NY Times - Homeowners just walk away

This (2-2-2010 Business Section) article reports a U.S. Treasury projection that by June 2010, 5.1 million homeowners will own a home worth 75% or less of the mortgage amount. This 75% of home value to mortgage value ratio is referred to as a "critical threshold."

Many (about 17%) of these people may just walk away from their home and default on the loan without attempting loan modification first. (Broker Note: Keep in mind that the US Government owns/insures 90% of mortgages in U.S. through Fannie, Freddie, FHA, VA...)

As the article says, your credit score takes a big hit. (No dah!) But just remember that your credit score is used by employers, credit card companies, utility companies, your insurance company for rates, and almost every financial/rental housing contact you have and many other contacts.

This article didn't mention that people still owe the debt and may be "chased" or "hounded" by collection agencies. You sign a Promissory Note that says you will pay the mortgage...if the bank forecloses on the property and sells for less than the mortgage balance , you owe the difference(and you can bet they will include their legal, marketing and sales costs to determine the difference). It is often referred to by the courts as a "deficiency judgment". Same thing happens in a short sale...If the bank has any reason to believe you have resources, it (and future debt collectors) may come after you.

I can envision a day where they will be legally able to come after your 401K...

Summary: When you agree to pay a mortgage over 15 to 30 years, you never know what your life will be like. Life changes happen to everyone and I understand the stress. It's a tough decision to walk away and there will be consequences. But don't think the lenders are going to leave you alone - you could be hounded for years...

Should we pay more to Fannie and Freddie CEOs?

Anyone want to write your US Congressional Rep/Senator to ask that we give more of our tax money to US Gov't owned entity CEOs of Fannie Mae/Freddie Mac?

Fannie Mae's CEO Michael Williams and Freddie Mac's CEO Charles Haldeman are only supposed to be getting around $6 million each for their 2009 service? Hey, this was far less salary that the former CEOs made during their leadership participating in the collapse of the mortgage industry...

Honk if you believe they are underpaid?

...by the way, US Congress just approved an increased debt limit to provide more funding so Fannie and Freddie can buy more loans...and go into more US debt to do it!

NACA - Love 'em or hate 'em - seems to be the best mortgage rate program

As much of a pain in the A**(almost as painful as childbirth so I've been told) that NACA (Neighborhood Association of America) may be, it's still a pretty effective purchase/refinance program - Bottom line: It's an interest rate buydown program that applies "all" Seller concessions, earnest money, down payment, etc, toward lowering interest rate - For example, my most recent client got his mortgage interest rate down to 0.875%

Historic Districts - Love 'em or hate 'em?

According to page B1 of the 1-14-2010 Marietta Daily Journal, the Marietta City Council designated a section of Marietta as a Historic District, or about 29 homes along Kennesaw Avenue near the Marietta Square from the Loop up to Atwood Drive.

I don't know if I really like the concept of the government doing this and telling a homeowner what they can or can't do with the property. But some people do have some wild & extreme ideas and do things to their homes that detract from the value of the look of the neighborhood. However, it rubs at the true life, liberty and pursuit of happiness. And if everyone knew you can always do whatever you wanted to a house, then people would have to accept that and either buy a house and live with that possiblity or rent and move away at the first sight of change...

Once a home is designated in an Historic District, the homeowner is limited on the changes to the exterior look of the house. Any exterior structural addition, color of paint, new windows, and any other changes/additions to the land require City Council approval.

What makes it especially interesting in Marietta is that Phillip Goldstein and Johnny Sinclair (both on the City Council) are involved with real estate and shed a slanted view of such designations...

Most people feel that they ought to be somewhat assured that a neighborhood's look and feel will continue as when they moved in and is not disturbed...the owner should be allowed to do whatever they want with the property that is in good taste and doesn't detract from the harmony and look of the neighborhood.

So what do you think? Do you trhink there ought to be specific guidelines in addition to building codes to protect the look of homes in an area that is more than 50 years old? Or do you like the laissez-faire doctrine?

UPDATE (1-27-2010): Marietta Mayor Steve Tumlin - with egg on face - has vetoed this decision because of apparent errors in the number/type of public meetings over the area. Legally there were supposed to be more public meetings which now exposed the city to possible legal action - therefore, the Mayor vetoed the decision and therefore, it will NOT be designated an Historic District...At least until someone figures out what is the next step....

Sheetrock Problems

There are not only issues and class-action lawsuits with toxic Chinese sheetrock imported during the 2005-2006 surge in home construction, but apparently there are now issues with American manufactured sheetrock.

Strong smells of rotten egg odors and MIT says 50% Gypsum & 50% cellulose - But i think it might have a sulphur content that corrodes wiring, copper plumbing, and light fixtures.

Anyone have any sheetrock they installed during 2005-2006?

Heat pumps or gas furnaces - which is better?

Here's an interesting discussion on heat pumps - http://www.furnacecompare.com/heat-pumps/

Does anyone have a heat pump story to share?

Is it cheaper to rent or buy a house?

It all depends... It depends as how you define "cheaper" and what you use as the "costs" when comparing the two related expenses.

If your neighbor upstairs lifts weights at 3:00 am or you feel threatened by those lurking in your apartment complex and you just want to move, then ignore this post.

If you think you're getting a great tax benefit, check the standard tax exemption amount for not itemizing taxes. According to the Center for Economic Policy Research in Washington, a couple filing jointly have a $10,900 standard exemption – about $2,100 more than a typical $200,000 loan ($11,000 in interest & $2,000 property taxes). Only slightly better, but excluding all those extra expenses for yard tools, home repairs, and extra furnishings that come with owning a house.

Also, consider the price-to-rent ratio. Divide the price of the house by the amount of monthly rent that could be earned from it. Anything greater than 9 (historical average) suggests it’s better to rent because the price is getting higher than average and may come down in value in a shorter time frame.

Owning your own home can be a good investment – over time. How much time?

It all depends…