Are you tired of these kinds of headlines?

 Thought so.

Just a year back, everything was fine and people were making money in business, on property and the stock markets. Today, you would be very fortunate if you did not lose money in any of these areas. In times like these, I ask myself, why bother saving?  The answer to that question is that you have to save if you want to see your children through to independence and then retire comfortably. And that, my friend, is the purpose of my blog. 

I will be posting comments on my little understanding on mortgages, loans, insurance and savings and investments in general. Hopefully, there will be other intelligent and successfull investors and businessman who will also contribute to this blog, so that all participating here may be wiser when it comes to handling their personal finances.

Here is my take, as a mortgage broker, on how we arrived at the present housing market situation.

The  federal funds rate which was around 6.5% in the second half of 2000, was slashed through out 2001 till by February 2002, it was about 1.75%. Rates were then more gradually cut till they reached 1% in April 2004 and though they started rising from July of that year, it was 2 years, July 2006, before they exceeded 5%. The Fed cut rates in 2001 to avert a recession, but inadvertently planted the seeds for the turmoil in the housing market today. As rates went down, mortgages became affordable and people who normally would not qualify for such loans, based on their incomes, suddenly found themselves being offered mortgages from banks. For large numbers of families, their dream of owning a home became a reality. There was only one problem in this scenario. The lending banks did not ask the borrowers to prove that they would be able to maintain their mortgages when interest rates eventually rose. It was then about this time, that foreclosure rates started rising.

There were other factors as well. The banks came up with self certification mortgages which did not require any proof of income. They would accept the income stated on the application form with out running any checks, on the reasoning that they had the property as security or collateral. These mortgages came to be known as Ninja mortgages – No Income No Job No Assets, as customers who took out these mortgages probably would not have qualified if their circumstances had been looked in to with more diligence.  As foreclosures increased, property prices crashed. Many properties lost even more value on account of vandalism as empty properties inevitably suffer this fate. The end result was that families lost their homes, banks lost their loans and as financial sector shares crashed, shareholders lost a substantial part of their investment in these institutions.  Further, the problem was not confined to the USA only, as many banks frequently sell their mortgage portfolios or mortgage backed securities to other banks to raise capital. European and Asian banks bought many of these portfolios or securities as on paper they offered a very good return on their investment. Subprime mortgages are highly profitable as the interest rates levied from customers are quite high in line with the higher risk these mortgages carry. Nobody wants to be left out when there are profits to be made and so when the housing market in the USA crashed, European and Asian banks felt the pain. The net result has been that all banks have become extremely cautious in lending, not only to customers and businesses but even among themselves. Since lending generally fuels business and consumption, we now find ourselves heading towards a recession.

So how do we prevent this kind of a situation in the future?

I am no economist but the First Amendment grants me the right to make my opinion heard, even though it may be the dumbest thing you ever came across. So here goes.

The sole criteron for lending should be the ability of the borrower to pay back the loan and not the value of the property. The property should only play a secondary role in the lending decision.Mortgages should be granted only to customers who can prove a consistent and reliable income. They should not be granted on property values as these can fluctuate drastically or disappear completely. The loan can be quantified as a certain multiple of the total net disposable income of a family and no more. Another way arriving at the loan figure would be that the total net disposable income should be atleast twice the annual mortgage interest.  This would ensure that the mortgage installment on an interest only basis would be affordable even if the interest rate doubled. By disposble income, I mean the portion of the income left after all taxes and everyday expenses have been deducted. Banks should be compelled to do their due diligence and keep detailed records of their investigations before lending to customers. An independant body would then be responsible for monitoring mortgages and would have the power to impose penalties to erring lenders.

Purchasing a mortgage payment protection insurance policy should be mandatory for all borrowers. These policies pay out if the borrower is unable to work on account of accident, sickness or redundancy. They are usually two year policies and relatively cheap. They usually do not pay out in the first 6 months of purchase or where the person covered knew that he/she was going to be made redundant. In genuine cases, they pay out an amount covering the mortgage installment and utility bills. This payment provides some relief while the breadwinner looks for a job or recovers his health.

Finally, the lenders themselves could help avoiding such a catastrophic situation again. They could set up their own insurance company to guarantee the cost of  mortgages in default. The reasoning behind this suggestion is that a property rapidly loses its value once the lender forecloses and puts it on the market as explained earlier. It seems to me that it would be a much better proposition for the lender to let the family stay in the home and maintain it and advise and encourage the bread winner to sort out his problems. The insurance company would cover the cost of interest on the mortgage for a fixed period just like the mortgage payment insurance mentioned earlier. The insurance would only cover the basic interest cost of the loan to the lender and not the interest charged to the borrower.Also, the insurance company would do its own due diligence before selling the policy and shaky loans would probably be declined for cover.

In conclusion, I would say that most people are over optimistic on how much they can afford to borrow. It should be the lender’s responsibility to arrive at the right figure to lend so that neither they nor the borrower need suffer on account of inappropriate lending.

Thanks for reading and I hope you will let me have any comments, positive or otherwise, on my thoughts.

Zeke



Sell and Rent Back

Many business borrowers do not prepare adequately for the commercial mortgage business loan problems that are common in most business financing scenarios. By anticipating typical commercial loan difficulties, business owners are more likely to avoid potentially disastrous business finance consequences.

With rapidly deteriorating financing for residential investment property, overcoming business loan and commercial mortgage problems is even more important. This summary provides an introduction to four critical commercial loan factors and should assist commercial borrowers to better anticipate key business financing difficulties.

It is not unusual to find that business investment lenders and business loan brokers are not as forward-looking about business financing and investing difficulties as most borrowers would expect, and I have published another article about commercial lenders to avoid. The focus here is on four typical commercial mortgage loan and SBA business loan difficulties often overlooked by commercial lenders and borrowers.

Commercial borrowers should be prepared for commercial loan scenarios that involve unexpected business financing problems. With business financing there are several key commercial mortgage problems which should be avoided. Business loan problems are more serious and prevalent than many borrowers would imagine.

Some of these commercial mortgage business loan difficulties might be unavoidable, but in most cases these business financing and SBA loan challenges can be successfully overcome. Commercial borrowers will be poised to take proper corrective action if they are aware of common commercial loan difficulties.

Avoidable Commercial Real Estate Investment Property Financing Scenario Number One: Use of secondary business financing -

Many commercial borrowers want the flexibility to use subordinated debt (a seller second or other secondary financing) in order to acquire a commercial property or business opportunity investment with a smaller down payment. Many forms of business investing will not permit a seller second or other forms of subordinated debt. With a commercial loan via non-traditional business lenders, a commercial borrower can use subordinate business financing (including seller seconds) to reduce the amount of their down payment.

Commercial Mortgage Example Number Two: Sourcing-seasoning assets and seasoning of ownership -

Some commercial lenders will require borrowers to document the source of the down payment for a purchase (sourcing). Many business lenders require borrowers to document where down payment money is coming from, often for up to 12 months in order to provide seasoning confirmation. Ownership seasoning is determined by establishing a minimum period for ownership prior to being eligible for refinancing.

Such a problem will probably not deter all borrowers. When it does apply, business borrowers should insist on a lender without seasoning and sourcing requirements.

Business Financing Example Number Three: Commercial mortgage recall terms -

Business loan recall conditions will often allow the commercial lender to force the borrower to repay their loan before the normal loan expiration. If a commercial loan agreement does not include recall terms, such a possibility is not of immediate concern to a borrower.

Commercial lenders will routinely include recall conditions in a business loan agreement. The provisions which will prompt a recall will vary and typically include annual business lender monitoring of financial statements, tax returns and credit history. Without agreed income, tax returns and credit standards, the lender can choose to require the borrower to pay off the commercial loan within a very short period of time.

Contingency Plans for Business Finance Recalls: What to do about a commercial loan recall -

To avoid an unanticipated recall scenario, commercial borrowers would be wise to consider only commercial loans which do not have recall terms. For commercial borrowers who have recall provisions in their business financing agreement, it will be equally wise to consider refinancing their business loan or commercial mortgage before a recall occurs so that refinancing is accomplished when it is most appropriate for the borrower.

When borrowers receive a business financing recall, they must quickly obtain refinancing assistance. When reviewing commercial loan choices for refinancing, borrowers should attempt to exclude potential lenders that require recall terms.

Business Loan Example Number Four: Business financing that needs a long-term commercial loan -

Is long-term investing and financing really possible for a business loan? Some business investment lenders will only offer 5 years (or less) before commercial real estate financing will expire with a balloon payment due.

There are commercial mortgage programs which can provide long-term financing, even though many lenders will only offer shorter-term options for investment business financing. Longer-term commercial real estate financing will often be the critical difference that facilitates a successful business investment because a new business loan will not be required for many years and commercial loan payments will also be reduced.

Additional Commercial Loan Problems and Solutions -

Unfortunately commercial borrowers will frequently encounter commercial mortgage business loan problems similar to those described here. To better prepare for this, an advisable approach is to explore business financing resources that will facilitate a better understanding of complex commercial loan issues. The Commercial Real Estate Loan Guide and The Working Capital Management Guide are two examples of business finance resources that will provide possible solutions for many difficult commercial financing situations.



Rent Back Fast

The owner of the property I am about to re-possess has a loan to a building society/not a mortgage/as a first entry for colateral. the Court has decreed that I take possession in order to be repaid my loan? what are my rights please?

Sell House Quick

If you find yourself in the position were your flat may be repossessed and are looking ways that you may be able to avoid being evicted from the property that you own then a “Sell & Rent Back Scheme” might be for you.

The fundamental principle behind the Sell & Rent Back Scheme is that the current owner of the property is able to sell his or her house quickly to avoid being evicted and have the property repossessed while at the same time not having to leave the property and be able to rent it back as a tenant, quite often it is not unusual for these schemes to include the ability to buy back the property at a later stage if your financial situation has improved.

By using this method it does see that all your debts are cleared not only the outstanding balance of the mortgage but any secured debts and mortgage arrears will be paid in full as opposed to the alternative of the property being auction any thing outstanding will be chased by the lender until it is paid back in full also of course if the property went to auction would be removed from your house and would have to find alternative accommodation.

For this reason this solution is increasing in popularity in the UK and is supplying an alternative to that of eviction amongst the UK’s growing credit crisis also referred to as “the credit crunch”

Even if you find your self in the situation were eviction is just days away by engaging in one of these schemes you will find your lenders more than willing to cooperate as they would much rather prefer this alternative were they get paid back in full than the expensive and lengthy process of eviction, repossessed, auctioning and the chasing of the remaining debt.

go now to http://www.avoidhomerepossession.co.uk/



Quick Property Sale

There may be periods in a homeowner’s life when his or her personal circumstances change dramatically and it makes economic sense to sell the house as quickly as possible, thus releasing the capital that has built up in it. The reasons are many and varied and may include:

1. The breakdown of a relationship. Whether the partners in the house are married or not, there may be financial pressures caused by the breakdown of the relationship. One of the partners may have started another relationship, in which case they may require capital release in order to finance another mortgage or rental costs. Some of the Sell and Rent Back companies will buy the house very quickly, and rent it back to the remaining partner at a competitive rate.

2. The homeowner may have to move with his/her job, either within the UK or abroad. If this move is seen to be fairly permanent, then capital will be required to finance a new home in the new location. For those relocating or emigrating, some of the Sell and Rent Back companies will buy the house in as little as 14 (working) days.

3. If the homeowner has been in arrears with mortgage payments they could fear the prospect of having their home repossessed and see that a quick house sale would be a financially better alternative and enable them to avoid repossession.

4. Should one of the partners in a house die, the remaining partner’s income may be insufficient to cover the mortgage, then again, a quick house sale may be seen as a beneficial alternative to having the home repossessed.

5. In a falling house market, to sell your house now may be a shrewd move. If financial experts project that house prices may fall 20%, then the homeowner could take the view that selling the house quickly, without Estate Agent’s or Auctioneer’s fees, for as close to its current value as possible, will reduce the capital loss. The house could then be rented back at a competitive rate until the market is viewed to have ‘bottomed out’.

The average level of personal debt is increasing, and a quick house sale may be seen as one way of paying off all debts in one go. This is especially useful if you suffer a reduction in income which is viewed as a temporary situation. To sell the house, pay off the debts and live in rented accommodation for a while may be a sensible strategy. Indeed, with many of the Sell to Stay companies, you can sell your house quickly and rent it back at a competitive rate.

There are many routes to achieving a quick house sale.

1. Estate Agents – Estate Agents will always tell you that they can sell houses very quickly. This may be true when the market is rising and there is a lot of competition for every house, but when prices flatten, or indeed fall, houses stick and your ‘quick sale’ may be lost.

2. Auction – Auctions are the ultimate vehicle to value a property. Any property is only worth what another will pay for it, and an auction with many interested parties in the room will produce the best market price for a property with a very quick sale.

3. However, anyone who goes to an auction will be expecting a bargain – they view the items that go to auction as being ‘on-offer’ and only there because they have failed to sell elsewhere. You may not get a good price at auction.

4. Sealed Bid – Requesting sealed bids is another good way of valuing a property. However, the process suffers from the same market pressures as the previous two. From the buyer’s point of view, putting in a sealed bid when the market is rising is a worrying process, as he/she doesn’t want to bid too low for fear of losing it. This can result in some extremely over-priced bids. On the other side of the coin, in a falling market the worry is that the buyer may bid too high and end up with a home in negative equity. This results in the seller receiving a number of disappointingly low bids.

5. Sell and Rent Back – Sell and Rent Back companies will buy your house very quickly – many of them promise to buy it within 14 (working) days. They will give you 80% or more of the value of your house – but that’s it! You don’t have to pay the Estate Agent or the Auctioneer, just your legal fees. Furthermore, many of the Sell and Rent Back companies will allow you to stay in your home and rent it back at a competitive rate.

So if you need a quick house sale, you must try to strike a balance between speed and the amount of money you will receive from the different methods of selling your property.



Passive Income

I dont believe that the estate agents are putting forward our offers to thew bank and seem to be mucking us around.
We would like to go straight to the bank with our offer!!

Rent Back Fast

Annually, about half a million bicycle related injuries occur. In addition, according to the National Highway Traffic Safety Administration, a bicyclist is killed approximately every six hours. However, most bicycle crashes are predictable and preventable by using proper precautions on the part of bicyclists and motorists.

Types of Bicycle Crashes

Falls and Collisions

Over 50 percent of bike crashes are the result of falls. Falls commonly occur either when the front wheel suddenly stops moving or when the rear wheel slides out. The front wheel can stop if it falls into a road defect, such as a crack or drain grate, or if the front brakes are applied very hard. Rear wheels can skid out when turning on gravel, sand, ice, metal surfaces, or any slippery surface.

After falls, the most frequent type of bike accidents are collisions with a stationary object, such as trees. Falls and collisions with fixed objects account for about 75 to 80 percent of all bicycle crashes.

Car-Bicycle Crashes

Car-bike crashes account for between about ten to 15 percent of bicycle accidents but result in the largest number of fatalities. Most of these accidents occur when either the bicyclist or the motorist is turning or crossing at an intersection or driveway. Other car-bike crashes occur when the bicyclist is not obeying traffic laws and is cycling on the wrong side of the road or running red lights.

Bicycle Crash Injuries

Injuries from bicycle crashes are most often to the limbs, and include fractures, abrasions, and lacerations. Fractures account for about 25 percent of bike crash injuries, and facial injuries account for about one third of injuries. The most severe and disabling injuries are brain injuries, which can result in a permanent disability. Head injuries are also more likely to be fatal.

What To Do When In a Bike-Car Crash

To the extent possible and practical to avoid further accidents or injuries after a bicycle crash, do the following:

* Do not move if you are seriously injured. Wait for medical help.

* Accept medical help, even if you do not feel severely injured.

* Wait for the police so an accident report can be filed with statements from witnesses, and the at-fault driver, and the crash scene investigated.

* Leave damaged property and equipment as it was until police arrive.

* Contact a personal injury lawyer who understands bicycling.

Bicycle Safety and Crash Prevention

Not surprisingly, helmets can protect again head injuries, both brain injuries and upper facial injuries. Studies show that about 75 percent of bicyclists who were severely brain injured were not wearing helmets. To provide proper protection, helmets must be fitted correctly.

Although helmets can protect against head injury, they do not protect from getting hit by cars. To help prevent personal injury, bicyclists must use common sense and remain alert when cycling on roads to avoid crashes with cars. Although drivers should be more attentive to the presence of bicyclists, the odds of injury favor the bicyclist. This is why it is so important to follow some basic common sense prevention guidelines which include:

* Follow the law and ride on the right side of road; stop at stop signs and red lights; use a headlight at night (also beneficial in the day).

* Avoid stopping in the blind spot of a car at a red light. You can be hit if it turns right and you go straight.

* Use a bell or horn to signal or alert drivers of your presence.

* Use a headlight and a rear light, especially at night.

* Use a mirror to glance at traffic behind, especially when approaching intersections.

* Be attentive and alert to the cars. Watch for left turning cars crossing in front that may not see you, and pay attention to parked cars for which a door may open.

* Slow down so you can stop quickly if necessary.

* Avoid riding on sidewalks.

* Avoid busy streets, especially as a novice rider.

If you have been injured in a bike crash, you may be eligible for compensation. Contact an experienced bike accident attorney for more information on a potential bike injury claim.



Real Estate Professionals

the tenants won’t pay me the rent and so I want them out, but what is the easiest and quickest way to do this? thanks

Real Estate Professionals

Do you think it is a bad time to buy?

Sell and Rent Back

 

Statistics as of Friday, 3/20/2009

 

The market continues to shift.  The supply of available Single Family Detached homes  dropped an additional 2% to 38,652.  In the past month, closings stayed strong at 6087 to lower the overall supply to 6 ¼ months.  Keep in mind a balanced market is considered 6 months, which makes about 60% of our market a sellers market.

 

Additionally, pending sales have reached another new high at 12,265.  Scottsdale, another area of pendings, is under $1M so it is showing activity.  An increase of nearly 30% in pendings has been observed here in the past 3 weeks, so increased sales should be seen over the next few weeks.

 

The best markets in the Valley at the current time are Phoenix and the West Valley, at 5 ¼ months each.  Following closely is the SE Valley at 5 ¾ months.

 

Because of a shortage of realistic financing for JUMBO loans, the higher end continues to lag behind.  For $1M+, supply levels are at 4 years for Scottsdale and 5 years for PV.

 

 

 

 

 

 

MLS Statistics

Area Breakdown

 

Overall Market.  Since last week, inventories are down 2%.  Active listings total 38,652 with closings in the past month of 6087.  This is approximately a 6 ¼ month supply.

 

Phoenix.  Since last week, inventory levels are down by 2%.  Active listings total 8816 with closings in the past month of 1719.  This is approximately a 5 ¼ month supply.

 

West Valley.  Since last week, inventory levels are down by 2%.  Active listings total 9644 with closings in the past month of 1800.  This is approximately a 5 ¼ month supply.

 

NE Valley.  Since last week, inventory levels are down by 1%.  Active listings total 5691 with closings in the past month of 309.  This is approximately a 18 ½ month supply.

 

SE Valley.  Since last week, inventory levels are down by 2%.  Active listings total 8696 with closings in the past month of 1532.  This is approximately a 5 ¾ month supply.

 

Scottsdale Over $1M.  Since last week, inventory levels are down by 1%.  Active listings total 1469 with closings in the last month of 31.  This is approximately a 47 ½  month supply.

 

Scottsdale Under $1M.  Since last week, inventory levels have not changed.  Active listings total 2494 with closings in the last month of 192.  This is approximately a 13 month supply.

Paradise Valley.  Since last week, inventory levels have not changed.  Active listings total 578 with closings in the last month of 10.  This is approximately a 58 month supply.



Sell House Quick