Craig's Blog

Great College Park Condo

2008-06-18T13:40:28Z

Relocating Seller wants offer today. 12th floor efficiency condo with built-in bookcases overlooks Greenbelt Park and Courtyard. Seller will help with down payment and closing costs if needed! Secure building offers 24-hour desk attendant. Condo fee includes water,gas & electricity. Pool, sauna, exercise room and party room available. Convenience store on premises as well as Metro & UMCP shuttle bus. 5 minutes from University of Maryland, NASA Godard, Metro Station, BWI, I-95 and BW Parkway. 15 minutes from Walter Reed, Fort Meade, Naval Hosp., NIH, Washington D.C. (White House and the US Capitol).

Bank of America wins approval to buy Countrywide

2008-06-05T17:39:05Z

By IEVA M. AUGSTUMS, AP Business Writer 5 minutes ago CHARLOTTE, N.C. -

The Federal Reserve on Thursday approved Bank of America Corp.'s purchase of distressed subprime mortgage lender Countrywide Financial Corp. ADVERTISEMENT In a statement, the federal regulatory said it considered many comments for and against the company buyout and "has considered carefully the financial factors of the proposal." Charlotte-based Bank of America, which announced its $4 billion acquisition of the Calabasas, Calif.-based mortgage lender in January, has faced much criticism for Countrywide's large exposure to subprime home loans that were offered to borrowers despite their shaky credit. Countrywide lost about $1.6 billion in the last six months of 2007, and the company faces numerous investigations and lawsuits related to its lending practices. Bank of America has said it will tighten those lending standards. "This transaction represents a rare opportunity for Bank of America to significantly gain market share in the mortgage business, allowing it to expand in a cornerstone financial product," Bank of America Chairman and Chief Executive Officer Ken Lewis said in a statement commenting on the Fed decision. In its order, the Fed board said that after the proposed deal Bank of America would remain the largest depository institution in the country, controlling approximately $773.4 billion in deposits, which represent 10.9 percent of total insured bank deposits in the country. When the deal was first announced, Bank of America said it would pay about $4 billion in an all-stock deal for Countrywide, exchanging 0.1822 shares of Bank of America for each share of Countrywide outstanding. In recent months, some analysts have speculated that the deal may be completed at a lower price because of further deterioration in the mortgage market and a continued rise in mortgage delinquencies and defaults. Experts have said that the deterioration of the mortgage market and Countrywide's loan portfolio could lead to costly write-downs and create a drag on Bank of America's earnings. But on Monday, Lewis told analysts on a conference call that he believed buying Countrywide was still a good deal even though the housing market had continued to falter since the deal was announced. Lewis said he believed that housing conditions would improve by early next year. He said that Countrywide and its professional sales force would give the bank a boost as it pushes to increase market share in the mortgage sector. Bank of America said it expects the sale to close in the July-September quarter. The Fed board approved the deal in a 32-page order issued Thursday. Countrywide had said previously that it will hold a special meeting of shareholders on June 25 to approve the proposed sale. ___ AP Economics Writer Martin Crutsinger in Washington contributed to this report.

Top Rated Wireless Carriers

2008-05-24T10:40:25Z

The Tech Blog Verizon tops in wireless survey, Sprint falls behind Wed May 21, 2008 3:35PM EDT Buzz up!on Yahoo!Chatters are growing happier with their overall wireless service, according to a new survey, with Verizon Wireless taking top honors and Sprint slipping into last place among the four big carriers. That said, overall scores for customer satisfaction fell somewhat short of the stratosphere. The results come courtesy of the American Customer Satisfaction Index, which rates various industries and companies on a scale of 1 to 100 based on national phone surveys. The scores? Overall wireless service garnered a 68, the highest score in the four years that the index has been tracking wireless satisfaction—not bad, but not exactly what I'd call an A+. Verizon Wireless scored a 72 in the survey, giving it top marks among the four big wireless carriers. AT&T and T-Mobile both tied at 71, with AT&T gaining the most ground thanks to its four-percent spike since 2007 (thanks, in part, to the iPhone, according to ACSI researchers). Meanwhile, Sprint's ACSI rating fell to just 56, an 8 percent drop from last year. What happened? Well, the struggling carrier's decision to slash 5,000 jobs last year—with another 4,000 to come—could have something to do with it, ACSI researchers said. Just for comparison's sake, the spiraling airline industry got an ACSI score of 62 (tumbling almost 14 percent from 1994), the U.S. Postal Service got a 74 (up from a score of 61 in 1994), FedEx scored an 85, and both McDonald's and Microsoft made do with a middling 69. How's your carrier been treating you lately? Care to grade 'em on your own scale of 1 to 100? Fire away!

County Council Raises Property Taxes in MC

2008-05-22T15:18:27Z

Montgomery Passes Budget That Raises Taxes

By Ann E. Marimow
Washington Post Staff Writer
Thursday, May 22, 2008; 1:17 PM

With little discussion, Montgomery County Council members this morning gave final approval to a $4.3 billion budget that will bring property tax increases of about 13 percent for the average homeowner and raise energy taxes by about $10 a year for the average household.

Faced with slowing revenue from a weakened housing market, the council voted unanimously to exceed Montgomery's charter limit on property tax revenue for only the fourth time since the cap was approved by voters in 1990.

The council kept the rate at the current level rather than raising it by 7.5 cents as County Executive Isiah Leggett had suggested. But the bill for the median-priced home will still increase $316, or 14.3 percent, to $2,520, because of rising property assessments.

To ease the hit on homeowners, the council also approved a $579 credit for primary residences.

"This budget is a product of bad economic times and required compromises, which doesn't make for an optimal result, just a necessary one," said council member Roger Berliner (D-Potomac-Bethesda).

For days, the council was deeply divided over whether to revise labor union contracts that provide most government workers with raises of 8 percent. In the end, a compromise left contracts untouched, but requires an additional $16 million in cuts to be evenly divided between county government and school system operations.

Overall spending will increase 4.3 percent, the smallest annual increase in at least 12 years. Funding for the public schools will rise 4.1 percent, a smaller increase than the system requested but $10 million more than Leggett recommended.

Turn $451 a month into a Million Bucks

2008-05-20T08:46:17Z

Turn $451 a Month Into a Million Bucks

Save $219 Per Month on Taxes

Here's How: The average refund for the 2008 filing season so far is about $2,500. If you received an average refund and you are in the 25% federal tax bracket, you could be entitled to three extra exemptions worth $3,500 each. That would boost your take-home pay by $219 a month. A couple of reasons you might be eligible for more exemptions: becoming a new parent or buying a house.

Save $100 Per Month on Food

Here's How: Bring your lunch and snacks to work. Considering that the average meal at McDonald's costs $5 and Dunkin' Donuts charges $2 for a large cup of coffee, the brown-bag windfall can be substantial.

Save $80 Per Month on Entertainment

Here's How: We're talking about one fewer dinner-and-a-movie night every month. That assumes you and your significant other pay the average $33 per person for a restaurant meal (according to a recent Zagat survey) and that you spend $7 per ticket, the average price at the movies (according to the Motion Picture Association of America).

Save $28 Per Month on Health Care

Here's How: The typical family spends $1,321 on out-of-pocket health expenses each year, says the U.S. Department of Health and Human Services. You can pay those costs with a flexible spending account, which lets you set aside pretax dollars.

Save $10 Per Month on Auto Insurance

Here's How: The average consumer pays $829 annually for car insurance, according to the National Association of Insurance Commissioners. Raising your deductible from $250 to $1,000 can save you 15% or more.

Save $8 Per Month on a Well Maintained Car

Here's How: Keep your car's engine tuned and tires inflated to the proper air pressure. Those minor improvements can save you up to $100 on gas each year.

Save $6 Per Month on Generic Non-Prescription Medicines

Here's How: The average American spends $185 annually on over-the-counter medications. Generics cost up to 40% less than their brand-name counterparts and work just as well.

$451 Saved in Total!

Invest the found money every month in a retirement account that earns an average of 8% return over the next 35 years, and you'll have $1 million. That wasn't too hard, right?

Copyrighted, Kiplinger Washington Editors, Inc.

The Brighter Side of Housing

2008-05-16T13:10:19Z

The Brighter Side of Housing

And now for the heartwarming side of the housing bust: It's helping some people buy homes that they couldn't afford a couple of years ago.

Michelle Dudley for years commuted 50 miles each way to her job as a civil servant in Anaheim, Calif., because she and her husband, Don, didn't feel they could afford a home near her office. This week, though, the Dudleys moved into a three-bedroom house in Anaheim that they recently bought for $390,000, down from the original listing price of $445,000 in November. Similar homes in the area were selling for as much as about $600,000 two years ago, says Erin Eckert, an agent for Redfin, an online real-estate brokerage that represented the Dudleys.

More from WSJ.com:

· Drinks? DJs? See Realtor Inside

· My $1,200 Radon Job

• Moving Out Ahead of the Demolition Brings Sadness, Joy

Still, many potential buyers are holding out for better deals. The Wall Street Journal's quarterly survey of housing-market conditions in 28 major metro areas points to continued downward pressure on prices in much of the country.

As usual, there is huge variation from town to town. In most of the country, inventories of unsold homes are no longer growing quickly, as they did in 2006 and 2007, but remain huge. The supply has shrunk modestly in Boston and Denver over the past year. But the number of for-sale signs continues to rise swiftly in the Portland, Ore.; Seattle; Raleigh-Durham, N.C.; San Francisco; and Washington areas.

The biggest gluts are in Florida. In the Miami-Fort Lauderdale area, the supply of single-family homes and condominiums is enough to last 34 months at the average sales rate of the past year. That months-supply figure is about 21 in Orlando, 18 in Tampa and Las Vegas, 17 in Detroit and 14 in Phoenix. A six-month inventory is generally considered a rough balance between supply and demand.

For condos alone in Miami-Dade County, the supply would last 45 months at the current sales rate.

Prices are coming down fast. Real-estate data company Zillow.com estimates that the median value for all homes in the 12 months ended March 31 fell 25% in the Las Vegas metro area, 19% in Miami and Orlando, and 16% in Phoenix. The typical value is still rising modestly in a few places, including the metro areas of Raleigh and Charlotte, N.C., Dallas and Houston. One hitch for house hunters, though, is that mortgage lenders have become much more restrictive with loans. And even buyers who can get financing still face a tricky question: Should I wait for a lower price? Buying now, with home prices generally falling, is "a gamble," says Ms. Dudley, who just moved into her new Anaheim home. But, she says, home prices will rise again at some point. Meanwhile, she was tired of her long, expensive commute.

See a sortable chart of housing data

Kevin McCleary, a computer-security consultant, remained a renter through the housing boom even though he could afford to buy, because he believed prices were reaching unsustainable levels. In October, though, he and his fiancée finally decided to buy a foreclosed home in Herndon, Va., and negotiated a price of about $443,000. The same home sold in 2005 for $645,000. "I don't believe we hit it at the perfect time," Mr. McCleary says. On the other hand, he says, "we were just tired of putting our lives on hold."

During the boom, home prices rose far faster than incomes. Home prices as measured by the S&P/Case-Shiller national index shot up 74% in the six years through 2006, while median household income rose 15%. (Neither figure is adjusted for inflation.) Now prices in many areas are adjusting back toward more affordable levels, a process that could take several years.

In an analysis of 330 metro areas in last year's fourth quarter, National City Corp., a banking concern, and Global Insight, an economic research firm, found that home prices were sharply overvalued in relation to household income and other factors in 21 metro areas, down from a peak of 58 metro areas in the second quarter of 2006.

Economists at the two firms look at home prices in relation to household income and other variables, including population density (an indication of how much land is available) and past differences in prices caused by factors like climate and schools. They then classify as "overvalued" metro areas where home prices are more than 33% above a level that could be explained by fundamental drivers of housing costs. Among areas where this analysis finds that home prices are still too high are Bend, Ore., Atlantic City, N.J., Miami, Honolulu and Portland, Ore.

In most of the country, "we're getting a return to normalcy" in the relation between home prices and incomes, says Richard DeKaser, chief economist at National City. But, he adds, prices may overshoot on the down side.

Economists at Goldman Sachs say home prices are likely to level off by late 2009. They also point to improving affordability. Goldman's chief U.S. economist, Jan Hatzius, says the share of a typical family's income needed to pay mortgage payments on a median-priced home averaged about 17.5% from 1993 to 2003, before jumping to 26% in 2006. The figure now has fallen to 20% and is likely to keep declining as home prices fall.

Mr. Hatzius estimates that average U.S. home prices have fallen 15% since the second quarter of 2006 and projects they will fall an additional 10% before stabilizing late next year. But he also sees a risk that home prices will fall further, particularly if the foreclosure problem proves worse than already expected.

Goldman estimates that foreclosures will add 1 million to 1.5 million homes to the for-sale market this year, compared with less than half a million a year before 2007.

During the first quarter, homes acquired by lenders through foreclosure accounted for 33% of all sales of previously occupied homes in California, up from just 3.2% a year earlier, according to DataQuick Information Systems, a research firm in La Jolla, Calif.

Homeowners hoping to avoid a foreclosure are adding to downward pressure on the market, says Daniel R. Odio, owner of DROdio Real Estate Inc. in Alexandria, Va. Such people often seek to unload their homes through a "short sale," in which the price is less than the amount owed on the mortgage and the lender agrees to forgive the difference. Homeowners hoping to do a short sale sometimes advertise very low asking prices to lure buyers, even if there is little chance the lender would accept bids at that level, Mr. Odio says. The "fictional" asking price, in turn, misleads potential buyers about the value of nearby homes.

The supply of lower-priced homes has surged in some areas. Steven Thomas, president of Re/Max Real Estate Services in Aliso Viejo, Calif., says there are about 1,260 condos available for under $250,000 in Orange County, Calif., or about triple the year-earlier total.

Write to James R. Hagerty at bob.hagerty@wsj.com

Eight Ways to Cut Summer Energy Bills

2008-05-12T14:41:01Z

Eight Ways to Cut Summer Energy Bills

With summer finally kicking into gear across the country, you can almost hear the gentle hum of air conditioners ratcheting up. And with it, climbs home energy bills.

These days, the average household spends $1,900 annually on energy (based on electricity and gas usage), according to the Environmental Protection Agency (EPA). But much of that, say energy conservationists, is money wasted.

The good news: Cutting back doesn't mean you need to be a tree-hugging naturalist, suffering stoically as you read by candlelight. These days, you can do right by the environment and your pocketbook-without any major lifestyle sacrifices. In fact, by taking some relatively painless steps, you can cut your bills by one-third or more.

More from SmartMoney.com:

· 13 Simple Ways to Lower Your Electric Bill

· 7 Energy-Saving Eco-Gadgets

• 8 Ways to Cut Your Grocery Bill

Here are eight easy ways to save this summer (including a few tips that will work year-round).

1. Upgrade Your Thermostat

Are you the type who likes to chill after a sticky workday by coming home to a house that's as cool as a meat locker? You can live this dream and cut your energy costs by investing in a programmable thermostat. These handy little devices allow you to cool your home at different temperatures at specific times.

So you could, for example, turn down the AC during the day, when your family is away from home-and crank it up again 30 minutes before the first family member returns. Or, you could turn it down during the wee hours of the morning, when no one's likely to notice a shift in temperature.

Installing a programmable thermostat shouldn't set you back more than $100 to $150-and the energy savings can be substantial. According to the U.S. Department of Energy (DOE), you could cut your heating and cooling bills by 10% annually just by turning your thermostat back 10% to 15% for 8 hours a day.

2. Go Green

Ok-this will require a bit of effort on your part, but the returns are twofold: Planting just three shady trees around your house not only can whack $100 to $250 off your annual heating and cooling costs, according to the DOE, but will most likely make your yard more attractive, to boot. (Leafy trees can shield the house from direct sunlight, keeping temperatures down, while still permitting sunlight to hit your house during the winter months.)

Not interested in nurturing your green thumb? Simply pulling the shades (or drawing your curtains) can cut energy costs as well, says Mel Hall-Crawford, an energy efficiency expert at the Consumer Federation of America.

3. Keep It Clean

Keeping your air-conditioning unit clean and in peak performance is another big money saver. To kick the summer off, your AC unit should have a professional tune up (expect to pay somewhere between $90 and $120), says Maria Vargas, an Energy Star spokesperson at the EPA. (Energy Star is a joint program run by the EPA and the DOE that, among other things, deems certain products energy-efficient.) And air-conditioning filters (regardless of whether you have central air or an individual unit) should generally be checked every month or so to see if they need cleaning or replacement. This is something you should be able to do on your own.

Another item to add to your spring cleaning list: Dusting off your refrigerator condenser coils, says Hall-Crawford. This will make the unit run more efficiently.

4. Buy a Better Bulb

Compact fluorescent light bulbs (called CFLs) require 75% less energy than traditional (officially called incandescent) light bulbs, and last up to 10 times longer, according to the ASE. Be sure to look for CFLs with the Energy Star label, since these bulbs won't have any buzzing or humming problems, promises Energy Star's Reed. These bulbs now come in smaller sizes (called subcompacts) that can fit into any lamp, and they have a wider color spectrum. According to the Alliance to Save Energy (ASE), replacing just four well-used 100-watt incandescent bulbs with equivalent 23-watt CFLs will save you $120 to $200 over three years.

Also, do you still have one of those halogen lamps leftover from your college days? (You know-those tall lamps that didn't cost much more than a couple of pizzas to buy?) Do yourself a favor: Dump it. Not only are these dangerous fire starters, but their bulbs, which can generate temperatures of 700 to 1,100 degrees Fahrenheit, are energy hogs as well, says Vargas. That makes them considerably less inexpensive than they seemed back in the day.

5. Join the Fan Club

A ceiling fan can balance out a room's temperature, allowing you to turn down the AC and still feel cool.

6. Unplug

Even when all of your home electronics are turned off, many continue to suck down energy. The main culprits: televisions, VCRs, DVD players, stereos, phones and microwave ovens. (Generally, anything that has a clock, a remote control or an on/off light falls into this category.) In fact, idle TVs cost U.S. consumers $600 million annually, or $5 per household, according to the EPA. One solution: Plug the items that can truly be turned completely off into a power strip, and then use that as your on/off switch.

7. Fight Leaks

Your pricey, cooled air might be leaking right out of your house. Leaky windows and ducts (which carry the air to the rooms in your home) are two ways that cool air can be lost, making your air conditioner work harder. "We have found that as many as 70% of ducts are installed with leaks," says Vargas. Having your ducts properly sealed and insulated could save you as much as 10% in energy costs, according to the EPA. So if you think your duct system is faulty, try to have it checked out by an HVAC (heating, ventilation and air-conditioning) technician. (One way to find one is to visit the North American Technician Excellence web site.)

8. Be a Savvy Shopper

By far the biggest way to save is to invest in energy-efficient appliances. When shopping around, look for the Energy Star label. There are more than 44 product categories that qualify.

Of course, replacing your appliances (particularly the biggies, like a refrigerator or dishwasher) will require an upfront investment. But if you've got an old clunker, you could recoup your costs quickly. For example, if your central-air-conditioning unit is more than 10 years old, replacing it with an Energy Star-qualified model could cut your operating costs by 30%.

Expanded Mortgage Help

2008-05-12T11:19:05Z

BUSH ADMINISTRATION TO EXPAND MORTGAGE HELP FOR STRUGGLING FAMILIES
Expanded FHASecure able to help half a million homeowners stay in their homes by cutting mortgage payments

WASHINGTON - The Bush Administration today announced additional mortgage assistance for subprime borrowers who are at risk of foreclosure. The plan, which is designed to help address the adverse economic conditions affecting many communities across America, will help break the cycle of house price depreciation that is being caused by an increasing number of foreclosures and the overall contraction in the credit market. Under the new plan, HUD's Federal Housing Administration (FHA) would have the added flexibility to insure more mortgages, including those for borrowers who were late on a few payments and/or received a voluntary mortgage principal write-down from their lender.

This FHASecure expansion will help more homeowners who are struggling to keep up with mortgage payments on their high-cost subprime loans. With this expansion of FHASecure, the Administration expects about 500,000 families to refinance into prime-rate FHA-insured mortgages in total by the end of this year.

"Our plan will help hundreds of thousands of desperate families who have no place else to turn for safer, lower cost ways to keep their homes," said Federal Housing Commissioner-Assistant Secretary for Housing Brian D. Montgomery at a hearing of the House Financial Services Committee. "We want to be able to help families who are in the right house, but the wrong mortgage."

In August 2007, FHA modified its refinancing program to help creditworthy homeowners who missed payments after their teaser rates reset. Now, FHASecure is expanding its eligibility standards. Homeowners who believe they meet this additional eligibility criteria must fall into one of the following categories:

Borrowers with adjustable rate mortgages who were late on two consecutive monthly mortgage payments or at two different times over the previous twelve months. FHA will require a 97 percent loan-to-value (LTV) ratio for these borrowers to refinance, the same LTV as FHA's current standard.
Borrowers with adjustable rate mortgages who were late on three consecutive monthly mortgage payments or at three different times over the past 12 months. FHA will require a 90 percent LTV ratio for these borrowers to refinance.

With these new criteria, the expanded FHASecure can help additional borrowers access a more viable refinancing option and will offer lenders an alternative to foreclosing on these individuals. Lenders may voluntarily write down the outstanding subprime mortgage principal balances to a 97 percent or 90 percent LTV ratio depending on the borrowers' circumstances. FHA will also encourage lenders to make other arrangements, such as subordinate financing, to "fill the gap" between the existing loan balances and the FHA-insurable loan amount. The refinanced loan amount backed by the FHA would be based upon a new appraisal, performed by an FHA-approved appraiser.

FHA will insure new, more affordable mortgages in exchange for this equity cushion, which will protect FHA's insurance fund, and thus the taxpayer, against risk. Currently, FHA's insurance fund is self-sustaining, meaning that it requires no appropriation of taxpayer dollars because homeowners pay for the product themselves. Further, any new FHASecure loans will continue to meet FHA's no-nonsense underwriting standards. Lenders will be required to ensure borrowers have the capacity to repay their mortgages; show a reasonable credit history; employment history; and fully document and verify their incomes.

Like all FHA-insured loans, borrowers will be required to pay upfront and annual premiums on their loans, which directly contribute to the soundness of FHA's insurance fund and protect taxpayers. FHA will also be simultaneously updating the pricing policy for these premiums. The new policy will base premiums on the individual borrower's credit risk profile. More than 90 percent of FHA-backed loans are 30-year fixed rate mortgages. Homeowners currently using FHASecure are saving $400 a month on average compared to their previous subprime loans.

"More homeowners continue to turn to FHA to find mortgage terms they can afford. We're keeping families in their homes while doing what's in the best interest of future generations who will rely on the safety and soundness of FHA to put a roof over their heads. The modifications to the existing FHASecure product offer a prudent, yet appropriate, way to help more families refinance without putting the government or taxpayers at risk. Consistent with FHA's historical mission, the changes are designed to help FHA provide additional liquidity and stabilize local real estate markets."

Since September 2007, FHA has helped pump nearly $68 billion of much-needed mortgage activity into the housing market, $28.5 billion of which was through FHASecure. FHASecure has helped more than 150,000 homeowners who are current or past due on their loans avoid foreclosure, and, with today's announcement, it is expected to assist 500,000 total families by December 31, 2008.

Housing Crisis Over?

2008-05-07T13:48:59Z

The Housing Crisis Is Over

By CYRIL MOULLE-BERTEAUX
May 6, 2008; Page A23

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high - but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 - or seven months of supply - by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.

The Worst Is Behind Us

2008-05-07T13:45:45Z

'The Worst Is Behind Us': Paulson Joins Street Luminaries, Declares Victory

Posted May 07, 2008 11:28am EDT by Aaron Task in Newsmakers, Recession, Banking Related: UBS, FNM, LM, LAZ, MER, CFC, BSC

With Treasury Secretary Hank Paulson and Merrill's John Thain chiming in, there's now near unanimity of opinion on Wall Street: The worst of the credit crisis is over.

Such comments seem outrageous given the latest batch of scary headlines from UBS, Fannie Mae, Legg Mason, Lazard, et al. But hope springs eternal on Wall Street, and the reality is the crisis in the debt markets has eased since JPMorgan's Fed-engineered purchase of Bear Stearns, which Paulson called "an inflection point." (Critics have used similar terms, but with a far different meaning.)

Meanwhile, even Henry "Mr. Sunshine" Blodget is starting to come around to the idea that the housing market may be hitting bottom, thanks to an op-ed by Cyril Moulle-Berteaux, managing partner of Traxis Partners, in The Wall Street Journal.

In making the case for a housing-market bottom, Moulle-Berteaux notes house price affordability has improved dramatically and the inventory of new homes is falling. (The piece appeared prior to Wednesday's weak report on pending sales of existing homes for March.)

The fund manager makes a compelling case, but omits the key element of financing. While demand for housing remains fairly stable and mortgage rates are still historically low, even buyers with high credit scores and large down payments are reportedly struggling to secure as lenders like Countrywide and WaMu grapple with the bubble's aftermath.

10 Red Flags For Home Buyers

2008-05-05T15:53:56Z

RISMEDIA, May 5, 2008-The average home buyer views at least 10 homes over an eight week search so it isn't practical to get a professional inspection of every house they tour. FrontDoor.com, a new real estate website powered by HGTV, comes to the rescue pointing out things to look for in your own pre-inspection that will help identify potential problems before calling in the pros.

FrontDoor.com's Top 10 Red Flags for Home Buyers

1) Mass Exodus from the Neighborhood

Don't let a home's curb appeal keep you from glancing down the street. Are there several other homes for sale? Are nearby businesses boarded up or vandalized? Get the scoop from the neighbors. If everyone else wants to leave the street, maybe you should, too - before you're stuck with a bad investment.

2) Mediocre Maintenance

Three layers of roofing and gutters with plants growing in them are signs the owners aren't big on maintaining their home. What else did they neglect?

3) Foundation Failures

Check out the yard grading. If the yard slopes towards the house, it could cause water to run down the foundation walls or into the basement, which will be costly to repair. Scour the foundation for damage. Bulges or cracks bigger than 1/3 inch can mean the house has serious structural issues.

4) Bad Smells - Inside or Outside

Take a big whiff of the air inside and outside the house. Do you smell anything funky? If you can't smell anything but the huge baskets of potpourri all over the house, this could be a red flag.

5) Faulty or Old Wiring

While you're probably not an electrician, make sure all the switches and outlets in the house function properly. Flickering lights, circuits that don't work and warm or hot outlets or faceplates are all symptoms of wiring problems.

6) Fresh Paint... on One Wall

New paint can really spruce up drab walls, but it can also hide bigger problems, like water damage, mildew or mold. If the room smells strange or if you see stains or saggy walls or ceilings, have an inspector look for mold and leaks.

7) Locked Doors and Blockades

Ask about any rooms that are "off limits" during your home tour, and arrange to see them later if you're interested in the house.

8) Foggy or Non-Functioning Windows

Check for water in between double-paned windows and make sure all the windows are functional.

9) Structural Walls or Floors have been Removed

Sure you love the open floor plan, but was the house always open or did the homeowners renovate? If they removed a load-bearing wall without adjusting the framing, it can shift weight to other parts of the house. Hire a structural engineer if you think any renovations are questionable.

10) Bugs!

No one wants a house with a pest problem - be it roaches, mice or worst of all, termites. Be on the lookout for unwelcome creatures as you tour the house. Even if no foes pop out while you're there, consider a separate termite inspection if you're thinking of purchasing the property.

The Bottom Line

Always get a professional inspection for the house you choose to buy. Skipping a home inspection is not a good way to cut costs. You'll end up paying more in the long run when problems arise.

For more information, visit http://www.frontdoor.com/.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Great Efficiency Condo

2008-05-05T09:25:00Z

Seller wants an offer now! No down payment with FHA financing and Nehemiah for qualified buyers. Great 12th floor efficiency with built-in bookcases and views of courtyard & Greenbelt Park. Secure building offers 24-hour desk attendant Condo fee includes water, gas & electricity. Pool, sauna, exercise room and party room available. Convenience store on premises as well as Metro & UMCP shuttle bus. Potentially a great investment property and rental. PG6558516. Only 147K.

Fan Fare

2008-05-05T09:15:59Z

If you're looking to stay cool and save on energy bills this summer, look up. A good ceiling fan, when properly used and maintained, can help keep your cooling and heating costs down throughout the year.

To reap the maximum benefits - in comfort level and savings - it's important to make sure that ceiling fans are properly installed and that you use the right size and model for the room.

Consider ceiling fan blade spans, which range from 29 to 54 inches, and room size, and be sure that the fan is mounted in the middle of the room, at least 7 feet above the floor and 18 inches from the walls. Other performance factors to consider include the motor type and grade (performance, medium or economy), and the blades' pitch and material. The fans with the best blade and motor designs are most efficient and quieter as well. Look for models with the highest air flow efficiency, which is measured by cubic feet per minute per watt (CFM/watt) at each speed.

An Energy Star-rated fan is 50 percent more efficient than a conventional fan and can save $10 or more annually on utility bills. If this doesn't seem like much, consider the additional savings that come from adjusting the thermostat accordingly and keeping air conditioner (or heater) use to a minimum.

Ceiling fans keep people cool, not the spaces they're in, so be sure to turn off the fan when not in a room. In the summer, make sure the fan is moving in a counter-clockwise direction so that it produces the downward windchill effect; in the winter, reverse the direction and use the fan at a low speed to force the warm air near the ceiling up and then down along the walls and floor.

And don't forget about the lights. Most ceiling fans include some kind of light fixture, which is often used as the main light source in a room. Be sure to use an energy-efficient light kit and to turn it off when a room is empty.
Source: www.energystar.gov

Downpayment Assistance with The Nehemiah Program

2008-05-02T20:32:08Z

Thanks to The Nehemiah Program ^®, more than 250,000 individuals and families now own homes.

Let us help you achieve the American dream:

Gift funds up to 6% of the final contract sales towards your downpayment and/or closing costs
Gift funds for both first time and repeat homebuyers (Nehemiah charges a nominal processing fee that may be paid by the seller, homebuyer, or lender.)
Gift funds for both new construction and resale homes
No repayment of gift money
No income or asset limits
No geographical restrictions

If you are a qualified homebuyer using an eligible loan program, such as an FHA loan, The Nehemiah Program can help you become a homeowner!

By utilizing The Nehemiah Program in conjunction with FHA financing, qualified buyers could buy with mimimal out of pocket cash. A great program for first-time homebuyers looking to get into home ownership or those with limited cash resources

Have a question, please let me know.

Fed's interest rate cut could help ARM holders

2008-05-02T20:19:39Z

Fed's interest rate cut could help ARM holders

By Stephanie Armour and Sandra Block, USA TODAY The Federal Reserve's action on Wednesday was the latest in an interest-rate-cutting drive over eight months that's helped lower the yields that many adjustable-rate mortgages are tied to.

Thanks to the Fed's cuts, the rates to which those ARMs have been resetting have sometimes saved homeowners hundreds of dollars a month. For some struggling mortgage holders, the lower rates have helped stave off delinquencies or foreclosures.

RATE AX FALLS AGAIN: Fed makes a quarter-point cut

"This could be the difference between a person being current (on a mortgage) or delinquent," says Orawin Velz, senior research director at the Mortgage Bankers Association. "The risk of foreclosures due to resets has declined."

But Wednesday's cut might not bring any further relief for ARM holders, says Greg McBride, a senior analyst at Bankrate.com. The benchmark indexes for ARMs had already factored in Wednesday's Fed rate cut, he says. ARM holders, McBride says, "got the benefit back in March."

Still, the Fed's action, its seventh cut since September, could bring other benefits. The average rate on a home-equity line of credit fell to 5.7% last week from 7.3% in January, Bankrate.com says; the average on a home-equity loan was 7.73%. Those rates move in direct response to Fed cuts, so they could fall further this week, McBride says.

Other effects on consumers:

•Possible relief ahead for savers. As is usually true when the Fed cuts, savers with certificates of deposit will see lower rates, though their discomfort could end soon if the Fed halts its rate cutting. "We are at or near the bottom on CD yields," McBride says. "If the Fed moves to the sidelines, that will be the first good news savers have had in a long time."

Last week, the average one-year CD rate was 1.93%, Bankrate.com says. But to try to draw more deposits, some financial institutions are dangling much higher rates, McBride says, so savers should shop around.

•Some credit card holders win. Consumers with variable-rate credit cards could benefit, because those rates also tend to move in lockstep with the Fed, McBride says. But the lower rates will be restricted to those with top-notch credit. Saddled with losses from other consumer loans, banks have sharply raised rates for customers considered risky, even if they've paid their bills on time and have decent credit.

•Easing payments for some subprime borrowers. Many subprime loans are ARMs that impose much higher payments once they reset. Nearly 90% of subprime mortgages issued from 2004 to 2006 charge low rates that rise rapidly after a year or two, the Center for Responsible Lending says.

A majority of subprime mortgages are tied to the three-month LIBOR (London Interbank Offered Rate). That rate has fallen from 5.4% in July 2007 to 3% in April.

For many prime borrowers, too, Fed cuts have meant lower resets on their ARMs. Before the housing boom peaked in 2005, many buyers were able to buy homes by taking on ARMs that carried low payments that would escalate once the rates reset. And 2008 marks a peak when a huge chunk of those loans will reset; many loans that originated in 2006 reset this year.

As the Fed has cut rates, the rates on the indexes used to set rates on ARMs have also declined. The yield on the one-year Treasury - to which most prime ARMs are linked - fell from 5.7% in July 2007 to 5.2% last month. (Contributing to that decline was rising demand for Treasuries from investors seeking the safety of U.S.-backed securities.)

"The Fed rate cut has brought down short-term rates," says Lawrence Yun, chief economist at the National Association of Realtors. "Today's rate cut can marginally lower short-term rates and hence, ARM resets."

Brenda Sullivan's ARM will reset in June, and because of the Fed rate cuts, it will actually decrease from 4.75% to 4.25%. "I've been worried for the past year about how it would reset," says Sullivan, 44, of Poway, Calif., who works for a non-profit.

"My payment will decrease almost $200 a month," she says, "which, given the cost increases of so many other fixed expenses, will be very welcome."

If the Fed hadn't cut short-term rates, a homeowner with a subprime mortgage could have seen monthly loan payments climb by up to $1,000, according to the MBA. Now, with the cuts, those payments may rise only about $100, the MBA concluded.

Without any Fed rate cuts, "It would have been terrible," says Brian Bethune, an economist at Global Insights. "You'd have a much more severe downturn. There has been no question since last summer that there's been a reduction in benchmark rates."

Renovation Financing for REO Homes

2008-05-02T13:57:30Z

As REO agents, we see hundreds of homes that need repairs or improvements. When homes go through the foreclosure process, most of the owners do not have the funds to cover normal maintenance needs or carpet and appliance replacements. These properties can present wonderful purchase opportunities. Rather than purchase a home that has been fixed up by the seller with different tastes in paint color, carpet and appliance selection, why not purchase a REO home that needs some work and fix it up just the way you want it for your own comfort and pleasure. Financing lender owned home with deferred maintenance is easier when the lender has loan products that will cover needed renovation financing. The following details the requirements and use of the FHA Streamlined 203 (k) product that can meet the needs of many purchasers. We have found that most of the time REO property repairs that are needed amount to a cost less than $35,000 if the buyer is diligent with planning. Not all lenders offer this type of financing, so if you need this type of assistance ask your REALTOR for a lender referral. FHA Streamlined 203(k)

Limited Repair Program

FHA's Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.

MORTGAGEE LETTER 2005-50

SUBJECT: Enhancements to "Streamlined (k)" Limited Repair Program

Mortgagee Letter 2005-19 (ML 05-19) announced the Streamlined (k) Limited Repair Program to augment FHA's existing Section 203(k) rehabilitation program for less extensive repairs and improvement. This Mortgagee Letter replaces in its entirety ML 05-19 and is designed to make the program more reflective of the desire of many homebuyers and existing homeowners to improve their homes including making them more energy efficient.

This Mortgagee Letter contains important changes to the Streamlined (k) program described in Mortgagee Letter 2005-19, including:

· Additional eligible work items, including lead-based paint stabilization.

· Increased maximum mortgage amount for repair or rehabilitation costs from $15,000 to $35,000.

· Elimination of minimum repair cost threshold.

Like the regular Section 203(k) rehabilitation loan program, Streamlined (k) is available for use in conjunction with other Departmental programs and activities. This Mortgagee Letter introduces some procedural requirements applicable only to Streamlined (k) - including:

· The availability of Streamlined (k) to pay for lead-based paint stabilization costs above and beyond that paid for by HUD when it sells real estate owned (REO).

· The option (rather than a requirement) for the mortgagee to establish a contingency reserve of rehabilitation loan proceeds.

In addition, like the regular Section 203(k) program, Streamlined (k) is available:

· To augment an FHA Energy Efficient Mortgage (EEM),

· To insure the mortgage on a single-family housing unit sold from the HUD's REO inventory

· To insure a mortgage that covers both repairs costs and the refinance of an existing mortgage.

What improvements are eligible under the new Streamlined (k) program?

The Streamlined (k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. The Streamlined (k) program includes the discretionary improvements and/or repairs shown below:

· Repair/Replacement of roofs, gutters and downspouts

· Repair/Replacement/upgrade of existing HVAC systems

· Repair/Replacement/upgrade of plumbing and electrical systems

· Repair/Replacement of flooring

· Minor remodeling, such as kitchens, which does not involve structural repairs

· Painting, both exterior and interior

· Weatherization, including storm windows and doors, insulation, weather stripping, etc.

· Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens

· Accessibility improvements for persons with disabilities

· Lead-based paint stabilization or abatement of lead-based paint hazards

· Repair/replace/add exterior decks, patios, porches

· Basement finishing and remodeling, which does not involve structural repairs

· Basement waterproofing

· Window and door replacements and exterior wall re-siding

· Septic system and/or well repair or replacement

What are the minimum and maximum amounts for repair costs under this program?

Given the need for homeowners to make minor repairs without exhausting personal savings, and in consideration of the increasing cost of materials, the minimum repair cost of $5,000 is eliminated and the ceiling is now raised to $35,000. This revised maximum repair/rehabilitation amount recognizes the cost of making older homes more energy efficient. Note that as described below, when the repairs exceed $15,000, the mortgagee must perform or obtain an inspection to determine that all listed repairs were completed.

Can this program be used for repairs and improvements on purchases of HUD Homes?

Like the regular Section 203(k) program, Streamlined (k) may be used for single-family housing sold by HUD. REO properties that have been designated by FHA's Management and Marketing contractor (M&M) as "insurable" with repair escrow ($5,000 or less in required repairs) or "uninsurable" (with more than $5,000 but no more than $35,000 in required repairs) are eligible for the Streamlined (k) program provided that the repairs qualify as eligible work items outlined in this Mortgagee Letter.

What if the REO property requires lead-based paint stabilization?

The Streamlined (k) program may be used for the financing of REO purchases where a pre-1978 property has been determined to contain lead-based paint and the M&M Contractor has completed a stabilization plan and cost estimate to stabilize (mitigate) the deteriorated paint. The purchaser must sign a 203(k) rehabilitation financing lead agreement requiring that a clearance examination and report be included in the work write-up and conducted before release of the final construction disbursement and before occupancy. The credit from HUD, received at sales closing by the purchaser, associated with the lead-based paint stabilization plan is not included in the $35,000 Streamlined (k) limit. The Streamlined (k) program may be used for all eligible repair items as shown above, including the cost of lead-based paint stabilization not paid for by HUD when it sells a property requiring lead-based paint stabilization. A state- or Environmental Protection Agency (EPA) certified lead-based paint inspector, certified risk assessor or sampling technician, must perform the clearance examination.

When the Department sells a single-family REO property, the M&M Contractor determines whether repairs are necessary to stabilize any lead-based paint. HUD's regulations for pre-1978 housing require the stabilization of paint except for paint determined not to be lead-based paint. HUD may reduce the sales price by the amount of a credit equal to the Department's contribution toward the cost of lead-based paint stabilization. Any lead-based paint stabilization costs in excess of this credit become the responsibility of the purchaser.

Can the Streamlined (k) program be used for refinancing the mortgage?

The Streamlined (k) program is also available for mortgage refinance transactions including those where the property is owned free-and clear. Only credit-qualifying "no cash out" refinance transactions with an appraisal are eligible for the Streamlined (k) program. The form HUD-92700 provides instructions for calculating the maximum mortgage permitted for Streamlined (k) loans for purchase and refinance transactions.

If the borrower has owned the property for less than a year, the acquisition cost must be used to determine the maximum mortgage amount. The requirement to use the lowest sales price within the last year does not apply to the Streamlined (k) program.

What are the appraisal requirements under the Streamlined (k) program?

The Streamlined (k) program may be used for discretionary repairs and/or improvements that may not have been identified in the course of a pre-purchase inspection or appraisal. The mortgagee must provide the appraiser with information regarding the proposed rehabilitation or improvements and all cost estimates so that an after-improved value can be estimated. A description of the proposed repairs and/or improvement must be included in the appraisal report as well as the contractor's cost estimate. The appraiser is to indicate in the reconciliation section of the appraisal report an after-improved value subject to completion of the proposed repairs and/or improvements.

What are the mortgagee's requirements for examining the contractor bids? For paying the contractor prior to beginning construction? For inspections of the work?

· Contractor bids: While mortgagees are not contractors, participation in this program requires that they examine the contractor's bid(s) and determine that they fall within the usual and customary range for similar work. Mortgagees must also ensure that the selected contractor(s) meet all jurisdictional licensing and bonding requirements.

· Payments in advance of construction: The mortgagee-at its discretion-may provide the contractor with up to 50 percent of the estimated cost of any work item prior to beginning construction. Such payments should only be made where the mortgagee is satisfied with the reputation of the contractor(s) and the contractor is not willing or able to defer receipt of payment until completion of the work or the payment represents the cost of materials incurred prior to construction.

· Payments for Inspections:

o For repair costs not exceeding $15,000, the mortgagee is not required to perform, or have others perform, inspections of the completed work. However, the mortgagee may choose to obtain or perform inspections if it believes such actions are necessary for program compliance and/or risk mitigation. Mortgagees may also ensure that the repairs and/or improvements have been completed by obtaining contractor's receipts or by a signed Mortgagor's Letter of Completion. If the mortgagee determines that an inspection(s) by a third party is necessary to ensure proper completion of the proposed repair or improvement item, the mortgagee may charge the borrower for the costs of no more than two inspections per each contractor.

o For repairs in excess of $15,000, the mortgagee must perform or obtain an inspection of the completed work by a third party.

What are the mortgagor's requirements for selecting the contractor? And what are the mortgagee's requirements for review of the contractor and the rehabilitation proposal?

The mortgagor must use one or more contractors to complete the repairs. "Self-help" arrangements, in which the mortgagor performs the work, are not to be approved unless the mortgagor can sufficiently demonstrate that he or she has the necessary expertise and experience to perform the work competently (e.g., mortgagor is an electrician and will perform electrical repairs/upgrades to the property).

The mortgagor will select the contractor(s) who will provide estimates for work to be done. The mortgagee reviews the mortgagor's proposed work plan and cost estimates to ensure the planned work meets all program and repair recommendations as noted on the appraisal report. The mortgagor must provide the mortgagee with a written cost estimate(s) and references from a duly licensed and bonded contractor(s) for each specialized repair or improvement. If "self-help" arrangements are utilized, the mortgagor must provide written estimates from the suppliers of the materials. Those repairs and improvements must meet any local codes and ordinances and the mortgagor and/or contractor must obtain all required permits prior to the commencement of work.

The cost estimate(s) must clearly state the nature and type of repair and the cost for completion of the work item and must be made even if the mortgagor is performing some or all of the work under a self-help arrangement. The mortgagee must review the contractor's credentials, work experience and client references and may require the mortgagor to provide additional cost estimates if necessary. After review, the selected contractor(s) must agree in writing to complete the work for the amount of the cost estimate and within the allotted time frame. A copy of the contractor's cost estimate(s) and the Homeowner/Contractor Agreement(s) must be placed in the insuring binder. The contractor must finish the work in accordance with the written estimate and Homeowner/Contractor Agreement and any approved change order. As in the regular 203(k) program, the Rehabilitation Construction Period begins when the mortgage loan is closed.

What are the mortgagee's requirements for paying contractors?

No more than two payments may be made to each contractor, or to the mortgagor if the mortgagor is performing the work under a self-help arrangement. The first payment is intended to defray material costs and shall not be more than 50% of the estimated costs of all repairs/improvements. When permits are required, those fees may be reimbursed to the contractor at closing. The final payment to the contractor will be made following completion of all work and release of any and all liens arising out of the contract or submission of receipts or other evidence of payment covering all subcontractors or suppliers who could file a legal claim. When necessary, the mortgagee may arrange a payment schedule, not to exceed two (2) releases, per specialized contractor (an initial release plus a final release.) Mortgagees are to issue payments solely to the contractor, except if the mortgagor is performing the work under a self-help arrangement, in which case the mortgagor may be reimbursed for materials purchased in accordance with the previously obtained estimates; the mortgagor may not be compensated for his or her labor.

To eliminate the need and cost for an inspection of the completed repair(s) or improvement(s) when not exceeding $15,000, the mortgagee may accept receipts or proof of completion of the work to the homeowner's satisfaction from the contractor. Before a final release is made, the mortgagor must sign a statement acknowledging that the work has been completed in a professional and satisfactory manner.

May the mortgagee establish a Contingency Reserve?

The Streamlined (k) program does not mandate a contingency reserve be established. However, at the mortgagee's discretion a contingency reserve account may be set up for administering the loan. Funds held back in contingency reserve must be used solely to pay for the proposed repairs or improvements and any unforeseen items related to these repair items. Any unspent funds remaining after the final work item payment(s) is made, must be applied to the mortgage principal.

Is there a maximum mortgage amount worksheet that must be used?

Form HUD-92700, 203(k) Maximum Mortgage Worksheet must be used to calculate the mortgage amount. Also, the appraiser must provide an after-improved value since 110% of that amount is used in calculating the maximum mortgage. Architectural and consultant fees, line items 6 and 7 of Section B of the worksheet are not applicable to the Streamlined (k) program. For Item 3 of Section D, please refer to handbook HUD-4155.1 REV-5, paragraph 1-7 which provides the various maximum loan-to-value ratios.

Expenses that may be included in the total amount of the improvements, not to exceed the $35,000 limit, are inspection fees, building and other permits, the supplemental origination fee, title update costs and the amount of any contingency reserve required by the mortgagee.

Can we combine the Streamlined (k) with an Energy Efficient Mortgage (EEM)?

The EEM program, as described in ML 05-21, may be used in conjunction with the Streamlined (k) program. The amounts permissible under the EEM program-as well as the qualifying requirements-are in addition to those available under the Streamlined (k) program and, thus, combined may exceed the $35,000 Streamlined (k) repair cost limit. Both the cost of EEM improvements as well as weatherization items (not to exceed $2,000) may be added to the total FHA loan amount.

What are the "closeout requirements" under the Streamlined (k) program?

The mortgagee electronically certifies the closeout via the FHA Connection and is not required to forward the closeout documents to FHA. As with all FHA case binders, the originator must retain the file, either in hard copy or electronic format, for two years following endorsement of the mortgage. Proper close-out means that the mortgagee has certified that it has reviewed and verified for accuracy of the following without limitations: mortgagor's acknowledgement of satisfactory completion, evidence of release of lien(s), mortgagee's inspection report(s), change orders, mortgagee accounting of the escrow funds, and record of disbursements.

Are there specific data entry requirements under the Streamlined (k) program?

The mortgagee must enter "203KS" in the 203(k) Consultant ID field in the

Case Number Assignment Screen (and the Insurance Application Screen) to identify the Streamlined (k) product and enter the amount of the repairs in the Repair Escrow Amount field in the Insurance Application Screen. In the event that the mortgagee had originally begun processing the case as a purchase mortgage without repairs, the mortgagee should update the existing case data in the Case Number Assignment screen, changing the ADP Code to a valid 203(k) ADP Code and the Construction Code to Substantial Rehabilitation.

If the Streamlined (k) mortgage is for a refinance transaction, please enter "substantial rehabilitation" in the drop down screen labeled "Construction Code" and "Not Streamlined" (the refinance type) in the drop down screen labeled "All Refinances" in the Case Number Assignment Screen in FHA Connection.

What items remain ineligible for the Streamlined (k) program?

Properties that require the following work items are not eligible for financing under the Streamlined (k):

· Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall;

· New construction (including room additions);

· Repair of structural damage;

· Repairs requiring detailed drawings or architectural exhibits;

· Landscaping or similar site amenity improvements;

· Any repair or improvement requiring a work schedule longer than six (6) months; or

· Rehabilitation activities that require more than two (2) payments per specialized contractor.

Mortgagors may not use the Streamlined (k) program to finance any required repairs arising from the appraisal that do not appear on the list of Streamlined (k) Eligible Work Items or that would:

· Necessitate a "consultant" to develop a "Specification of Repairs/Work Write-Up";

· Require plans or architectural exhibits;

· Require a plan reviewer;

· Require more than six months to complete;

· Result in work not starting within 30 days after loan closing; or

· Cause the mortgagor to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted. (FHA anticipates that, in a typical case, the mortgagor would be able to occupy the property after mortgage loan closing).

Free Grants from CountryWide Home Loans

2008-05-01T20:28:45Z

Countrywide has a FREE (and I really mean free, no strings attached, no higher rates to cover, no paperwork) Grant Program for buyers that is intended to foster homeownership and community development. If the property is located in a low or moderate income tract, or if the borrowers make less money than the average income for the county's income tract, we provide the grant.

We qualify people for the grant either based on PROPERTY LOCATION or BORROWER's INCOME.

$1500 Grant - if the property is in a moderate tract or buyer makes less than 74K in DC or VA or 80K in MD
$3000 Grant - if in a low income tract or buyer makes less than 46K in DC or VA or less than 50K in MD

Here's a list of qualified counties:

Washington-Arlingto n-Alexandria, DC-VA-MD-WV

Arlington
Clarke
Fauquier
Fairfax
Jefferson
Loudoun

Prince William
Spotsylvania
Stafford
Warren

Bethesda-Gaithersbu rg-Frederick, MD

Calvert
Charles
Frederick
Montgomery
Prince George's

Feel free to contact me for more infomation.