Mim Heisey

I was recently asked by a question about refinancing by a client that I consider rather business savvy. "Why would someone want to refinance a house that is underwater (financially)??

Lets paint the scenario that many people are in:

1) They owe significantly more on their house than current market value: that is, they are "underwater".

2) They like their house and neighborhood, and believe that it is their responsibility to pay the debts they incurred, so they would like to stay, and not just walk away. They also have worked hard to get and improve their good credit scores.

3) They would like to refinance to get a lower interest rate , but nobody wants to loan them that much on a new loan. (Obama's current loan mod plan allows for a refinance on Fannie Mae and Freddie Mac loans- but only up to 105% of market value. NOT helpful if you are 110-120% in debt!)

4) They may have a diminished income because of the economic downturn, and meeting their high mortgage payment is getting increasingly difficult....OR they may be proactive in making sure that they are in the best possible position so that they DON'T miss any payments!

5) They are really feeling trapped-- and angry when they read about the big bonuses that some big banks and business CEOs are still receiving! ANd so AM I!!

So what to do?

There has been Congressional conversation about a new extension to the Home--- plan that would allow refinances up to 125% Loan-to-value. That would certainly be helpful to many more persons than the current plan. A 1%-2% drop in annual interest rate can save $100's of dollars per month on larger home loan. $200,000 at 6-1/2% on a 30 year loan is $1264/month. 5% rate yields less than $1075. That is almost $200/ month savings on a moderate sized home in many markets.

Multiply that by 2 (for a $400,000 mortgage) or more for homes in more expensive areas and you can see why the ability to refinance can be a great help. Perhaps the larger factor is that, with the lower payment, I can stay in my home and continue to pay my bills, (continue)being a productive member of my community, and not disrupting my family's life.

My hat is off to-(and I am looking to help anyway that I can) any homeowners who are still living by the principles that standing up to responsibilities that they took on is only their just and right response. If the market was still growing, we would all want to take the profit that accrues, do we not? That is the risk of business and purchasing over renting.

Do homeowners need to make some adjustments? To be sure, we do!! But help for the homeowner that really helps the homeowner would be a welcome change to big business and big government!

Do you ever wonder who is benefiting from a short sale and who is paying for it? At first glance it appears that the homeowner/seller is benefiting. The buyer of the property certainly hopes that they are--benefiting from the transaction, that is. I am told that the bank is happier short-saleing than foreclosing on a home, since it cuts their losses in the long run. That does not mean that they are anxious to give away their money, by the way, and it is not an easy sell to convince them to do so.

But what about the rest of us? What about the purchasers who saved up for a downpayment the old fashioned way and have no bank agreeing to a sort sale or loan modification to bail them out? What about you and me the taxpayer? Do we win??

My hope is that by getting folks who would otherwise face foreclosure thru a shortsale, I am helping us all.

--The community will have less vacant houses setting as targets for vandelism and deterioration.

--Banks will have to take some of the burden for contributing to this crises. (By the way, some of our local banks are not doing short sales, because they were not doing 100%+ equity financing!)

--Sellers will be able to sell to an appreciative buyer, and will then either rent, or perhaps even buy a smaller home they can afford on their reduced income.

--Prices will correct more quickly and the housing market will stabilize again, bringing jobs back into our communities. (You can't outsource building houses for Shippensburg, PA to India or China.)

While it is certainly true that this crises is going to cost us all a lot of money and more that a few sleepless nights for some, I would hope that we are, collectively learning a few home truths.

1) While you may feel jealous of the write off that a neighbor is getting in a short sale, you also can be thankful that you do not have the stress of being upside down in your mortgage, and then lost the ability to pay for you home. (If you are, perhaps you want to give me a call and see if I can help you see light at the end of that scary tunnel.)

2) Solid financial (and moral) decisions always pay off in the long run. Winning the lottery looks like a great blessing-- until you take a close look at those winners lives in a few years. Nearly 100% are no better off than they were before the big windfall, and most are in worse straits

3) Doing the right thing doesn't always seem to pay, and thieves sometimes get away with their theft, but a praying grandmother put it this way. "I pray that my grandchildren will always get caught when they do wrong. " Then they will learn to do right, and will thrive in the long run.

4) There is great value in peace-of-mind and a clear conscience. You can't put a price on them, and the savings in heartache and doctor bills to correct it ....and you CAN put THAT in the bank!

Mim

"New Designation available!"

I am to often often fascinated by the emails that come across my screen, despite the best effort of my multiple Scam, (oops I meant to type "Spam") filters. Most have a very convincing opening line about how you can make great leaps forward in your business or personal financial life by following their plan. And then of course there is always the "just XXX $$" to get started line.

The latest one that I took the time to open, hoping that it would prove to be honest and useful, since (I thought) it came from a trusted site, touted a new designation for 'TOP AGENTS" and sited the high requirements that were needed to qualify.. Souned good...and legitimate. . and worthwhile.. .until I got to the bottom line and realized that I was reading from a for profit (theirs, not mine)look-alike site that was trying to hook me for a big subscription fee for a designation that was only promotion hype.

I am a firm believer in the value of experience, and the added value that education can provide. I think that designations are valid ways to express those qualities and present those values to our customers/consumers. I just wish we had a better way of eliminating or red-lining the for-a-dollar look-alikes that are for sale, and deceive and confuse the public.

May I answer by asking you a few questions that you ought to consider before making a decision?

1) What is available to rent here in this aera that you would consider living in? At what rent $$?

2) How does rental cost compare to monthly costs on purchase of a similar property? did you factor in the tax benefits of homeownership? what about the closing costs of buying --spread over 2, 3 or 5 years?

3) Is your employer subsidizing your move? paying some or all of your closing costs? If they are, will they make a lump sum settlement to you if you do not buy, or is that money lost to you if you rent?

4) What is your risk tolerance? If it is not high you may consider rental more favorable, even in a stable, slowly increasing market. People who make the decision to buy in this market may look VERY VERY SMART 2 or 3 years from now. Real estate has certainly made a market correction from the peak prices that we hit in late 2006. Whether it is the absolute bottom before the next upswing we will only know AFTER the upswing.

5) Are you planning to take advantage of the great interest rates and minimum downpayments that are available now ? YES! THERE IS MONEY AVAILABLE IF YOU HAVE REASONABLY GOOD CREDIT!! Try FHA 95-97% financing, for instance.

6) How sure are you that the job will end at 2 years?
6b) Would you consider renting the property after you move from this area. (You might have a very attractive interest rate to carry the property on if you jump in at todays record low rates ;.)

As an experienced Realtor here in the Cumberland Valley of Pennsylvania, I help my clients look at what is best for THEM, and that can only be done by asking the right questions and getting more facts of their situation than are typically included in a public forum.

Do yourself a favor! Get experienced, personal assistance when you are making such a big financial decision. It'll give you a great rate of return on investment!
Hope that helps. Mim Heisey
REALTOR GRI
HALE REAL ESTATE