit” you to be a participant or victim of mortgage loan origination fraud. Mortgage loan origination fraud involves falsifying a borrower’s information to increase the likelihood of qualifying. Besides falsifying information such as bank statements, W-2 forms, and tax returns; mortgage origination fraud could also include the use of a false identification, false asset rentals, backward applications, and the use of credit enhancement schemes.

Additionally, affinity fraud is reportedly a growing issue, such that co-conspirators are often recruited within the same ethnic group or gang. Although, affinity fraud could be an element of any mortgage fraud scheme, it is sometimes devised to launder money.

To alert consumers, the FBI’s mortgage fraud report also cites emerging trends. The list includes schemes such as commercial mortgage loan fraud, condominium conversion fraud, bankruptcy fraud, foreclosed property theft/fraudulent leasing, tax-related fraud, the resurgence of debt elimination/redemption schemes, first time homebuyer tax credit schemes, and flopping/short sale fraud (fraudulently lowering the value of a distressed property).

The FBI’s assessment is that mortgage fraud activity is likely to persist due to continued poor economic indicators (including employment and housing). The environment is not only ripe for perpetrators to implement the typical mortgage frauds (such as loan origination fraud); they are also devising new ways to circumvent mortgage guidelines and laws for personal gain. The FBI states that detecting fraud can sometimes lags behind industry indicators for up to two years, so increased fraud reporting efforts will not indicate any immediate changes.

Don’t let your desire for the American Dream turn into a nightmare. If you suspect that you are a victim or are being recruited for mortgage fraud, file a report with the local FBI field office. Additional resources are offered by the Financial Fraud Enforcement Task Force website, StopFraud.gov; including how to report suspected mortgage fraud.

By Dan Krell
Copyright © 2011

Original published at https://dankrell.com

This article is not intended to provide nor should it be relied upon for legal and financial advice.  Using this article without permission is a violation of copyright laws.

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Should you refinance your mortgage?

Have you refinanced your mortgage yet? Many home owners have recently taken advantage of some of the lowest mortgage interest rates we’ve seen in two generations. If you haven’t refinanced yet, it may not be too late. However before you run off to your local bank to sign mortgage documents, consider what you want to achieve and if it will benefit you.

Of course lowering your mortgage interest rate is a good thing, right? However you should also consider the mortgage terms and the cost of refinancing. Besides lowering the interest rate, you could refinance your mortgage to shorten the duration, change the mortgage type, cash-out on your home’s equity, or a combination of any of the above. These days, however, many homeowners are just hoping to capitalize on lower interest rates to reduce their monthly payments.

If you want to shorten the duration of your mortgage by refinancing your 30 year mortgage to 15 years, don’t expect to lower your monthly payment. Although mortgages with a shorter duration typically have lower interest rates, the monthly payment can be higher than a longer duration mortgage of the same type and amount because the amortization period is shortened.

If you want to change the type of mortgage you have, consider the advantages and drawbacks of various programs that may be available. There are many types of mortgages; some are considered to be risky or advantageous depending on prevailing markets and your personal financial situation. Not for every home owner, mortgage types such as the balloon mortgage, reverse mortgage, or the many configurations of hybrid mortgages offer the mortgage holder specific benefits and risks. Home owners with these types of mortgages may refinance more often because of changing markets and financial conditions.

Although it’s not in vogue these days, cash-out refinances are still offered by some lenders to pay down debt, home renovations, or any other sensible reason you could use cash. If you are seeking to cash-out equity in your home, be prepared for stricter underwriting to make for a rigorous mortgage process. Depending on the lender and program underwriting requirements, you may also be required to document the purpose for the cash.

Although mortgage refinancing has recently been appealing due to very low interest rates, many home owners are having trouble qualifying. Remember that just because you may have qualified for a mortgage in the past, changes to your finances and credit history as well as changes in the mortgage industry could affect your ability to refinance. Another qualifying issue to consider is the loan-to value of the refinance, since many homes across the country have recently depreciated in value.

Even obtaining a FHA or VA streamline refinance has become increasingly difficult for some home owners. Once considered a “fast-track” refinance option, obtaining these streamline refinances have become more difficult in the last year because of changes to lender underwriting requirements.

If you’re still thinking about refinancing, compare rates as well as lender fees and mortgage terms. Determine if the cost of the refinance merits the advantages, as well as if there are alternatives. The Federal Reserve Board (federalreserve.gov/pubs/refinancings), the Federal Trade Commission (ftc.gov), Fannie Mae (fanniemae.com) and Freddie Mac (freddiemac.com) offer consumer resources to help you understand the benefits, drawbacks, and considerations of mortgage refinancing.

By Dan Krell
Copyright © 2010

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Protect your pipes from cold weather

Even though insurance agencies and home contractors often release statements this time of year alerting home owners to take precautions to protect their pipes from freezing, I’m sometimes stunned by some home owners’ lack of knowledge about the subject. If not taken seriously, extensive damage could occur in a home due to a frozen or ruptured pipe.

A common misconception that many have about cold weather’s effects on pipes is that the frozen water inside the pipe causes the rupture. However, it’s not the ice, per se, that makes a pipe burst; but rather the pressure that builds inside the pipe that makes it rupture. When a pipe freezes, excessive air pressure builds up between the ice blockage and a closed faucet.

Experts describe ice buildup in pipes, which can occur through contact with cooled air, as being more common than people know. In extreme weather situations, precautions should be taken to help prevent frozen and ruptured pipes. Besides temperature, wind chill is sometimes the culprit of freezing pipes; holes in walls or foundations can allow chilled air to come into contact with your home’s interior- including pipes. Depending on the pipe placement and weather conditions, pipes can freeze any time the temperature dips below freezing; however, extra precautions should be taken when the weather becomes extreme.

Common precautions used to prevent freezing and bursting pipes include insulating pipes, “the dripping faucet,” and “winterizing.” Some experts suggest that insulating pipes may prevent a frozen or ruptured pipe- but it is not a guarantee. Pipe insulation can vary by type and price; foam sleeves or fiberglass jackets are most commonly used. The materials in the sleeves and jackets insulate pipes from cold air much like the insulation in your home’s walls and attic insulates home’s interior from cold air.

In extreme weather, the “dripping faucet” is one of the most commonly used methods by home owners to prevent a busted pipe. The water drip may not stop a pipe from freezing; however, it can relieve some pressure from the system to prevent a pipe from rupturing in case freezing does occur.

“Winterizing” is a term used to describe the draining of water and pressure from the plumbing system. Experts recommend winterizing your home if you plan an extended winter trip, leaving your home vacant. Winterizing and de-winterizing your home can put additional stress on your home’s plumbing system and components, so hiring a plumber to perform this procedure is recommended.

Short overnight trips may not require you to winterize your home, however experts caution that lowering the thermostat overnight could put your pipes in jeopardy.

Pipes can still freeze or rupture even when you take precautions. If you have a frozen pipe- call your plumber. Opening faucets can reduce air pressure in the system so as to prevent a rupture. Your plumber should guide you on how to thaw the frozen pipe, since you should be cautious for obvious reasons. However, homeowners have often used hair dryers to lamps to thaw frozen pipes. Finding a frozen pipe can be tricky since pipes are often hidden inside walls and between floors. If a pipe does burst, close the main water valve immediately and call your plumber immediately.

Additional information about protecting your home from frozen or ruptured pipes can be obtained from your plumber and/or insurance agent.

by Dan Krell
© 2010

Comments are welcome. This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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