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Lax Lending Could Blow Up Housing Market Again

by Leslie Edwards

I had a bad car accident once and for awhile after, I drove very carefully.  Slowly, over time, my bad driving habits returned. It is the same when someone has a health scare, like a heart attack.  Immediately after, they diligently follow the doctor's orders regarding diet, exercise and smoking.  But again, over time, most people revert back to their old habits. 

Is the Government back to their old ways? People might think that the after this latest housing crisis, the Government would realize that not every one should own a home.  But already, the pressure is on for banks to lend to people using less stringent criteria and accepting lower credit scores.

Are we destined for another housing crash? Read this article from the Washington Times.

Double bubble Lax lending policy could blow up housing market again
By THE WASHINGTON TIMES
The Washington Times
6:35 p.m., Thursday, December 16, 2010

Fannie Mae and Freddie Mac currently guarantee about $5.5 trillion of outstanding mortgages and debts - nearly as much as the Treasury's own public debt. If the companies were fully nationalized, the government's books would have to reflect both the revenues and losses from those obligations. 

Americans have lost more than $4 trillion in assets since the housing market collapsed in 2006. Risky government mortgage lending regulations helped inflate prices beyond reason, but those policies have not gone away. Instead, they've just moved into a new home, the Federal Housing Administration (FHA). Unless Congress acts to renovate eligibility requirements for borrowers, we could see an even worse financial disaster unfold.


Signed into law in July, the Dodd-Frank Act pulled Fannie Mae and Freddie Mac lending institutions out of the subprime loan business. Those government-sponsored monstrosities were fingered as prime culprits in the financial collapse, so the Obama administration has enlisted the FHA to perform the same functions. Peter Wallison and Edward Pinto of the American Enterprise Institute have raised the alarm, writing, "As in the period leading up to the 2008 financial crisis, these loans will again contribute to a housing bubble, which will feed on government funding and grow to enormous size."

Congress began blowing the initial bubble in 1992 when it amended Fannie's and Freddie's charters to compel the mortgage giants to back financing for low- and middle-income families seeking housing. Subsequently, those enterprises induced mortgage lenders to relax their qualification standards, allowing millions to buy homes with no or little money down. As these properties went into foreclosure starting in 2006, the red ink at Fannie and Freddie ran into the hundreds of billions - with the public footing the bill. In October, the Federal Housing Finance Agency estimated the eventual cost to taxpayers would be up to $360 billion.

 The pressure to perpetuate dicey lending has begun already. The National Community Reinvestment Coalition, a housing rights group, filed complaints on Dec. 7 with the Department of Housing and Urban Development, claiming 22 banks across the country have violated fair-housing laws by denying FHA-insured loans to black and Hispanic borrowers with credit scores above the federal minimum.

 The FHA insures loans for borrowers with a minimal credit score of 580 and a down payment of 3.5 percent. The feds responded the next day by launching an investigation into the banks' practices.

Participating lenders are caught between the Scylla of penalty for denying loans to marginal borrowers and the Charybdis of sanction for having too many defaults on their books. It will only get worse: The FHA has announced it intends to pump up its loan volume to $1.34 trillion by 2013 and make nearly half of its loans subprime by 2017. Thus, the stage is set for a second housing-market crash.

 If Republicans in the 112th Congress intend to make good on their promise to set the country back on the path to financial stability, they should toughen FHA mortgage lending standards by requiring higher credit scores and larger down payments. Better yet, the feds should get out of the mortgage business altogether and let the free market reach an equilibrium free of bubble and bust.

While Uncle Sam may appear compassionate in assisting low-income families become homeowners, this "charity" has been disastrous. Millions have lost homes in the recent crash, with the burden falling most heavily on financially responsible Americans to clean up the billions in damage done. Learning from these mistakes of the past will prevent their return in the future.

If you know someone who is behind on their mortgage payments, have them call me for a FREE confidential consultation.  As a Certified Distressed Property Expert, I help people avoid foreclosure. 

leslie edwards

Environmentally Aware, Socially Conscious, Politically Active Real Estate Agent

770.460.9448

CDPE Certified Distressed Property Expert

CRS   Certified Residential Specialist

Epro  Certified Internet Professional

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Selling South Metro Atlanta including:

Clayton, Fayette, Henry, Coweta, Merewether, South Fulton & Spalding Counties

All the towns and cities south of the Atlanta International Airport, including:

Brooks, College Park, Fairburn, Fayetteville, Jonesboro, Locust Grove, McDonough

Newnan, Sharpsburg, Stockbridge, Palmetto, Peachtree City, Tyrone and more

Moving Families Since 1978

Let My Experience Work For You

fax:  770.460.0739

www.SouthMetroAtlantaMLS.com

www.leslieedwards.com/blog

leslie@leslieedwards.com

RE/MAX Around Atlanta

 

 

The Impact of a Foreclosure or Short Sale on One's Credit

by Leslie Edwards

The Impact of a Foreclosure or Short Sale on One's Credit

With today's real estate market driven by foreclosures and short sales, a common question today is how will a foreclosure, short sale, or loan modification affect one's credit score?  Below is some helpful information regarding each one of these areas.  To fully understand these comments, it is important to understand that currently there are no codes or mathematical algorithms that distinguish between a foreclosure, deed-in-lieu of foreclosure, or short sale.  Thus, current credit scoring models treat all three of these occurrences the same.  In addition, it is important to understand that every credit report is based on different variables and, thus, how much one's score will be impacted is impossible to gauge (i.e. someone with a fabulous long-term past credit history will be less affected than someone with a brief negative credit history).
       
Foreclosure

  • Remains on a credit report for 7 years.
  • Current Conforming guidelines require a waiting period of at least 5 years since the completion date of the foreclosure as well as a 10% down payment and at least a 680 credit score.  In addition, no 2nd home or investment property purchases are allowed nor cash-out refinances until the foreclosure has dropped off of the credit report.  
  • FHA guidelines require a waiting period of 4 years since the completion date of the foreclosure or 3 years if there have been extenuating circumstances.

       
Deed-in-lieu of Foreclosure

  • Although this is a "voluntary" foreclosure, it is reported the exact same way as a foreclosure on a credit report.
  • The Conforming guidelines are the same as for a foreclosure but require only a 4 year waiting period rather than 5.

       
Short Sale

  • Can be reported as either a charge-off, a settlement, or a type of foreclosure on the credit report (different creditors do it different ways).  
  • Thus, how much a score will be affected depends on who is doing the reporting and how they are choosing to report.  
  • Despite some reports to the contrary, there is no set answer to how much a credit score will be affected on a short sale.  It is a type of foreclosure, so it is best for one to expect the same foreclosure guidelines as above to be in effect for a short sale unless the foreclosing bank clarifies otherwise.  


Loan Modification

  • Under this arrangement, a lender simply lowers the borrower's rate and payment.  This solution does not reduce the principal balance nor is the lender forgiving any of the debt.  A loan modification is simply a method to avoid foreclosure and it is not considered as serious as the other methods above.
  • On the credit report, a loan modification is reported as a "Partial Payment Plan."
  • Credit scores will decrease with a loan modification but how much will depend on the other factors showing on the credit report.

                 
The bottom line is that clearly one's credit score will be adversely affected by any of the above occurrences, however, the exact amount of impact remains quite a mystery.

Save your credit, relieve the uncertainty, and most of all, help your family.

Call me for Short Sale and Pre-Foreclosure Solutions and let's get started on the path to recovery.

http://www.leslieedwards.com/Blog/What-is-a-Short-Sale-and-Why-You-Might-Want-One

leslie edwards                                                                           Environmentally Aware, Socially Conscious, Politically Active Real Estate Agent                                                                                        770.460.9448 

www.SouthMetroAtlantaMLS.com                               www.leslieedwards.com/blog                                           leslie@leslieedwards.com

RE/MAX Around Atlanta

 

This is not what I signed up for....

by Leslie Edwards

Way back in Elementary School, my expectation was that I would go to college and study to be a therapist.  Some say that lots of crazy people go into the field to figure out what is going on with themselves. Hmmm...                        College came 5 years after High School (that's a whole other story) and it took me another 5 years to get a degree in Psychology while working full-time.          It was pretty exciting when I got my first job/internship with the Fulton County Alcohol and Drug Treatment Center.  I thought I was on my way to the career I had planned for since Elementary School.                                                       The reality of the situation was not at all what I expected.  The failure rate of addiction treatment was huge compared to a very small success rate. I found out quickly that the chance that I could actually help someone was minuscule.  All I could really do is listen, which left me seriously depressed.  If the patient cried, I often cried too.  I carried their pain home with me and it did not take me long to realize that the job was too hard on my own mental health.                  

In 1977 I got a real estate license on a lark.  Part time I closed a few transactions and soon, real estate was in my blood. I could actually help people get what they wanted and if they came back, it was a success, not a failure. At closing, everyone was happy. The buyers got a house, the seller got a check, agents, loan officers and attorneys all got paid a fair fee for their work. 

There is a "new normal" in real estate today and my job has changed so much that it now looks and feels more like my Therapist experience than my real estate experience of the first 30 years.

Today, buyers have to wait months to close a foreclosure or a short sale, both of which dominate the current real estate market.  Sellers who have to move, because of the foreclosures and short sales in their neighborhoods, are bringing money to closing or negotiating a short sale or deed in lieu of foreclosure with their mortgage companies, which has a huge negative effect on their credit ratings.  The fees for real estate agents, loan officers and attorneys have steadily decreased while expenses and the work involved have more than doubled.  So rarely at closings today, is everyone happy.  Often nobody is happy.   Listing appointments today consist of telling sellers their homes are not worth what they paid and finding out if they are behind on their mortgage payments and if so, how much.                                                                 It often feels like I am in my Psychologist mode rather than in my Sales Person mode.  A lot has changed in the past few years. So many sellers are experiencing hardships that make it impossible to make the payments and are at risk of losing their homes.  When I listen to some of them tell me their stories, I still want to cry and I still take their pain home with me                                                         

It does not look like things are going to improve any time soon.  The news reports claim people are once again spending money so the economy must be recovering.  I don't think so.                                                                  Often, right after people have an accident or serious illness, they will drive more cautiously, quit smoking, eat right and exercise.  Human nature is such that, over time, these same people will start falling back into their old habits. 

           My sense is that those spending money are just reverting to old spending habits that got them into trouble in the first place.

Foreclosures are moving steadily up in the higher price ranges.  There are also many interest only loans that cannot be refinanced because the appraisals willl not support the loan amount they approved when the interest only loan was made.  Because we have had historically low interest rates, those loans have remained manageable for many.  Once the interest rate starts moving up, and it will, those interest only loans will start to adjust to higher interset rates and monthly payments, causing a whole new stream of foreclosures and short sales.

The job has changed. Because I have 32 years of experience in the real estate trenches, I can help some people fix their problems and that is some consolation. Some people can't be helped.  Sometimes it is their own fault but most often something bad has happened to cause them to lose their home.

If you know someone who needs help, have them call me. I will do a free consultation to find out what we can do for them.

I am ready for the business to return to the time when we all got to be happy at closing, but until then, I am trying to help everyone I can.

You cannot change the world one at a time but if you help one person, you can change their world.

leslie edwards 770.460.9448                                                               selling real estate throughout South Metro Atlanta

environmentally aware, socially conscious, politically active

 

 

Slow Death By Rubber Duck

by Leslie Edwards

Leslie Edwards For years, I have been preaching the dangers of chemicals, artificial hormones, aluminum, plastic, teflon, metals & dyes because I believe they are making people sick and killing them. There are more cancers, alzheimers and other diseases including all the newer immune deficiency diseases.I believe that the dramatic in...crease in childhood cancers, autism and other diseases is the result of changes in baby products. Glass and rubber nippled baby bottles have morphed into cheap plastic bottles that some mothers heat up in the mocrowave, plastic sippy cups, flame retardent, sythetic clothes that are full of chemicals, plastic diapers, plastic parts on cribs, processed foods, plastic toys from China,lead based paint, aluminum cans and cookware and the list goes on and on. It is frustrating that parents are not paying attention. The Book "Death By Rubber Duck" is a great resource. Read this review and sign the petition to get Congress more involved in the issue.http://greenlagirl.com/book-review-slow-death-by-rubber-duck-your-homes-secret-dangers/No one can do it all. If everyone does a little, we can change the world.

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Moving Families Since 1978

Let My Experience Work For You

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leslie@leslieedwards.com

 

 

Guard Your Metal

by Leslie Edwards

As long as I have been selling real estate, I never, until late last year, heard of people stealing  metal to sell to the recyclers.  I have had air conditioners stolen and wiring and copper pipes stripped from homes I was selling. 

Late last year I was marketing a foreclosed property on 5 acres with a huge, way bigger than the house, metal outbuilding.  One day the man who had the property under contract called in a panic because he bought the property because of the huge building and demanded to know why was it being torn down? 

We contacted the police who went over there and arrested three men who were attempting to dismantle the entire building to sell the metal to scrap metal dealers.

I saw this article about copper and it reminded me about that transaction and that I should warn homeowners about this new trend in crime.  Remember to guard your metal.

Copper Is Like Gold These Days

With copper at more than $4 per pound, thanks to demand in Asia, home owners should guard the metal like it was gold.

"You would never leave gold sitting out in the yard," says OneBeacon Insurance Group executive Charlie Sidoti, who estimates a 300 percent increase in claims of copper theft in the past 18 months.

Homes sitting empty are easy targets. Sidoti recommends installing fences, motion-detector lights and security cameras to discourage thieves from ripping out air conditioner coils, plumbing, rain gutters, sprinklers and bronze lawn ornaments.

Meanwhile, 35 states have pending or signed legislation requiring people selling metal to show identification to scrap dealers.

Source: Time Rebecca Winters Keegan (06/23/2008)

If you want to talk real estate, call me at 770.460.9448 or email leslie@leslieedwards.com

leslie edwards     sells real estate     RE/MAX Around Atlanta

30 Years  Experience Isn't Expensive ......  It's Priceless

Raise Your Credit Score

by Leslie Edwards

1. Pay your bills on time

2. If you have missed payments, get current and stay current.  The longer you pay on time the better your credit score

3. Even if you pay off a collection it will remain on your credit report for seven years. 

4. If you cannot make your payments, contact your creditors or see a credit counselor

5. Keep balances low on revolving credit

6. Maintain fewer open accounts

7. Don't close unused credit lines.  Closing accounts will not help your score

8. Don't open new lines of credit

The best credit score is between 760 to 850

General loan guidelines will consider scores in the low 600's and sometimes even in the high 500's with compensating factors.

If you need help finding a loan, call me.  I work with some great mortgage people and would be happy to give you names.  It is always good to shop rates, but don't be fooled.  Often the lowest rate does not have the lowest costs and the difference in costs can make the lowest interest rate, the most expensive program for you. Get and compare all the costs, not just the interest rate.

Call me for a FREE, no obligation consultation regarding your real estate needs and dreams.

leslie edwards  sell real estate  770.460.9448 direct  RE/MAX  See 100,000+ listings for sale at www.leslieedwards.com

 

Displaying blog entries 1-6 of 6

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