It appears that more than just homeowners are walking away from foreclosures. Apparently banks are too. This is thought by many to be the next wave of the housing crisis.
On another note the Old E. Baltimore project is mostly done but I still need to get past the inspections for city and section 8. I’m on my fourth plumber now and counting. Hopefully this one will get it right and actually pass the inspection. Once that’s done I’ll post pics but its probably not a good idea to post them before. Most of the work on this one was done prior to my purchase so the inspection is always a crap shoot. It really just depends on the inspector and his/her mood.
According to three researches at the Federal Reserve Bank of New York, the 2005 bankruptcy law is another contributor to our economy in crisis. The article states that prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, homeowners were able to file Chapter 7 liquidation. This allowed them to continue to pay their mortgages while freeing themselves of unsecured (not asset backed) debt. You can red the rest of the article here.
By now we all should know how our country got into this economic depression. Anyone who doesn’t know isn’t paying attention. Yes I did call it a depression just like I called it a recession before it was official. It’s not just me either. However, if you don’t know how it happened, here is my condensed list:
In another attempt to fend off a recession yesterday, the Feds once again cut short term interest rate 1/4 point to 2 percent. While this may not affect mortgage rates it does however affect Home Equity Lines Of Credit (HELOC). These lines of credit are normally tied to short term rates vs. the long term rates that affect a traditional mortgage. These short term rates are also typically lower. Many property owners have benefited from the recent rate cuts. It’s a good time to pay down your lines if credit. One way is to continue making the same payments from before and applying the extra directly to principal. However, there may be a better way to take advantage of these rate cuts.
In almost all states and major cities in the country there are housing assistance programs. These programs exist for first time home buyers, teachers, low income families, etc. These programs are normally public, non-profit or church based. These organizations offer a variety of programs and assistance to first time home buyers. One service in particular is the down payment and closing cost help program. They offer funds in the form of grants and loans which buyers can use toward the down payment and closing costs for the purchase a home.
This can be the biggest challenge for new investors. How do I know how much to pay for a property? There are so many factors involved that it can feel a little overwhelming. In fact it scares some investors away from buying their first property. I’m here to tell you that it’s not rocket science. A class in using a spreadsheet program such as Microsoft Excel or learning to use a financial calculator might be the most difficult part of the process. There are several performance measurements commonly used when valuing property. Three measurements commonly used by investors include CAP Rate, Net Operating Income (NOI), and Return On Investment (ROI). There are many other ratios and measurements used in real estate finance such as Gross Rent Multiplier, Debt Service Coverage Ratio, Operating Ratio, etc. This information can be found in many finance books or at finance courses at your local Community College.
My contractors are all pretty good, so they don’t need me watching over them all day. When I’m not flipping houses, I’m usually looking for the next flip or rental to add to the portfolio. Well, actually I should say when I’m not physically at any of the properties… Of the houses I saw today, this property looks like a decent deal. The asking price was $69,900 and has been reduced to $53,900 in just under a month! The details are as follows:
I’ve been attempting to get my head around this thing for a while. How could banks have been so reckless, all the while knowing what the future held? As we all may know by now the Feds have done it. Last week they decided they would help poor little Bear Sterns from a messy collapse. It may not stop with them either. There must be a line at the Feds doorstep by now. After all its not the banks fault for their poor practices and questionable ethics. It must be the taxpayers fault, since we are the ones who will pay for this in the end. What this says is that banks are basically allowed to use poor standards and practices , jeopardize the economy and be bailed out in the end. When it comes to large banking institutions, it seems they are.
Don’t get me wrong, I am not against what the Feds and JP Morgan did to help Bear Sterns. I believe that the ramifications, of allowing them to fail, would have been huge. Poor performing Securities would have been dropped and written down by every institution on Wall street. But maybe in the end that is what needs to happen before the economy will begin to fight its way back. Can the government bail out every institution facing trouble?
HUD foreclosed properties are available in most areas of the country. The Department of Housing and Urban Development (HUD) is a parent organization to the Federal Housing Administration or (FHA). The sales process is quite a bit different from county/city foreclosures or even purchasing a house from a home owner. This organization provides federal mortgage insurance to lenders, mostly for low to middle income borrowers. Lenders that foreclose on a home previously insured by the FHA, can file a claim for the remaining balance. Once the FHA refunds the lender the ownership will be transferred to HUD. HUD in turn auctions the home on the open market. Contrary to what many believe, investors are given the opportunity to bid on properties that are not purchased by potential owner occupants. Typically after the initial ten day period, investor’s bids are accepted. This is a good thing for house flippers, given that many home owners are not looking for a property that will require major repairs. You can even find multi-unit properties for sale on occasion. Other programs exist for non-profits, teachers, police officers, hurricane Katrina evacuees, firefighters, emergency medical technicians and other public service entities.
The other day someone asked me what I thought was the biggest contributor to today’s mortgage mess. I thought about low interest rates, inflated home prices, Mortgage Company lenience, and subprime lending. It’s difficult to say that there was one root more responsible than another since they all played together in one big mortgage mess. However, if I must choose, subprime lenders get the most blame in my opinion. The main reason they get the blame is because of the ugly gremlins that spawned out of subprime lenders. These offenders are commonly referred to as predatory lenders. The situation has gotten so bad that there is legislation being discussed by congress. The intention is to curtail the many practices commonly described as predatory lending. Read the rest of this entry »