Richard's Real Estate Thoughts

With numerous good reports on the economic front over the last few weeks, many are starting to suggest that the recession is over. Jobs though continue to be a problem.

To answer questions about the impact of the stimulus program, the administration has announced that the stimulus is approaching 1,000,000 jobs saved or created. From the White House blog.

According to information on Recovery.gov, Tennessee has been an especially fortunate recipient of the stimulus funds.

Still, Tennessee's unemployment remains over 10% through September, despite the 1156 jobs identified as created by the stimulus. Some good news is starting to be announced locally. More on that later.

UPDATE STIMULUS IMPACT FOR TENNESSEE: Posted November 1, 2009

As promised the stimulus figures were updated on Recovery.gov. The new figures indicate that the stimulus has created over 640,000 jobs nationwide, and 9548 in Tennessee.

Richard Smith NMLS 184479 Cell: 423-280-0345 Toll Free: 888-474-9920 Office: 423-899-6898

American Acceptance Mortgage, Inc NMLS 132505, TN/GA Licensee Email: rsmith@aamonline.com

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

Apply Here

Begin your Home Search here

Reverse Mortgage Calculator

www.RichardSmithHomeLoans.com

The administration support, and the approaching deadline, has given much momentum to the extension and the expansion of the First Time Home Buyer tax credit.

And the Senate Finance Committee has pushed forward a proposal to extend a credit to existing home owners. Included in the Senate bill is also extended unemployment benefits.

In fact it would no longer be a first time home buyer tax credit. Just a home buyer tax credit.

Provisions of the tax credit agreement

• Deadline to be extended to April 30
• Existing home owners, who have owned prior residence at least 5 years, may receive up to $6,000
• Income limits increased to $125,000 for singles and $225,000 for couples
• Homes over $800,000 are not eligible

There would be a significant change to the new deadline - rather than closing by April 30, the contract must be accepted by April 30. (No back dating, right.)

Some senators are insisting that this is the "last extension."

Estimates on the boost from the tax credit, as far as actual new home sales, vary - from no impact to significant impact.

One thing known - the cost. Another $10,000,000,000 or so.

I love the logic about how to pay for the tax credit. From the HILL.com , "Senate Finance Chairman Max Baucus (D-Mont.) said that the cost will be offset by delaying a tax break for U.S.-based international corporations that was scheduled to start in 2010."

This tax credit will be funded by delaying another tax credit - not by cancelling the other tax credit but by delaying.

The Chattanooga Community Kitchen is in the process of its Fast Day Fund raiser.

Member churches and other organizations ask their members to skip a meal and to donate the cost of that skipped meal to the Community Kitchen.

This fund raiser has taken different forms, but has been the main fund raiser for the Kitchen for many years.

The Kitchen has received national recognition as a model for a local non profit organization. It was originally started in 1982 as a feeding program. There were 7 downtown churches that partnered to meet a growing need in Chattanooga.

The Kitchen has its own blog. You can stay current on needs and on offerings by checking updates here.

The main program is to provide food 365 days a year:

• Breakfast 7:00am to 8:00am seven days a week
• Lunch 11:00am to 11:45am seven days a week
• Dinner 4:00pm to 4:45pm weekdays

Other programs focuson employment, shelter, counseling. A big help for many homeless is that the Kitchen provides a place for basic, essential services like bathrooms and showers, telephones, mail, washers and driers, and more.

The Community Kitchen is well known and well respected in Chattanooga because of its long service to the needs of our community.

You can help by volunteering or with a donation. Click here to make a donation.

Richard Smith NMLS 184479 Cell: 423-280-0345 Toll Free: 888-474-9920 Office: 423-899-6898

American Acceptance Mortgage, Inc NMLS 132505, TN/GA Licensee Email: rsmith@aamonline.com

FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation

Home financing in Tennessee and Georgia.

Apply Here

Begin your Home Search here

Reverse Mortgage Calculator

www.RichardSmithHomeLoans.com

Whether or not you agree with the First Time Home Buyer tax credit, the Obama administration through Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan has called for the credit to be extended.

Such support from the administration may very well be sufficient to pass the extension. Evidently, the tax credit is seen as a critical to continue the jump start of the economic recovery.

It still seems to me that the tax credit is not doing much in the way of creating new buyers, and that it mostly takes from from future sales. But the recent and unexpected drop in home sales appears likely to push through the tax credit extension.

Udate: Bloomberg article describes building momentum for extension and for expansion of the tax credit.

The Chattanooga Renaissance Oktoberfest was held this past weekend.

Despite the threat of rain and the cool weather the turnout was good. Music, food, activities and fun times highlighted the event. The proceeds went to help the Chattanooga Education, Arts, and Culture programs.

Dancing and music on Walnut Bridge	The view in Coolidge Park
One of the bands playing on the bridge
Glass Blowing in the Bluff View District	In the park with Mel and Dude from Mellow Mushroom

 

My friend and local social networking hero, insurance agent extraordinaire Jon Moss provided these videos.

  

"I love Chattanooga"

The Chattanooga Choo Choo by violin

This past Sunday Parade Magazine published an article entitled "Beware of Reverse Mortgages."  The article was misleading on a number of fronts, but the biggest issue I have with the report is that it presented legitimate issues that a home owner should consider immediately beside fraud and discriminatory abuses that apparently exist. (Although the article did not provide any supporting documentation for its accusations of cited abuses.)

Parade Magazine should apologize for misrepresenting FHA Reverse Mortgages.

The article associated reverse mortgages with subprime lending. This association of legitimate issues involved with considering a reverse mortgage, with subprime lending and with predatory practices has misrepresented what is a good loan option for many seniors. As a result Parade has probably done a serious disservice to those seniors.

The use of phrasing such as "strapped US homeowners" inaccurately places the reverse mortgage option in language associated with the housing and financial market collapse.  In fact a reverse mortgage is not possible for most "strapped US homeowners" as the equity requirements pretty much exclude many of the circumstances that might make a homeowner strapped.

The article states "consumer advocates have long cautioned that reverse mortgages should be a last resort because of their high fees." This statement is made without citing the source. Further, it presents a comparative judgment as a fact, without even the least attempt made to provide supporting information for comparison.

Finally as I stated initially, the most gross violation of responsible reporting is that the legitimate issues to consider in the decision about a reverse mortgage are tied directly to non specific cases of illegal fraud and discrimination. One specific illegality mentioned has to do with coercision to execute a title transfer.

In actuality, such a practice has nothing to do with a reverse mortgage.

No reference is given. There is a vague mention of the FBI and HUD, but there are no specifics.

No verifiable statistics are given.

The writer simply uses emotionally loaded language - scam artists, unscrupulous loan officers, aggressive tactics, defrauding, scheme, steered.

Parade Magazine should issue an apology to the nation for its misrepresentation of an important loan option available to seniors and take full responsibility for its irresponsibly unbalanced and misleading presentation  - omitting relevant facts and actual comparisons, associating legitimate considerations with predatory and illegal activity, failing to cite sources and supporting facts.

Here is a link to the Parade Magazine article.

Some facts about a reverse mortgage.

• there is no title transfer of home ownership
• the home must have enough equity to qualify
• the senior does not have a monthly house payment to make
• closing costs that are supposedly high include costs that a traditional mortgage would pay in monthly installments
• the senior cannot outlive the loan or lose their home because of the loan terms
• the senior is guided in their decision by HUD approved housing counselors, not just the loan originator
• a link to the FHA FAQ for reverse mortgages

Here is a reverse mortgage calculator to find how much you might qualify for with a reverse mortgage.

With four closings today, totaling 8 in October, the FDIC closed bank list broke 100 to reach 103 for the year.

Today there were 3 Florida banks and 1 Georgia bank. The ramifications are many.

You Tube video from FDIC Chairman Shelia Bair,

At present the FDIC fund is stretched.

The loss of local banks always has adverse local impact. Of course these banks are not lost, only sold. And most depositors are protected.

The local bank though becomes part of a larger bank.

The worst news is that some projections look to as many a 400 more bank closings can be expected over the next few years, costing as much as $100 billion.

The recovery may be underway, propped up by massive federal spending and tax credit.

Unemployment, commercial real estate, closed businesses and lost industries, have not yet finished taking their toll.

I hate to end the week on a negative.

Congress and regulators are looking at changes to improve the capital structure of the financial markets and institutions. Federal Reserve Chairman Ben Bernanke called today for quick Congressional action to finalize new legislation for capital requirements and to improve regulation and supervisory enforcement.

We have a ways to go.

Update: 3 more banks, in WI, MN, and IL, were closed yesterday after I wrote this post. Total now 106, and counting.

The more I think about the First Time Home Buyer Tax Credit, the less I like the program. In one previous post, I concluded that the credit was not creating new buyers as promised, but only borrowing from future sales.

In other words, we are paying for purchases that would have taken place without the incentive. One analysis suggests that 4 out of 5 tax credit recipients would have purchased anyway. This means that each new buyer costs the Treasury $40,000.

In another previous post, I suggested an alternative to the tax credit, which my numbers indicate would cost less, help more, and better target need. This alternative might also help revitalize the MI industry, which was hit as hard as any by the financial crash.

This alternative involves an MI risk subsidy for $8,000.

Today though I am writing about another reason NOT to extent the First Time Home Buyer Tax Credit - TAX FRAUD.

Already, just with tax year 2008, tax fraud associated with the First Time Home Buyer Tax Credit has been rampant.

• 19,000 claims for the credit did not actually purchase a new home
• 74,000 claims for the credit have previously owned a home

So, in addition to not being effective and to having a very high cost, the tax credit is leading to a significant amount of tax fraud and questions are being raised as to whether the program is being managed well.