Aspen Real Estate Blog
Your Magic Number
February 3, 2010
Improve your financial habits so your score goes up and stays up.
You know your Social Security number, your PIN, an access code here, a password there. But do you know the number that will cost -- or save -- you thousands of dollars? Your credit score is a number that banks use to determine whether you qualify for credit -- and if so, how much interest they'll charge you. Insurance carriers and phone companies rely on the scores to decide if you're a good credit risk. A prospective boss or landlord may turn you down if your score doesn't measure up.
Improve your financial habits so your score goes up and stays up.Torrey Shannon and her husband, Dan, filed for bankruptcy in 2002. "We've cleaned up our act," she says, "but if you look at our scores, you'd assume we're deadbeats. Not a day goes by that it doesn't affect us. We can't get a home until 2012."
How your score is calculated may seem mysterious, but it's essential to know your number and how to make it work for you.
Q: What Is a Credit Score?
A: Your credit score represents your creditworthiness: how likely you will pay your bills Quick read more or view full article and pay them on time.
The Minneapolis-based Fair Isaac Corporation (better known as FICO) was the first to boil down your credit history, a detailed report on how you borrow and repay your debts, into a single three-digit number.
The FICO scale ranges from a low 300 to a high 850. The higher your score, the more likely you will qualify for the lowest interest rates. FICO gives its formula to the three credit bureaus -- Equifax, Experian, and TransUnion -- and they apply the math to your credit reports. Each pulls information from a slightly different network of lenders to compile its own report on you. (FICO earns a small royalty for each score the bureaus sell to lenders.) Because of this, you actually have three FICO scores, one from each of the bureaus, and they can vary by as many as 50 points.
You are entitled to one free credit report from each of the bureaus once a year. You can get the FICO scores based on your TransUnion and Equifax credit reports from myfico.com for $15.95 each. Experian no longer sells its FICO scores to individuals.
Q: How Is Your Score Calculated?
A: Your score reflects how well you've managed your debt. Black marks such as late payments remain on your record for seven years. (For some forms of bankruptcy, it's ten years.) There are factors that don't affect your score: employment status, income, debit card habits, savings, bounced checks, overdraft fees, utility bills, and late rent (if the issue hasn't gone to court).
Here's what the bureaus use to calculate your score.
Payment history (35 percent)
The lowdown: The bureaus factor in when you last paid an account late, how often you pay late, and by how many days.
The strategy: Set up automatic payments to guarantee you're never late. If you have a 760 FICO score, for example, you could probably qualify for a 4.9 percent mortgage. Drop 100 points (after one skipped or late credit card payment) and you'd be lucky to get 5.5 percent. Pay bills on time and you'll improve your score within months.
Total Debt (30 percent)
The lowdown: In general, higher debt loads work against you.
The strategy: Lenders look at your "usage ratio" -- how much debt you owe on your credit cards compared with the total amount you could borrow. To keep your ratio low, don't max out your cards, and don't cancel cards you don't use.
Say you owe $100 apiece on five credit cards, each of which would let you borrow up to $1,000. Your overall usage ratio -- debt ($500) divided by credit limit ($5,000) -- is 10 percent. Cancel all but one card and your debt is still $500, but your available credit drops to $1,000. Your usage ratio is now 50 percent, enough to lower your score. A lot.
The people with the best scores tend to use no more than 9 percent of their available credit. Go above 50 percent, and your score is headed for a nosedive, says Steve Bucci of MMI Financial Education Foundation, a credit-counseling firm.
Duration (15 percent)
The lowdown: The longer you've had an account, the better. A late payment on a two-year-old account will hurt your score more than if you'd had the card for two decades.
The strategy: Avoid opening new accounts unless necessary, and keep your oldest credit cards active (assuming you pay any new charges in full). "In this environment, if you don't use a card, you lose it," says Frank Remund of Seattle's Credit IQ, a fee-only financial advisory firm. "To demonstrate you're still using the card, sign up to have it automatically make one utility payment every month."
New credit (10 percent)
The lowdown: Multiple requests for credit mean you're a greater risk. FICO looks at the number of new accounts that you have opened as well as the number of requests, or inquiries (there are two kinds), for your credit score or report.
The strategy: "Hard" inquiries -- when you actually apply for new credit -- can ding your score. The best way to protect yourself is to squeeze your applications -- whether for a mortgage or a car or student loan -- into the same 45-day period so they'll count as a single inquiry.
Nowadays, banks and insurance companies routinely check account holders' credit reports. If your score has dropped, they might increase your interest rate, reduce your credit limit, or cancel your card. (Starting on February 22, 2010, credit card companies will no longer be able to raise your rate on old balances if you have a fixed-rate card.)
"Soft" inquiries don't count against you. For example: requests you make for your own credit report and those "preapproved" card offers that arrive, unsolicited, in the mail.
Types of Credit (10 percent)
The lowdown: FICO looks at the number and "quality" of each type of account. For instance, a credit card from a national bank carries more weight than one from a department store.
The strategy: Revolving accounts (credit cards) tend to count more than installment loans (mortgages, car loans, student loans) because they're better predictors of your debt management. If your mix of debt is considered "off balance," it can hurt you. For example, it's possible to have too many credit cards but not enough of other types of loans (four or five cards is probably okay, says Adam Jusko of indexcreditcards.com, depending on how long you've had them).
Q: Can You Improve Your Score?
A: If you've made mistakes, get back on track as soon as possible, says Careen Foster, director of scoring product management at FICO. "The longer you wait, the longer it takes to improve your scores." In today's brave new world of tighter credit standards, you need at least a 700 to qualify for a card you once could have gotten with a 600, says Adam Jusko.
Get the Real Free
Check all three of your credit reports at annualcreditreport.com, the only site authorized by federal law. Don't be fooled by wacky commercials and computer ads for other "free" sites. You get one free report per bureau per year; pull a different one every four months to catch problems sooner.
Check for Mistakes
Are there accounts you don't recognize, names that aren't yours, addresses where you've never lived, an incorrect birth date or Social Security number, inaccurate reporting of delinquencies? Has anyone stolen your identity? Have the bureaus combined your information with that of someone with a similar name?
Report Errors
Laura Curley, who runs a charitable foundation in Chicago, was shopping with her husband, Dan, for an equity line of credit when they discovered that a disgruntled customer service rep had reported Dan as deceased on their mortgage file, a "fact" picked up by all three credit bureaus. "As a result," says Laura, "my credit scores were in the 780s. My husband's were zero. Official inquiries got the situation remedied."
One study found that 79 percent of all credit reports had mistakes; one in four contained errors serious enough to have a significant negative impact on scores. Report errors to the appropriate credit bureau. It has 30 days to investigate and respond.
Don't Get Flipped
Say you owe $1,000 on a revolving account and have a limit of $5,000. The bank might mistakenly say you owe $5,000 and have exceeded your limit of $1,000 four times over. New York City consumer advocate Mathew Sheldon says his score had dropped to 620 before he realized one of the card companies was improperly reporting the numbers. He got it fixed, he says, and he's back up to 730. If this happens to you, write to the consumer reporting company and the creditor that provided the information, detailing the inaccuracy.
Time Your Inquiries
You don't actually have a "permanent" credit report. All you have is some numbers stored in a computer file that changes constantly as lenders send in updates. If a bank asks for your score the day before you pay your credit card bills, it will get a different number than it would a few days later.
If you're in a hurry to get a loan and your report doesn't show recent transactions (paying off a balance, for example), ask your mortgage broker to get a "rapid rescore." This will ensure that the lender sees you at your best, but it costs about $30 to $90 per account. If you can wait a month, your report will update automatically.
DIY Improvements
You don't need to pay "experts" to improve your score. You don't need to pay $15.95 a month for credit monitoring services. And you don't need to pay "dispute mills" to argue against every black mark on your credit report. "These companies don't tell you that a negative factor might disappear for a while because the lender didn't respond to a letter in 30 days," says Candy Marshall of Suite Solutions, in Los Alamitos, California, which sells credit reports to bankruptcy lawyers. "But if it really belongs on your report, it will just reappear in a month, when the lender reports to the credit bureau again."
Your best strategy: Improve your financial habits so your score goes up and stays up.
Better Score, Cheaper House
If a family put a 3.5% down payment on a $172,900 four-bedroom house in Greenville, South Carolina, they would take out a loan for $166,850. Here's what their true bottom line would look like.
Score Rate Payment Cost
760+ 4.981% $893.75 $326,900
700–759 5.203 $916.50 $335,090
680–699 5.380 $934.83 $341,689
660–679 5.594 $957.22 $349,749
640–659 6.024 $1,002.93 $366,205
620–639 6.570 $1,062.30 $387,578
Less than 620: It will be tough to get a loan at all.
Better Score, Cheaper Car
A buyer puts $3,000 down on a $25,605 2009 Honda Accord EX-L sedan and finances the rest over 60 months. Here's his true bottom line.
Score Rate Payment Cost
720+ 6.42% $441.45 $29,487
690–719 7.88 $457.05 $30,423
660–689 9.86 $478.73 $31,724
620–659 12.79 $511.91 $33,715
590–619 17.64 $569.60 $37,176
500–589 18.43 $579.32 $37,759
Less than 500: It will be tough to get a loan at all.
Beth Kobliner is the author of Get a Financial Life and a contributor to National Public Radio's The Takeaway. Reach her at bethkobliner.com.
From Reader's Digest - October 2009 Read Less
You know your Social Security number, your PIN, an access code here, a password there. But do you know the number that will cost -- or save -- you thousands of dollars? Your credit score is a number that banks use to determine whether you qualify for credit -- and if so, how much interest they'll charge you. Insurance carriers and phone companies rely on the scores to decide if you're a good credit risk. A prospective boss or landlord may turn you down if your score doesn't measure up.
Improve your financial habits so your score goes up and stays up.Torrey Shannon and her husband, Dan, filed for bankruptcy in 2002. "We've cleaned up our act," she says, "but if you look at our scores, you'd assume we're deadbeats. Not a day goes by that it doesn't affect us. We can't get a home until 2012."
How your score is calculated may seem mysterious, but it's essential to know your number and how to make it work for you.
Q: What Is a Credit Score?
A: Your credit score represents your creditworthiness: how likely you will pay your bills Quick read more or view full article and pay them on time.
The Minneapolis-based Fair Isaac Corporation (better known as FICO) was the first to boil down your credit history, a detailed report on how you borrow and repay your debts, into a single three-digit number.
The FICO scale ranges from a low 300 to a high 850. The higher your score, the more likely you will qualify for the lowest interest rates. FICO gives its formula to the three credit bureaus -- Equifax, Experian, and TransUnion -- and they apply the math to your credit reports. Each pulls information from a slightly different network of lenders to compile its own report on you. (FICO earns a small royalty for each score the bureaus sell to lenders.) Because of this, you actually have three FICO scores, one from each of the bureaus, and they can vary by as many as 50 points.
You are entitled to one free credit report from each of the bureaus once a year. You can get the FICO scores based on your TransUnion and Equifax credit reports from myfico.com for $15.95 each. Experian no longer sells its FICO scores to individuals.
Q: How Is Your Score Calculated?
A: Your score reflects how well you've managed your debt. Black marks such as late payments remain on your record for seven years. (For some forms of bankruptcy, it's ten years.) There are factors that don't affect your score: employment status, income, debit card habits, savings, bounced checks, overdraft fees, utility bills, and late rent (if the issue hasn't gone to court).
Here's what the bureaus use to calculate your score.
Payment history (35 percent)
The lowdown: The bureaus factor in when you last paid an account late, how often you pay late, and by how many days.
The strategy: Set up automatic payments to guarantee you're never late. If you have a 760 FICO score, for example, you could probably qualify for a 4.9 percent mortgage. Drop 100 points (after one skipped or late credit card payment) and you'd be lucky to get 5.5 percent. Pay bills on time and you'll improve your score within months.
Total Debt (30 percent)
The lowdown: In general, higher debt loads work against you.
The strategy: Lenders look at your "usage ratio" -- how much debt you owe on your credit cards compared with the total amount you could borrow. To keep your ratio low, don't max out your cards, and don't cancel cards you don't use.
Say you owe $100 apiece on five credit cards, each of which would let you borrow up to $1,000. Your overall usage ratio -- debt ($500) divided by credit limit ($5,000) -- is 10 percent. Cancel all but one card and your debt is still $500, but your available credit drops to $1,000. Your usage ratio is now 50 percent, enough to lower your score. A lot.
The people with the best scores tend to use no more than 9 percent of their available credit. Go above 50 percent, and your score is headed for a nosedive, says Steve Bucci of MMI Financial Education Foundation, a credit-counseling firm.
Duration (15 percent)
The lowdown: The longer you've had an account, the better. A late payment on a two-year-old account will hurt your score more than if you'd had the card for two decades.
The strategy: Avoid opening new accounts unless necessary, and keep your oldest credit cards active (assuming you pay any new charges in full). "In this environment, if you don't use a card, you lose it," says Frank Remund of Seattle's Credit IQ, a fee-only financial advisory firm. "To demonstrate you're still using the card, sign up to have it automatically make one utility payment every month."
New credit (10 percent)
The lowdown: Multiple requests for credit mean you're a greater risk. FICO looks at the number of new accounts that you have opened as well as the number of requests, or inquiries (there are two kinds), for your credit score or report.
The strategy: "Hard" inquiries -- when you actually apply for new credit -- can ding your score. The best way to protect yourself is to squeeze your applications -- whether for a mortgage or a car or student loan -- into the same 45-day period so they'll count as a single inquiry.
Nowadays, banks and insurance companies routinely check account holders' credit reports. If your score has dropped, they might increase your interest rate, reduce your credit limit, or cancel your card. (Starting on February 22, 2010, credit card companies will no longer be able to raise your rate on old balances if you have a fixed-rate card.)
"Soft" inquiries don't count against you. For example: requests you make for your own credit report and those "preapproved" card offers that arrive, unsolicited, in the mail.
Types of Credit (10 percent)
The lowdown: FICO looks at the number and "quality" of each type of account. For instance, a credit card from a national bank carries more weight than one from a department store.
The strategy: Revolving accounts (credit cards) tend to count more than installment loans (mortgages, car loans, student loans) because they're better predictors of your debt management. If your mix of debt is considered "off balance," it can hurt you. For example, it's possible to have too many credit cards but not enough of other types of loans (four or five cards is probably okay, says Adam Jusko of indexcreditcards.com, depending on how long you've had them).
Q: Can You Improve Your Score?
A: If you've made mistakes, get back on track as soon as possible, says Careen Foster, director of scoring product management at FICO. "The longer you wait, the longer it takes to improve your scores." In today's brave new world of tighter credit standards, you need at least a 700 to qualify for a card you once could have gotten with a 600, says Adam Jusko.
Get the Real Free
Check all three of your credit reports at annualcreditreport.com, the only site authorized by federal law. Don't be fooled by wacky commercials and computer ads for other "free" sites. You get one free report per bureau per year; pull a different one every four months to catch problems sooner.
Check for Mistakes
Are there accounts you don't recognize, names that aren't yours, addresses where you've never lived, an incorrect birth date or Social Security number, inaccurate reporting of delinquencies? Has anyone stolen your identity? Have the bureaus combined your information with that of someone with a similar name?
Report Errors
Laura Curley, who runs a charitable foundation in Chicago, was shopping with her husband, Dan, for an equity line of credit when they discovered that a disgruntled customer service rep had reported Dan as deceased on their mortgage file, a "fact" picked up by all three credit bureaus. "As a result," says Laura, "my credit scores were in the 780s. My husband's were zero. Official inquiries got the situation remedied."
One study found that 79 percent of all credit reports had mistakes; one in four contained errors serious enough to have a significant negative impact on scores. Report errors to the appropriate credit bureau. It has 30 days to investigate and respond.
Don't Get Flipped
Say you owe $1,000 on a revolving account and have a limit of $5,000. The bank might mistakenly say you owe $5,000 and have exceeded your limit of $1,000 four times over. New York City consumer advocate Mathew Sheldon says his score had dropped to 620 before he realized one of the card companies was improperly reporting the numbers. He got it fixed, he says, and he's back up to 730. If this happens to you, write to the consumer reporting company and the creditor that provided the information, detailing the inaccuracy.
Time Your Inquiries
You don't actually have a "permanent" credit report. All you have is some numbers stored in a computer file that changes constantly as lenders send in updates. If a bank asks for your score the day before you pay your credit card bills, it will get a different number than it would a few days later.
If you're in a hurry to get a loan and your report doesn't show recent transactions (paying off a balance, for example), ask your mortgage broker to get a "rapid rescore." This will ensure that the lender sees you at your best, but it costs about $30 to $90 per account. If you can wait a month, your report will update automatically.
DIY Improvements
You don't need to pay "experts" to improve your score. You don't need to pay $15.95 a month for credit monitoring services. And you don't need to pay "dispute mills" to argue against every black mark on your credit report. "These companies don't tell you that a negative factor might disappear for a while because the lender didn't respond to a letter in 30 days," says Candy Marshall of Suite Solutions, in Los Alamitos, California, which sells credit reports to bankruptcy lawyers. "But if it really belongs on your report, it will just reappear in a month, when the lender reports to the credit bureau again."
Your best strategy: Improve your financial habits so your score goes up and stays up.
Better Score, Cheaper House
If a family put a 3.5% down payment on a $172,900 four-bedroom house in Greenville, South Carolina, they would take out a loan for $166,850. Here's what their true bottom line would look like.
Score Rate Payment Cost
760+ 4.981% $893.75 $326,900
700–759 5.203 $916.50 $335,090
680–699 5.380 $934.83 $341,689
660–679 5.594 $957.22 $349,749
640–659 6.024 $1,002.93 $366,205
620–639 6.570 $1,062.30 $387,578
Less than 620: It will be tough to get a loan at all.
Better Score, Cheaper Car
A buyer puts $3,000 down on a $25,605 2009 Honda Accord EX-L sedan and finances the rest over 60 months. Here's his true bottom line.
Score Rate Payment Cost
720+ 6.42% $441.45 $29,487
690–719 7.88 $457.05 $30,423
660–689 9.86 $478.73 $31,724
620–659 12.79 $511.91 $33,715
590–619 17.64 $569.60 $37,176
500–589 18.43 $579.32 $37,759
Less than 500: It will be tough to get a loan at all.
Beth Kobliner is the author of Get a Financial Life and a contributor to National Public Radio's The Takeaway. Reach her at bethkobliner.com.
From Reader's Digest - October 2009 Read Less
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A Much-Needed Road Map
February 3, 2010
The short-sales process, often agonizingly long, may not speed up overnight, but there’s reason to believe that better days are ahead. The federal government’s long-awaited guidelines for standardizing short sales were released at the end of 2009, and although they don’t take effect until April, mortgage servicers have the option of implementing them early.
The short sales guidelines are part of the government’s new Home Affordable Foreclosure Alternative Program, known as HAFA, which is an add-on to the Obama Administration’s more wide-reaching Home Affordable Modification Program launched in early 2009. The idea is that if borrowers are eligible for the modification program but are unable to work out a plan to stay in their home, they—and their lenders—have a well-mapped route for executing a short sale or a deed in lieu of foreclosure.
The new HAFA program applies to the large volume of so-called "risky" loans that were issued outside of Fannie Mae and Freddie Mac guidelines during the housing boom, such as zero-down loans, option ARMs, and Alt-A mortgages that didn’t require extensive income documentation (see sidebar, "Which Loans Are Eligible?"). As of this writing, Fannie and Freddie were developing their own, similar guidance for loans they’ve backed.
The Quick read more or view full article HAFA guidelines are voluntary, but major banks and servicers—including Bank of America, Chase, Wells Fargo, and Citimortgage—as well as dozens of smaller lenders, are expected to participate, clearing up the logjam of potential short sales on their books.
To participate, a mortgage servicer must have opted in to the government’s Home Affordable Modification Program by the close of last year. Through the end of November 2009, there were 78 such mortgage servicers, which together cover approximately 85 percent of eligible mortgage debt, according to the program’s servicer performance report.
How the Rules Will Help
Observers say the HAFA guidelines speak to many of the real estate industry’s ongoing frustrations over short sales. For starters, lenders will have a financial incentive to get these deals moving. Servicers get $1,000 to cover their costs, and subordinate lien holders get up to $3,000 through a matching arrangement in exchange for relinquishing their lien. In addition, borrowers receive $1,500 to defray their moving costs.
The guidelines also include standardized forms, procedures, and timelines—and allow the borrower to receive preapproved short sale terms prior to the property listing. These measures should address the resistance of serious buyers to invest time, money, and effort into a purchase offer without having any assurance that the lender will accept their offer or even look at it in a reasonable time frame (or, just as bad, accept a last-minute rival offer).
Also, the HAFA rules require that borrowers be fully released from future liability for the debt. That will be a relief to home owners in recourse states who would otherwise remain liable for debt collection. Slightly fewer than half of the states are recourse states.
Getting New Systems In Place
Bank of America in late 2009 rolled out an initiative to dovetail with the guidelines, and other lenders may follow with their own programs that anticipate the new rules. Through its "cooperative program," the bank’s mortgage servicers reach out to owners who are unable to modify their mortgage. "We developed our program in anticipation of the federal guidelines," says David Sunlin, Bank of America Home Loans senior vice president who oversees the company’s foreclosure and REO activities. Sunlin participated in a webinar hosted by REALTOR® Magazine in mid-December to talk about the bank’s new procedures.
Sunlin says the bank’s program gives troubled owners "a preapproved solicitation for a short sale" along with proactive processing of all the required steps: "appraisals, review of financials, investor approvals, mortgage insurer approvals, second-lien approvals—all of these can be done while the property is being marketed," he says, "so when an offer is brought to the table we can do a much quicker turnaround."
It will take months for lenders to modify their procedures in accordance with the guidelines (and, for agency loans, in accordance with the Fannie Mae and Freddie Mac guidelines), and even then, the new rules surely won’t be a cure-all. But there does seem to be a light at the end of the tunnel.
Sunlin says the fall-out rate for short sales at Bank of America has been as high as 70 percent. His hope is that with the new guidelines, that rate will drop to something similar to that for REO transactions, which have a 10 percent to 15 percent fall-out rate.
"Short sales have always been a reactive process," he says. "We need a proactive process, and the guidelines are a good start." REALTORS® no doubt would like to see that hold true.
Which Loans Are Eligible?
The Home Affordable Foreclosure Alternative Program provides short sales guidelines for loans not owned or guaranteed by Fannie Mae or Freddie Mac (those agencies are expected to release their own, similar guidance). The following conditions also must be met:
The property is the borrower’s principal residence.
The mortgage loan is a first lien mortgage originated on or before Jan. 1, 2009.
The mortgage is delinquent or default is reasonably foreseeable.
The current unpaid principal balance is equal to or less than $729,750.
The borrower’s total monthly mortgage payment exceeds 31 percent of the borrower’s gross income. Read Less
The short sales guidelines are part of the government’s new Home Affordable Foreclosure Alternative Program, known as HAFA, which is an add-on to the Obama Administration’s more wide-reaching Home Affordable Modification Program launched in early 2009. The idea is that if borrowers are eligible for the modification program but are unable to work out a plan to stay in their home, they—and their lenders—have a well-mapped route for executing a short sale or a deed in lieu of foreclosure.
The new HAFA program applies to the large volume of so-called "risky" loans that were issued outside of Fannie Mae and Freddie Mac guidelines during the housing boom, such as zero-down loans, option ARMs, and Alt-A mortgages that didn’t require extensive income documentation (see sidebar, "Which Loans Are Eligible?"). As of this writing, Fannie and Freddie were developing their own, similar guidance for loans they’ve backed.
The Quick read more or view full article HAFA guidelines are voluntary, but major banks and servicers—including Bank of America, Chase, Wells Fargo, and Citimortgage—as well as dozens of smaller lenders, are expected to participate, clearing up the logjam of potential short sales on their books.
To participate, a mortgage servicer must have opted in to the government’s Home Affordable Modification Program by the close of last year. Through the end of November 2009, there were 78 such mortgage servicers, which together cover approximately 85 percent of eligible mortgage debt, according to the program’s servicer performance report.
How the Rules Will Help
Observers say the HAFA guidelines speak to many of the real estate industry’s ongoing frustrations over short sales. For starters, lenders will have a financial incentive to get these deals moving. Servicers get $1,000 to cover their costs, and subordinate lien holders get up to $3,000 through a matching arrangement in exchange for relinquishing their lien. In addition, borrowers receive $1,500 to defray their moving costs.
The guidelines also include standardized forms, procedures, and timelines—and allow the borrower to receive preapproved short sale terms prior to the property listing. These measures should address the resistance of serious buyers to invest time, money, and effort into a purchase offer without having any assurance that the lender will accept their offer or even look at it in a reasonable time frame (or, just as bad, accept a last-minute rival offer).
Also, the HAFA rules require that borrowers be fully released from future liability for the debt. That will be a relief to home owners in recourse states who would otherwise remain liable for debt collection. Slightly fewer than half of the states are recourse states.
Getting New Systems In Place
Bank of America in late 2009 rolled out an initiative to dovetail with the guidelines, and other lenders may follow with their own programs that anticipate the new rules. Through its "cooperative program," the bank’s mortgage servicers reach out to owners who are unable to modify their mortgage. "We developed our program in anticipation of the federal guidelines," says David Sunlin, Bank of America Home Loans senior vice president who oversees the company’s foreclosure and REO activities. Sunlin participated in a webinar hosted by REALTOR® Magazine in mid-December to talk about the bank’s new procedures.
Sunlin says the bank’s program gives troubled owners "a preapproved solicitation for a short sale" along with proactive processing of all the required steps: "appraisals, review of financials, investor approvals, mortgage insurer approvals, second-lien approvals—all of these can be done while the property is being marketed," he says, "so when an offer is brought to the table we can do a much quicker turnaround."
It will take months for lenders to modify their procedures in accordance with the guidelines (and, for agency loans, in accordance with the Fannie Mae and Freddie Mac guidelines), and even then, the new rules surely won’t be a cure-all. But there does seem to be a light at the end of the tunnel.
Sunlin says the fall-out rate for short sales at Bank of America has been as high as 70 percent. His hope is that with the new guidelines, that rate will drop to something similar to that for REO transactions, which have a 10 percent to 15 percent fall-out rate.
"Short sales have always been a reactive process," he says. "We need a proactive process, and the guidelines are a good start." REALTORS® no doubt would like to see that hold true.
Which Loans Are Eligible?
The Home Affordable Foreclosure Alternative Program provides short sales guidelines for loans not owned or guaranteed by Fannie Mae or Freddie Mac (those agencies are expected to release their own, similar guidance). The following conditions also must be met:
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Skiers Buy Vacation Homes as Prices Fall
February 3, 2010
OVER the holiday season all was snowy and bright at ski areas across the country, with a festive jingle in the air. It wasn’t sleigh bells — it was the sound of money. Vacation-home seekers who saw recessionary opportunities were looking to buy.
Many were ready to pay in cash, and they wanted great deals, like a $900,000 slope-side condominium for $500,000 or a studio in town for half the asking price. They were getting what they wanted because it is the best buyers’ market in 20 years, real estate agents said, with inventory at levels not seen since 2001.
John Eldridge, 59, a lawyer, and his wife, Amelia, 58, of Fayetteville, Ark., have a lot of affection for Snowmass, Colo. They learned to ski there with their families in the 1970s. They were married there and bought a small condo so they could visit often. Two children and several grandchildren later, they are looking to move up to a three-bedroom condo. After looking at more than 10 units during their annual holiday visit to Snowmass in December, they decided to wait until January to make an offer of $700,000 on a three-bedroom ski-in, ski-out condo that was listed at more Quick read more or view full article than $1 million just last year.
"We’re seeing a number of price reductions as sellers get more realistic," said Ms. Eldridge, who has been a real estate agent for 30 years and is well acquainted with the vagaries of the market. “Time has caused some sellers to accept offers that they may have rejected before."
As an example of those low prices Andrew Ernemann, a broker at B. J. Adams & Company, which has offices in Aspen and Snowmass, said there was a studio just a few blocks from the Aspen gondola listed at $275,000. Just a few years ago the asking price would have been upward of $350,000.
If prices are flat or still falling, the number of sales seems to be increasing, real estate offices across the West said. Patti Brave, a broker in the Cordillera office of Slifer, Smith & Frampton in the Vail Valley in Colorado, said that the first seven months of 2009 were dismal, but that the rising stock market had helped drive up sales, though prices at Vail and Beaver Creek are still off by 10 percent or more in the last three years.
Telluride, the historic Colorado mining town tucked in the end of a valley in the remote San Juan Mountains, remains a bright spot for sellers, agents there say. Steve Finger, owner of Finbro Construction and Development, is building Element 52, a 200,000-square-foot, 32-unit luxury condo project overlooking town. The development, which is more than 60 percent sold, is named for telluridium, a form of gold ore mined here in the 19th century.
Even with mortgage rates holding at around 4 percent for qualified buyers, cash deals are king right now, brokers say.
In Jackson, Wyo., “buyers are paying cash and determining the market,” said Greg Prugh, a broker, who said prices have fallen by as much as 50 percent since 2007. He recently sold a two-bedroom condo in Teton Village listed at $700,000 for $360,000 in cash. “Modern-day Jackson was built on construction, financing and real estate,” he said. “With financing tight, those jobs are gone, and the middle-class people who bought condos on spec are forced to sell.”
The huge price cuts seem to be bringing in more traffic, brokers say. “Phones are ringing and people are walking into our offices again,” said Martha Johnson, president of Rivers to Peaks Big Sky Real Estate in Big Sky, Mont. A recent client, William Martin, 53, and his wife, Susan, 51, from Locust Grove, Ga., paid $275,000 for a condo listed at $600,000 in the Big Sky Town Center, because “we’ve been coming here for 17 years to ski,” he said. “It is not crowded, not pretentious and the price was right.”
For the first time since a major downturn in 2007, Tom Peek, a partner at the Park City office of Prudential Utah Real Estate, is seeing “a lot of pent-up demand” for real estate in Park City-Deer Valley.
“Normally we don’t see a lot of activity until Christmas time,” Mr. Peek said, “but our market started picking up around Thanksgiving, before the slopes were even open.”
A two-bedroom condo on the ice rink in Park City could go for $600,000 (less for cash), he said; a few years ago it would have cost more than $1 million. In New Park and Redstone, developments within five miles of the ski areas, a two-bedroom new-construction condo would cost under $300,000.
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Kevin Moloney for The New York Times
Snowmass is one of the resort areas with a large inventory of homes for sale.
Shari Chase, president and chief executive of Chase International real estate in Nevada, said low mortgage rates (around 4 percent for buyers with good credit scores) and a federal tax credit of $6,500 for eligible repeat home buyers have helped to revive the condo market in South Lake Tahoe and Incline Village. “People are looking for long-term investments,” she said, “and that’s putting something that’s very solid and much needed into the foundation of the housing industry.”
“There are great values in all the areas that were overbuilt during the real estate boom years,” she added. “What was a million is now $600,000, and a $600,000 condo will sell for $325,000.”
Pamela Goetz, associate broker at Sotheby’s International Realty Sun Valley, said: “We all got into a fantasy world there for a while but are going back to the old rules of real estate: Make a wise purchase and anticipate holding it for a while.”
Ski areas in the Northeast have not been hit as hard those in the West, but condo prices, already lower than those in the West, are now the lowest in decades, brokers say. Stowe, Vt., has seen a “noticeable uptick” in activity in the last few months, particularly at the high end, said Brent Libby, managing broker in the Stowe office of Sotheby’s Vermont Country Properties.
“Owners of some luxury properties are highly motivated to sell and have made it known,” he said. He recently sold a condo listed at $1.175 million for less than $900,000 (cash) and expects the bargain prices to hold up through the spring but probably not beyond.
Many of his clients come from the financial world. “The stock market is up, and everyone is feeling optimistic,” he added.
Sunday River and Mount Abrams in Maine are known for uncrowded slopes, short lift lines and great snow even in bad years; more than 95 percent of the terrain has snow-making equipment. Ed Kennett of Kennett Realty in Bethel, Me., is listing condos that start at $70,000 for a studio and just under $200,000 for two-bedroom units. He anticipates that the market will hit bottom by June 2010, then prices will start to rise. “Sellers assume the bottom is hit before buyers want it to be,” he said.
Deb Howard, a second-home expert at the National Association of Realtors, said that though the 2009 market was the lowest it had been in a decade she expected some good news this year. Agents said traffic was particularly high during the holidays.
“Typical clients come to vacation in an area many times as a renters,” Ms. Howard said. “When they feel comfortable and are ready to buy, it can take months or even years to find the perfect second home.”
“Of course,” she added, “there are the clients who come once, fall in love and want to buy before they step on a plane to go back home.” Read Less
Many were ready to pay in cash, and they wanted great deals, like a $900,000 slope-side condominium for $500,000 or a studio in town for half the asking price. They were getting what they wanted because it is the best buyers’ market in 20 years, real estate agents said, with inventory at levels not seen since 2001.
John Eldridge, 59, a lawyer, and his wife, Amelia, 58, of Fayetteville, Ark., have a lot of affection for Snowmass, Colo. They learned to ski there with their families in the 1970s. They were married there and bought a small condo so they could visit often. Two children and several grandchildren later, they are looking to move up to a three-bedroom condo. After looking at more than 10 units during their annual holiday visit to Snowmass in December, they decided to wait until January to make an offer of $700,000 on a three-bedroom ski-in, ski-out condo that was listed at more Quick read more or view full article than $1 million just last year.
"We’re seeing a number of price reductions as sellers get more realistic," said Ms. Eldridge, who has been a real estate agent for 30 years and is well acquainted with the vagaries of the market. “Time has caused some sellers to accept offers that they may have rejected before."
As an example of those low prices Andrew Ernemann, a broker at B. J. Adams & Company, which has offices in Aspen and Snowmass, said there was a studio just a few blocks from the Aspen gondola listed at $275,000. Just a few years ago the asking price would have been upward of $350,000.
If prices are flat or still falling, the number of sales seems to be increasing, real estate offices across the West said. Patti Brave, a broker in the Cordillera office of Slifer, Smith & Frampton in the Vail Valley in Colorado, said that the first seven months of 2009 were dismal, but that the rising stock market had helped drive up sales, though prices at Vail and Beaver Creek are still off by 10 percent or more in the last three years.
Telluride, the historic Colorado mining town tucked in the end of a valley in the remote San Juan Mountains, remains a bright spot for sellers, agents there say. Steve Finger, owner of Finbro Construction and Development, is building Element 52, a 200,000-square-foot, 32-unit luxury condo project overlooking town. The development, which is more than 60 percent sold, is named for telluridium, a form of gold ore mined here in the 19th century.
Even with mortgage rates holding at around 4 percent for qualified buyers, cash deals are king right now, brokers say.
In Jackson, Wyo., “buyers are paying cash and determining the market,” said Greg Prugh, a broker, who said prices have fallen by as much as 50 percent since 2007. He recently sold a two-bedroom condo in Teton Village listed at $700,000 for $360,000 in cash. “Modern-day Jackson was built on construction, financing and real estate,” he said. “With financing tight, those jobs are gone, and the middle-class people who bought condos on spec are forced to sell.”
The huge price cuts seem to be bringing in more traffic, brokers say. “Phones are ringing and people are walking into our offices again,” said Martha Johnson, president of Rivers to Peaks Big Sky Real Estate in Big Sky, Mont. A recent client, William Martin, 53, and his wife, Susan, 51, from Locust Grove, Ga., paid $275,000 for a condo listed at $600,000 in the Big Sky Town Center, because “we’ve been coming here for 17 years to ski,” he said. “It is not crowded, not pretentious and the price was right.”
For the first time since a major downturn in 2007, Tom Peek, a partner at the Park City office of Prudential Utah Real Estate, is seeing “a lot of pent-up demand” for real estate in Park City-Deer Valley.
“Normally we don’t see a lot of activity until Christmas time,” Mr. Peek said, “but our market started picking up around Thanksgiving, before the slopes were even open.”
A two-bedroom condo on the ice rink in Park City could go for $600,000 (less for cash), he said; a few years ago it would have cost more than $1 million. In New Park and Redstone, developments within five miles of the ski areas, a two-bedroom new-construction condo would cost under $300,000.
Skip to next paragraph
Enlarge This Image
Kevin Moloney for The New York Times
Snowmass is one of the resort areas with a large inventory of homes for sale.
Shari Chase, president and chief executive of Chase International real estate in Nevada, said low mortgage rates (around 4 percent for buyers with good credit scores) and a federal tax credit of $6,500 for eligible repeat home buyers have helped to revive the condo market in South Lake Tahoe and Incline Village. “People are looking for long-term investments,” she said, “and that’s putting something that’s very solid and much needed into the foundation of the housing industry.”
“There are great values in all the areas that were overbuilt during the real estate boom years,” she added. “What was a million is now $600,000, and a $600,000 condo will sell for $325,000.”
Pamela Goetz, associate broker at Sotheby’s International Realty Sun Valley, said: “We all got into a fantasy world there for a while but are going back to the old rules of real estate: Make a wise purchase and anticipate holding it for a while.”
Ski areas in the Northeast have not been hit as hard those in the West, but condo prices, already lower than those in the West, are now the lowest in decades, brokers say. Stowe, Vt., has seen a “noticeable uptick” in activity in the last few months, particularly at the high end, said Brent Libby, managing broker in the Stowe office of Sotheby’s Vermont Country Properties.
“Owners of some luxury properties are highly motivated to sell and have made it known,” he said. He recently sold a condo listed at $1.175 million for less than $900,000 (cash) and expects the bargain prices to hold up through the spring but probably not beyond.
Many of his clients come from the financial world. “The stock market is up, and everyone is feeling optimistic,” he added.
Sunday River and Mount Abrams in Maine are known for uncrowded slopes, short lift lines and great snow even in bad years; more than 95 percent of the terrain has snow-making equipment. Ed Kennett of Kennett Realty in Bethel, Me., is listing condos that start at $70,000 for a studio and just under $200,000 for two-bedroom units. He anticipates that the market will hit bottom by June 2010, then prices will start to rise. “Sellers assume the bottom is hit before buyers want it to be,” he said.
Deb Howard, a second-home expert at the National Association of Realtors, said that though the 2009 market was the lowest it had been in a decade she expected some good news this year. Agents said traffic was particularly high during the holidays.
“Typical clients come to vacation in an area many times as a renters,” Ms. Howard said. “When they feel comfortable and are ready to buy, it can take months or even years to find the perfect second home.”
“Of course,” she added, “there are the clients who come once, fall in love and want to buy before they step on a plane to go back home.” Read Less
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Basalt Brokers list "Estate in a Crate"
July 9, 2009
BASALT — Two Basalt real estate agents feel they have a property listing that is odd enough to get noticed in this stagnant, recession-ravaged market.
Ted Borchelt and Jana Dillard are trying to sell “the estate in a crate” — a 38,500-square-foot English manor. The estate in Malmesbury, Wiltshire, U.K., was doomed for destruction because of a development project. Two American architectural antique dealers rescued the estate, then put it in a few thousand crates.
The wood, stone and other materials of the 236-year-old manor were carefully dismantled, numbered, catalogued, then stored. It's available for purchase and assembly, like a giant Lego project. The listing price is $5 million, which includes shipping costs to Oklahoma City, where one of the sellers lives, Borchelt said. The actual shipping cost could be more or less, depending on the location in the U.S.
A buyer would need a large vacant lot and a hefty budget for reconstruction. “Basically, you'll be buying the skin and erecting the skeleton,” Borchelt said.
The manor, known as Cowbridge House Estate, is also available in bits and pieces although the sellers prefer to keep it intact. Borchelt and Dillard, both of Chaffin Light Real Estate, got the listing because of Borchelt's connections Quick read more or view full article with a family member of one of the owners when he worked at the Roaring Fork Club. The owners, Jack Smith Schick and Michael O'Gara, don't have a deadline for closing a deal.
“They realize these things just don't fly off the shelves,” Borchelt said.
But they figure if anyone is interested in this troubled economy, it could well be a resident or visitor to Aspen. “You never know who might be interested,” said Dillard.
The saga of the London Bridge suggests a sale isn't out of the question. The city of London sold the structurally-challenged bridge to a businessman who reassembled it at Lake Havasu City to attract tourists. He ultimately wanted to lure buyers for retirement homes. The scheme worked.
Even if Cowbridge doesn't sell right away, it provides a great conversation piece for the two real estate agents. Instead of lamenting about the slow market at gatherings, they can talk about their unusual listing. “It's so out-of-the-box and fun to talk about,” Dillard said.
The architectural splendors of the “estate in a crate” include 46 carved stone windows, a hand-carved English oak staircase and 28,000 slate roof tiles.
scondon@aspentimes.com Read Less
Ted Borchelt and Jana Dillard are trying to sell “the estate in a crate” — a 38,500-square-foot English manor. The estate in Malmesbury, Wiltshire, U.K., was doomed for destruction because of a development project. Two American architectural antique dealers rescued the estate, then put it in a few thousand crates.
The wood, stone and other materials of the 236-year-old manor were carefully dismantled, numbered, catalogued, then stored. It's available for purchase and assembly, like a giant Lego project. The listing price is $5 million, which includes shipping costs to Oklahoma City, where one of the sellers lives, Borchelt said. The actual shipping cost could be more or less, depending on the location in the U.S.
A buyer would need a large vacant lot and a hefty budget for reconstruction. “Basically, you'll be buying the skin and erecting the skeleton,” Borchelt said.
The manor, known as Cowbridge House Estate, is also available in bits and pieces although the sellers prefer to keep it intact. Borchelt and Dillard, both of Chaffin Light Real Estate, got the listing because of Borchelt's connections Quick read more or view full article with a family member of one of the owners when he worked at the Roaring Fork Club. The owners, Jack Smith Schick and Michael O'Gara, don't have a deadline for closing a deal.
“They realize these things just don't fly off the shelves,” Borchelt said.
But they figure if anyone is interested in this troubled economy, it could well be a resident or visitor to Aspen. “You never know who might be interested,” said Dillard.
The saga of the London Bridge suggests a sale isn't out of the question. The city of London sold the structurally-challenged bridge to a businessman who reassembled it at Lake Havasu City to attract tourists. He ultimately wanted to lure buyers for retirement homes. The scheme worked.
Even if Cowbridge doesn't sell right away, it provides a great conversation piece for the two real estate agents. Instead of lamenting about the slow market at gatherings, they can talk about their unusual listing. “It's so out-of-the-box and fun to talk about,” Dillard said.
The architectural splendors of the “estate in a crate” include 46 carved stone windows, a hand-carved English oak staircase and 28,000 slate roof tiles.
scondon@aspentimes.com Read Less
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