January 20, 2017
Finding An Affordable Neighborhood
Trulia quoted me in How To Find An Affordable Neighborhood. It opens,
There’s more to consider when buying a house than the house itself. The neighborhood can be equally, if not more, important. You might already have must-haves in mind for the type of property you’ll buy — at least two bathrooms to stay sane, for example. Now you need to focus on finding the best neighborhood that fits your budget. Read on for some tips, techniques, and practices to help you find affordable neighborhoods, whether you’re looking at homes for sale in Seattle, WA, or anywhere else across the country.
1. Use the Affordability layer in Trulia Maps
The most important factor when looking for an affordable home is price. No surprise there. But the listing price doesn’t tell you the full story. The seller could have simply picked a number because that’s what they’d like to get, a price that might have nothing to do with reality.
Use the Affordability layer in Trulia Maps to compare listing prices with recent sales prices. Just scroll over your neighborhood of interest to see the median listing price, change your filter, and then scroll over the same area to see the median sales price. There may be a huge price difference between the two, which besides a too-optimistic seller could also reflect a softening market. A once-unaffordable neighborhood, based on listing prices alone, might now be in reach once you see what homes are actually selling for.
Also look at the sales price per square foot, a real eye-opener. You can see exactly how much location affects a home’s price. “If using a price-per-square-foot comparison, the homebuyer must be sure to compare similar-sized properties or allow for the different results based upon the differences in size,” says Greg Stephens, chief appraiser for Metro-West Appraisal Co. in Detroit, MI.
2. Explore other neighborhoods
If you already have a neighborhood in mind, take some time to look at the bordering neighborhoods as well. You might find more affordable options that have the same benefits. “As home prices increase within desirable areas, generally speaking, locations on the periphery become in demand,” suggests Michael Kelczewski, a Pennsylvania and Delaware real estate agent.
Pick your neighborhood of interest and note the listing and sales prices. Then pick a bordering neighborhood that costs less to buy into. Compare amenities in Trulia Maps, and you can see where the restaurants, grocery stores, nightclubs, cafes, stores, arts and entertainment areas, spas, and active-life spaces are located.
Don’t rule out up-and-coming neighborhoods. Yes, you’re taking a risk here. “Up-and-coming,” as a description, might turn out to be a tad too hopeful if the neighborhood is really going nowhere. How do you minimize the risk? Look for warning signs. “Distressed areas generally are identified by low sales volumes, elevated value decreases, and poor access to amenities,” says Kelczewski.
3. Look for fixer-uppers
If your heart is set on a neighborhood that lets you bike to work and raise urban chickens, you might not be able to get a dreamy, move-in-ready abode with all new upgrades. Instead, target fixer-uppers, or remodels, or teardowns. You might wish to consider a house with “good bones,” as they say, meaning there’s potential in there somewhere. If the house doesn’t even have that, a teardown might be in order.
You can often find fixer-uppers in the foreclosure arena. But beware. “Purchasing an REO/short sale or auction property when the asset is sold ‘as is’ necessitates a network of professionals to understand the condition and to project rehab costs,” offers Kelczewski. “Contractors, electricians, plumbers, even structural engineers may be required in order to adequately analyze a property.”
You’ll also need to devote some time, or sweat equity, to save money when you buy a fixer-upper. “It is important to have a sense of how much work would be needed to get the house in the shape you would want it to be. You would need to get estimates for the work — the final cost will probably be higher than the estimates — and try to determine how long it will take to get permits approved and contractors in the door … [and] it will probably take longer than everyone tells you,” says David Reiss, professor of law at Brooklyn Law School in Brooklyn, NY. “But when you are pulling your hair out because you are cooking dinner in a half-finished kitchen, remember all of the money that you saved when you bought.”
January 20, 2017 | Permalink | No Comments
Friday’s Government Reports Roundup
- A paper, titled How Low Can House Prices Go? Estimating a Lower Bound, discusses how in risk management, the credit risk and required capital associated with mortgage assets is often estimated through stress testing where the house price path is an important determinant of the severity of the stress test.
- HUD published an implementation notice for several of the provisions of the Housing Opportunity Through Modernization Act (HOTMA), which passed Congress and was signed into law by President Obama in July 2016. The provisions specifically impact the Housing Choice Voucher and Project-Based Voucher programs. HUD’s notice seeks additional public input on the proposed implementation requirements and future changes to these programs. Comments are due March 20, 2017.
- During his nomination hearing to become HUD Secretary, Dr. Ben Carson said that he would not seek to eliminate rental assistance; however, the future of public housing remains uncertain. The incoming administration will inherit a public housing system with a shortfall of $25.6 billion for much-needed repairs, as well as waiting lists of hundreds of thousands of individuals hoping to find an affordable home. Some housing advocates have concerns regarding the possibility of instituting work requirements and time limits for public housing residents, which would disproportionately burden elderly and disabled public housing residents.
January 20, 2017 | Permalink | No Comments
January 19, 2017
New Protections for Homeowners
Consumers Digest quoted me in Protections Coming for Homeowners. It opens,
New rules that cover mortgage servicing aren’t dramatic, but they should help certain consumers, experts say. In August 2016, Consumer Financial Protection Bureau finalized rules that focus on foreclosure protections and delinquencies.
“These changes are more at the margins,” says David Reiss, who is a law professor at Brooklyn Law School. “It’s looking at normal situations that occur and adding protections for consumers.”
The new rules, which are expected to take effect by 2018, would prevent dual tracking. Dual tracking is when foreclosure proceedings start while a homeowner who is current on his/her mortgage awaits a decision about a request to work with the loan servicer to avoid foreclosure. (This request is known as loss mitigation.)
In addition, borrowers who are current on their mortgage since a prior loss-mitigation application can avoid foreclosure by having their application reviewed again if they have unexpected financial difficulties. Loan servicers also have to notify borrowers when a loss-mitigation application is complete. Finally, if a borrower is in foreclosure and his/her loan is transferred to another servicer, he/she won’t have to restart the loss-mitigation application process with the new servicer.
January 19, 2017 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Roundup
- Although federal guidelines allow foreclosed homes to be sold with occupants, in a recently published article in Housing Policy Debate, the author reports that the guidelines are largely irrelevant in practice. In fact, data obtained from HUD through a Freedom of Information Act request shows that in Fiscal Years 2010-2014, there were a total of 23,746 requests for FHA-insured foreclosed properties to be conveyed while occupied. However, only 87 of those requests—much less than one percent—were approved by the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA),
- In a blog post by Enterprise, the author addresses the nomination of Dr. Ben Carson as the lead of HUD and his rhetoric regarding his vision of the agency.
- In an op-ed, Matt Hoffman, vice president at Enterprise Community Partners, examines several ways in which cities can become more equitable, vibrant and affordable. According to Hoffman, cities should consider: cracking down on the housing black market, empowering tenants, using municipal property for housing, putting good schools in neighborhoods that need them the most, thinking and acting inter-jurisdictionally and making all data public.
January 19, 2017 | Permalink | No Comments
January 18, 2017
Hidden Mortgage Fees
TheStreet.com quoted me in Hidden Fees Cost Consumers Billions: Which Ones Are the Worst? It opens,
Consumers are notoriously combative over high product and sales fees, and who can blame them?
Fees for common items like mortgages, credit cards, bank accounts and online deliverables, among many others, can really add up, and do hit consumers hard in the pocketbook.
That goes double for so-called “hidden fees” – shadowy charges on goods and services that buyers usually don’t know about.
A new study by the Washington, D.C.-based National Economic Council shows that Americans lose “billions of dollars” from such hidden fees. Another study of communications firms like AT&T, Verizon and Comcast by the Consumer Federation of America pegs hidden fee costs at $60 billion annually.
Few hidden fees are favored by consumer advocates, but some are worse than others.
“My household bills look very much like those of a typical consumer – two cell phones, cable, broadband and landline telephone,” says Dr. Mark Cooper, the CFA’s Director of Research and author of the communications industry report. “Hidden fees – excluding the price of the service, taxes, and governmental fees – added about 25% to my total bill.”
Here’s a quick list:
* * *
Mortgage fees – Outside of the cable/telecom arena, the mortgage sector may well boast the most hidden fees. “When applying for a mortgage, a borrower can be hit with all kinds of obscure fees like processing fees, notary fees, courier fees, even fees for sending emails,” says David Reiss, a professor of law at Brooklyn Law School. ” Before paying the mortgage application fee, the borrower should ask whether any of the fees are waivable. If they are charged by the lender, as opposed to a third party like a government agency, they may very well be waivable.”
Consumers should be on the lookout for hidden fees, across the board. Some solid due diligence can keep a few more bucks in your pocket and strike a blow against companies with fee programs that operate in the shadows, time and time again.
But as of right now, those hidden fees are paying off for companies, and at U.S. consumers’ expense.
January 18, 2017 | Permalink | No Comments
Wednesday’s Academic Roundup
- This article titled, Foreclosure Sales and Recourse, documents the imbalance of foreclosure sales with respect to recourse laws applied to primary mortgages in the U.S. using geographic state borders as exogenous variation combined with individual transaction data located close to the border.
- A paper titled, Public Investment and Housing Price Appreciation; Evidence from the Neighborhood Stabilization Program, assesses impact of the Neighborhood Stabilization Program (NSP), a federal program designed to convert foreclosed properties into renovated affordable housing through public investment.
- This paper, titled Effects of FHA Loan Limit Increases by ESA 2008: Housing Demand and Adverse Selection, examines the impacts of changes in the Federal Housing Administration (FHA) insured loan limit in response to the Economic Stimulus Act (ESA) of 2008.
January 18, 2017 | Permalink | No Comments
January 17, 2017
Mnuchin, When No One Is Watching
Alexander Hamilton
My latest column for The Hill is Hamilton Acted in Good Faith. Will Steven Mnuchin Do The Same? It reads:
UCLA’s legendary basketball coach John Wooden famously said, “The true test of a man’s character is what he does when no one is watching.”
Steven Mnuchin, another leading citizen of Los Angeles, is now in the spotlight as President-elect Donald Trump’s nominee to lead the U.S. Department of the Treasury.
Running the Treasury Department requires financial know-how, which this former Goldman Sachs banker has in spades. But it also requires character, as a large part of the Treasury secretary’s job is to embody the good faith that the American people want the rest of the world to have in us.
In Alexander Hamilton’s Report Relative to a Provision for the Support of Public Credit, written just after he became the first U.S. Treasury secretary, he notes that the government must maintain public credit “by good faith, by a punctual performance of contracts. States, like individuals, who observe their engagements, are respected and trusted, while the reverse is the fate of those, who pursue an opposite conduct.”
OneWest’s actions during Mnuchin’s tenure as chief executive officer raise questions about whether Mnuchin has demonstrated the character necessary to be a worthy successor to Hamilton.
A recently disclosed memo by lawyers at California’s Office of the Attorney General documents a pattern of bad faith toward homeowners with OneWest mortgages. The memo documents evidence of widespread wrongdoing that helped the bank and hurt the homeowners. The evidence includes the backdating of notarized and recorded documents in 99.6 percent of the examined mortgage files and unlawful credit bids and substitutions of trustees in 16.0 percent of those files.
These are not merely technical violations. They shortened the time that homeowners had to get their mortgages back in good standing and they violated a number of procedural protections for homeowners facing non-judicial foreclosures.
Non-judicial foreclosures give lenders the ability to bypass the courts so long as they strictly abide by the procedural protections set forth by statute. Non-judicial foreclosures can only maintain their legitimacy if lenders respect those procedural protections. This is because there is no judge to make sure that the procedural protections are being adhered to. Without them, a homeowner can be no more than a sheep being led to the financial slaughterhouse of an improper foreclosure.
Some bankers have argued that focusing on violations of mortgage terms is overly legalistic, and beside the point given the widespread defaults during the financial crisis. It isn’t. The violations documented in the memo benefited the bank and harmed homeowners by allowing foreclosures to occur faster than they would if the formalities were followed.
They also allowed the bank to avoid paying various taxes relating to the sale of foreclosed properties. Some of the violations documented in the memo can result in felony convictions, which shows just how seriously California views the procedural requirements relating to non-judicial foreclosures. Ultimately, California’s then-Attorney General (and now U.S. Senator) Kamala Harris, chose not to file this complex lawsuit, but the memo’s findings are disturbing nonetheless.
As Hamilton knew, acting in good faith, performing agreements as they are written and keeping promises lead to respect and trust, “while the reverse is the fate of those, who pursue an opposite conduct.” The American people deserve a leader at Treasury with those traits, one who cherishes the rule of law as the basis of a both a healthy market economy and a well-functioning democratic government.
Other nations expect that we meet this standard, too. If they see us as just another bully on the world stage, we will lose our ability to lead by example. Members of the Senate Finance Committee should ask Mnuchin whether his actions at OneWest met the standard set forth by Hamilton.
We won’t be in the rooms where important decisions happen, so we need to have confidence in how Mnuchin will act when he thinks that no one is watching.
January 17, 2017 | Permalink | No Comments
