Sunday, March 23, 2008

Mortgages after Divorce

I am writing this blog because it is very close to my heart. To quote Robin Williams,
"Ah yes, divorce, from the Latin word meaning to rip out a man's genitals through his wallet." Ouch! He couldn't be more correct. My divorce was just finalized last May, and I certainly felt as though some things were ripped out with it. I gave everything to the ex, my kids hate me, my credit stinks, and of course the mortgage biz is in the toilet. So, no house, no equity, no kids, no credit, and no money. That pretty sums up our "family law system". I hope the judge that did my case reads this. All in all some day again I will be on top again (at least that is what everybody keeps telling me). Now, believe it or not, there is life after divorce. There are two things you should know. If the ex doesn't refinance the house and take your name off of it, that is okay, as long as they supply you with 12 months cancelled checks showing they are making the payment, mortgage companies won't count that debt against you. For credit cards, the same thing goes, except all that you have to show is the divorce decree and we won't care about the debt. HOWEVER, there is one area we run into problems. Even though you have a divorce decree, if they stop making payments on the mortgage or the joint credit cards, the creditors don't care who is supposed to pay what. They will come after you. The creditors were not party to the divorce and you are liable. If the accounts go into collection, it will affect your credit and thus your ability to get it. My advice to you is put a time limit in the divorce decree of 2 years or less for the house to either refinance or sell the home, and require your ex to refinance their credit cards. Just some common sense tips to help you get a mortgage after divorce.

Wednesday, March 19, 2008

Long Boat Key Endorses New Hotels

Seems Long Boat Key is finally realizing that the loss of hotels in the area has send high end toursists elsewhere and has finally voted to make it easier for small restaruants and hotels to rebuild and remain in the area.

Fed Cuts Key Rate

Here is a series of Q's and A's on the Fed's cut today. My take on it is that we have some real problems here with the banking system in this country and nobody wants to fess up on what's really happening - Tom


WASHINGTON — The Federal Reserve reduced its benchmark interest rate by three-quarters of a percentage point on Tuesday, to 2.25 percent, a cut that was less than investors had been hoping for even though it was one of the deepest in Fed history.


Falling interest rates may be a boon to borrowers, but they can be hard on savers and retirees on fixed incomes.
On Tuesday, the Federal Reserve cut its key short-term interest rate three-quarters of a percentage point to 2.25 percent -- a move designed to spur banks, credit card issuers and other financial institutions to lower their rates as well.
It was the sixth cut since September, and it pushed the rate a full three percentage points below the 5.25 percent that prevailed last summer.
Here is how borrowers and savers are faring in the lower-rate environment.
Q:How does the Federal Reserve action affect the interest rates on consumer products?
A:When the Fed lowers its federal funds rate, which is the interest banks charge each other on overnight loans, the financial institutions typically pass on the lower rates to borrowers and savers. Shortly after the Fed acted, many of the nation's big banks lowered their prime lending rate to 5.25 percent from 6 percent.
Q:Will consumers see lower rates on their credit cards?
A:Probably, but not right away, said Greg McBride, senior financial analyst with Bankrate.com.
"Card issuers tend to pass along rate increases more quickly than rate decreases," he said. The lag is typically up to three months, and the reduction may not match the Fed's cut, he added.
The average rate on a variable-rate credit card six months ago was 14 percent; now it is about 12.35 percent.
Another maneuver that can reduce the benefit for consumers is that some card issuers switch to fixed rates from variable rates to keep their profits from dropping.
Q:What about home mortgage loans?
A:"The biggest beneficiaries of the repeated rate cuts are homeowners facing resets with adjustable-rate mortgages," McBride said.
That is because the rate on many of these home loans is pegged to the rate on the one-year Treasury bill, which tends to move down after Fed rate cuts.
"Last summer, borrowers with an adjustable-rate mortgage pegged to one-year Treasuries could have seen their rate jump by 3 percentage points," McBride said. "Now, borrowers could see their rate decline."
So a family with a $200,000 home loan would have seen a $370 increase in monthly payments if the rate adjusted last summer, but a loan that reset this spring would have a $50 per month decline, he said.
Q:Will fixed-rate mortgages be affected?
A:These loans typically reflect the rate on 10-year Treasury notes, and this is affected more by conditions in credit markets and inflationary expectations than by Fed action on short-term rates. Fixed-rate mortgages currently are being offered a bit below 6 percent now, not much of a drop from the high around 6.8 percent last July, Bankrate.com estimates.
Q:What about homeowners with lines of credit?
A:Borrowers with outstanding lines of credit should see their monthly payments drop as the rate on these loans falls in line with the prime rate, said David Tysk, a senior financial adviser with Ameriprise Financial in Minneapolis.
He said that a client with a $100,000 outstanding line of credit already has seen a $180 drop in his monthly payment and could see that rise to more than $200 after the latest Fed action.
Q:What about savers?
A:As the Fed has lowered rates, the return on savings accounts and many short-term investments has fallen, too.
Tysk noted that the yields on certificates of deposit are down and that investment alternatives such a municipal bonds and money market funds "are not doing well in the current climate."
He said that what a consumer should do depends on his or her short-term needs -- and comfort level.
Tysk said one concerned client recently moved a big chunk of his savings to federally insured bank accounts and government securities. "Consumer sentiment is very real," he said.
Q:How are retirees and others living on fixed income feeling the pinch of lower rates?
A:"If you are a retiree, these are tough times," Tysk said. That is because returns on savings are down while costs -- from gasoline to heating oil, health care and food -- are rising.
The retirees, he added, are finding a variety of ways to cope.
Some have been borrowing, perhaps to pay for a new furnace or car, because paying a low rate on a loan beats paying tax of 25 percent or more on a withdrawal from an Individual Retirement Accounts or a company-sponsored retirement savings plan, he said.
"They also have an incredible ability to adapt ... delaying purchases, home projects, things like that," Tysk said.
Q:Is the Fed finished?
A:Mark Vitner, senior economist with Wachovia Corp. in Charlotte, N.C., thinks there is room for more rate cuts.
"They probably have to overdo it, and then take some back later in the year or next year," he said. He described the Fed action to date as "a full frontal assault on the credit crunch. They're hitting with everything they've got. It's pretty remarkable. I think six months from now we'll look back and marvel at how creative the Fed was and how successful they were."
While leaving the door open for additional rate cuts, policy makers also expressed growing concern about inflation. "Uncertainty about the inflation outlook has increased," the central bank said. "It will be necessary to continue to monitor inflation developments carefully."
The statement highlighted the growing problem that the Fed faces, between fighting an economic downturn and heading off new inflationary pressures that have become apparent in everything from energy and food prices to the falling value of the dollar.
In a sign of the difficult choices the Fed faces, two of the 10 members of the policy-making Federal Open Market Committee dissented from the decision, favoring a smaller rate cut.
The two dissenters in Tuesday's decision were Richard W. Fisher, president of the Dallas Fed, and Charles I. Plosser, president of the Philadelphia Fed, both of whom have been outspokenly hawkish about inflation issues in recent months.
The Fed's announcement was the culmination of an extraordinary series of actions over the past two weeks to prop up financial markets and the economy with a flood of cheaper money.
The Federal Reserve has reduced its overnight lending rate, the federal funds rate, six times since September, and did so twice in January alone.
With the latest reduction, the federal funds rate is far below the rate of inflation, meaning that the "real," or inflation-adjusted, rate is below zero. It is also well below the European Central Bank's benchmark interest rate of 4 percent or the Bank of England's rate of 5.25 percent.
On the edge of panic
Investors had already assumed that the central bank would reduce the cost of borrowing by at least another three-quarters of a percent on Tuesday, but mounting worries about a meltdown in financial markets and the Fed's emergence as lender of last resort had elevated expectations even higher.
Indeed, expectations about another deep cut in interest rates were so high that the central bank was at risk of setting off a new wave of panicky selling if it had announced a reduction of less than three-quarters of a percentage point. In fact, the Dow Jones Industrial Average began falling after the announcement of the Fed action before reversing course and finishing the day up 420.41 points at 12,392.66, its highest one-day gain in five years.
A lower federal funds usually leads to lower interest rates for mortgages, consumer loans and commercial borrowing.
But Fed officials had been startled and frustrated that their previous rate reductions were doing nothing to lower the long-term interest rates that are most relevant for expanding a business or buying homes or cars.
Part of the reason, analysts said, is that lower overnight interest rates have only limited relevance to the fundamental problem that is roiling the credit markets and the economy: the huge losses caused by the collapse of the housing bubble and the home loan environment that fed it.
Most analysts predict that housing prices, which have already fallen in most parts of the country, will drop much further before they hit bottom.
About 8 million homeowners already owe more on their mortgage than their houses are currently worth, and foreclosure rates have soared over the past year.
The Fed's problem is that its primary tools for stimulating growth -- reductions in the cost of borrowing -- do little to address the fears about bad loans. Many if not most private forecasters have concluded that the United States has probably entered a recession. The Labor Department has reported back-to-back declines in payroll employment in January and February.
And while the unemployment rate is still low at 4.8 percent, the number of private-sector jobs has declined for three months in a row -- a pattern that has almost always been accompanied by a recession in recent decades.
Bailing out banks
With financial markets becoming dysfunctional, Fed officials have announced a series of steadily bigger lending programs for banks and Wall Street investment firms.
On Sunday, Fed officials agreed to lend up to $30 billion to JPMorgan Chase to engineer its takeover of Bear Stearns, a major Wall Street firm that was near collapse.
But Fed officials face increasingly contradictory pressures: inflation is rising even though growth has stalled.
The federal funds rate is once again edging close to zero, at which point the central bank would have to resort to entirely new strategies if it wants to keep opening its monetary spigots.
But a growing number of economists, including some Fed officials, contend that the housing bubble and downturn stemmed at least in part from the central bank's own decision to keep interest rates at rock-bottom lows from 2001 to the middle of 2004.
Meanwhile, consumer prices, even after excluding the prices of food and energy, are climbing faster than the central bank's unofficial target of less than 2 percent a year.

Courtesy: New York Times

Thursday, March 13, 2008

Second Phase of Parking Coming to Sharky's

The engineering department in Venice is starting to build the second phase of the parking lot at the Venice Fishing Pier.
The improvement, which replaces the existing dirt parking area south of the pier, will provide 182 paved parking spaces, eight for handicap use and 46 grass spaces.
It also includes sea turtle-friendly lighting, landscaping, a handicap accessible ramp to the beach, continuation of the boardwalk to connect the north parking area, restrooms and pier and stormwater collection and treatment that will reduce flooding during rain storms, the city said.
Once the project is complete, there will be 375 parking spaces. The project’s cost is $1,290,646 and the money is coming from the Pier Fund and General Fund Reserve.
It should be done by the end of May. Sharky’s on the Pier restaurant and the fishing pier will be open throughout the construction, the city reports. Parking is currently available north of the fishing pier and along the east side of Harbor Drive next to the golf course.
Other activities at the beach include beach tilling as required by the city's beach nourishment permits in order to prepare the sand for the sea turtle nesting season. (courtesy Venise Gondolier)

New Insurers help Citizens

It seems as though there are some insurers besides Citizens that want to do business in Florida. They have snapped up almost 500,000 policies so far this year. Most of the policies aren't in the riskiest areas, but its a start. This offers the people of Florida a much wider variety of insurers that ultimately leads to lower premiums and greater service. Beware though, the policies can adjust higher at renewal, but you have the option of going back to Citizens.

Sarasota County Fair 3/14/08 to 3/23/08

The Sarasota County Fair is in town at Robarts Arena startint this Friday 3/14/2008 at Robarts Arena. The Arena is located on Fruitville Road, just west of Lockwood Ridge Road.

Foreclosure Crisis? Myth or Fact?

Is there really a foreclosure crisis, or something manufactured by the news media outlets? If you look at the superficial numbers, yes, foreclosures are up on average 78.23% nationwide. However the number of foreclosures are actually less than 1% of the homes out there. This is because the foreclosure rate has always been very low, and really except for a few markets, see below chart, nothing much is happening. The medial outlets make it look like most of the country will end up on the street. I think they need some regulation. There has to be something we can put on them for upsetting the economy.

In fact, most people that are in trouble to to resetting loans, ie option arms, are working with their lenders to re negotiate the loans so it is a win win for eveybody!

Wednesday, March 12, 2008

Bank of America and Countrywide Deal in Trouble?

I hate to be the bearer of bad news, but it seems there might be a problem here. Does B of A really want all the liability that is coming from Countrywide? I personally blame Countrywide for a lot of the problems going on in the mortgage industry, and quite frankly the economy. They gave many people loans that should of never gotten them. Here is a spot from Jim Cramer on his views on the B of A merger with CW. He makes an ominous comment about one and a half minutes into his thing. Enjoy. http://www.thestreet.com/video/10406994/index.html#10406994

Option Arms?

The option arms that are surviving the mortgage wars are actually pretty good. These are very distant cousins to the ones that everybody is in trouble with. The really good ones work like this: The minimum payment is from 3% to 4%, this keeps you from building up too much defered interest too fast. You can get a fixed rate around 8% or less, so you are not at the mercy of the market. They offer stated income options for situations that make sense. You can get these for investment, primary, and secondary residences. If you use them right, you can actually pay off your property sooner than with a regular mortgage.

Big Banks in Trouble

Big banks have only themselves to blame on this one. They entered markets and bought local community banks and for the most part erased any connection and duty they had to the local community. When a "big bank" takes over a local bank a number of things happen. All the money the bank kept locally was sent to another "central location"in another state. Most of the existing staff is let go and college "wannabees" were hired who have no clue past checking or savings accounts. They were hired and trained to sell the "product of the day" rather than what was best for the borrower. Then the local "trust" accounts were taken to a "central location" and, here a crime, the new managers of the trusts would then decide where the trust money would go, and often it wasn't what the trust was set up for initially. Example, there was a couple in Texas that saved all their lives and donated millions to a trust to support their favorite charity. A "big bank" came in and bought the local bank that was managing the trust. The "big bank" decided that the trust wasn't making enough money (the managers of the trust get paid on how much money the trust makes), so they stopped giving to the charity the trust was set up for. WOW! Now if the bank had been under local ownership and management it would of never happened.

Go into a bank today and go back in 30 days and see how many of the same people are still there. I worked for a year at a "big bank" as a mortgage loan officer and I was assigned a couple of branches to call on. I felt so sorry for the people at the branch. They were so overworked and under appreciated. Every day they would have their priorities by upper management changed, so in reality nobody could get ahead and people were constantly being shuffled around. It was like the bank didn't want anybody to become too good at their job.

Then came the mortgage mess. Where were the regulators during all of this? I saw a couple of them testifying on Capitol Hill and they sure didn't look smart to me. I never saw so many dumb looks in my life as I did that day. Whose money did the banks loose? Where did they get this kind of money to play with? Why does it seem that all their money was in mortgages? Why weren't they investing in their local communities by loaning money to businesses? Why aren't they responsible to the local community.

It seems to me that if we are going to allow "big banks" then they have to be held much more accountible for their actions. Otherwise I am all for eliminating "branch banking" and going back to much smaller and more responsible banks in this country.

Wednesday, March 5, 2008

Countrywide Junket Called Off

Seems our friends at Countrywide have cancelled their junket to Florida. Seems the Bank Of America money didn't include expensive junkets for Countrywide execs. Stay tuned for more.

My Radio Spot (click here for spot)

Here is my radio spot that we recently recorded with Star 107.9 here is Sarasota, Fl. They are a classic radio station and you can listen to them at http://www.oldies108.com/.

Sunday, March 2, 2008

From Our Friends at Countrywide

Thursday, 28 Feb 2008
Countrywide Chooses Sun Over Ski Trip!
OriginallyPosted By:Jane Wells Funny Business

I've been hearing from sources that Countrywide, despite cancelling an expensive ski junket to Colorado, is planning two even bigger events in Hollywood, Fla.
Now comes confirmation from a source at The Westin Diplomat Resort & Spa that Countrywide Financial has booked the location for two different events, one starting next Wednesday -- lasting a week -- the second, happening at the end of April.
Those familiar with the details say the first event is for 300 people, the second event will be much larger. Who's coming and why, I don't know. Is it for clients? Countrywide employees? People being foreclosed on? Florida has one of the highest foreclosure rates in the nation.
We have asked Countrywide for information -- and to confirm whether the trips are still on -- but haven't heard back yet.
The Westin Diplomat is described as a resort with "luxurious accommodations, magnificent views, and an experience sure to inspire renewal." Rooms start at $400 a night (yes, that's where they start), but can go up to $1,000 for a "Club Floor Suite."
One source tells me Countrywide spends "about $4,000 per guest and $5-6 million combined," and that the events include "parties/dinner every day, celebrity entertainment, activities, suite upgrades, private jet usage for execs, gifts, etc., etc."
I'll let you know what the company says, if anything. It has not responded to our questions recently.

Short Sales

Here is the scoop on short sales. A short sale is when you sell your house or the bank in a foreclosure action sells your home for less than you own on it. In the old days, (pre-2008), when this happened at the end of the year you got a pleasant (NOT!) surprise from your lender of a 1099 for the short sale amount. For example: You owed $200,000 on your mortgage and only for $150,000 for it. In the clear, NO! Under the old rules you would have to treat the $50,000 difference as income at the end of the year. YIKES! Under the new rules, that doesn't happen anymore. HOWEVER, this only applies to your PRINCIPLE RESIDENCE! People that walk away or are foreclosed on their investment property and end up with a short sale, THEY WILL GET STUCK PAYING TAX ON THAT MONEY! If you think the bank was tough, wait till you see what the IRS will do if you don't pay it.

The GOOD NEWS on this rule is that you don't get nailed with a double whammy of loosing your home and then a HUGE tax liability. The BAD NEWS is that many people who are not in danger of loosing their homes, are using this "help out" as an way to walk away from a home that has lost value in this market. Those people should be prosecuted. Why you ask? Well when they dump their homes out of selfishness, they are hurting the values of the homes around them. There are whole straits of homes in Detroit that are just empty! Me think that we are creating a self fullfilling prophecy.

My advice to people is to stick it out and ride the wave.