If you spend any time on the Internet, you’ve probably seen ads for “free” credit scores. They usually appear alongside ads promising to make your belly fat disappear.
There are two problems with these promotions. First, you usually have to sign up for credit monitoring, identity theft protection or some other service to get your credit score. These products cost anywhere from $15 to $18 a month.
But even more troubling, these scores could give you a distorted view of your credit standing, according to a report from the Consumer Financial Protection Bureau. That’s because these credit scores usually aren’t the same scores lenders use when they consider your application for a loan, the CFPB said. Credit scores marketed to consumers who order their credit reports from AnnualCreditReport.com could also mislead consumers, the report said.
While consumers are often reminded of the importance of a good credit score, there are lots of different credit scores circulating in the marketplace. Some credit scores sold to consumers by the big three credit bureaus – TransUnion, Equifax and Experian – are “educational” scores that aren’t used by lenders, the CFPB says. The score you buy may be based on different information than the one used to consider your application for a car loan or home mortgage. Another possibility: The information used to calculate your score could change between the time you buy a score and the time you apply for a loan.
The discrepancy isn’t a problem for consumers with stellar credit, says John Ulzheimer, president of consumer education for SmartCredit.com. “If you’ve got fantastic credit, you’re going to have a fantastic score regardless of what score is being used,” he says. Similarly, if your score is abysmal, there’s not going to be much difference between the score you buy and the one lenders see.
Most consumers, though, fall between those two extremes, Ulzheimer says. Here’s how differences between the score you have and the one your lenders use could cost you money:
If the score leads you to believe your credit is worse than it is, you could end up settling for higher interest rates than you’re eligible for, or decide not to apply for credit at all.
If the score causes you to feel overconfident about your credit, you could waste time and money applying for loans that won’t be approved. You could even end up in worse shape, because when you apply for a loan, inquiries from creditors show up on your credit report. Multiple inquiries could dent your score.
Knowing the score
Fortunately, starting this month, millions of consumers will get a look at the credit scores lenders use. A provision of the financial reform bill that took effect requires lenders to provide you with a free copy of your credit score whenever they turn you down for a loan or approve a loan with a higher interest rate than the one offered to their best customers.
Lenders must give you the score used to make a determination on your loan, not a generic or educational version. They’re also required to explain the factors that affected your score and show where it falls on the range of possible credit scores.
This is useful information, but it won’t help consumers who want to know where they stand before they apply for a loan. How to get a more accurate idea of what your lenders will see:
Order your free credit reports. While scores differ, they’re all based on information from your credit reports. So at the very least you should check your credit reports to make sure the information in them is accurate.
You can get an annual copy of each of your credit reports from the three credit bureaus at AnnualCreditReport.com.
Information on your credit report can affect everything from your car insurance premiums to whether you get a job. Only 38 percent of consumers have obtained a copy of their credit report, according to the National Bureau of Economic Research.
If you decide to buy a score, buy a FICO score. There are lots of credit scores out there, but the FICO score is the one the vast majority of lenders use. You can purchase a FICO score based on your TransUnion and Equifax credit reports for $19.95 each at MyFICO.com.
FICO scores based on Experian credit reports are not available to consumers.
Use free scores to give you a general idea of where you stand. Websites Credit Karma, Quizzle, Credit Sesame and Credit.com provide free, no-obligation credit profiles.
This isn’t the same as a FICO score, but you’ll get a general idea of whether you’re an excellent, average or poor credit risk.
Source: USA TODAY, a division of Gannett Co. Inc., Sandra Block
Thursday, July 28, 2011
Florida real estate gets high marks in Fed’s latest economic review
Florida emerged as something of a stand-out student in the Federal Reserve’s latest report on real estate in the Southeast.
Amid gloomy reports from brokers in the Fed’s Atlanta district, authors of the closely watched economic report card noted Florida was bucking the trend and reporting positive news.
This has been a running theme in the Fed’s monthly Beige Books, with sales of Florida homes outperforming the rest of the South. In tempered language for its July report, the Fed said the Atlanta district’s reports of modest growth in home sales over the prior year came thanks to the Sunshine State.
“Gains continued to be driven largely by reports from Florida brokers. Outside Florida, the majority of contacts reported sales declined,” the report stated. “The outlook among Florida brokers was somewhat positive, but elsewhere sales are expected to remain weak.”
Tourism fared the best in the Atlanta district’s write up, with Fed authors calling it “strong.” The report noted high-end retail seemed to be gaining traction, though the retail industry as a whole is less optimistic than a year ago.
In all, the Fed described the Southeast’s economy as basically flat compared to June. That’s a bit worse than the description for the national economy as a whole, which the Fed said continued to grow, but at a more modest pace.
Source: The Miami Herald, Douglas Hanks. Distributed by McClatchy-Tribune Information Services.
Amid gloomy reports from brokers in the Fed’s Atlanta district, authors of the closely watched economic report card noted Florida was bucking the trend and reporting positive news.
This has been a running theme in the Fed’s monthly Beige Books, with sales of Florida homes outperforming the rest of the South. In tempered language for its July report, the Fed said the Atlanta district’s reports of modest growth in home sales over the prior year came thanks to the Sunshine State.
“Gains continued to be driven largely by reports from Florida brokers. Outside Florida, the majority of contacts reported sales declined,” the report stated. “The outlook among Florida brokers was somewhat positive, but elsewhere sales are expected to remain weak.”
Tourism fared the best in the Atlanta district’s write up, with Fed authors calling it “strong.” The report noted high-end retail seemed to be gaining traction, though the retail industry as a whole is less optimistic than a year ago.
In all, the Fed described the Southeast’s economy as basically flat compared to June. That’s a bit worse than the description for the national economy as a whole, which the Fed said continued to grow, but at a more modest pace.
Source: The Miami Herald, Douglas Hanks. Distributed by McClatchy-Tribune Information Services.
Wednesday, July 27, 2011
What Happens to Borrowers After Foreclosure?
The after-effects following a foreclosure to a borrower may not be as bad as once thought, according to a new paper by Fed economists. With the wave of foreclosures plaguing the nation, Fed economists sought to find out what happens to households following a foreclosure.
Overall, the study found that post-foreclosure borrowers don’t fare too bad: The majority of these borrowers do not end up in “substantially less desirable neighborhoods or more crowded living conditions.” Also, the study found that from 2006 to 2008, 22 percent of post-foreclosure borrowers moved to a multifamily rental building, while about 75 percent still lived in a single-family structure. What’s more, the places where they moved were not found to have significantly lower median income, median house value, or median rent than their old neighborhood.
“These results suggest that, on average, foreclosure does not impose an economic burden large enough to severely reduce housing consumption,” according to the report.
Source: “Foreclosure Effects Found Not So Bad,” National Mortgage News (July 26, 2011)
Overall, the study found that post-foreclosure borrowers don’t fare too bad: The majority of these borrowers do not end up in “substantially less desirable neighborhoods or more crowded living conditions.” Also, the study found that from 2006 to 2008, 22 percent of post-foreclosure borrowers moved to a multifamily rental building, while about 75 percent still lived in a single-family structure. What’s more, the places where they moved were not found to have significantly lower median income, median house value, or median rent than their old neighborhood.
“These results suggest that, on average, foreclosure does not impose an economic burden large enough to severely reduce housing consumption,” according to the report.
Source: “Foreclosure Effects Found Not So Bad,” National Mortgage News (July 26, 2011)
5 do’s and don’ts when hiring contractors
Have a home remodeling project in mind? Here are some tips that may help you achieve a successful result.
1. Research pays off, but remember who the expert is.
DO research your project before you get quotes. It doesn’t hurt to find out, at least generally, the correct way your project should be completed. Look at trade magazines and visit home improvement websites to explore different approaches to remodeling. Sometimes there is more than one way to complete a project. For example, one painting contractor may prefer to paint your room with a tinted primer followed by two coats of latex paint, another may use a one-coat self-priming paint. Find out what industry standards are, what is a no-no under any circumstances or what might work best for your project. A little knowledge gives you power to negotiate the best price for the best work.
DON’T think a little knowledge makes you an expert. Above all, don’t think your project will be completed like projects you see portrayed on television. Home improvement television shows are deceiving. There are whole crews bringing the project to a finish in-between the time the camera is rolling. Mistakes are edited out. Remember that every remodeling project is different, and there can be hidden complications.
For example, replacing the slider door that’s been sticking for the last two years seems like a simple one-day project, but when your contractor takes out the existing door he might find it was not properly flashed by the original installer. Decay, dry rot or mold affecting the underlying framing may require him to do unexpected work. He may not be a shady contractor; he might be concerned that if he replaces the slider without fixing the underlying problem, in a few years you’ll be unhappy with his finished product.
Most reputable contractors will keep you informed of any unexpected developments and will discuss solutions with you, including estimated extra costs. They will show you problem areas and explain the process for fixing them in detail. In some cases, they can tell you in advance what kinds of hidden problems they’ve seen before and whether they think they’ll experience the same issues with your remodeling project.
2. Get competitive bids, but don’t take the lowest bid offered.
DO get competitive bids. For small projects, calling 2 or 3 contractors is usually sufficient. For larger, more extensive projects, it’s wise to have a minimum of 4 to 5 contractors bidding against each other. People will spend weeks researching the best cars and haggling over a car sale when it’s time to buy a new vehicle, but don’t hesitate to spend thousands of dollars on a remodeling project after mere hours or a few short meetings with contractors.
DON’T take the lowest bid offered, thinking you will be getting the best deal, even if your contractor shows up in a designer polo in a big, shiny truck with custom lettering looking like the perfect professional. Be leery of any contractor eager to bid lower than everyone else. It’s common practice for less-reputable remodelers to have “hidden costs” they spring on you later in the project, when everything is torn apart and you feel like you can’t back out without extreme inconvenience or loss of what you’ve already invested.
3. Negotiate for the best price, but don’t under-value your contractor.
DO negotiate for the best price. Pick the best contractors, and give them a chance to bid against each other for your project. Most contractors are willing to negotiate. If you can’t get them to negotiate on the labor price, ask them to offer you discounts on materials. Most contractors get commercial discounts between 5-25 percent from suppliers and may be able to offer you a portion, if not all, of this discount without suffering a loss on the value of their time. Depending on the size of your project, this can equate to significant savings. Some contractors may offer you a much lower labor price to beat out other bids but make up for it later through high mark-ups on materials.
DON’T get too obsessed with negotiating. Contractors often pay high insurance and overhead costs, especially if they have employees. They want to work for you, but if you want a high quality product, keep in mind that a reputable contractor with good references will walk away from your project if he thinks you are under-valuing his skills. No one wants to be under-valued. Asking for a bottom line price is not inappropriate, but asking him to be competitive with someone he knows to be the worst contractor in town could land you in spot where you have ONLY the bad contractor to complete your job. Be fair.
4. Insist on a contract and understand its terms.
DO insist on a comprehensive contract. Surprisingly, many people think a contract locks them into a set price, which is not really the case. Anyone can write a number down on paper! The most important aspect of any remodeling contract is the detailed scope of services to be provided. Even for small jobs, this is the key to getting services with a set price. For example, if your contractor is replacing an old window, NEVER accept a contract that says: “Window Replacement $XXX.XX!” The contract should specify whether or not the window will be removed and disposed of (not all contractors dispose of construction debris); whether the new window will be caulked and weatherized; or even whether the old window molding will be re-applied or replaced. Also, the contract should state how long it will take to reasonably complete services, as well as what kind of materials will be used. Insist on high quality fasteners, caulking and other materials to protect the integrity and long-term durability of your project.
DON’T ignore payment terms, which can vary greatly between contractors. Make sure you understand terms fully. Pay your contractor in a timely manner, especially if he’s efficient and provides quality workmanship. If you find the contractor is not meeting his end of the bargain, you have every right to withhold payment until a certain portion of the work is completed in accordance with the terms of your contract. Make sure payment terms state amounts to be paid at specified time periods. Having a clear and concise contract legally protects both parties and prevents misunderstandings about what is expected by all.
5. Check references carefully.
DO check references, and if possible, look at a portfolio of finished projects. Try to arrange a visit to a site where the contractor performed work similar to your own project.
DON’T let a contractor’s charm sway you. The best con artists can “talk a dog off a meat wagon.” If you are investing a sizeable amount of money into a remodeling project, you want to ensure that the contractor has a good track record by calling or visiting client references – not his relatives. If possible, try to talk with clients who have finished projects more than a year old. Newly remodeled areas always look great compared with the old, but work that still looks great a year or more later is proof of quality workmanship.
Ask these questions about how the contractor worked: Did the project move along smoothly? Did the contractor show up to work daily or have a project manager so the project moved along in a timely manner, or did work go unfinished for days or weeks at a time, seeming to take forever to complete? Did they work haphazardly or clean up at the end of each day to minimize disruption? Some people want a project completed simply and quickly, some want fancy detailing finished to magazine perfection. Decide what services are most important to you, write a list of them and discuss how they will be completed in a reasonable timeline with the contractor.
Source: Networx. Distributed by McClatchy-Tribune Information Services. Laura Foster-Bobroff is a Hometalk – http://www.hometalk.com – writer.
1. Research pays off, but remember who the expert is.
DO research your project before you get quotes. It doesn’t hurt to find out, at least generally, the correct way your project should be completed. Look at trade magazines and visit home improvement websites to explore different approaches to remodeling. Sometimes there is more than one way to complete a project. For example, one painting contractor may prefer to paint your room with a tinted primer followed by two coats of latex paint, another may use a one-coat self-priming paint. Find out what industry standards are, what is a no-no under any circumstances or what might work best for your project. A little knowledge gives you power to negotiate the best price for the best work.
DON’T think a little knowledge makes you an expert. Above all, don’t think your project will be completed like projects you see portrayed on television. Home improvement television shows are deceiving. There are whole crews bringing the project to a finish in-between the time the camera is rolling. Mistakes are edited out. Remember that every remodeling project is different, and there can be hidden complications.
For example, replacing the slider door that’s been sticking for the last two years seems like a simple one-day project, but when your contractor takes out the existing door he might find it was not properly flashed by the original installer. Decay, dry rot or mold affecting the underlying framing may require him to do unexpected work. He may not be a shady contractor; he might be concerned that if he replaces the slider without fixing the underlying problem, in a few years you’ll be unhappy with his finished product.
Most reputable contractors will keep you informed of any unexpected developments and will discuss solutions with you, including estimated extra costs. They will show you problem areas and explain the process for fixing them in detail. In some cases, they can tell you in advance what kinds of hidden problems they’ve seen before and whether they think they’ll experience the same issues with your remodeling project.
2. Get competitive bids, but don’t take the lowest bid offered.
DO get competitive bids. For small projects, calling 2 or 3 contractors is usually sufficient. For larger, more extensive projects, it’s wise to have a minimum of 4 to 5 contractors bidding against each other. People will spend weeks researching the best cars and haggling over a car sale when it’s time to buy a new vehicle, but don’t hesitate to spend thousands of dollars on a remodeling project after mere hours or a few short meetings with contractors.
DON’T take the lowest bid offered, thinking you will be getting the best deal, even if your contractor shows up in a designer polo in a big, shiny truck with custom lettering looking like the perfect professional. Be leery of any contractor eager to bid lower than everyone else. It’s common practice for less-reputable remodelers to have “hidden costs” they spring on you later in the project, when everything is torn apart and you feel like you can’t back out without extreme inconvenience or loss of what you’ve already invested.
3. Negotiate for the best price, but don’t under-value your contractor.
DO negotiate for the best price. Pick the best contractors, and give them a chance to bid against each other for your project. Most contractors are willing to negotiate. If you can’t get them to negotiate on the labor price, ask them to offer you discounts on materials. Most contractors get commercial discounts between 5-25 percent from suppliers and may be able to offer you a portion, if not all, of this discount without suffering a loss on the value of their time. Depending on the size of your project, this can equate to significant savings. Some contractors may offer you a much lower labor price to beat out other bids but make up for it later through high mark-ups on materials.
DON’T get too obsessed with negotiating. Contractors often pay high insurance and overhead costs, especially if they have employees. They want to work for you, but if you want a high quality product, keep in mind that a reputable contractor with good references will walk away from your project if he thinks you are under-valuing his skills. No one wants to be under-valued. Asking for a bottom line price is not inappropriate, but asking him to be competitive with someone he knows to be the worst contractor in town could land you in spot where you have ONLY the bad contractor to complete your job. Be fair.
4. Insist on a contract and understand its terms.
DO insist on a comprehensive contract. Surprisingly, many people think a contract locks them into a set price, which is not really the case. Anyone can write a number down on paper! The most important aspect of any remodeling contract is the detailed scope of services to be provided. Even for small jobs, this is the key to getting services with a set price. For example, if your contractor is replacing an old window, NEVER accept a contract that says: “Window Replacement $XXX.XX!” The contract should specify whether or not the window will be removed and disposed of (not all contractors dispose of construction debris); whether the new window will be caulked and weatherized; or even whether the old window molding will be re-applied or replaced. Also, the contract should state how long it will take to reasonably complete services, as well as what kind of materials will be used. Insist on high quality fasteners, caulking and other materials to protect the integrity and long-term durability of your project.
DON’T ignore payment terms, which can vary greatly between contractors. Make sure you understand terms fully. Pay your contractor in a timely manner, especially if he’s efficient and provides quality workmanship. If you find the contractor is not meeting his end of the bargain, you have every right to withhold payment until a certain portion of the work is completed in accordance with the terms of your contract. Make sure payment terms state amounts to be paid at specified time periods. Having a clear and concise contract legally protects both parties and prevents misunderstandings about what is expected by all.
5. Check references carefully.
DO check references, and if possible, look at a portfolio of finished projects. Try to arrange a visit to a site where the contractor performed work similar to your own project.
DON’T let a contractor’s charm sway you. The best con artists can “talk a dog off a meat wagon.” If you are investing a sizeable amount of money into a remodeling project, you want to ensure that the contractor has a good track record by calling or visiting client references – not his relatives. If possible, try to talk with clients who have finished projects more than a year old. Newly remodeled areas always look great compared with the old, but work that still looks great a year or more later is proof of quality workmanship.
Ask these questions about how the contractor worked: Did the project move along smoothly? Did the contractor show up to work daily or have a project manager so the project moved along in a timely manner, or did work go unfinished for days or weeks at a time, seeming to take forever to complete? Did they work haphazardly or clean up at the end of each day to minimize disruption? Some people want a project completed simply and quickly, some want fancy detailing finished to magazine perfection. Decide what services are most important to you, write a list of them and discuss how they will be completed in a reasonable timeline with the contractor.
Source: Networx. Distributed by McClatchy-Tribune Information Services. Laura Foster-Bobroff is a Hometalk – http://www.hometalk.com – writer.
New grant for military first-time home buyers
A new program offers financial assistance to first-time homebuyers who are veterans or active-duty military members. The Pentagon Federal Credit Union Foundation, a nonprofit national organization, offers the program through its Dream Makers program.
Active duty personnel, veterans, retired members of the military and employees of the U.S. Department of Defense and the Department of Homeland Security may be eligible for a grant up to $5,000 to use toward downpayments and closing costs if buying their first home. The grants can be applied to a mortgage issued by any financial institution.
“Members of the military often put off buying a home early in their careers because they’re moving around the country a lot,” says Kate Kohler, chief operating officer for the PenFed Foundation. “We want to make sure they have resources to add immediate equity into their home when they decide to buy.”
Requirements:
Source: INFORMATION, INC.
Active duty personnel, veterans, retired members of the military and employees of the U.S. Department of Defense and the Department of Homeland Security may be eligible for a grant up to $5,000 to use toward downpayments and closing costs if buying their first home. The grants can be applied to a mortgage issued by any financial institution.
“Members of the military often put off buying a home early in their careers because they’re moving around the country a lot,” says Kate Kohler, chief operating officer for the PenFed Foundation. “We want to make sure they have resources to add immediate equity into their home when they decide to buy.”
Requirements:
- Military affiliation – (active duty, reserve, National Guard or veteran) – a Department of Defense employee or a Department of Homeland Security employee.
- First-time homebuyer or not owned a home for the last three years; or a home has been lost through divorce or disaster.
- Gross household income, including allowances, used to qualify for a mortgage loan is a maximum of $55,000 per year, or 80% of a community’s median income based on family size.
Source: INFORMATION, INC.
Citizens board OKs sinkhole rate hikes
Calling proposed rate increases painful but necessary, Citizens Property Insurance Corp.’s Board of Governors on Wednesday unanimously approved sinkhole premium increases for 2012 that will cause rates for coastal homeowners to skyrocket, some by thousands of dollars a year.
Meeting via conference call to adjust the sinkhole rates, board members and Citizens’ staff said they are bound by the passage of a new state law (SB 408) to set rates for sinkholes that are actuarially sound.
“We recognize that the need for sinkhole coverage is enormous,” said Citizens CFO Sharon Binnon. “This fact is not lost on us but this is about Citizens’ past experience. … These rates are the direct result in the explosion of claims.”
Non-sinkhole related Citizens coverage, which is capped by law at 10 percent a year, will increase by a statewide average of 8.8 percent in 2012.
The proposed sinkhole rates have come under fire on a number of fronts, including from Sen. Mike Fasano, R-New Port Richey, whose region will see some of the highest premium increases for sinkhole coverage. Fasano made numerous, unsuccessful attempts to amend the legislation to reduce the hit on policyholders in sinkhole prone regions of the state.
“There are people who live in sinkhole prone areas that could potentially be forced out of their homes due to these rate increases,” Fasano said in a statement prior to the vote. “Homeowners who have lenders that require sinkhole coverage will have to come up with huge amounts of money that will be hard to find, especially during these rough economic times.”
Under the new law, Pasco County coastal residents, according to Citizens estimates, will see average sinkhole premiums jump from $441 to $4,017, an increase of 810 percent for the optional coverage required by some – though not most – mortgage lenders.
During the half-hour teleconference, Citizens staff said although many of the proposed premium increases indicate incredible percentage increases, the actual increased costs are far less dramatic. In Jackson County, Citizens rates for sinkhole coverage increased by 6,461 percent. The actual rate increases from 68 cents to $44 a year.
Regardless, the rate hike drew harsh criticism from former Florida Insurance Consumer Advocate Sean Shaw, who now works for a law firm that represents sinkhole claimants.
“The Board of Governors’ vote today was unanimously brash, devastating and irresponsible,” Shaw said following the vote. “The only thing standing in the way of the big bang of sinkhole costs is the Office of Insurance Regulation – they must protect consumers.”
Despite facing no big hurricanes since 2005, the industry continues to lose money from covering people in Florida, with sinkhole claims a big part of that, insurers contend. In addition to having to pay old, re-opened hurricane claims, the companies have been hit hard with a huge spike in sinkhole claims in recent years, particularly in the area north of Tampa Bay.
Last year, Citizens collected about $32 million in sinkhole premiums but paid out more than $245 million in claims, Binnon said, a trend that has also hit private property insurers who contend the spike can’t be related to a geological change, but is more likely due to savvy attorneys, public claims adjusters and inadequate protections in Florida law.
The bill gave the industry ways to reduce payouts in sinkhole claims, including a two-year limit on claims, more stringent definitions of what a sinkhole is and more clout during the claims appeal process.
Citizens now handles 1.4 million policies, most of which can be found in the riskiest areas for hurricane and sinkhole damage. The new law includes a provision that, going forward, Citizens rates must mirror the sinkhole risk, which unlike hurricane coverage is not based on future probability but solely on past experience, Binnon said.
Board member Carlos LaCasa raised concerns over the inability of buyers to obtain mortgages without optional sinkhole coverage. Citizens’ staff said most lenders do not require it, but the number of lenders who do is increasing. In addition, federally backed lender Freddie Mac requires sinkhole coverage, though Fannie Mae does not.
Detailed rate increase numbers by coverage area for sinkhole and non-sinkhole coverage are included in Citizens backup material at: https://www.citizensfla.com/includes/openfile2.cfm?file=/bnc_meet/docs/400/01C_2012_Indications_by_Territory.pdf&delete=false
Source: News Service of Florida, Michael Peltier
Meeting via conference call to adjust the sinkhole rates, board members and Citizens’ staff said they are bound by the passage of a new state law (SB 408) to set rates for sinkholes that are actuarially sound.
“We recognize that the need for sinkhole coverage is enormous,” said Citizens CFO Sharon Binnon. “This fact is not lost on us but this is about Citizens’ past experience. … These rates are the direct result in the explosion of claims.”
Non-sinkhole related Citizens coverage, which is capped by law at 10 percent a year, will increase by a statewide average of 8.8 percent in 2012.
The proposed sinkhole rates have come under fire on a number of fronts, including from Sen. Mike Fasano, R-New Port Richey, whose region will see some of the highest premium increases for sinkhole coverage. Fasano made numerous, unsuccessful attempts to amend the legislation to reduce the hit on policyholders in sinkhole prone regions of the state.
“There are people who live in sinkhole prone areas that could potentially be forced out of their homes due to these rate increases,” Fasano said in a statement prior to the vote. “Homeowners who have lenders that require sinkhole coverage will have to come up with huge amounts of money that will be hard to find, especially during these rough economic times.”
Under the new law, Pasco County coastal residents, according to Citizens estimates, will see average sinkhole premiums jump from $441 to $4,017, an increase of 810 percent for the optional coverage required by some – though not most – mortgage lenders.
During the half-hour teleconference, Citizens staff said although many of the proposed premium increases indicate incredible percentage increases, the actual increased costs are far less dramatic. In Jackson County, Citizens rates for sinkhole coverage increased by 6,461 percent. The actual rate increases from 68 cents to $44 a year.
Regardless, the rate hike drew harsh criticism from former Florida Insurance Consumer Advocate Sean Shaw, who now works for a law firm that represents sinkhole claimants.
“The Board of Governors’ vote today was unanimously brash, devastating and irresponsible,” Shaw said following the vote. “The only thing standing in the way of the big bang of sinkhole costs is the Office of Insurance Regulation – they must protect consumers.”
Despite facing no big hurricanes since 2005, the industry continues to lose money from covering people in Florida, with sinkhole claims a big part of that, insurers contend. In addition to having to pay old, re-opened hurricane claims, the companies have been hit hard with a huge spike in sinkhole claims in recent years, particularly in the area north of Tampa Bay.
Last year, Citizens collected about $32 million in sinkhole premiums but paid out more than $245 million in claims, Binnon said, a trend that has also hit private property insurers who contend the spike can’t be related to a geological change, but is more likely due to savvy attorneys, public claims adjusters and inadequate protections in Florida law.
The bill gave the industry ways to reduce payouts in sinkhole claims, including a two-year limit on claims, more stringent definitions of what a sinkhole is and more clout during the claims appeal process.
Citizens now handles 1.4 million policies, most of which can be found in the riskiest areas for hurricane and sinkhole damage. The new law includes a provision that, going forward, Citizens rates must mirror the sinkhole risk, which unlike hurricane coverage is not based on future probability but solely on past experience, Binnon said.
Board member Carlos LaCasa raised concerns over the inability of buyers to obtain mortgages without optional sinkhole coverage. Citizens’ staff said most lenders do not require it, but the number of lenders who do is increasing. In addition, federally backed lender Freddie Mac requires sinkhole coverage, though Fannie Mae does not.
Detailed rate increase numbers by coverage area for sinkhole and non-sinkhole coverage are included in Citizens backup material at: https://www.citizensfla.com/includes/openfile2.cfm?file=/bnc_meet/docs/400/01C_2012_Indications_by_Territory.pdf&delete=false
Source: News Service of Florida, Michael Peltier
Tuesday, July 26, 2011
New-Home Market Shows Signs of Stabilizing
New-home sales dropped in June, but a sharp increase in prices and declining inventories may be signs the sluggish new-home market is finally showing signs of rebounding, the Commerce Department reported Tuesday.
Sales of new homes dropped 1 percent in June, reaching an annual rate of 312,000 -- less than half the 700,000 rate that most economists consider healthy for the new-home sector. New-home sales fell to record lows in the Northeast and were also particularly sluggish in the West.
The Commerce Department reported 164,000 new homes for sale in June, which is a record low. Taking into account June’s sales pace, the supply of new homes on the market dropped to a 6.3-month supply, the lowest since April 2010.
However, builders are starting to build more. Last week, the Commerce Department released a report that showed a rebound in June for new building permits -- an indication for future building. Also, builders broke ground on more homes in June, with housing starts soaring 14.6 percent last month, marking a six-month high in housing starts.
Meanwhile, the median price of a new home increased to $235,200 in June, up 5.8 percent from May. Compared to June last year, the median price rose 7.2 percent. However, new-homes continue to be considerably higher than previously owned homes. The median price on existing-homes averaged $184,300 in June.
Source: “U.S. New Home Sales Fall in June, Prices Rise,” Reuters News (July 26, 2011)
Sales of new homes dropped 1 percent in June, reaching an annual rate of 312,000 -- less than half the 700,000 rate that most economists consider healthy for the new-home sector. New-home sales fell to record lows in the Northeast and were also particularly sluggish in the West.
The Commerce Department reported 164,000 new homes for sale in June, which is a record low. Taking into account June’s sales pace, the supply of new homes on the market dropped to a 6.3-month supply, the lowest since April 2010.
However, builders are starting to build more. Last week, the Commerce Department released a report that showed a rebound in June for new building permits -- an indication for future building. Also, builders broke ground on more homes in June, with housing starts soaring 14.6 percent last month, marking a six-month high in housing starts.
Meanwhile, the median price of a new home increased to $235,200 in June, up 5.8 percent from May. Compared to June last year, the median price rose 7.2 percent. However, new-homes continue to be considerably higher than previously owned homes. The median price on existing-homes averaged $184,300 in June.
Source: “U.S. New Home Sales Fall in June, Prices Rise,” Reuters News (July 26, 2011)
Spring buying boosted home prices for 2nd month
Home prices in major U.S. cities rose in May for the second straight month, propped up by a flurry of spring buyers. But after adjusting for such seasonal factors, prices fell in a majority of markets.
The Standard & Poor’s/Case-Shiller home-price index released Tuesday showed that prices rose in 16 of the 20 cities tracked.
Boston posted the biggest monthly increase, followed closely by Minneapolis and Washington. Prices in three metro areas hit the hardest by the housing crisis – Detroit, Las Vegas and Tampa, Fla. – fell to their lowest points since the recession began. Prices in Phoenix were unchanged.
The 20-city study rose 1 percent in May from April. The index measures prices compared with those in January 2000. It then provides a three-month average. The May data is the latest available.
Separately, the Commerce Department said fewer people bought new homes in June from May. Sales fell 1 percent last month to a seasonally adjusted annual rate of 312,000. That’s less than half the 700,000 that economists say is typical in healthy markets.
Housing remains the weakest part of the economy. High unemployment, larger downpayment requirements and tighter credit are preventing many buyers from entering the market. Many who can afford to buy are waiting because they are worried prices have yet to hit bottom.
Analysts say home prices have stabilized over the past six months. But uncertainty over unemployment and millions of foreclosures that have been delayed because of a government investigation could easily send prices downward in the coming months.
Robert Shiller, a Yale professor and co-founder of the home-price index, said too much of the economic picture remains up in the air to make any realistic projection about where home prices are headed.
“The aggregate economy is at a turning point and there is much uncertainty now,” he said.
David M. Blitzer, chairman of S&P’s index committee, said the month-over-month increase in May was attributed to a “seasonal period of stronger demand for houses.” Such increases are expected, he said.
“Sustained increases in home prices over several months and better annual results need to be seen before we can confirm a real estate market recovery,” he said. Over the last 12 months, prices have fallen in 19 of the 20 cities tracked.
One bright spot: Even when adjusted for seasonal factors, month-over-month prices rose in some markets that had been pummeled by slumping sales. Those cities are Chicago, Denver, Miami, Minneapolis and Seattle.
Still, prices in 11 markets fell when adjusted for the spring-buying season: Atlanta, Charlotte, Cleveland, Dallas, Detroit, Las Vegas, Los Angeles, Phoenix, Portland, San Diego and Tampa, Fla.
Last year, a tax credit for first-time buyers helped boost prices. They rose nearly 4 percent from April through July before falling more than 7 percent this winter to record lows. Prices in big metro areas sank in March to their lowest levels since 2002.
Americans are holding off from buying homes for a variety of reasons.
A growing number of contracts are being canceled before sales are final because unexpectedly low home appraisals are scuttling loans. Few people want to take on the extra debt associated with a home purchase. Even historically low home prices and cheap mortgage rates haven’t brought people back to the market.
Foreclosures and short sales – when a lender agrees to sell for less than what is owed on a mortgage – made up about 30 percent of all home sales last month, up from about 10 percent in past years. And 1.7 million potential foreclosures are being held up, according to real estate firm CoreLogic, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.
Sales of previously owned homes fell in June for a third straight month to a seasonally adjusted annual rate of 4.77 million homes. This year’s pace is lagging behind the 4.91 million homes sold last year – the fewest since 1997. In a healthy economy, people buy roughly 6 million homes per year.
Source: The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.
The Standard & Poor’s/Case-Shiller home-price index released Tuesday showed that prices rose in 16 of the 20 cities tracked.
Boston posted the biggest monthly increase, followed closely by Minneapolis and Washington. Prices in three metro areas hit the hardest by the housing crisis – Detroit, Las Vegas and Tampa, Fla. – fell to their lowest points since the recession began. Prices in Phoenix were unchanged.
The 20-city study rose 1 percent in May from April. The index measures prices compared with those in January 2000. It then provides a three-month average. The May data is the latest available.
Separately, the Commerce Department said fewer people bought new homes in June from May. Sales fell 1 percent last month to a seasonally adjusted annual rate of 312,000. That’s less than half the 700,000 that economists say is typical in healthy markets.
Housing remains the weakest part of the economy. High unemployment, larger downpayment requirements and tighter credit are preventing many buyers from entering the market. Many who can afford to buy are waiting because they are worried prices have yet to hit bottom.
Analysts say home prices have stabilized over the past six months. But uncertainty over unemployment and millions of foreclosures that have been delayed because of a government investigation could easily send prices downward in the coming months.
Robert Shiller, a Yale professor and co-founder of the home-price index, said too much of the economic picture remains up in the air to make any realistic projection about where home prices are headed.
“The aggregate economy is at a turning point and there is much uncertainty now,” he said.
David M. Blitzer, chairman of S&P’s index committee, said the month-over-month increase in May was attributed to a “seasonal period of stronger demand for houses.” Such increases are expected, he said.
“Sustained increases in home prices over several months and better annual results need to be seen before we can confirm a real estate market recovery,” he said. Over the last 12 months, prices have fallen in 19 of the 20 cities tracked.
One bright spot: Even when adjusted for seasonal factors, month-over-month prices rose in some markets that had been pummeled by slumping sales. Those cities are Chicago, Denver, Miami, Minneapolis and Seattle.
Still, prices in 11 markets fell when adjusted for the spring-buying season: Atlanta, Charlotte, Cleveland, Dallas, Detroit, Las Vegas, Los Angeles, Phoenix, Portland, San Diego and Tampa, Fla.
Last year, a tax credit for first-time buyers helped boost prices. They rose nearly 4 percent from April through July before falling more than 7 percent this winter to record lows. Prices in big metro areas sank in March to their lowest levels since 2002.
Americans are holding off from buying homes for a variety of reasons.
A growing number of contracts are being canceled before sales are final because unexpectedly low home appraisals are scuttling loans. Few people want to take on the extra debt associated with a home purchase. Even historically low home prices and cheap mortgage rates haven’t brought people back to the market.
Foreclosures and short sales – when a lender agrees to sell for less than what is owed on a mortgage – made up about 30 percent of all home sales last month, up from about 10 percent in past years. And 1.7 million potential foreclosures are being held up, according to real estate firm CoreLogic, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.
Sales of previously owned homes fell in June for a third straight month to a seasonally adjusted annual rate of 4.77 million homes. This year’s pace is lagging behind the 4.91 million homes sold last year – the fewest since 1997. In a healthy economy, people buy roughly 6 million homes per year.
Source: The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.
Citizens seeking big premium increase on sinkholes
Florida’s largest insurer of homes and businesses, state-backed Citizens Property Insurance Corp., will ask its board to approve a staggering rate increase for providing coverage on sinkhole policies, a company spokeswoman said Monday.
The company will ask its board Wednesday for an increase on average of more than 400 percent to purchase sinkhole coverage. In 2010, Citizens received about $32 million in premiums for sinkhole coverage with ultimate losses and loss-related expenses estimated to total $245 million. In areas where sinkhole claims have been particularly high, premium increases could be multiplied 20 times or more under the proposal.
Since the last major hurricane hit Florida in 2005, sinkhole claims have skyrocketed, totaling nearly $2 billion in the last four years. Most of the claims have come from Hernando, Hillsborough and Pasco counties, part of the Tampa Bay area.
New legislation passed this spring allows Citizens to raise its rates to whatever level it believes is necessary to offset such losses. Lawmakers heard testimony that sinkhole claims have tripled in the last three years with two-thirds of those coming from that tri-county region.
Citizens’ spokeswoman Christine Ashburn said the company’s board of governors will discuss the request for the rate hike Wednesday when it conducts its meeting by teleconference.
Citizens is Florida’s largest insurer of homes and businesses with more than 1.4 million policyholders. It was created by the Legislature in 2002 to provide insurance to homeowners in high-risk areas and those who couldn’t find coverage in the private market.
Source: The Associated Press.
The company will ask its board Wednesday for an increase on average of more than 400 percent to purchase sinkhole coverage. In 2010, Citizens received about $32 million in premiums for sinkhole coverage with ultimate losses and loss-related expenses estimated to total $245 million. In areas where sinkhole claims have been particularly high, premium increases could be multiplied 20 times or more under the proposal.
Since the last major hurricane hit Florida in 2005, sinkhole claims have skyrocketed, totaling nearly $2 billion in the last four years. Most of the claims have come from Hernando, Hillsborough and Pasco counties, part of the Tampa Bay area.
New legislation passed this spring allows Citizens to raise its rates to whatever level it believes is necessary to offset such losses. Lawmakers heard testimony that sinkhole claims have tripled in the last three years with two-thirds of those coming from that tri-county region.
Citizens’ spokeswoman Christine Ashburn said the company’s board of governors will discuss the request for the rate hike Wednesday when it conducts its meeting by teleconference.
Citizens is Florida’s largest insurer of homes and businesses with more than 1.4 million policyholders. It was created by the Legislature in 2002 to provide insurance to homeowners in high-risk areas and those who couldn’t find coverage in the private market.
Source: The Associated Press.
Fla. insurance cost comparisons made easy
A new homebuyer needs property insurance and wants advice. Which company is cheapest? Which one is most expensive?
The Florida Office of Insurance Regulation announced the re-launch of an interactive program designed to assist Florida’s homeowners to shop for homeowners’ rates. The new system, called the Consumer HomeOwners Insurance Comparison Electronic System (CHOICES), is a revamp of an earlier system developed in 2007.
CHOICES doesn’t offer quotes on a specific home; instead, it offers two home examples and generates, county-by-county, a range of costs to insure that house. While a homebuyer doesn’t get an actual quote – there’s no way to key in a specific home’s details – he’ll see a range of costs from lowest to highest as they would apply to that sample home. Those rates can be used as a yardstick to compare carriers before calling directly for a quote.
Someone seeking rock-bottom rates, for example, could choose to call the five least expensive carriers on the list. Or if a low price scares him, perhaps fearing that a company won’t be around to pay claims after a major disaster, he could decide to simply avoid the five most-expensive carriers.
Insurers base their quotes on different factors, and the most expensive carrier in one county could be the least expensive carrier elsewhere. In Miami-Dade County, for example, United Property & Casualty Insurance Company Inc. has the most expensive coverage at $9,873 per year without wind mitigation coverage, according to CHOICES. However, that same insurer ranks as the least expensive carrier in Seminole County, charging only $969 without wind mitigation.
The two sample coverage homes are a $150,000 property built before 2001 and a $300,000 property built in 2005.
“The system ranks companies’ rates in a given county, along with company contact information, to encourage Floridians to shop for a better rate,” says Florida Insurance Commissioner Kevin McCarty. “The system also illustrates the competitiveness of the homeowners’ insurance market in Florida and the benefits of shopping for insurance.”
CHOICES was originally released in 2007 as shopandcomparerates.com; at its peak, the website received nearly 10,000 hits a month. The rate quotes reflect the most recent rate filings accepted by the Florida Insurance Commission.
The Commission notes that the listing of an insurance company does not constitute an endorsement, and the rates don’t reflect surcharges or discounts. Consumers must still call carriers directly for an official premium quote.
Consumers can find the information at: http://www.floir.com/choices
Source: Florida Realtors®
The Florida Office of Insurance Regulation announced the re-launch of an interactive program designed to assist Florida’s homeowners to shop for homeowners’ rates. The new system, called the Consumer HomeOwners Insurance Comparison Electronic System (CHOICES), is a revamp of an earlier system developed in 2007.
CHOICES doesn’t offer quotes on a specific home; instead, it offers two home examples and generates, county-by-county, a range of costs to insure that house. While a homebuyer doesn’t get an actual quote – there’s no way to key in a specific home’s details – he’ll see a range of costs from lowest to highest as they would apply to that sample home. Those rates can be used as a yardstick to compare carriers before calling directly for a quote.
Someone seeking rock-bottom rates, for example, could choose to call the five least expensive carriers on the list. Or if a low price scares him, perhaps fearing that a company won’t be around to pay claims after a major disaster, he could decide to simply avoid the five most-expensive carriers.
Insurers base their quotes on different factors, and the most expensive carrier in one county could be the least expensive carrier elsewhere. In Miami-Dade County, for example, United Property & Casualty Insurance Company Inc. has the most expensive coverage at $9,873 per year without wind mitigation coverage, according to CHOICES. However, that same insurer ranks as the least expensive carrier in Seminole County, charging only $969 without wind mitigation.
The two sample coverage homes are a $150,000 property built before 2001 and a $300,000 property built in 2005.
“The system ranks companies’ rates in a given county, along with company contact information, to encourage Floridians to shop for a better rate,” says Florida Insurance Commissioner Kevin McCarty. “The system also illustrates the competitiveness of the homeowners’ insurance market in Florida and the benefits of shopping for insurance.”
CHOICES was originally released in 2007 as shopandcomparerates.com; at its peak, the website received nearly 10,000 hits a month. The rate quotes reflect the most recent rate filings accepted by the Florida Insurance Commission.
The Commission notes that the listing of an insurance company does not constitute an endorsement, and the rates don’t reflect surcharges or discounts. Consumers must still call carriers directly for an official premium quote.
Consumers can find the information at: http://www.floir.com/choices
Source: Florida Realtors®
Monday, July 25, 2011
Deadline Extended for Mortgage Relief Program
The deadline for applying to a program that provides mortgage relief to unemployed and medically challenged home owners has been extended to July 27.
The Emergency Homeowner Loan Program originally had a deadline slated for July 22, but the federal government extended the program, which started in June, to give home owners more time to apply.
Home owners eligible for the program will be able to qualify for up to $50,000 in interest-free loans for up to two years. Home owners who have had a drop in income of at least 15 percent from involuntary unemployment or underemployment due to economic conditions or a medical emergency are eligible for the program. (Learn more about eligibility requirements and the participating states at the Department of Housing and Urban Development’s Web site.)
HUD said it hopes to help up to 30,000 borrowers through the program.
Source: “HUD Extends Unemployment Aid Deadline,” HousingWire
The Emergency Homeowner Loan Program originally had a deadline slated for July 22, but the federal government extended the program, which started in June, to give home owners more time to apply.
Home owners eligible for the program will be able to qualify for up to $50,000 in interest-free loans for up to two years. Home owners who have had a drop in income of at least 15 percent from involuntary unemployment or underemployment due to economic conditions or a medical emergency are eligible for the program. (Learn more about eligibility requirements and the participating states at the Department of Housing and Urban Development’s Web site.)
HUD said it hopes to help up to 30,000 borrowers through the program.
Source: “HUD Extends Unemployment Aid Deadline,” HousingWire
Bargains Abound in Second-Home Market: 4 Hot Buys
Prices have dropped in many markets, and second-home hot spots that once were out of reach for many buyers have now become more affordable, The Wall Street Journal reports.
For example, a property on Hilton Head Island, S.C., that sold for $1.2 million in June 2006 sold in April 2011 for $750,000. Other big slashes in home prices have made such markets more affordable, and buyers are jumping in: On Palm Beach Island, Fla., sales were up 50 percent in the year ending June 30, and in the Hamptons in New York, transactions were up 59 percent in the second quarter compared to a year earlier.
Several second-home markets are already showing signs of stabilizing; in some, prices are even starting to rise, such as Santa Monica, Calif., and Aspen, Colo.
But some markets are continuing to see prices drop. For example in Miami, Fla., and Martha's Vineyard, Mass., foreclosed properties are continuing to dampen overall home prices there.
4 Areas With Vacation-Home Bargains
The Wall Street Journalreports that the following second-home markets continue to have softening prices, but buyers can find plenty of deals.
1. Martha's Vineyard, Mass.
Median home price: $403,000
Median home price 5 years ago: $638,000
Median home price: $403,000
Median home price 5 years ago: $638,000
2. Vail, Colo.
Median home price: $385,000
Median home price 5 years ago: $562,000
Median home price: $385,000
Median home price 5 years ago: $562,000
3. Miami
Median home price: $130,000
Median home price 5 years ago: $302,000
Median home price: $130,000
Median home price 5 years ago: $302,000
4. Palm Beach, Fla.
Median home price: $254,000
Median home price 5 years ago: $758,000
Median home price: $254,000
Median home price 5 years ago: $758,000
Source: “Vacation Homes: Why It May be a Time to Buy,” The Wall Street Journal
CVS challenges way Hillsborough appraised properties
Hillsborough County could lose $2.5 million in property taxes if drug store giant CVS prevails in a lawsuit challenging the county’s method of valuing 35 drug stores here.
It is a case that tax lawyers and property appraisers elsewhere in Florida will watch with interest because of the potential for a new legal precedent regarding commercial property assessment. Among the issues likely to be explored is what factors property appraisers should consider when valuing a commercial property.
The lawsuit was filed in 2007 but is now nearing a trial date.
CVS wants assessments on the stores revised for tax years 2005 through 2010. The company claims Property Appraiser Rob Turner over-valued the stores by 10-15 percent. That would translate into $2.5 million in taxes the county could lose if the drug chain wins the case, said Will Shepherd, general counsel for the property appraiser’s office.
“It’s a big money case,” he said.
Besides Turner, other defendants in the case are the state Department of Revenue and the county’s Value Adjustment Board. The board hears challenges to county property tax assessments; the revenue department establishes rules of procedure for value adjustment boards.
CVS argues its properties should be assessed, in part, based on what comparable properties are selling for in the same area.
But Shepherd said the company is basing it assessment on what it got for former Eckerd drug stores that CVS acquired in 2004, then sold. The former Eckerd stores brought about half the amount of money it would cost to acquire land and build a new drug store.
Shepherd claims those sales are not a true marker because CVS put a stipulation in the sales contracts that prohibits the stores from being used as drug stores by future owners.
That devalues the properties, Shepherd said, because drug stores are generally built specifically for that purpose on lots larger than is generally needed for other retail stores such as banks, gas stations and auto supply stores.
Therefore, Shepherd said, the sales contract prohibition effectively lowers the value of the property because it won’t be used for what it was intended: a drug store.
“They couldn’t sell them for that much because they blocked the guy who could pay the most money,” Shepherd said. “It’s really a case of the highest and best use. You can’t block the guy who’s likely to pay the most money.”
Ben Phipps, attorney for CVS, dismissed Shepherd’s argument as “meaningless.” Phipps said Walgreen Co., the nation’s second largest drug chain after CVS, would probably already have a site nearby and wouldn’t be a likely buyer when CVS sells a store it doesn’t need.
“What they’re saying is, ‘You could sell it to Walgreen and Walgreen would pay you more for it,’” Phipps said. “That’s not true because Walgreen is already there. Wherever there’s a CVS, there’s a Walgreen nearby.”
Phipps said the county is wrong in trying to value a building and lot based on what type of business is there. He said the state of Florida and most property appraisers value commercial properties as if they were vacant and ready to lease at market rent.
However, among the factors that the state constitution says property appraisers should consider is income from a property and its highest and best use. Shepherd said he will argue that the highest and best uses of the 35 CVS properties are as drugstores.
Phipps said this issue has come up in other states, but he expects the coming trial in Tampa to have more precedential value because experts on both sides will get an opportunity to testify in depth.
“The same issues have been raised before but not at the level and not with the sophistication that they will be in this case,” he said.
CVS is asking the court to set aside the assessments, establish new assessments based on what the company believes are legal methods, and refund the difference. The company is also asking the county to pay legal fees. Attorneys for the two sides will hold a preliminary meeting with Circuit Judge Bernard Silver on Aug. 3 to discuss a trial date.
Source: Tampa Tribune, Fla., Mike Salinero. Distributed by McClatchy-Tribune Information Services.
It is a case that tax lawyers and property appraisers elsewhere in Florida will watch with interest because of the potential for a new legal precedent regarding commercial property assessment. Among the issues likely to be explored is what factors property appraisers should consider when valuing a commercial property.
The lawsuit was filed in 2007 but is now nearing a trial date.
CVS wants assessments on the stores revised for tax years 2005 through 2010. The company claims Property Appraiser Rob Turner over-valued the stores by 10-15 percent. That would translate into $2.5 million in taxes the county could lose if the drug chain wins the case, said Will Shepherd, general counsel for the property appraiser’s office.
“It’s a big money case,” he said.
Besides Turner, other defendants in the case are the state Department of Revenue and the county’s Value Adjustment Board. The board hears challenges to county property tax assessments; the revenue department establishes rules of procedure for value adjustment boards.
CVS argues its properties should be assessed, in part, based on what comparable properties are selling for in the same area.
But Shepherd said the company is basing it assessment on what it got for former Eckerd drug stores that CVS acquired in 2004, then sold. The former Eckerd stores brought about half the amount of money it would cost to acquire land and build a new drug store.
Shepherd claims those sales are not a true marker because CVS put a stipulation in the sales contracts that prohibits the stores from being used as drug stores by future owners.
That devalues the properties, Shepherd said, because drug stores are generally built specifically for that purpose on lots larger than is generally needed for other retail stores such as banks, gas stations and auto supply stores.
Therefore, Shepherd said, the sales contract prohibition effectively lowers the value of the property because it won’t be used for what it was intended: a drug store.
“They couldn’t sell them for that much because they blocked the guy who could pay the most money,” Shepherd said. “It’s really a case of the highest and best use. You can’t block the guy who’s likely to pay the most money.”
Ben Phipps, attorney for CVS, dismissed Shepherd’s argument as “meaningless.” Phipps said Walgreen Co., the nation’s second largest drug chain after CVS, would probably already have a site nearby and wouldn’t be a likely buyer when CVS sells a store it doesn’t need.
“What they’re saying is, ‘You could sell it to Walgreen and Walgreen would pay you more for it,’” Phipps said. “That’s not true because Walgreen is already there. Wherever there’s a CVS, there’s a Walgreen nearby.”
Phipps said the county is wrong in trying to value a building and lot based on what type of business is there. He said the state of Florida and most property appraisers value commercial properties as if they were vacant and ready to lease at market rent.
However, among the factors that the state constitution says property appraisers should consider is income from a property and its highest and best use. Shepherd said he will argue that the highest and best uses of the 35 CVS properties are as drugstores.
Phipps said this issue has come up in other states, but he expects the coming trial in Tampa to have more precedential value because experts on both sides will get an opportunity to testify in depth.
“The same issues have been raised before but not at the level and not with the sophistication that they will be in this case,” he said.
CVS is asking the court to set aside the assessments, establish new assessments based on what the company believes are legal methods, and refund the difference. The company is also asking the county to pay legal fees. Attorneys for the two sides will hold a preliminary meeting with Circuit Judge Bernard Silver on Aug. 3 to discuss a trial date.
Source: Tampa Tribune, Fla., Mike Salinero. Distributed by McClatchy-Tribune Information Services.
Gov’t in talks to rent out foreclosures
The Obama administration is considering a plan that would take foreclosed homes off the market and rent them out – in a move aimed at clearing the glut of unsold foreclosed homes and preventing home values from falling any more, The Wall Street Journal reports.
The talks come at a time when national rents are on the rise and home prices have been falling. By taking advantage of higher rents, lenders would be able to cover the costs of holding the properties until the homes can be resold after the market stabilizes – and maybe even make a profit on it later, experts note.
Nationally, sales of distressed homes, which are often sold at steep discounts, continue to pull down home values. Removing some of the high number of foreclosed homes for sale is “worth looking at,” Federal Reserve Chairman Ben Bernanke said last week in testimony to Congress.
Just reducing Fannie Mae and Freddie Mac’s foreclosed property sales from its current rate of 50,000 each month to 30,000 could lessen total distressed sales by one-third and help avoid a further 3 percent to 5 percent decline in home prices, analysts at Credit Suisse estimate.
However, turning foreclosed homes into rentals could place lenders and the government in an unknown role of playing landlord.
Another idea being tossed around, according to The Wall Street Journal: Federal officials selling thousands of foreclosed properties to private investors who would agree to rent them out, and who could then work with property management firms and handle the day-to-day tenant demands.
Source: INFORMATION, INC.
The talks come at a time when national rents are on the rise and home prices have been falling. By taking advantage of higher rents, lenders would be able to cover the costs of holding the properties until the homes can be resold after the market stabilizes – and maybe even make a profit on it later, experts note.
Nationally, sales of distressed homes, which are often sold at steep discounts, continue to pull down home values. Removing some of the high number of foreclosed homes for sale is “worth looking at,” Federal Reserve Chairman Ben Bernanke said last week in testimony to Congress.
Just reducing Fannie Mae and Freddie Mac’s foreclosed property sales from its current rate of 50,000 each month to 30,000 could lessen total distressed sales by one-third and help avoid a further 3 percent to 5 percent decline in home prices, analysts at Credit Suisse estimate.
However, turning foreclosed homes into rentals could place lenders and the government in an unknown role of playing landlord.
Another idea being tossed around, according to The Wall Street Journal: Federal officials selling thousands of foreclosed properties to private investors who would agree to rent them out, and who could then work with property management firms and handle the day-to-day tenant demands.
Source: INFORMATION, INC.
Friday, July 22, 2011
Fewer Home Owners Report Equity in Homes
With falling property values, more home owners are reporting being underwater, owing more on their home than it’s currently worth.
One in three home owners -- or 33 percent -- say that their home is worth less than the amount they still owe on their mortgage, while another 18 percent aren’t even sure if they’re underwater, according to the latest Rasmussen Report of 676 home owners.
Upper-income home owners tend to be more confident about their home’s value than those who earn less, according to the study. Also, investors were found to be more confident than noninvestors about their home’s equity.
Overall, for the second straight month, less than half of home owners -- 49 percent -- say the value of their home is worth more than the amount they still owe on their mortgage. While that’s up from June’s all-time low of 45 percent, analysts are still concerned.
For comparison, in December 2008, 61 percent of home owners surveyed said they believed their home was worth more than their mortgage. While that number has fallen since, this is the first time the number of home owners believing they had equity in their home stayed below 50 percent for two months in a row.
Source: “Just 49% Say Home Is Worth More Than Mortgage,” Rasmussen Reports (July 21, 2011)
One in three home owners -- or 33 percent -- say that their home is worth less than the amount they still owe on their mortgage, while another 18 percent aren’t even sure if they’re underwater, according to the latest Rasmussen Report of 676 home owners.
Upper-income home owners tend to be more confident about their home’s value than those who earn less, according to the study. Also, investors were found to be more confident than noninvestors about their home’s equity.
Overall, for the second straight month, less than half of home owners -- 49 percent -- say the value of their home is worth more than the amount they still owe on their mortgage. While that’s up from June’s all-time low of 45 percent, analysts are still concerned.
For comparison, in December 2008, 61 percent of home owners surveyed said they believed their home was worth more than their mortgage. While that number has fallen since, this is the first time the number of home owners believing they had equity in their home stayed below 50 percent for two months in a row.
Source: “Just 49% Say Home Is Worth More Than Mortgage,” Rasmussen Reports (July 21, 2011)
NAR recommends qualified mortgage rules
Today, the National Association of Realtors® submitted its recommendations for a Qualified Mortgage (QM) Rule being considered by the Federal Reserve.
The Fed is implementing a new law, the Truth in Lending Act (TILA), which is part of the massive Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. (While they share many goals, the QM rule is separate from the Qualified Residential Mortgage or QRM rule under consideration by other federal agencies.)
Under TILA, the Fed must create a rule that would prohibit any creditor from providing a mortgage loan without “a reasonable and good faith determination that the borrower has the ability to repay the loan.”
The proposed rule gives creditors four ways to comply with the “ability to repay” requirement and creates criteria for compliance. Once finished, the Board will transfer all comments to the Consumer Financial Protection Bureau (CFPB), which assumed rulemaking authority on July 21, 2011.
NAR focused on three points of concern to Realtors:
• Seller financing should continue to be exempt from the ability-to-repay requirements, providing it fits the legal definition of “seller.” Generally, anyone who extends credit to a consumer more than five times per year is considered a creditor rather than a seller.
• The QM definition should include stronger consumer protections than currently proposed, promote liquidity, add ability-to-repay standards and offer lenders a safe harbor that reduces litigation.
• The QM rule’s 3 percent cap on points and fees should be adjusted, NAR says. One option is to reinstate the affiliated business exemption from the Real Estate Settlement Procedures Act (RESPA). Failing that, the rule should remove the cost of title and escrow charges from the calculation for fees and points.
NAR has posted its comment letter about ability to pay under the propose QM rules.
The original rule proposed by the Federal Reserve was posted in the Federal Register and also available online.
Source: Florida Realtors®
The Fed is implementing a new law, the Truth in Lending Act (TILA), which is part of the massive Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. (While they share many goals, the QM rule is separate from the Qualified Residential Mortgage or QRM rule under consideration by other federal agencies.)
Under TILA, the Fed must create a rule that would prohibit any creditor from providing a mortgage loan without “a reasonable and good faith determination that the borrower has the ability to repay the loan.”
The proposed rule gives creditors four ways to comply with the “ability to repay” requirement and creates criteria for compliance. Once finished, the Board will transfer all comments to the Consumer Financial Protection Bureau (CFPB), which assumed rulemaking authority on July 21, 2011.
NAR focused on three points of concern to Realtors:
• Seller financing should continue to be exempt from the ability-to-repay requirements, providing it fits the legal definition of “seller.” Generally, anyone who extends credit to a consumer more than five times per year is considered a creditor rather than a seller.
• The QM definition should include stronger consumer protections than currently proposed, promote liquidity, add ability-to-repay standards and offer lenders a safe harbor that reduces litigation.
• The QM rule’s 3 percent cap on points and fees should be adjusted, NAR says. One option is to reinstate the affiliated business exemption from the Real Estate Settlement Procedures Act (RESPA). Failing that, the rule should remove the cost of title and escrow charges from the calculation for fees and points.
NAR has posted its comment letter about ability to pay under the propose QM rules.
The original rule proposed by the Federal Reserve was posted in the Federal Register and also available online.
Source: Florida Realtors®
Fixed mortgage rates inch up from yearly lows
Fixed mortgage rates were mostly unchanged this week, inching up from their yearly lows.
The average rate on the 30-year fixed loan ticked up to 4.52 percent from 4.51 percent a week ago, Freddie Mac said Thursday. It reached its yearly low of 4.49 percent a month ago.
The average rate on the 15-year fixed loan, popular for refinancing, nudged up to 3.66 percent from 3.65 percent, its low point for the year.
Mortgage rates typically track the yield on the 10-year Treasury note. Yields fall when prices rise. In the past week, yields have been stable even though Congress and the Obama administration are less than two weeks away from a possible default on the government’s debt.
Negotiations to raise the government’s $14.3 trillion borrowing limit have yet to produce a deal that can pass both chambers of Congress, although a bipartisan Senate plan has drawn support from President Obama.
Low mortgage rates and depressed home prices have done little to revive the struggling housing market. Many people simply can’t take advantage of the historically low rates because of tighter lending standards and bigger required down payments.
Other potential homebuyers are holding off, concerned that housing prices will continue to fall.
Few economists expect the housing market to rebound before 2013.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.
The average rate on a five-year adjustable-rate mortgage edged down to 3.27 percent from 3.29 percent last week. Three weeks ago, it hit 3.25 percent, its lowest level on records dating back to 2005. The average rate on the one-year adjustable loan rose to 2.97 percent from 2.95 percent. It hit a record low last week.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees for the 30-year loans were unchanged at 0.7, according to Freddie Mac’s survey. Average fees for the 15-year fixed loan rose to 0.7. Fees for the five-year and one-year ARMs were 0.5.
Source: The Associated Press, Derek Kravitz, AP business writer. All rights reserved.
The average rate on the 30-year fixed loan ticked up to 4.52 percent from 4.51 percent a week ago, Freddie Mac said Thursday. It reached its yearly low of 4.49 percent a month ago.
The average rate on the 15-year fixed loan, popular for refinancing, nudged up to 3.66 percent from 3.65 percent, its low point for the year.
Mortgage rates typically track the yield on the 10-year Treasury note. Yields fall when prices rise. In the past week, yields have been stable even though Congress and the Obama administration are less than two weeks away from a possible default on the government’s debt.
Negotiations to raise the government’s $14.3 trillion borrowing limit have yet to produce a deal that can pass both chambers of Congress, although a bipartisan Senate plan has drawn support from President Obama.
Low mortgage rates and depressed home prices have done little to revive the struggling housing market. Many people simply can’t take advantage of the historically low rates because of tighter lending standards and bigger required down payments.
Other potential homebuyers are holding off, concerned that housing prices will continue to fall.
Few economists expect the housing market to rebound before 2013.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.
The average rate on a five-year adjustable-rate mortgage edged down to 3.27 percent from 3.29 percent last week. Three weeks ago, it hit 3.25 percent, its lowest level on records dating back to 2005. The average rate on the one-year adjustable loan rose to 2.97 percent from 2.95 percent. It hit a record low last week.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees for the 30-year loans were unchanged at 0.7, according to Freddie Mac’s survey. Average fees for the 15-year fixed loan rose to 0.7. Fees for the five-year and one-year ARMs were 0.5.
Source: The Associated Press, Derek Kravitz, AP business writer. All rights reserved.
Thursday, July 21, 2011
Listing website errors rile owners, brokers
In the old days, if you were looking for a new place to live, you picked up the local newspaper, looked at the real estate classifieds, put on comfortable shoes or gassed up the car, and began a house-to-house search.
The Internet has made the job easier, at least on your feet. In short order, you can look at all kinds of sales and rental listings just about anywhere – around the block or across the country.
Given their promise of information from all over the place, how reliable are websites such as Zillow, Trulia, HomeGain, and a growing number of others?
A colleague posed the question after seeing that his Abington, Pa., house was listed online by its ZIP code, which is shared by portions of neighboring towns, and included the wrong school district.
Ken Shuman, head of communications at Trulia, said his website obtained information on 95 million houses from county assessors’ offices nationwide and Fidelity National Real Estate Solutions, a data provider.
Various sources provide details about Zillow’s 100-million-plus homes, both for rent and for sale, said chief economist Stan Humphries: “Information comes in from public-record data, real estate brokerages, users of our information (consumers), and real estate agents directly.”
School sources provide that information, Humphries said, adding that “we do take pains to say the closest school to the property will not necessarily be the one children will be attending.”
“It would be great if we knew, but very difficult to know exactly,” he said.
Real estate agents take issue with these website flaws, as well as with the values the sites place on houses, for sale or not. (They also offer price information about homes already sold, for example.)
When asked whether he recommended these sites to consumers, Kit Anstey of Prudential Fox & Roach in Chester County, Pa., said, “Absolutely not. Very misleading.”
But Mark Wade of Prudential Fox & Roach in Philadelphia said the real estate websites did have some value.
“I think they play a very helpful part in house and condo hunting,” he said. “A lot of information is available at a potential buyer’s fingertips. (Trulia and Zillow) consolidate the information and are both fairly easy to navigate.”
Yet Wade added that he thought estimates of value offered on some websites, such as Zillow’s “Zestimates,” were unreliable, saying that using the formula that determine them “is akin to throwing arrows at a dartboard. You rarely know where it is going to land.”
Trulia’s Shuman, acknowledging that there is sometimes a 90-day delay in obtaining data, said the three-month “rolling average” his site offers is based on properties within municipalities rather than within metropolitan statistical areas.
“When people buy houses, they are looking for specific places – a city, town, or neighborhood,” he said. “MSAs can skew numbers. There are often dramatic differences from neighborhood to neighborhood.”
Trulia lets consumers “leverage” information about houses, Shuman said: “People often save homes from the site if they are not interested in buying them. If they are following a property, we serve them up recent comps (comparable sales) so they can manually update that information.”
HomeGain has an “instant home-prices tool” that allows an owner to recalculate a price range that might be better if actual amenities and square footage of living space were addressed. It doesn’t affect the information from official sources.
Regarding the accuracy of location and school information, Trulia, Zillow, and HomeGain all said owners could update details posted about their homes.
“If you feel your house is misrepresented on Trulia, you can update the information as long as the house is off-market,” Shuman said. “We hope to get edited information for houses on the market, but right now we are trying not to tussle with listing agents.”
The site also is “resetting school boundaries, as a result of a new relationship (with a data provider) we have just formed,” Shuman said. “We have school rankings and are expanding it to do searches based on school boundaries, setting a polygon search for the consumer on the map.” Rollout is planned for late July to mid-August.
Zillow requires people trying to update descriptions to prove that they are the homeowners, Humphries said.
It’s tough to pinpoint all but obvious misrepresentations, he said, but “we do filter for owners giving erroneous information about home or area, and eliminate the data from the models.”
The issue, for some, seems to be not so much the information the websites offer but what consumers might take away from it.
Philadelphia mortgage broker Fred Glick said the websites “can be the downfall for everyone involved” because they offer no sense of the condition of properties.
“When you want to get an idea of what your home is worth for a refinance, those sites can tell you the wrong value,” Glick said. “If the appraisal comes in lower, it may mean a higher interest rate than you were expecting.”
Zillow’s Jill Simmons said, “Zestimates are an estimate – a starting point in determining a home’s value,” not the actual value of a property.
The data on Zillow “are tools to help consumers make better real estate decisions,” Simmons said, “but we always recommend that people who want to buy, sell, or refinance engage a local professional like an appraiser or a real estate agent.”
Source: The Philadelphia Inquirer. Distributed by McClatchy-Tribune Information Services.
The Internet has made the job easier, at least on your feet. In short order, you can look at all kinds of sales and rental listings just about anywhere – around the block or across the country.
Given their promise of information from all over the place, how reliable are websites such as Zillow, Trulia, HomeGain, and a growing number of others?
A colleague posed the question after seeing that his Abington, Pa., house was listed online by its ZIP code, which is shared by portions of neighboring towns, and included the wrong school district.
Ken Shuman, head of communications at Trulia, said his website obtained information on 95 million houses from county assessors’ offices nationwide and Fidelity National Real Estate Solutions, a data provider.
Various sources provide details about Zillow’s 100-million-plus homes, both for rent and for sale, said chief economist Stan Humphries: “Information comes in from public-record data, real estate brokerages, users of our information (consumers), and real estate agents directly.”
School sources provide that information, Humphries said, adding that “we do take pains to say the closest school to the property will not necessarily be the one children will be attending.”
“It would be great if we knew, but very difficult to know exactly,” he said.
Real estate agents take issue with these website flaws, as well as with the values the sites place on houses, for sale or not. (They also offer price information about homes already sold, for example.)
When asked whether he recommended these sites to consumers, Kit Anstey of Prudential Fox & Roach in Chester County, Pa., said, “Absolutely not. Very misleading.”
But Mark Wade of Prudential Fox & Roach in Philadelphia said the real estate websites did have some value.
“I think they play a very helpful part in house and condo hunting,” he said. “A lot of information is available at a potential buyer’s fingertips. (Trulia and Zillow) consolidate the information and are both fairly easy to navigate.”
Yet Wade added that he thought estimates of value offered on some websites, such as Zillow’s “Zestimates,” were unreliable, saying that using the formula that determine them “is akin to throwing arrows at a dartboard. You rarely know where it is going to land.”
Trulia’s Shuman, acknowledging that there is sometimes a 90-day delay in obtaining data, said the three-month “rolling average” his site offers is based on properties within municipalities rather than within metropolitan statistical areas.
“When people buy houses, they are looking for specific places – a city, town, or neighborhood,” he said. “MSAs can skew numbers. There are often dramatic differences from neighborhood to neighborhood.”
Trulia lets consumers “leverage” information about houses, Shuman said: “People often save homes from the site if they are not interested in buying them. If they are following a property, we serve them up recent comps (comparable sales) so they can manually update that information.”
HomeGain has an “instant home-prices tool” that allows an owner to recalculate a price range that might be better if actual amenities and square footage of living space were addressed. It doesn’t affect the information from official sources.
Regarding the accuracy of location and school information, Trulia, Zillow, and HomeGain all said owners could update details posted about their homes.
“If you feel your house is misrepresented on Trulia, you can update the information as long as the house is off-market,” Shuman said. “We hope to get edited information for houses on the market, but right now we are trying not to tussle with listing agents.”
The site also is “resetting school boundaries, as a result of a new relationship (with a data provider) we have just formed,” Shuman said. “We have school rankings and are expanding it to do searches based on school boundaries, setting a polygon search for the consumer on the map.” Rollout is planned for late July to mid-August.
Zillow requires people trying to update descriptions to prove that they are the homeowners, Humphries said.
It’s tough to pinpoint all but obvious misrepresentations, he said, but “we do filter for owners giving erroneous information about home or area, and eliminate the data from the models.”
The issue, for some, seems to be not so much the information the websites offer but what consumers might take away from it.
Philadelphia mortgage broker Fred Glick said the websites “can be the downfall for everyone involved” because they offer no sense of the condition of properties.
“When you want to get an idea of what your home is worth for a refinance, those sites can tell you the wrong value,” Glick said. “If the appraisal comes in lower, it may mean a higher interest rate than you were expecting.”
Zillow’s Jill Simmons said, “Zestimates are an estimate – a starting point in determining a home’s value,” not the actual value of a property.
The data on Zillow “are tools to help consumers make better real estate decisions,” Simmons said, “but we always recommend that people who want to buy, sell, or refinance engage a local professional like an appraiser or a real estate agent.”
Source: The Philadelphia Inquirer. Distributed by McClatchy-Tribune Information Services.
VA loans make many foreclosed homes off-limits
The Department of Veterans Affairs provides home loans to veterans that helps them buy a house for very little money down, if any at all.
However, some of the VA requirements, which were created to protect buyers, actually hamstring them when it comes to purchasing a distressed property. Despite the high number of foreclosed houses, many sellers are reluctant to accept offers from those using VA loans because of their strict requirements – including that a dwelling be in shipshape condition.
The VA said it implemented the criteria to protect veterans from sinking money into a rundown house that they might not be able to afford later.
Bill White, assistant director of loan policy for the Veteran’s Benefits Administration, did acknowledge that it is possible the agency is “protecting somebody out of a home.” However, he also said the VA has no intention of changing its requirements.
Source: INFORMATION, INC.
However, some of the VA requirements, which were created to protect buyers, actually hamstring them when it comes to purchasing a distressed property. Despite the high number of foreclosed houses, many sellers are reluctant to accept offers from those using VA loans because of their strict requirements – including that a dwelling be in shipshape condition.
The VA said it implemented the criteria to protect veterans from sinking money into a rundown house that they might not be able to afford later.
Bill White, assistant director of loan policy for the Veteran’s Benefits Administration, did acknowledge that it is possible the agency is “protecting somebody out of a home.” However, he also said the VA has no intention of changing its requirements.
Source: INFORMATION, INC.
Turned down for a loan? Now you can find out why
Your credit score determines the interest rate you pay for a credit card, car loan, private student loan or a home mortgage. A low score could prevent you from getting a loan at all. But for years, this important number has been a mystery to most consumers.
Starting today, that will change.
A provision of the Dodd-Frank financial reform law that takes effect today requires lenders to provide consumers with a free credit score whenever:
• They reject an application for a loan. In that case, lenders will be required to provide consumers with an “adverse action” notice that includes their credit score and explains why they were turned down.
• They approve a loan but at a higher rate than the rate provided to their best customers. As in the first instance, lenders will be required to provide borrowers with a credit score and explain why they’re charging a higher rate.
• Lenders must provide the score they used to make a decision about your loan. They’ll also be required to explain the factors that adversely affected your score and the range of possible scores so you’ll know where you stand.
Consumers submit about 1 billion credit applications every year and of those, about half will fall under one of those two categories, says Mark Greene, CEO of FICO, which developed the most widely used credit score.
Many borrowers who receive the notices will be surprised to learn that they didn’t qualify for a lender’s best rate, Greene says. That could encourage more consumers to shop around and take steps to improve their scores, he says.
The requirement won’t create a burden for lenders because they’ve already bought the scores from FICO or other credit score providers, Greene says. “All (lenders) are doing is sharing it with the consumer,” he says.
The requirement won’t help consumers who want to view their scores before they apply for a loan. A federal law enacted in 2003 requires the three main credit bureaus to provide consumers with a free annual copy of their credit reports, but they’re not required to include a score.
Consumers can purchase a credit score from the credit bureaus when they order their free credit reports. They can also obtain credit scores when they enroll in credit-monitoring services offered by the credit bureaus.
However, those scores aren’t necessarily the same ones lenders use, according to a report issued Tuesday by the Consumer Financial Protection Bureau. Some credit bureaus sell consumers “educational” scores that aren’t the ones used by lenders. In other cases, the score may be based on a different model than the one lenders use, the report said.
If these differences lead consumers to mistakenly believe they’re poor credit risks, they may settle for less-favorable terms than they’re eligible to receive, the report said. Conversely, a consumer who mistakenly believes he is a good credit risk could waste time and effort applying for loans he’s not qualified for, CFPB said.
More cash
A separate provision of the financial reform bill that takes effect today will double the amount of money financial institutions must make available to customers after they deposit a check.
The provision requires banks and credit unions to make a minimum of $200 available to depositors in one business day, up from the current minimum of $100. There are exceptions: Financial institutions can hold on to funds for a longer period if the check exceeds $5,000 or the customer has repeatedly overdrawn his or her account.
Nessa Feddis, senior counsel for the American Bankers Association, says most banks already exceed the new requirement. “I don’t think many consumers are going to notice” the change, she says.
But some financial institutions have expressed concern that the rule change will make it more difficult for them to identify fraudulent checks. “There’s going to be more of a risk exposure to financial institutions in general as a result of this” rule change, says Mary Dunn, general counsel for the Credit Union National Association, a trade group.
Source: USA TODAY, a division of Gannett Co. Inc., Sandra Block
Starting today, that will change.
A provision of the Dodd-Frank financial reform law that takes effect today requires lenders to provide consumers with a free credit score whenever:
• They reject an application for a loan. In that case, lenders will be required to provide consumers with an “adverse action” notice that includes their credit score and explains why they were turned down.
• They approve a loan but at a higher rate than the rate provided to their best customers. As in the first instance, lenders will be required to provide borrowers with a credit score and explain why they’re charging a higher rate.
• Lenders must provide the score they used to make a decision about your loan. They’ll also be required to explain the factors that adversely affected your score and the range of possible scores so you’ll know where you stand.
Consumers submit about 1 billion credit applications every year and of those, about half will fall under one of those two categories, says Mark Greene, CEO of FICO, which developed the most widely used credit score.
Many borrowers who receive the notices will be surprised to learn that they didn’t qualify for a lender’s best rate, Greene says. That could encourage more consumers to shop around and take steps to improve their scores, he says.
The requirement won’t create a burden for lenders because they’ve already bought the scores from FICO or other credit score providers, Greene says. “All (lenders) are doing is sharing it with the consumer,” he says.
The requirement won’t help consumers who want to view their scores before they apply for a loan. A federal law enacted in 2003 requires the three main credit bureaus to provide consumers with a free annual copy of their credit reports, but they’re not required to include a score.
Consumers can purchase a credit score from the credit bureaus when they order their free credit reports. They can also obtain credit scores when they enroll in credit-monitoring services offered by the credit bureaus.
However, those scores aren’t necessarily the same ones lenders use, according to a report issued Tuesday by the Consumer Financial Protection Bureau. Some credit bureaus sell consumers “educational” scores that aren’t the ones used by lenders. In other cases, the score may be based on a different model than the one lenders use, the report said.
If these differences lead consumers to mistakenly believe they’re poor credit risks, they may settle for less-favorable terms than they’re eligible to receive, the report said. Conversely, a consumer who mistakenly believes he is a good credit risk could waste time and effort applying for loans he’s not qualified for, CFPB said.
More cash
A separate provision of the financial reform bill that takes effect today will double the amount of money financial institutions must make available to customers after they deposit a check.
The provision requires banks and credit unions to make a minimum of $200 available to depositors in one business day, up from the current minimum of $100. There are exceptions: Financial institutions can hold on to funds for a longer period if the check exceeds $5,000 or the customer has repeatedly overdrawn his or her account.
Nessa Feddis, senior counsel for the American Bankers Association, says most banks already exceed the new requirement. “I don’t think many consumers are going to notice” the change, she says.
But some financial institutions have expressed concern that the rule change will make it more difficult for them to identify fraudulent checks. “There’s going to be more of a risk exposure to financial institutions in general as a result of this” rule change, says Mary Dunn, general counsel for the Credit Union National Association, a trade group.
Source: USA TODAY, a division of Gannett Co. Inc., Sandra Block
Feds: House prices rose for second month
U.S. house prices rose 0.4 percent on a seasonally adjusted basis from April to May, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.8 percent increase in April was revised to a 0.2 percent increase.
For the 12 months ending in May, U.S. prices fell 6.3 percent. The U.S. index is 19.6 percent below its April 2007 peak and roughly the same as the January 2004 index level.
The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally adjusted monthly price changes from April to May ranged from -1.0 percent in the West South Central Division to +2.0 percent in the Mountain Division.
Source: Florida Realtors®
For the 12 months ending in May, U.S. prices fell 6.3 percent. The U.S. index is 19.6 percent below its April 2007 peak and roughly the same as the January 2004 index level.
The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally adjusted monthly price changes from April to May ranged from -1.0 percent in the West South Central Division to +2.0 percent in the Mountain Division.
Source: Florida Realtors®
Wednesday, July 20, 2011
Citizens inspections reduce mitigation discounts
Some customers of Citizens Property Insurance Corp., the Florida-owned insurer of last resort, are now receiving higher insurance bills.
Homeowners get insurance discounts if they harden their homes against hurricane destruction, but Citizens has started to check on clients to make sure they actually have the upgrade claimed for the discount.
On Monday, the Insurance Journal reported details about Citizens inspection program. As of May, the insurer had conducted more than 32,000 inspections, resulting in policyholders, on average, seeing their premiums increase by $476, for a total of $15.5 million.
Following the inspections, Citizens rescinded discounts for about 60 percent of the inspected homes – but the inspections led to new discounts for about 8 percent of policyholders who hadn’t been getting enough credit for the hardening they’d done.
Citizens will spend $14.5 million on the program this year, including about $11 million for the contractors that do the inspections.
Source: News Service of Florida
Homeowners get insurance discounts if they harden their homes against hurricane destruction, but Citizens has started to check on clients to make sure they actually have the upgrade claimed for the discount.
On Monday, the Insurance Journal reported details about Citizens inspection program. As of May, the insurer had conducted more than 32,000 inspections, resulting in policyholders, on average, seeing their premiums increase by $476, for a total of $15.5 million.
Following the inspections, Citizens rescinded discounts for about 60 percent of the inspected homes – but the inspections led to new discounts for about 8 percent of policyholders who hadn’t been getting enough credit for the hardening they’d done.
Citizens will spend $14.5 million on the program this year, including about $11 million for the contractors that do the inspections.
Source: News Service of Florida
Fla. insurer says 31% increase too small
Citing higher reinsurance costs and a new loss model, representatives of Castle Key Insurance Co. told regulators Tuesday that an average statewide increase of 31.2 percent, which it requested, is not enough – and the insurer plans to request another increase next year.
In a unique development, the Florida advocate charged with looking out for consumer interests agreed with Castle Key, saying in one situation that the company formerly known as Allstate Floridian should be charging more on over 50 percent of the 270,000 policies it covers across the state.
Company representatives told the Florida Office of Insurance Regulation (OIR) that its rates remain actuarially inadequate, but it’s trying to cushion the blow to policyholders by requesting only 31.2 percent this year. After next year’s request, however, some customers will see a premium increase of more than 68 percent. Among the added expenses cited by Castle Key is $143 million for nearly $900 million in reinsurance coverage.
Castle Key says that individual policyholders will see an increase ranging from 7.3 percent to 68.3 percent.
The company’s subsidiary, Castle Key Indemnity, has taken on more policies recently. That company requested an average increase of 35 percent, with individual policies rising between 16 percent and 61.3 percent.
Castle Key and Castle Key Indemnity are the sixth, and seventh largest property insurers in the state. Combined, the companies cover about 5 percent of the Florida market.
During the hearing, OIR consumer advocate Steve Alexander called for a lower rate hike average of about 23 percent for Castle Key, but he said Castle Key Indemnity should have asked for more. Alexander said his calculation showed the company should be requesting, at minimum, a 46 percent increase.
“The experience on the indemnity company has been very, very poor, probably because the company has written a lot of new business,” Alexander said following the hearing. “What they are asking for the indemnity company is reasonable.”
Alexander’s support took a few board members by surprise.
“I think that is the first time I’ve heard that,” said Belinda Miller, OIR deputy commissioner, referring to Alexander’s testimony. The OIR panel did not rule Tuesday, following a series of questions and requests for additional information.
Source: News Service of Florida, Michael Peltier
In a unique development, the Florida advocate charged with looking out for consumer interests agreed with Castle Key, saying in one situation that the company formerly known as Allstate Floridian should be charging more on over 50 percent of the 270,000 policies it covers across the state.
Company representatives told the Florida Office of Insurance Regulation (OIR) that its rates remain actuarially inadequate, but it’s trying to cushion the blow to policyholders by requesting only 31.2 percent this year. After next year’s request, however, some customers will see a premium increase of more than 68 percent. Among the added expenses cited by Castle Key is $143 million for nearly $900 million in reinsurance coverage.
Castle Key says that individual policyholders will see an increase ranging from 7.3 percent to 68.3 percent.
The company’s subsidiary, Castle Key Indemnity, has taken on more policies recently. That company requested an average increase of 35 percent, with individual policies rising between 16 percent and 61.3 percent.
Castle Key and Castle Key Indemnity are the sixth, and seventh largest property insurers in the state. Combined, the companies cover about 5 percent of the Florida market.
During the hearing, OIR consumer advocate Steve Alexander called for a lower rate hike average of about 23 percent for Castle Key, but he said Castle Key Indemnity should have asked for more. Alexander said his calculation showed the company should be requesting, at minimum, a 46 percent increase.
“The experience on the indemnity company has been very, very poor, probably because the company has written a lot of new business,” Alexander said following the hearing. “What they are asking for the indemnity company is reasonable.”
Alexander’s support took a few board members by surprise.
“I think that is the first time I’ve heard that,” said Belinda Miller, OIR deputy commissioner, referring to Alexander’s testimony. The OIR panel did not rule Tuesday, following a series of questions and requests for additional information.
Source: News Service of Florida, Michael Peltier
Fla.’s existing condo sales, median price up in June
Florida’s existing condo sales rose 8 percent in June with a total of 7,941 units sold statewide compared to 7,330 sold in June 2010, according to the latest housing data released by Florida Realtors®. The statewide existing condo median sales price last month was $93,900; a year earlier, it was $92,300 for a 2 percent increase. The national median existing condo sales price was $165,400 in May 2011, according to the National Association of Realtors® (NAR).
“Promising signs continue for a slowly strengthening economy and housing market,” said 2011 Florida Realtors President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “Mortgage interest rates remain historically low and affordability conditions are strong.”
Nine of Florida’s metropolitan statistical areas (MSAs) reported higher existing condo sales in June; six MSAs had higher existing home sales.
In Florida’s year-to-year comparison for existing home sales, a total of 17,597 homes sold last month compared to 18,402 homes sold in June 2010 for a decrease of 4 percent. The statewide median sales price for existing homes last month was $138,000; a year earlier, it was $141,200 for a 2 percent decrease.
However, June’s statewide existing home median price was about 1.8 percent higher than it was in May. Sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes, according to NAR analysts. The median is the midpoint; half the homes sold for more, half for less.
The national median sales price for existing single-family homes in May 2011 was $166,700, down 4.5 percent from a year ago, according to NAR. In Massachusetts, the statewide median resales price was $300,375 in May; in California, it was $291,760; in Maryland, it was $233,568; and in New York, it was $211,900.
NAR’s latest industry outlook points to the still-sluggish job market and overly restrictive lending requirements as factors constraining housing’s recovery. “The job market has sputtered recently, and because variations in local job creation impact housing demand, markets will recover unevenly around the country,” said NAR Chief Economist Lawrence Yun. “If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”
The interest rate for a 30-year fixed-rate mortgage averaged 4.51 percent in June, significantly lower than the 4.74 percent averaged during the same month a year earlier, according to Freddie Mac. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Source: Florida Realtors®
“Promising signs continue for a slowly strengthening economy and housing market,” said 2011 Florida Realtors President Patricia Fitzgerald, manager/broker-associate with Illustrated Properties in Hobe Sound and Mariner Sands Country Club in Stuart. “Mortgage interest rates remain historically low and affordability conditions are strong.”
Nine of Florida’s metropolitan statistical areas (MSAs) reported higher existing condo sales in June; six MSAs had higher existing home sales.
In Florida’s year-to-year comparison for existing home sales, a total of 17,597 homes sold last month compared to 18,402 homes sold in June 2010 for a decrease of 4 percent. The statewide median sales price for existing homes last month was $138,000; a year earlier, it was $141,200 for a 2 percent decrease.
However, June’s statewide existing home median price was about 1.8 percent higher than it was in May. Sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes, according to NAR analysts. The median is the midpoint; half the homes sold for more, half for less.
The national median sales price for existing single-family homes in May 2011 was $166,700, down 4.5 percent from a year ago, according to NAR. In Massachusetts, the statewide median resales price was $300,375 in May; in California, it was $291,760; in Maryland, it was $233,568; and in New York, it was $211,900.
NAR’s latest industry outlook points to the still-sluggish job market and overly restrictive lending requirements as factors constraining housing’s recovery. “The job market has sputtered recently, and because variations in local job creation impact housing demand, markets will recover unevenly around the country,” said NAR Chief Economist Lawrence Yun. “If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”
The interest rate for a 30-year fixed-rate mortgage averaged 4.51 percent in June, significantly lower than the 4.74 percent averaged during the same month a year earlier, according to Freddie Mac. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Source: Florida Realtors®
Tuesday, July 19, 2011
Freddie Mac: 'Double Dip' in Housing Is Unlikely
Freddie Mac continues to sound optimism about the housing market for the second half of 2011. In its latest economic and housing market outlook report, Freddie Mac says that the housing market is unlikely to experience a “double dip” and home sales are projected to reach above last year’s pace by 3 percent to 5 percent.
Despite an unemployment rate that sits at 9.2 percent, Freddie Mac says the gloomy job picture reflects a temporary “soft patch” in the economy and “does not foreshadow an inflection point in gross domestic product growth.”
Freddie Mac forecasts that the housing market “will likely follow the performance of the overall economy for the remainder of 2011.”
Rental housing will likely see the largest growth. Freddie Mac’s first-quarter apartment property price index rose 15.2 percent compared to last year.
While home buyer affordability is at record levels and mortgage rates are at historical lows, households are still putting off major purchases like buying a home, according to the report.
"Following June's labor market report, households are naturally concerned about their financial futures, which is being reflected in the housing market," says Frank Nothaft, Freddie Mac’s chief economist. "Yet, the single-family market will likely improve over the balance of 2011, in keeping with positive GDP forecasts for the United States. Home sales are expected to be up over 2010's pace, perhaps by 3 to 5 percent. And after clear weakness in national price metrics through the first quarter, there are glimmers the second quarter will likely show gradual improvement over time."
Source: “Freddie Mac Says Housing Sector Unlikely to See Double Dip,” HousingWire (July 18, 2011) and “July 2011 U.S. Economic and Housing Market Outlook,” Freddie Mac (July 18, 2011)
Despite an unemployment rate that sits at 9.2 percent, Freddie Mac says the gloomy job picture reflects a temporary “soft patch” in the economy and “does not foreshadow an inflection point in gross domestic product growth.”
Freddie Mac forecasts that the housing market “will likely follow the performance of the overall economy for the remainder of 2011.”
Rental housing will likely see the largest growth. Freddie Mac’s first-quarter apartment property price index rose 15.2 percent compared to last year.
While home buyer affordability is at record levels and mortgage rates are at historical lows, households are still putting off major purchases like buying a home, according to the report.
"Following June's labor market report, households are naturally concerned about their financial futures, which is being reflected in the housing market," says Frank Nothaft, Freddie Mac’s chief economist. "Yet, the single-family market will likely improve over the balance of 2011, in keeping with positive GDP forecasts for the United States. Home sales are expected to be up over 2010's pace, perhaps by 3 to 5 percent. And after clear weakness in national price metrics through the first quarter, there are glimmers the second quarter will likely show gradual improvement over time."
Source: “Freddie Mac Says Housing Sector Unlikely to See Double Dip,” HousingWire (July 18, 2011) and “July 2011 U.S. Economic and Housing Market Outlook,” Freddie Mac (July 18, 2011)
No big fixes planned for troubled housing market
The Obama administration has no plans to introduce another large-scale program for relieving the troubled housing market, despite the president’s recent admission that his past efforts have not solved the problem, according to a senior administration official.
President Obama’s acknowledgment that the weak housing market had become one of his administration’s chief burdens set off industry speculation that there could be another large government offensive to jump-start the sector.
But experts said the government’s options are limited. There isn’t likely to be the money or political will to push through any significant legislation to address the problem, they said. And the evolution of the housing crisis may have pushed it beyond quick policy fixes.
Yet housing remains one of the biggest drags on the economic recovery and threatens to loom over the 2012 election. Millions of borrowers are facing foreclosure, while others are stuck in homes worth less than they owe, leaving them feeling cash-strapped at a time when consumer spending is needed to fuel economic growth.
“There is no money and, to some degree, we have run out of ideas. I have seen them all,” said Mark Zandi, chief economist of Moody’s Analytics. “I don’t think there is something grand that could make a big difference.”
Obama set off the speculation about another large housing program earlier this month during a Twitter town hall when he said that dealing with the aftermath of the housing bubble had been one of his chief challenges. The administration had made progress, he said, but “it’s not enough. And so we’re going back to the drawing board.”
The administration is keeping an eye on how the market is evolving and what is driving distress, said an administration official, who spoke on the condition of anonymity to discuss internal deliberations. An inter-agency group that includes senior officials from the Department of Housing and Urban Development and the Treasury Department continues to collect input from outside groups and members of Congress, the official said.
The administration is not preparing to launch a large new program, but is considering several options including expanding existing efforts, the official said.
The administration already has poured billions of dollars into programs to help homeowners avoid foreclosure, injected millions of dollars into teetering state housing finance agencies and made it easier for borrowers to refinance their loans even if they owe more than their homes are worth.
But most of those efforts have fallen short of expectations. Despite all-time low interest rates, home prices remain near historic lows, sales are weak and a backlog of homes headed to foreclosure could prolong the crisis for years.
“I think the administration has put out quite a number of initiatives over the last couple of years to soften the blow of the [housing] crisis. Those measures did soften the blow,” said Michael S. Barr, a former assistant Treasury secretary in the Obama administration.
But most foreclosures are now caused by economic factors such as unemployment rather than subprime loans, said Barr, a law professor at the University of Michigan. “I don’t think any housing-specific answer is likely to make a significant difference right now. The larger macro issues are more important.”
Still, the administration is being inundated with proposals from advocacy and industry groups for buoying the housing market, including a push to loosen strict lending standards and find ways to turn the foreclosed homes weighing on the market into rental properties. Many also want the administration to force banks to cut the principal balance for borrowers who owe more than their homes are worth, known as being underwater, according to industry officials and consumer advocates.
And not everyone has given up on finding a legislative solution. Sen. Barbara Boxer (D-Calif.) introduced legislation earlier this year that would require Fannie Mae and Freddie Mac, the mortgage financing giants, to allow borrowers who are underwater on their mortgage more flexibility to refinance into lower-interest rate loans without pricey upfront fees. Sen. Johnny Isakson (R-Ga.) recently signed on as a co-sponsor of the legislation, which the lawmakers say could keep 54,000 borrowers out of foreclosure.
The biggest opportunity for wide-ranging change may be a settlement being negotiated between a coalition of state attorneys general and large banks related to flawed foreclosure practices, industry officials and consumer advocates say. Those efforts are aimed at overhauling the industry’s business practices and potentially creating funds that could be used to aid troubled homeowners facing foreclosure.
A provision could be added to the potential settlement requiring banks to write down the balances of underwater borrowers, according to consumer advocates.
Overall, the housing market is suffering from too much supply and not enough demand, said David Stevens, head of the Mortgage Bankers Association. It would take more than nine months to sell all of the homes on the market at the current sales rate, according to industry data. But there are also more than 4 million homeowners in trouble on their mortgage, with many somewhere in the foreclosure process.
But lending standards remain strict, particularly for investors, many of whom have a difficult time qualifying for the government-backed loans that make up a majority of the market, according to Stevens. “We clearly need an investor market to absorb the inventory,” he said.
Some housing experts said that fixing the housing sector may be too big for a single plan.
“New measures can make a difference at the margins and help in specific markets, but it will take more stakeholders working together to achieve the biggest scale” of changes, said Peter P. Swire, a law professor at Ohio State University.
Source: washingtonpost.com
President Obama’s acknowledgment that the weak housing market had become one of his administration’s chief burdens set off industry speculation that there could be another large government offensive to jump-start the sector.
But experts said the government’s options are limited. There isn’t likely to be the money or political will to push through any significant legislation to address the problem, they said. And the evolution of the housing crisis may have pushed it beyond quick policy fixes.
Yet housing remains one of the biggest drags on the economic recovery and threatens to loom over the 2012 election. Millions of borrowers are facing foreclosure, while others are stuck in homes worth less than they owe, leaving them feeling cash-strapped at a time when consumer spending is needed to fuel economic growth.
“There is no money and, to some degree, we have run out of ideas. I have seen them all,” said Mark Zandi, chief economist of Moody’s Analytics. “I don’t think there is something grand that could make a big difference.”
Obama set off the speculation about another large housing program earlier this month during a Twitter town hall when he said that dealing with the aftermath of the housing bubble had been one of his chief challenges. The administration had made progress, he said, but “it’s not enough. And so we’re going back to the drawing board.”
The administration is keeping an eye on how the market is evolving and what is driving distress, said an administration official, who spoke on the condition of anonymity to discuss internal deliberations. An inter-agency group that includes senior officials from the Department of Housing and Urban Development and the Treasury Department continues to collect input from outside groups and members of Congress, the official said.
The administration is not preparing to launch a large new program, but is considering several options including expanding existing efforts, the official said.
The administration already has poured billions of dollars into programs to help homeowners avoid foreclosure, injected millions of dollars into teetering state housing finance agencies and made it easier for borrowers to refinance their loans even if they owe more than their homes are worth.
But most of those efforts have fallen short of expectations. Despite all-time low interest rates, home prices remain near historic lows, sales are weak and a backlog of homes headed to foreclosure could prolong the crisis for years.
“I think the administration has put out quite a number of initiatives over the last couple of years to soften the blow of the [housing] crisis. Those measures did soften the blow,” said Michael S. Barr, a former assistant Treasury secretary in the Obama administration.
But most foreclosures are now caused by economic factors such as unemployment rather than subprime loans, said Barr, a law professor at the University of Michigan. “I don’t think any housing-specific answer is likely to make a significant difference right now. The larger macro issues are more important.”
Still, the administration is being inundated with proposals from advocacy and industry groups for buoying the housing market, including a push to loosen strict lending standards and find ways to turn the foreclosed homes weighing on the market into rental properties. Many also want the administration to force banks to cut the principal balance for borrowers who owe more than their homes are worth, known as being underwater, according to industry officials and consumer advocates.
And not everyone has given up on finding a legislative solution. Sen. Barbara Boxer (D-Calif.) introduced legislation earlier this year that would require Fannie Mae and Freddie Mac, the mortgage financing giants, to allow borrowers who are underwater on their mortgage more flexibility to refinance into lower-interest rate loans without pricey upfront fees. Sen. Johnny Isakson (R-Ga.) recently signed on as a co-sponsor of the legislation, which the lawmakers say could keep 54,000 borrowers out of foreclosure.
The biggest opportunity for wide-ranging change may be a settlement being negotiated between a coalition of state attorneys general and large banks related to flawed foreclosure practices, industry officials and consumer advocates say. Those efforts are aimed at overhauling the industry’s business practices and potentially creating funds that could be used to aid troubled homeowners facing foreclosure.
A provision could be added to the potential settlement requiring banks to write down the balances of underwater borrowers, according to consumer advocates.
Overall, the housing market is suffering from too much supply and not enough demand, said David Stevens, head of the Mortgage Bankers Association. It would take more than nine months to sell all of the homes on the market at the current sales rate, according to industry data. But there are also more than 4 million homeowners in trouble on their mortgage, with many somewhere in the foreclosure process.
But lending standards remain strict, particularly for investors, many of whom have a difficult time qualifying for the government-backed loans that make up a majority of the market, according to Stevens. “We clearly need an investor market to absorb the inventory,” he said.
Some housing experts said that fixing the housing sector may be too big for a single plan.
“New measures can make a difference at the margins and help in specific markets, but it will take more stakeholders working together to achieve the biggest scale” of changes, said Peter P. Swire, a law professor at Ohio State University.
Source: washingtonpost.com
Housing expected to improve over last year
The U.S. housing market, aided by a recovering rental sector, is unlikely to experience a “double-dip” setback, Freddie Mac said Monday.
In its U.S. Economic and Housing Market Outlook for July, the Federal Home Loan Mortgage Corp. said housing likely will follow the performance of the overall economy for the rest of 2011. Additionally, home sales are projected to be above last year’s numbers by 3- to 5 percent.
The report also indicated that despite record levels of homebuyer affordability and historically low mortgage rates, households were concerned about their financial futures and were holding off making major purchases, notably homes.
The rental housing market showed the clearest signs of a turnaround with the apartment property price index showing a 15.2 percent gain over the year through the first quarter of 2011.
“Following June’s labor market report, households are naturally concerned about their financial futures, which is being reflected in the housing market,” said Frank Nothaft, Freddie Mac’s vice president and chief economist. “Yet, the single-family market will likely improve over the balance of 2011, in keeping with positive [gross domestic product] forecasts for the United States.”
Source: United Press International Inc.
In its U.S. Economic and Housing Market Outlook for July, the Federal Home Loan Mortgage Corp. said housing likely will follow the performance of the overall economy for the rest of 2011. Additionally, home sales are projected to be above last year’s numbers by 3- to 5 percent.
The report also indicated that despite record levels of homebuyer affordability and historically low mortgage rates, households were concerned about their financial futures and were holding off making major purchases, notably homes.
The rental housing market showed the clearest signs of a turnaround with the apartment property price index showing a 15.2 percent gain over the year through the first quarter of 2011.
“Following June’s labor market report, households are naturally concerned about their financial futures, which is being reflected in the housing market,” said Frank Nothaft, Freddie Mac’s vice president and chief economist. “Yet, the single-family market will likely improve over the balance of 2011, in keeping with positive [gross domestic product] forecasts for the United States.”
Source: United Press International Inc.
Home building spikes in June after dismal spring
Builders broke ground on more single-family homes and apartments in June, as the home-building industry tried to shake off a historically bad spring.
The Commerce Department says builders began work on a seasonally adjusted 629,000 homes last month, a 14.6 percent increase from May. Still, that’s roughly half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market.
Much of the increase came from a surge in apartment construction, a volatile part of the industry. That jumped 31.8 percent last month.
Single-family home construction rose a more modest 9.4 percent. Building permits, a gauge of future construction, increased 2.5 percent. June’s building pace was the best showing since January and single-family home construction saw the biggest monthly increase since June 2009, when the recession ended.
Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the builders’ trade group.
Builders are nearly 31 percent ahead of the 477,000-per-year pace from April 2009, which was the lowest point on records dating back to 1959. Still, they are down roughly 73 percent from their peak of nearly 2.3 million homes in January 2006.
Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales. A short sale is when lenders allow borrowers to sell their homes for less than what is owed on the mortgage.
New-home sales fell in May to a seasonally adjusted pace of 319,000 homes per year. That’s far below the 700,000 homes per year that economists consider healthy.
One reason is that previously occupied homes are a better deal than new homes. The median price of a new home is more than 30 percent higher than the median prices for a re-sale. That’s more than twice the markup in healthy housing markets.
Loans are also harder to get. Most private lenders are requiring 20 percent downpayments and higher credit scores for the best rates.
The weak housing industry is also holding back the U.S. economy. In past modern-day recessions, housing accounted for 15 to 20 percent of overall economic growth. This time around, between 2009 and 2010, housing contributed just 4 percent to the economy.
In the past month, President Barack Obama said the housing market has “been most stubborn to us trying to solve the problem.” And last week, Federal Reserve Chairman Ben Bernanke said the troubles facing home construction and sales were more persistent than previously thought.
The National Association of Home Builders said Monday that its survey of industry sentiment rose to 15 in June. That’s after a May in which builder outlook hit its lowest level in nine months. But the index is still just seven points above the lowest reading on record, in January 2009. And any reading below 50 indicates negative sentiment about the housing market. The index hasn’t reached 50 since April 2006, the peak of the housing boom.
Source: The Associated Press, Derek Kravitz, AP real estate writer.
The Commerce Department says builders began work on a seasonally adjusted 629,000 homes last month, a 14.6 percent increase from May. Still, that’s roughly half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market.
Much of the increase came from a surge in apartment construction, a volatile part of the industry. That jumped 31.8 percent last month.
Single-family home construction rose a more modest 9.4 percent. Building permits, a gauge of future construction, increased 2.5 percent. June’s building pace was the best showing since January and single-family home construction saw the biggest monthly increase since June 2009, when the recession ended.
Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the builders’ trade group.
Builders are nearly 31 percent ahead of the 477,000-per-year pace from April 2009, which was the lowest point on records dating back to 1959. Still, they are down roughly 73 percent from their peak of nearly 2.3 million homes in January 2006.
Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales. A short sale is when lenders allow borrowers to sell their homes for less than what is owed on the mortgage.
New-home sales fell in May to a seasonally adjusted pace of 319,000 homes per year. That’s far below the 700,000 homes per year that economists consider healthy.
One reason is that previously occupied homes are a better deal than new homes. The median price of a new home is more than 30 percent higher than the median prices for a re-sale. That’s more than twice the markup in healthy housing markets.
Loans are also harder to get. Most private lenders are requiring 20 percent downpayments and higher credit scores for the best rates.
The weak housing industry is also holding back the U.S. economy. In past modern-day recessions, housing accounted for 15 to 20 percent of overall economic growth. This time around, between 2009 and 2010, housing contributed just 4 percent to the economy.
In the past month, President Barack Obama said the housing market has “been most stubborn to us trying to solve the problem.” And last week, Federal Reserve Chairman Ben Bernanke said the troubles facing home construction and sales were more persistent than previously thought.
The National Association of Home Builders said Monday that its survey of industry sentiment rose to 15 in June. That’s after a May in which builder outlook hit its lowest level in nine months. But the index is still just seven points above the lowest reading on record, in January 2009. And any reading below 50 indicates negative sentiment about the housing market. The index hasn’t reached 50 since April 2006, the peak of the housing boom.
Source: The Associated Press, Derek Kravitz, AP real estate writer.
Monday, July 18, 2011
Free advice to help owners keep their homes
Free counseling can help struggling homeowners try to find ways to keep their homes: The U.S. Department of Housing and Urban Development (HUD) provides a list of government-approved counselors on its website, hud.gov.
The counselors often know of special programs that lenders don’t, said Kevin Maher, director of community education for the nonprofit Consumer Credit Management Services in Delray Beach, Fla.
His counseling agency was among those giving free help recently to hundreds who stood in line at a Help for Homeowners Community Event in Hollywood, Fla. The event brought out an overflowing crowd: 1,333 homeowners when organizers had only expected about 1,000.
Counselors know about HUD, Fannie Mae and Freddie Mac programs, Maher said. They also keep up-to-date on what local agencies are offering.
If people are in foreclosure, the courts offer free mediation, added Diane Stephenson, foreclosure prevention services manager at Maher’s Consumer Credit agency. “It’s in the best interests of the people to take advantage of the mediation,” she said.
There are also programs to help the unemployed or underemployed, Maher said.
The Obama Administration has a new program, starting Aug. 1, that will give unemployed homeowners with FHA loans a break on part or all of their mortgage payments for up to 12 months.
To qualify, the unemployed will have to be 90-days delinquent on their loans, said Brian Sullivan, a U.S. Housing and Urban Development spokesman.
Those mortgage companies participating in the Making Home Affordable Program will also be required to give the year-long reprieve “whenever possible,” according to a HUD statement.
© 2011 Sun Sentinel. Distributed by McClatchy-Tribune News Service, Donna Gehrke-White.
The counselors often know of special programs that lenders don’t, said Kevin Maher, director of community education for the nonprofit Consumer Credit Management Services in Delray Beach, Fla.
His counseling agency was among those giving free help recently to hundreds who stood in line at a Help for Homeowners Community Event in Hollywood, Fla. The event brought out an overflowing crowd: 1,333 homeowners when organizers had only expected about 1,000.
Counselors know about HUD, Fannie Mae and Freddie Mac programs, Maher said. They also keep up-to-date on what local agencies are offering.
If people are in foreclosure, the courts offer free mediation, added Diane Stephenson, foreclosure prevention services manager at Maher’s Consumer Credit agency. “It’s in the best interests of the people to take advantage of the mediation,” she said.
There are also programs to help the unemployed or underemployed, Maher said.
The Obama Administration has a new program, starting Aug. 1, that will give unemployed homeowners with FHA loans a break on part or all of their mortgage payments for up to 12 months.
To qualify, the unemployed will have to be 90-days delinquent on their loans, said Brian Sullivan, a U.S. Housing and Urban Development spokesman.
Those mortgage companies participating in the Making Home Affordable Program will also be required to give the year-long reprieve “whenever possible,” according to a HUD statement.
© 2011 Sun Sentinel. Distributed by McClatchy-Tribune News Service, Donna Gehrke-White.
Tax exemption for military now available
Members of the military who were deployed in 2010 can get a break on their property taxes thanks to a new exemption that’s just become available.
Florida voters approved a constitutional amendment for the exemption in the November elections. The Legislature put the finishing touches on the exemption by approving the legal language. Now, it’s up to members of the military to file applications for the benefit.
The Duval County Property Appraiser’s Office has been sending information about the exemption to the region’s military bases.
“If they don’t know about it yet, they’ll soon know,” said Dana Clark, division chief of customer service and exemptions.
The exemption is for those deployed outside the United States in support of Operation Enduring Freedom, Operation Iraqi Freedom or Operation New Dawn.
The amount of savings on property taxes is based on how much time a service member was deployed during the previous year. The longer the deployment, the greater the exemption.
For instance, if a service member was deployed six months in 2010, the exemption would cut the tax bill by 50 percent. The military exemption would be in addition to the homestead exemption that all Floridians receive. If a service member was deployed for six months in 2010 and owns a $150,000 home, the military exemption would translate to a reduction of about $750 on the tax bill.
The savings will appear on the 2011 property tax bill. That’s the way the law works – the amount of time spent in deployment the previous calendar year will be applied to an exemption that cuts the current year’s property taxes.
Clark said so far, about 150 people have applied for the exemption in Duval County. For more information about the discount, service members should contact their county tax appraiser.
The homestead exemption is the latest way Florida has sought to ease the property tax burden for those in the military.
Another tax break that’s been around for a while allows service members who are transferred to keep their homestead exemption for their Florida homes. Florida law lets them keep that homestead exemption even if they move out of the homes and rent them. Typically, a rental home can’t get the benefits of the homestead exemption.
Source: Jacksonville.com , David Bauerlein, The Consumer Advocate. All Rights Reserved.
Florida voters approved a constitutional amendment for the exemption in the November elections. The Legislature put the finishing touches on the exemption by approving the legal language. Now, it’s up to members of the military to file applications for the benefit.
The Duval County Property Appraiser’s Office has been sending information about the exemption to the region’s military bases.
“If they don’t know about it yet, they’ll soon know,” said Dana Clark, division chief of customer service and exemptions.
The exemption is for those deployed outside the United States in support of Operation Enduring Freedom, Operation Iraqi Freedom or Operation New Dawn.
The amount of savings on property taxes is based on how much time a service member was deployed during the previous year. The longer the deployment, the greater the exemption.
For instance, if a service member was deployed six months in 2010, the exemption would cut the tax bill by 50 percent. The military exemption would be in addition to the homestead exemption that all Floridians receive. If a service member was deployed for six months in 2010 and owns a $150,000 home, the military exemption would translate to a reduction of about $750 on the tax bill.
The savings will appear on the 2011 property tax bill. That’s the way the law works – the amount of time spent in deployment the previous calendar year will be applied to an exemption that cuts the current year’s property taxes.
Clark said so far, about 150 people have applied for the exemption in Duval County. For more information about the discount, service members should contact their county tax appraiser.
The homestead exemption is the latest way Florida has sought to ease the property tax burden for those in the military.
Another tax break that’s been around for a while allows service members who are transferred to keep their homestead exemption for their Florida homes. Florida law lets them keep that homestead exemption even if they move out of the homes and rent them. Typically, a rental home can’t get the benefits of the homestead exemption.
Source: Jacksonville.com , David Bauerlein, The Consumer Advocate. All Rights Reserved.
Friday, July 15, 2011
Priciest U.S. Listing Sold at 43% Discount
A Los Angeles County estate that once was the highest-priced home in the U.S. at $150 million has sold in an all-cash deal for $85 million--a 43 percent discount.
Belonging to Candy Spelling, the widow of famous TV producer Aaron Spelling, the 56,500-square-foot home--the biggest in Los Angeles County--had lingered on the market for two years at $150 million. The 4.7-acre Holmby Hills estate is about 1,500 square feet larger than the White House.
The home has sold at $85 million to British socialite Petra Ecclestone, daughter of the Ecclestone family which ranked 254th this year on Forbes’ list of wealthiest people, with a net worth of $4.2 billion. Ecclestone reportedly plans to use the estate part-time.
Determining an asking price on multimillion-dollar luxury homes can be difficult. "Generally speaking, you are not going to have matching comps because every estate is different when you get to that price range," says Jordan Cohen, estates director for RE/MAX Olson & Associates.
The home boasts 123 rooms, including a flower-cutting room, a humidity-controlled silver storage room, and a basement bowling alley.
Considering the high list price, the home was thought to possibly set a new record for the highest home price sale in the U.S. However, that title still belongs to a transaction earlier this year in Silicon Valley, which set a record for the highest known price ever paid for a single-family home in the U.S. at $100 million.
Source: “Petra Ecclestone Buys Spelling Mansion for $85 Million,” The Los Angeles Times (July 15, 2011)
Belonging to Candy Spelling, the widow of famous TV producer Aaron Spelling, the 56,500-square-foot home--the biggest in Los Angeles County--had lingered on the market for two years at $150 million. The 4.7-acre Holmby Hills estate is about 1,500 square feet larger than the White House.
The home has sold at $85 million to British socialite Petra Ecclestone, daughter of the Ecclestone family which ranked 254th this year on Forbes’ list of wealthiest people, with a net worth of $4.2 billion. Ecclestone reportedly plans to use the estate part-time.
Determining an asking price on multimillion-dollar luxury homes can be difficult. "Generally speaking, you are not going to have matching comps because every estate is different when you get to that price range," says Jordan Cohen, estates director for RE/MAX Olson & Associates.
The home boasts 123 rooms, including a flower-cutting room, a humidity-controlled silver storage room, and a basement bowling alley.
Considering the high list price, the home was thought to possibly set a new record for the highest home price sale in the U.S. However, that title still belongs to a transaction earlier this year in Silicon Valley, which set a record for the highest known price ever paid for a single-family home in the U.S. at $100 million.
Source: “Petra Ecclestone Buys Spelling Mansion for $85 Million,” The Los Angeles Times (July 15, 2011)
Fixed mortgage rates fall toward 2011 lows
Fixed mortgage rates fell this week, and the rate on the 15-year loan dropped to its lowest point of the year.
The average rate on the 30-year loan decreased to 4.51 percent from 4.60 percent a week ago, Freddie Mac said Thursday. It reached its yearly low a month ago, at 4.49 percent.
The average rate on the 15-year fixed mortgage, popular for refinancing, fell to 3.65 percent from 3.75 percent. Its previous low this year was 3.67 percent, reached three weeks ago.
Rates typically track the yield on the 10-year Treasury note. Yields fell sharply last week after dismal jobs data pushed investors into the safety of government bonds. Yields fall as prices rise.
Low mortgage rates and depressed home values have done little to revive the struggling housing market. Many people can’t take advantage of the low rates because of tighter lending standards and higher downpayment requirements. Lenders are cautious because the weak economy and high unemployment make it more likely that some borrowers will default.
Other potential homebuyers are holding off, concerned that housing prices will continue to fall.
Few economists expect the housing market to rebound before 2013.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.
The average rate on a five-year adjustable-rate mortgage edged down to 3.29 percent from 3.30 percent last week. Two weeks ago, it hit 3.25 percent, its lowest level on records dating back to 2005. The average rate on the one-year adjustable loan fell to 2.95 percent, a record low, from 3.01 percent.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees for the 30-year loans were unchanged at 0.7, according to Freddie Mac’s survey. Average fees for the 15-year fixed loan and the five-year ARM were 0.6. The average fees for the one-year ARM fell to 0.5.
Source: Copyright © 2011 The Associated Press, Daniel Wagner, AP business writer.
The average rate on the 30-year loan decreased to 4.51 percent from 4.60 percent a week ago, Freddie Mac said Thursday. It reached its yearly low a month ago, at 4.49 percent.
The average rate on the 15-year fixed mortgage, popular for refinancing, fell to 3.65 percent from 3.75 percent. Its previous low this year was 3.67 percent, reached three weeks ago.
Rates typically track the yield on the 10-year Treasury note. Yields fell sharply last week after dismal jobs data pushed investors into the safety of government bonds. Yields fall as prices rise.
Low mortgage rates and depressed home values have done little to revive the struggling housing market. Many people can’t take advantage of the low rates because of tighter lending standards and higher downpayment requirements. Lenders are cautious because the weak economy and high unemployment make it more likely that some borrowers will default.
Other potential homebuyers are holding off, concerned that housing prices will continue to fall.
Few economists expect the housing market to rebound before 2013.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.
The average rate on a five-year adjustable-rate mortgage edged down to 3.29 percent from 3.30 percent last week. Two weeks ago, it hit 3.25 percent, its lowest level on records dating back to 2005. The average rate on the one-year adjustable loan fell to 2.95 percent, a record low, from 3.01 percent.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees for the 30-year loans were unchanged at 0.7, according to Freddie Mac’s survey. Average fees for the 15-year fixed loan and the five-year ARM were 0.6. The average fees for the one-year ARM fell to 0.5.
Source: Copyright © 2011 The Associated Press, Daniel Wagner, AP business writer.
Thursday, July 14, 2011
HUD: $55.8M for Fla.’s public housing stock
U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan awarded $55,885,727 to 81 public housing authorities in Florida. Funding is part of a $1.9 billion package awarded nationwide. The funds will allow agencies to make major large-scale improvements to their public housing units.
HUD’s Capital Fund Program provides annual funding to all public housing authorities to build, repair, renovate and/or modernize the public housing in their communities.
“While this funding will certainly help housing authorities address long-standing capital improvements, it only scratches the surface in addressing the deep backlog we’re seeing across the country,” said Donovan. “Housing authorities need nearly $26 billion to keep these homes safe and decent for families; but given our budget realities, we must find other innovative ways to confront the decline of our public housing stock.”
Earlier this month, HUD released “Capital Needs in the Public Housing Program,” a study that that found the nation’s 1.2 million public housing face an estimated $25.6 billion in large scale repairs. Unlike routine maintenance, capital needs make the housing decent and economically sustainable, such as replacing roofs or updating plumbing and electrical systems to increase energy efficiency.
Over the last 75 years, the federal government has invested billions developing and maintaining public housing. Still, the nation continues to lose thousands of public housing units annually, primarily due to disrepair.
HUD posted a list of agencies online, outlining the Florida and national agencies that will receive money, along with the amount.
Source: Florida Realtors®
HUD’s Capital Fund Program provides annual funding to all public housing authorities to build, repair, renovate and/or modernize the public housing in their communities.
“While this funding will certainly help housing authorities address long-standing capital improvements, it only scratches the surface in addressing the deep backlog we’re seeing across the country,” said Donovan. “Housing authorities need nearly $26 billion to keep these homes safe and decent for families; but given our budget realities, we must find other innovative ways to confront the decline of our public housing stock.”
Earlier this month, HUD released “Capital Needs in the Public Housing Program,” a study that that found the nation’s 1.2 million public housing face an estimated $25.6 billion in large scale repairs. Unlike routine maintenance, capital needs make the housing decent and economically sustainable, such as replacing roofs or updating plumbing and electrical systems to increase energy efficiency.
Over the last 75 years, the federal government has invested billions developing and maintaining public housing. Still, the nation continues to lose thousands of public housing units annually, primarily due to disrepair.
HUD posted a list of agencies online, outlining the Florida and national agencies that will receive money, along with the amount.
Source: Florida Realtors®
Citizens chairman: Sell off part of state insurer
Admonishing lawmakers for making a shaky insurance pool even more precarious, the chairman of the Citizens Property Insurance Corp. on Wednesday said the insurer should be allowed to sell off a large chunk of its business to private interests. Citizens Chairman James Malone says the move would reduce exposure and allow it to continue offering coverage to the state’s riskiest property.
The change would probably raise rates dramatically for hundreds of thousands of policyholders, but Malone says it must be done because the insurer is expected to have 1.4 million policies under its umbrella before the end of next week.
Of those 1.4 million Citizens policies, up to 900,000 are likely uninsurable in the private market because they cover older homes, mobile homes and residences along the coast.
Malone estimated that the remaining policies could be marketed to some private entity because they involve billions of dollars in assets and a widely dispersed premium base. He envisioned a return to Citizens’ roots – a true insurer of last resort.
“That has a value someplace in this open market,” Malone said. “The state of Florida needs money, and (some Citizens policies) could be turned into an asset that had a value that people were willing to purchase in the private sector.”
Created as the insurer only for those who couldn’t get policies from private companies, Citizens has gone beyond that role to become the largest property insurer in the state. The insurer continues to charge rates that are actuarially too low, many say.
Coupled with carrier insolvencies and private market decisions to reduce books of business, Citizens adds about 1,000 policyholders every day. Because taxpayers back the company, critics say the addition of so many policies leaves the state a major hurricane away from financial fiasco.
“If the right decision had been made politically, let’s say five years ago … we wouldn’t have this exposure,” Malone said. “We could have (had) a huge event and everybody in this state could feel comfortable that resources were available to take care of the loss.”
Malone made the comments at the second to last board of governors meeting before all board members are removed from office July 31. After Aug. 1, a new governing board will be seated.
Florida officials have been trying to depopulate Citizens for years. With premium rates held artificially low by lawmakers, however, the gap between Citizens’ insurance rates and private insurance rates continues to widen. So far, lawmakers have tried to provide financial incentives for private insurers to take Citizens policyholders from the pool.
“Today we use depopulation as a method to try to use the (private) carriers currently in the market to … take on our exposure and remove it from Citizens,” said Christine Ashburn, Citizens spokeswoman. “It sounds like what (Malone) is talking about is a bit different.”
Sen. Garrett Richter, R-Naples and chairman of the Senate Banking and Insurance Committee, said Malone’s idea should be given serious consideration. After years of unsuccessful efforts to reduce the number of Citizens’ policyholders, Richter said lawmakers would be receptive to anything that works toward that end.
“All our efforts to deal with this issue have so far been unsuccessful,” Richter said. “I respect the chairman’s intellect and business acumen and will approach the idea with an open mind.”
Malone said he is skeptical that lawmakers will be able to accomplish much on the issue next year. Despite a strong push by Gov. Rick Scott and a cadre of new lawmakers swept into office in November, legislators were unable to reverse growth in the company’s customer base this past year. Legislators did pass a law that will make it easier for private insurers to raise rates to meet their obligations, but Citizens was not given the ability to significantly to reduce its exposure.
“If they weren’t willing to take a tough vote in this cycle, I can’t imagine anyone is going to take a tough vote during an election year,” Malone said.
Malone’s comments come a day before Citizens finalizes a $900 million pre-event financing deal to shore up the fund’s liquidity for the remainder of the 2011 hurricane season and beyond. The sale is expected to conclude today. A Citizens financial consultant said the sale went better than expected. Not only did the state receive more favorable rates, but the market was willing to purchase bonds of longer maturity.
“Financing by any measure was extremely successful,” said John Forney, consultant with Raymond James. “It enabled Citizens to meet its liquidity goals for the 2011 hurricane season and beyond at very attractive interest rates while expanding the investor universe and taking advantage of the excess demand that is here to lower those rates even further.”
Source: News Service of Florida, Michael Peltier
The change would probably raise rates dramatically for hundreds of thousands of policyholders, but Malone says it must be done because the insurer is expected to have 1.4 million policies under its umbrella before the end of next week.
Of those 1.4 million Citizens policies, up to 900,000 are likely uninsurable in the private market because they cover older homes, mobile homes and residences along the coast.
Malone estimated that the remaining policies could be marketed to some private entity because they involve billions of dollars in assets and a widely dispersed premium base. He envisioned a return to Citizens’ roots – a true insurer of last resort.
“That has a value someplace in this open market,” Malone said. “The state of Florida needs money, and (some Citizens policies) could be turned into an asset that had a value that people were willing to purchase in the private sector.”
Created as the insurer only for those who couldn’t get policies from private companies, Citizens has gone beyond that role to become the largest property insurer in the state. The insurer continues to charge rates that are actuarially too low, many say.
Coupled with carrier insolvencies and private market decisions to reduce books of business, Citizens adds about 1,000 policyholders every day. Because taxpayers back the company, critics say the addition of so many policies leaves the state a major hurricane away from financial fiasco.
“If the right decision had been made politically, let’s say five years ago … we wouldn’t have this exposure,” Malone said. “We could have (had) a huge event and everybody in this state could feel comfortable that resources were available to take care of the loss.”
Malone made the comments at the second to last board of governors meeting before all board members are removed from office July 31. After Aug. 1, a new governing board will be seated.
Florida officials have been trying to depopulate Citizens for years. With premium rates held artificially low by lawmakers, however, the gap between Citizens’ insurance rates and private insurance rates continues to widen. So far, lawmakers have tried to provide financial incentives for private insurers to take Citizens policyholders from the pool.
“Today we use depopulation as a method to try to use the (private) carriers currently in the market to … take on our exposure and remove it from Citizens,” said Christine Ashburn, Citizens spokeswoman. “It sounds like what (Malone) is talking about is a bit different.”
Sen. Garrett Richter, R-Naples and chairman of the Senate Banking and Insurance Committee, said Malone’s idea should be given serious consideration. After years of unsuccessful efforts to reduce the number of Citizens’ policyholders, Richter said lawmakers would be receptive to anything that works toward that end.
“All our efforts to deal with this issue have so far been unsuccessful,” Richter said. “I respect the chairman’s intellect and business acumen and will approach the idea with an open mind.”
Malone said he is skeptical that lawmakers will be able to accomplish much on the issue next year. Despite a strong push by Gov. Rick Scott and a cadre of new lawmakers swept into office in November, legislators were unable to reverse growth in the company’s customer base this past year. Legislators did pass a law that will make it easier for private insurers to raise rates to meet their obligations, but Citizens was not given the ability to significantly to reduce its exposure.
“If they weren’t willing to take a tough vote in this cycle, I can’t imagine anyone is going to take a tough vote during an election year,” Malone said.
Malone’s comments come a day before Citizens finalizes a $900 million pre-event financing deal to shore up the fund’s liquidity for the remainder of the 2011 hurricane season and beyond. The sale is expected to conclude today. A Citizens financial consultant said the sale went better than expected. Not only did the state receive more favorable rates, but the market was willing to purchase bonds of longer maturity.
“Financing by any measure was extremely successful,” said John Forney, consultant with Raymond James. “It enabled Citizens to meet its liquidity goals for the 2011 hurricane season and beyond at very attractive interest rates while expanding the investor universe and taking advantage of the excess demand that is here to lower those rates even further.”
Source: News Service of Florida, Michael Peltier
Wealthy Americans upgrade to pricier primary homes
Amid still-depressed housing numbers that dominate headlines, a new survey by the independent New York City-based Luxury Institute and the Institute for Luxury Home Marketing finds that high net-worth U.S. homeowners are taking advantage of the downturn and trading up into higher-priced primary residences.
Lured by lower prices, one in four U.S. consumers with an annual income of $150,000 or more have bought a residential property since 2008 at a median purchase price of $509,000 – an increase of 3.2 percent from the 2005 to 2007 period.
Most new residences (83 percent) are single-family homes and two-thirds of those are in suburban settings. Seventeen percent plan to purchase additional property this year, while 23 percent of those younger than 50 plan to buy in 2011.
More than one-third (37 percent) of the wealthy value their homes at $1 million or higher, while 32 percent assess their primary residence to be worth $500,000 or less.
Seventy percent of wealthy homebuyers used a real estate agent to help with their property purchase, and two-thirds of that group says they would work with the same agent again.
“Luxury is the good news story in real estate,” says Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing. “The number of wealthy households has jumped back to pre-recession levels and affluent home buyers are actively purchasing. The National Association of Realtors’ statistics show that national home sales at $1 million and above were up more than 18 percent year-over-year in 2010. Strong activity continues this year as well.”
For complete details from this WealthSurvey on wealthy homebuyer attitudes, plans and marketing preferences, visit LuxuryInstitute.com.
Source: Florida Realtors®
Lured by lower prices, one in four U.S. consumers with an annual income of $150,000 or more have bought a residential property since 2008 at a median purchase price of $509,000 – an increase of 3.2 percent from the 2005 to 2007 period.
Most new residences (83 percent) are single-family homes and two-thirds of those are in suburban settings. Seventeen percent plan to purchase additional property this year, while 23 percent of those younger than 50 plan to buy in 2011.
More than one-third (37 percent) of the wealthy value their homes at $1 million or higher, while 32 percent assess their primary residence to be worth $500,000 or less.
Seventy percent of wealthy homebuyers used a real estate agent to help with their property purchase, and two-thirds of that group says they would work with the same agent again.
“Luxury is the good news story in real estate,” says Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing. “The number of wealthy households has jumped back to pre-recession levels and affluent home buyers are actively purchasing. The National Association of Realtors’ statistics show that national home sales at $1 million and above were up more than 18 percent year-over-year in 2010. Strong activity continues this year as well.”
For complete details from this WealthSurvey on wealthy homebuyer attitudes, plans and marketing preferences, visit LuxuryInstitute.com.
Source: Florida Realtors®
House acts to overhaul flood insurance program
Congress is trying to right a four-decade-old federal flood insurance program that was nearly sunk by Katrina and other 2005 hurricanes.
The House on Tuesday voted 406-22 to add five years to the life of the National Flood Insurance Program (NFIP) and carry out changes, such as allowing a bump in premiums, to restore solvency to the agency that now owes some $17.8 billion to the federal Treasury.
The flood insurance program, a branch of the Federal Emergency Management Agency, enjoys bipartisan support but has been reeling in recent years both because of the huge costs of Katrina and the inability of Congress to act on needed changes. Since 2006 the Government Accountability Office has identified the flood insurance program as “high-risk” because of inadequate management and insufficient funds.
The bill, which has the support of the Barack Obama White House, now goes to the Senate.
Speaking in support of the legislation, the first long-term extension of the flood insurance program since 2004, were several lawmakers from Mississippi and Missouri River area districts that have been hit hard this year by flooding.
“It’s been a very tough spring for North Dakota,” said Rep. Rick Berg, R-N.D., who pushed an amendment that would protect homeowners who buy policies at least 30 days before their property is damaged even when FEMA declares that there is a flood in progress.
The legislation would make the program more fiscally sound by phasing in actuarially sound rates for policyholders and increasing the minimum deductible for properties. The flood insurance program would have more flexibility in raising premiums. It reduces some subsidies and removes barriers that have kept private insurers from competing in the market.
The bill also allows communities required to buy flood insurance because of the findings of new mapping to seek a suspension of that requirement for up to five years while they fix their flood protection systems.
The NFIP was founded in 1969 to allay the federal costs from flood disasters, and since then has paid more than $30 billion in claims.
About 20,000 communities across the country participate in the flood insurance program by carrying out floodplain management plans in exchange for federally backed flood insurance for homeowners, renters and businesses. With private insurers unwilling or unable to compete in the market, the federal government handles almost all flood insurance.
The program now has about 5.6 million policies bringing in $3.4 billion a year in premiums. Supporters said the legislation, if enacted, would increase the flood insurance program’s income by about $4.2 billion over 10 years. The NFIP said premiums average about $500 a year.
The program was generally self-sustaining before 2005, but with the hurricane disasters of that year Congress increased its borrowing authority three times, from $1.5 billion to $20.8 billion.
Without the reforms in the legislation, said its sponsor, Rep. Judy Biggert, R-Ill., “homeowners and businesses will have limited or no access to flood insurance and Congress will inevitably have to bail out flood disaster victims as it did prior to 1968.”
One of the few voices of dissent came from Rep. Candice Miller, R-Mich., who said the flood insurance program was a “boondoggle” that needs to be eliminated. She said one percent of the properties in the program account for 40 percent of the claims because they repeatedly flood and the government subsidizes their reconstruction. A Miller amendment to terminate NFIP and allow states to form interstate compacts to provide insurance failed, 384-38.
Source: The Associated Press, Jim Abrams. All rights reserved.
The House on Tuesday voted 406-22 to add five years to the life of the National Flood Insurance Program (NFIP) and carry out changes, such as allowing a bump in premiums, to restore solvency to the agency that now owes some $17.8 billion to the federal Treasury.
The flood insurance program, a branch of the Federal Emergency Management Agency, enjoys bipartisan support but has been reeling in recent years both because of the huge costs of Katrina and the inability of Congress to act on needed changes. Since 2006 the Government Accountability Office has identified the flood insurance program as “high-risk” because of inadequate management and insufficient funds.
The bill, which has the support of the Barack Obama White House, now goes to the Senate.
Speaking in support of the legislation, the first long-term extension of the flood insurance program since 2004, were several lawmakers from Mississippi and Missouri River area districts that have been hit hard this year by flooding.
“It’s been a very tough spring for North Dakota,” said Rep. Rick Berg, R-N.D., who pushed an amendment that would protect homeowners who buy policies at least 30 days before their property is damaged even when FEMA declares that there is a flood in progress.
The legislation would make the program more fiscally sound by phasing in actuarially sound rates for policyholders and increasing the minimum deductible for properties. The flood insurance program would have more flexibility in raising premiums. It reduces some subsidies and removes barriers that have kept private insurers from competing in the market.
The bill also allows communities required to buy flood insurance because of the findings of new mapping to seek a suspension of that requirement for up to five years while they fix their flood protection systems.
The NFIP was founded in 1969 to allay the federal costs from flood disasters, and since then has paid more than $30 billion in claims.
About 20,000 communities across the country participate in the flood insurance program by carrying out floodplain management plans in exchange for federally backed flood insurance for homeowners, renters and businesses. With private insurers unwilling or unable to compete in the market, the federal government handles almost all flood insurance.
The program now has about 5.6 million policies bringing in $3.4 billion a year in premiums. Supporters said the legislation, if enacted, would increase the flood insurance program’s income by about $4.2 billion over 10 years. The NFIP said premiums average about $500 a year.
The program was generally self-sustaining before 2005, but with the hurricane disasters of that year Congress increased its borrowing authority three times, from $1.5 billion to $20.8 billion.
Without the reforms in the legislation, said its sponsor, Rep. Judy Biggert, R-Ill., “homeowners and businesses will have limited or no access to flood insurance and Congress will inevitably have to bail out flood disaster victims as it did prior to 1968.”
One of the few voices of dissent came from Rep. Candice Miller, R-Mich., who said the flood insurance program was a “boondoggle” that needs to be eliminated. She said one percent of the properties in the program account for 40 percent of the claims because they repeatedly flood and the government subsidizes their reconstruction. A Miller amendment to terminate NFIP and allow states to form interstate compacts to provide insurance failed, 384-38.
Source: The Associated Press, Jim Abrams. All rights reserved.
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