Let The US Ride Over The Fiscal Cliff | Waccabuc Real Estate
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5 real estate tasks best done early | Waccabuc NY Real Estate
For the past several years, my cousin Melanie has done my entire family a fantastic favor: She holds Thanksgiving one week early, on the weekend preceding the actual holiday.
What this means is that what is normally a stress-filled, highly dramatic odyssey for many along holiday-impacted freeways, railways and airways has become a highly attended, drama-free family event. (OK, maybe not drama-free, but as low-drama as a family affair can get!)
Instead of many couples having to alternate between his family and hers, or negotiate which side a blended family’s kids will and won’t be able to see for the holiday, everyone can basically show up — easy, peasy, lemon squeezy. (Thanks, Mel!)
While reflecting with gratitude on my quick-and-easy drive home after this year’s early bird Turkey Day, my mind gravitated, as it is wont to do, to real estate. While I’m a big proponent of avoiding premature real estate moves, there are a number of tasks that are best done before you think they need to be. These are things that tend to take longer or often turn out to be more complex than people plan for.
1. Check your credit. Everyone knows that you should check your credit, or have your mortgage broker do it, some time before you get ready to start house hunting. What people fail to factor in are the real-life turnaround times on rehabbing your credit in the event there are errors, fraudulent entries, balances you need to bring down, or trade lines (credit accounts) you need to build up in order to qualify for a home loan.
For the most part, erroneous entries should be removed/removable in relatively short order, but on occasion, something like an account that was truly, but fraudulently, opened by a relative in the borrower’s name can take weeks or months to resolve and remove. Many wannabe buyers who consider themselves uber-responsible, financially, may also be surprised to find that lenders require that they have some demonstrable history of responsibly using credit. In some cases, they will actually need to open and maintain one or more credit accounts in good standing for a short while to qualify.
2. Change your spending habits. The most-overlooked benefit of the tight lending guidelines in place during the past few years is that they motivated mortgage applicants to buckle down, get out of debt and be meticulous about their credit. In the process, people actually rehabbed their spending habits and financial behaviors way in advance of buying a home, creating a level of financial discipline that is freeing, enjoyable and stands them in good stead as homeowners over the long term.
As loan guidelines loosen up a bit, it’s still advisable for buyers-to-be to get serious about the whole picture of their finances as soon as they make the decision that they want to buy a home down the road, and clean up their spending, saving, debting and other money matters, stat.
3. Saving. I’ve seen buyers save up precisely what they need to put down on a home and pay their closing costs, not realizing that they might actually need to demonstrate several months’ worth of payments that will still be in “reserve” in their savings or investment accounts after they close escrow and deplete their cash-to-close savings.
Also, buyers who start saving late often fail to calculate for the very common tendency buyers have to increase their search price range over time, and for the costs of the fixes and furnishings they’ll want when they move in.
These miscalculations tend to result in buyers trying to get unrealistic deals on the first few homes they like, losing a few before they get real about what can truly be had for their dollar in their market.
4. Apply for tax reassessment. Don’t not apply to have your taxes reassessed because the deadline has already passed for the year. Many who hold off because they missed the deadline actually end up losing track of this to-do list item and forget to come back around to it. If you’ve missed the deadline to apply to have your home’s assessed value reduced for property tax purposes, just apply anyway — early for next year.
5. Talk to a real estate or mortgage broker. Don’t delay. Real estate and mortgage brokers are a wealth of information that has the power to take your mental estimations of what will be involved and required to buy or refi or sell into the realm of a reality-based action plan. And they are ecstatic to get calls from prospective clients (that’s you) months, even years, in advance, as it makes their job, once it’s time to do it, much smoother and simpler.
Talking to a pro before you think you need to can be an eye-opening course-corrector in terms of understanding things like how much you need to put down, any work you need to do to your credit, what you can expect your home to go for or cost you, and many other expectation-managing, plan-of-action-driving essentials.
via inman.com
Fed Gov. pushes separate lending rules for community banks | Waccabuc NY Homes
The threat of losing community banks in the home lending space, prompted Federal Reserve Board Governor Elizabeth Duke to propose the creation of a separate regulatory regime for smaller banks this week.
While speaking to the Community Bankers Symposium in Chicago, Duke said one-size-fits-all regulatory structures ignore the unique burdens community banks face when dealing with Dodd-Frank Act rules and Basel III capital requirements.
“Balancing the cost of regulation that is prescriptive with respect to underwriting, loan structure, and operating procedures against the lack of evidence that balance sheet lending by community banks created significant problems, I think an argument can be made that it is appropriate to establish a separate, simpler regulatory structure to cover such lending,” Duke said during her speech.
Duke is one of the first Fed Governors to go on the record, saying she believes regulation is starting to reach a point where its benefits are now outweighed by the risks of overburdening community banks and forcing them out of home lending altogether.
For starters, higher-interest rates and balloon payments have become targets of lending regulations tied to Dodd-Frank and the Consumer Financial Protection Bureau. But community banks have successfully used these products time and time again in the past.
Unlike subprime lenders, which abused these tools to drive volume and then sold them through the securitization channel, community banks generally hold the risk on their balance sheets, Duke asserted.
“They use higher interest rates to compensate for the lack of liquidity in these loans or to cover higher processing costs because community banks lack economies of scale, and they use balloon payments as a simple way to limit their interest-rate risk,” Duke said.
Concerns over new capital requirements and additional operating procedures could push community banks away altogether, Duke said. Â This is a problem when considering banks and credit unions together represented 25% of all originations in the U.S. marketplace last year.
Rather than imposing the same regulatory structure on all institutions, Duke proposes the creation of a separate regulatory regime that possesses the skills to evaluate smaller banks on the disclosures they make and through on-site bank supervision.
via housingwire.com
7 steps to retexturing drywall | Waccabuc NY Real Estate
It’s a pretty common scenario on the home improvement scene: You’ve removed some wallpaper or wainscoting, or you’ve relocated a door or a window, or maybe you’ve just repaired same drywall damage caused by one of life’s little mishaps. No matter the origin, you end up with some drywall that doesn’t have any texture on it. And now, you’re at a loss as to exactly how you’re going to get that flat, unadorned piece of drywall to blend in with the texture on the rest of the wall that’s surrounding it.
In truth, matching drywall texture is always a tricky process unless you’re experienced at it. Even the pros can have a tough time with it. You first have the issue of matching the existing texture for the main body of the patch, and then feathering the new texture out onto the old in ever-decreasing amounts so that the transition between new and old is seamless. It’s difficult to come up a perfect match, and the larger the area is and the more centered it is on the wall or ceiling, the more likely it is that you’re going to see it.
The other problem you’re likely to run into is what’s known as “flashing.” After the patch is done and painted, the new texture will tend to absorb paint differently than the old texture, due to differences in previous paint, materials and other factors. The result can be a difference in sheen that also contributes to the patched area standing out from the rest of the wall, even if the texture matches. And the more sheen the new paint has — satin or semigloss as opposed to flat, for example — the worse the problem can be.
Start fresh
For all those reasons, especially if you’re not an experienced drywall texture matcher, your best bet is to simply start over with a fresh, flat wall. That doesn’t mean that you need to tear off all the drywall and replace it. It just means that you want to get rid of the old texture.
Tarp the floor in front of the wall with plastic sheeting. Don’t use canvas painter’s tarps, as the dust is hard to get back out of them. Wear a respirator to prevent breathing in the dust from the sanding and scraping operations, and always wear eye protection.
Sand or scrape the old texture on the wall to remove the majority of it. You don’t need to get rid of all of it — in fact, you want to be careful not to sand too deep and cut into the paper cover on the drywall. What you’re looking to do is knock down all of the high spots. Brush the wall down with a dry paintbrush or soft broom to get the bulk of the dust off it. Roll up the plastic sheeting to contain all the dust and dispose of the plastic, then put down new sheeting for the next operation.
The next step is to apply a light skim coat of drywall joint compound over the entire wall. You can use all-purpose compound for this, but topping compound will go on smoother and sand easier. For best results, thin the joint compound with a little water first to give it a smoother, creamier consistency that will allow it to trowel on easier. Use a 12-inch or larger drywall knife, and spread it onto the wall in broad strokes. The goal is to apply a thin, uniform coat over the entire wall, with as few ridges from the trowel as possible. Some ridges are going to be inevitable, and don’t worry about them — they’ll sand off later. But the fewer the better, since that’ll save you some sanding labor.
Allow the compound to dry completely. It will become lighter as it dries — how long it takes depends on temperature, humidity, and the thickness of the coat — but be sure that the entire wall is completely dry before proceeding. Next, sand the wall again lightly to remove any ridges, and then check your work. Use additional compound to fill in any low spots or flaws, allow the additional compound to dry, then lightly sand again. Thoroughly brush the wall down again, and you now have a smooth, uniform surface to work with, eliminating the need to try to match textures.
You’ll now want to seal the wall, using a drywall sealer or other primer. This will help to prevent uneven absorption of the paint. After the primer is dry, apply the texture of your choice to the entire wall. When the texture is dry, prime everything a second time, which will seal the texture itself. This step is especially important if you’re using satin or semigloss paint. If you’ll be painting the wall with a dark color, have your paint store tint the primer for you, which will give you a more uniform finish color. Finally, paint the wall.
via inman.com
Right away, housing challenges for Obama | Waccabuc NY Real Estate
President Barack Obama image via barackobama.com.
Now that President Barack Obama has won re-election, there are several housing-related challenges staring the federal government square in the face. These are some of the decisions that will have to be made in the coming weeks:
1. The “fiscal cliff”: The fiscal cliff is a series of tax increases and spending cuts that will go into effect unless U.S. lawmakers come up with an alternative plan to reduce the federal deficit by $1.2 trillion as required by the Budget Control Act of 2011. The spending cuts, known as “sequestrations,” would automatically go into effect on Jan. 2 and be split evenly between defense spending and domestic spending.
The credit rating agency Standard & Poor’s has said there’s a 20 to 25 percent chance the U.S. economy will go into a double-dip recession should Congress fail to reach an agreement avoiding the fiscal cliff. S&P’s deputy chief economist, Beth Ann Bovino, warned that such a scenario would cause home prices, currently at a bottom of 31 percent below their mid-2006 peak, to tumble to a record low of 40 percent below peak.
In a report released in September, the Obama administration called sequestration “bad policy” that “would be deeply destructive to national security, domestic investments, and core government functions.” The president has put forward two deficit reduction proposals that included both spending cuts and revenue increases, but has run into opposition from some members of Congress who oppose tax increases and want to reduce the deficit solely through spending cuts, the report said.
Given that Congress remains divided after the election — Republicans retained control of the U.S. House of Representatives and Democrats retained control of the U.S. Senate — whether lawmakers can come to an agreement over the coming weeks remains a question.
2. The mortgage interest deduction (MID): Revamping the mortgage interest deduction is one of the solutions proposed to head off the fiscal cliff and could be part of a broader plan to streamline the tax code by eliminating some loopholes and deductions. Some experts have said the MID, which costs the government about $90 billion a year, is unlikely to survive in its present form, though what would take its place, if anything, is unclear.
Two years ago, a bipartisan deficit reduction commission recommended scaling back the MID, which is currently capped at mortgages worth up to $1 million for both principal and second homes and home equity debt up to $100,000. The deduction is available only to taxpayers who itemize.
The commission, often referred to as Simpson-Bowles, proposed turning the deduction into a 12 percent nonrefundable tax credit available to all taxpayers, capping eligibility to mortgages worth up to $500,000, and eliminating the deduction on interest from second homes and home equity debt.
The National Association of Realtors, which has consistently defended the mortgage interest deduction in its current form, was highly critical of the recommendation, claiming any changes to the MID could depreciate home prices by up to 15 percent, and promising to “remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest.”
3. Mortgage debt forgiveness: Another homeowner tax break may be on the table in fiscal negotiations: the Mortgage Debt Relief Act of 2007, which is set to expire at the end of this year. The law exempts up to $2 million in mortgage debt forgiven by a lender in a short sale, loan modification or foreclosure from federal taxation. The law applies only to mortgage debt incurred to fund the purchase or improvement of a principal residence.
Banks have relied heavily on short sales to meet their obligations under the terms of a $25 billion settlement with the nation’s five largest mortgage servicers over so-called “robo-signing” practices. If the debt relief law lapses, however, homeowners would have less of an incentive to pursue short sales because forgiven mortgage debt could be considered taxable income.
4. Qualified mortgages: Now that we know the Dodd-Frank Wall Street Reform and Consumer Protection Act is here to stay — presidential candidate Mitt Romney had vowed to repeal it — there are two controversial rules contained within the law that are waiting to be finalized: the qualified mortgage (QM) and the qualified residential mortgage (QRM).
QM would establish standards for borrowers’ “ability to pay” the mortgages they seek, while QRM would establish certain baseline standards for safe underwriting and require lenders to retain a 5 percent minimum ongoing stake in any loans they originate that don’t meet QRM requirements.
The regulations are under the aegis of the Consumer Financial Protection Bureau (CFPB), which postponed action on both rules in June after protests from Realtors, builders, banks, unions and consumer groups. Under Dodd-Frank, the CFPB is required to issue the qualified mortgage rule by Jan. 21, 2013.
via inman.com
How Much House Can You Get for $400,000? | Waccabuc Realtor
via zillow.com
Great Recession creates 4.8 million renters | Waccabuc NY Real Estate
The United States added 4.8 million renters in the past six years while losing 1.7 million owner households as the dynamics of the real estate space changed in the wake of the 2008 financial meltdown, according to the Mortgage Bankers Association.
The market experienced additional changes in the first nine months of 2012, creating unexpected outcomes in the housing finance sector, prompting the MBA to alter its forecast for 2012.
In brief, the MBA revised its estimate for 2012 mortgage originations to $1.7 trillion, up from $1.4 trillion a year earlier. Still, the trade group predicts total originations will taper off to $1.3 trillion in 2013, eventually hitting $1.1 trillion in 2014. However, mortgage rates are expected to hover below 4% through the mid-part of next year.
The MBA expects gross domestic product will inch up from 1.6% in 2012 to 2% in 2013. Meanwhile, the forecast suggests existing home sales will increase from 4.6 million in 2012 to approximately 4.78 million next year.
Still, economic growth is contingent on government tax policies and at least a temporary avoidance of the fiscal cliff in early 2013.
“The tax increase in particular would be devastating to economic growth,” said MBA chief economist Jay Brinkmann. “We believe that the entire package of tax increases and spending cuts, if left unaltered, would cut 3.5 to 4 percentage points from our growth forecast.”
Another outlier is the final definition of the qualified mortgage rule from the Consumer Financial Protection Bureau, which will define what type of mortgage qualifies as safe from repurchase risk in cases of default. It’s unknown whether the final rule from CFPB, which is due out in January, will contain a safe harbor provision to protect lenders from buy back risk if they follow the guidelines.
These forecasts are based on the idea that QM comes in with a safe harbor and legislatures get past the fiscal cliff without dramatic spending and tax changes, said Mike Fratantoni, the MBA vice president of research and economics.
If the nation moves past the QM rule and the fiscal cliff without the introduction of new risks, the MBA expects moderate economic growth and an uptick in home prices annually from roughly 1.2% in 2012 to 3.5% in 2013.
via housingwire.com
Waccabuc NY Real Estate | Mortgage delinquencies spike in September, report says
While the nation’s foreclosure inventory continues to shrink, new delinquencies spiked sharply during September 2012, new data released Monday afternoon showed.
According to Lender Processing Services ($28.51 0%), the total U.S. mortgage delinquency rate — loans 30-plus days past due, but not in foreclosure — surged upward by 7.72%, reaching 7.4% in September versus the 6.87% reported one month earlier.
Despite the spike, September 2012 delinquency totals still remain below levels seen last year, LPS said.
While new delinquencies spiked in September, the volume of properties in foreclosure continues to shrink as banks and other financial instutions continue to work through a backlog of distressed real estate that remains well above historical levels of half of a percent or so, according to most industry experts.
LPS said that the nation’s foreclosure pre-sale inventory rate fell to 3.87% during September, down 4.05% from one month earlier and down 7.37% less than one year ago.
Florida, Mississippi, New Jersey, Nevada, and Louisiana represented the states with the highest percentage of noncurrent loans, according to the data report; Lousiana replaced New York, which had been in the top five for most of this year.
Despite the drop in foreclosure inventory, the surge in new delinquencies has led to something not seen this year until now: an increase in the amount of distressed properties, defined as properties 30 or more days delinquent or in foreclosure.
According to LPS, there were 5.45 million properties in distress during August 2012; for September, thanks to increasing delinquencies, that number now equals 5.64 million.
via housingwire.com
10 Strategies To Increase Your Credit Score In 24 Hours | Waccabuc Realtor
When you are in a hurry to increase your credit score there is 10 things that you can do with in 24 hours that help immensly. Here are the 10 things to increase your score:
1. Order your credit reports online for each of the top three credit reporting agencies individually. Even though it may be cheaper to order a three in one report offered by one of the Agencies, ordering individual credit reports will grant you the access to initiate a dispute online with each agency. You can’t improve your score in 24 hours unless you know what it is! Knowing where to start is important.
2. Call your credit card companies and request to increase your credit lines. Increasing credit lines will improve your outstanding debt to-available-credit ratio amounts on your revolving accounts, and can improve your credit by as much as 60 points.
3. Rearrange your debt so that every one of your credit cards have the lowest possible outstanding debt-to-available-credit ratio. A ratio of 25%-35% is ideal.
4. If you have the ability, pay down the cards until that ratio is recognized on your credit report.
5. Borrow money to pay down your debts referenced on your credit reports from a lender that doesn’t report, such as friends and family. Unreported debts will assist you to decrease those debt to available credit ratios and boost your score. Your private lenders may even want lesser interest than you are paying on the cards! While this business deal doesn’t appear on your credit report, it’s still debt, so use it wisely. You don’t want horrible Thanksgiving dinners after failure to pay on a loan made by a family relative.
6. If you have freshly paid down or paid off debts and they don’t show corrected on the report, fax that information to the credit agencies. Providing them with the verification of payoff is much faster then initiating a dispute of the account information. In many cases, the agency won’t verify the payoff with the lender, and accept your proof as correct.
7. Begin your dispute approach online with each service. The online dispute will suspend the negative derogatory items from your credit report for the short term, increasing your score. When the dispute is resolved your score will change accordingly, but for the period in-between you get a momentary reprieve from the effects of the negative derogatory information.
8. If you must choose one credit score to work on, spotlight your focus on the middle score. For most major purchases such as real estate or a vehicle, the lender will pull all three credit scores and use the middle score, (all three scores in one is called the tri-merge score) so this is the one that matters the most. If you improve your middle score over your highest score, the formerly top score is the one that now matters most.
9. Have a close friend or family member with a solid credit history add you to their card. You don’t even need to have the possession of an actual card, but by adding you to the account, you get the benefit of their long credit history. This doesn’t hurt their credit history at all. A Credit report is a compilation of accounts with your social security number attached to them. When your social security number was added to their account, you agreed to be responsible for it, and their years of good credit history now show up on your credit report. The individual person who lent you their excellent credit didn’t add their social security number to any of your accounts with the negative or derogatory history, so there is no way for the bad information to appear on their credit report.
10. If you have recent collection account reporting to your credit file that haven’t been paid? If so call the collection agency and ask, “do you delete?” About half of all collection agencies will take away the item from your credit report if you pay it in full, or a generous portion of the debt. Sometimes the collection agency can remove the debt from the credit bureaus instantaneously.
There are other things that can help you improve your credit score that will take much longer to implement. I think this list will suffice for now because these things can be done in 24 hours.
‘Obamacare’ individual mandate has no teeth | Waccabuc NY Real Estate
If, like most real estate professionals, you’re self-employed, you have to obtain your own health insurance unless you can obtain coverage through a spouse. Lots of self-employed people have no health coverage because they can’t afford it.
Starting in 2014, these people will run up against the most controversial portion of the Patient Protection and Affordable Care Act (“Obamacare”) — the individual health insurance mandate. This is the requirement that most legal residents of the United States obtain at least minimal health insurance coverage by 2014.
The word “mandate” sounds pretty serious. But what will actually happen if you don’t obtain health insurance by 2014? Surprisingly little.
The health care law says that individuals who can afford health insurance coverage and are not otherwise exempt must purchase minimum essential health coverage or pay a penalty to the IRS with their tax returns. The assessment of this penalty is the only consequence of not obeying the health insurance “mandate.”
How much is the penalty?
The exact amount of the tax penalty is based on household income above the level at which an uninsured individual is required to file a tax return — currently $9,500 per person and $19,000 per couple. This penalty is scheduled to be phased in over the next several years as follows:
- for 2014, the penalty is the greater of $95 or 1 percent of income
- for 2015, the greater of $325 or 2 percent of income
- for 2016, the greater of $695 or 2.5 percent of income, and
- the $695 amount is indexed for inflation after 2016.
The penalty for children is half the amount for adults, and an overall cap will apply to family payments. This cap will be three times the amount of the per-person penalty, regardless of how many people are in the family. Thus, the cap is $285 in 2014 but rises to $2,085 in 2016, after which point it is indexed to inflation. Moreover, the total penalty can never be more than the cost of a minimal “bronze” heath insurance plan that can be purchased through a state health insurance exchange. The CBO estimates that these policies will cost $4,500-$5,000 per person and $12,000-$12,500 per family in 2016, with the costs rising thereafter.
All in all, for most people the penalty will be less than the cost of obtaining health insurance. Many people may choose to wait until they get sick to purchase health insurance. This is something they will be able to do because “Obamacare” does not allow health insurers to refuse to insure people with pre-existing conditions.
In addition, the penalty applies only to taxpayers who can afford insurance but do not purchase it. The Congressional Budget Offices says that of the 30 million non-elderly Americans it estimates will not have health insurance in 2016, only about 6 million will be subject to the tax. The remainder will be exempt because their income is too low or they qualify for another exemption.
How will the IRS collect?
Taxpayers subject to the penalty are supposed to report the amount due on their tax returns and pay it along with their income taxes. What happens if they don’t? Not nearly as much as when they don’t pay their regular taxes.
The law greatly limits how the IRS can collect the penalty. It cannot use liens or levies to collect it, and taxpayers are not subject to criminal prosecution or any additional penalty if they don’t pay. Moreover, the IRS says that its revenue agents will not be involved in enforcing the penalty — that is, they won’t ask you about it during an audit. All enforcement will be done through automatic assessments and computer-generated correspondence.
The only power the IRS will have to collect the penalty is to withhold it from an uninsured taxpayer’s tax refund. Currently, most taxpayers get refunds because they have too much tax withheld during the year. This year 77 percent of taxpayers received an average refund of $2,707.
However, self-employed taxpayers have no tax withheld from their pay. Instead, they pay estimated taxes to the IRS four times a year. Self-employed people can easily avoid qualifying for a tax refund by making sure they don’t pay too much in estimated tax. If you have no refund, the IRS will have no way of collecting the penalty.
As a result of all this, some experts predict that the IRS will be unable to effectively enforce the penalty tax. Only time will tell.
via inman.com