This Ain’t Scary: Tax Credit Extension AND Expansion!!!

HAPPY HALLOWEEN!!!!

The Section 8 Dilemma for Landlords!

If you check in on occasion with my web logs and rants, you may have followed the articles written in August of this last summer about a North Portland Oregon duplex purchase and renovation started in August and completed in September.  Go to http://fabulousportland.com/2009/08/10/soi-took-my-own-adviceit-is-a-good-time-to-buy/ or scroll down on the right hand side of the page to the “Archives”>August to read all of the entries.  Anyway, by mid-September we were ready to rent!  I posted online and put out signage and flyers in front of the North Vancouver address, knowing that the popularity of the North Mississippi neighborhood and North Williams corridor would entice potential renters!!  Almost immediately the phone began to ring.  Many of the callers inquired as to whether we would accept “Section 8″ renters.  Section 8 is a division of the Housing Authority of Portland or HAP.  Their mission is dedicated to providing safe, decent and affordable housing for individuals and families who are challenged by income, disability or special needs.  I didn’t know much about Section 8, but was certainly not adverse to learning more.  I met with two young single mothers and was much impressed with their vitality, ambition and personality.  They explained the program and indicated their excitement that I was definitely willing to work with them and HAP!  We started the vetting process only to hit roadblock after roadblock.  Everyone at HAP was very helpful, but their hands are tied by what I perceive to be an antiquated system of establishing rents.  Our duplexes were 3 bedrooms, 1.5 baths and 1200 SF and I had established the going rate for the area to be a certain price point.  In an attempt to be competitive, I go online and compare other properties offered for rent and try to price my rentals a bit below other comparable properties.  So, I really felt I was asking market rent, considering the updated condition and location, or even a bit below market!  HAP’s system includes a process of assigning “points” for certain amenities such as garbage disposal, air conditioning, dishwasher and more but absolutely NO consideration for condition.  This encourages a lack of respect for living conditions and pride in one’s home.  These two young single mothers wanted to provide not just little extras (as a matter of fact neither even cared we didn’t have a garbage disposal) but wanted a pretty and safe and enjoyable home for their families to live.  They loved that the units had been lovingly restored and updated.  I was sorely disappointed, as I too, had raised two children as a single mother and knew what struggles these two vivacious women faced.  I wanted to help but HAP could simply not see fit to pay market rent.  There was an article in the Oregonian regarding HAP attempting to educate landlords about being open to Section 8 tenants.  I believe they must first readjust and update their thinking about how to value rents! By the way, I did quickly re-rent both units for my asking price!!

What’s the Deal About Reverse Mortgages???

What is a reverse mortgage?  Simply a way for those 62 years of age and older, to tap into existing equity in a home to purchase a primary residence!  Reverse mortgages got a “bad rap” in the ’60s, as the original incarnation involved the bank actually taking title to your home.  In the ’80s, FHA (Federal Housing Administration) got involved and started revising this mortgage instrument.  A reverse mortgage or HECM (Home Equity Conversion Mortgage) is an FHA-insured reverse mortgage which enables home buyers, 62 years or older, to purchase a primary residence and obtain a reverse mortgage in simultaneous transaction with no monthly mortgage payments.  It also allow these buyers to combine reverse mortgage proceeds with a down payment from their current home sale or other assets, to purchase a new home. 

• There is no income, health or credit score qualification
• There are “purchase and “refinance” options
• Must be a primary residence
• Down-payment is based on age, interest rate and home value
• Interest is added to the balance and the borrower gets the principal payment

So, a reverse mortgage is really just a negative amortization loan.  The maximum loan amount, at least through 2009, is $625,500.  But, the buyer can pay the difference is they purchase a more expensive property.  There is a 2% origination fee on the first $200k and 1% on anything above that. 

Eligible properties include:

• HUD approved condos
• Single family
• Owner-occupied, 1-4 units
• Manufactured homes built after 06/15/1976

Not Eligible:

• Bed & Breakfast
• Co-ops
• 2nd home
• Manufactured homes built before 06/15/1976

This is just another tool available to buy and sell homes in the Portland Oregon real estate market.  If you need more info for yourself or a family member, do call or write and I’ll refer you to some loan officers familiar with the process!

And, We Wonder Why We Have a Banking Crisis???

After this posting, I might have to rename my site from “Portland Real Estate Update” to “Portland Real Estate Rant”!  But, my recent short sale experience should make us all “mad as hell and we’re not going to take it any more”!!!  So, here’s my current short-sale story.  Due to the unfortunate circumstances of a job loss, my client had to sell her home.  After researching the market, we realized that we would be forced to negotiate with the 1st and 2nd lenders to accept less than was owed on the home.  In other words, we would “sell short”.  We began the long and arduous process of collecting the stacks of information needed by the lenders to review in order for them to agree to sell short.  We also began the marketing process to find that sweet spot in the pricing continuum and the buyer willing and able to purchase.  On a good day, it takes a VERY patient buyer to want to play that “waiting game” (with no definitive closing date and no assurance of the eventual acceptance of their offer).  Plus, the buyer makes an offer and during the wait there is the opportunity for other competing offers to be submitted and to be outbid!  So, the buyer attrition rate is HUGE!  Buyers continue to look for houses while waiting for an answer, ANY ANSWER, from the lenders and will often eventually just tire of the suspense and withdraw.  Well, in my current short sale case, the buyers patiently waiting and really wanted the house.  The 1st lender agreed to the short sale and offered the Freddie Mac “standard for the industry” (which is 10% of the amount owed) to the 2nd lender (who actually has no power in the transaction other than the ability to say no).  US Bank holds the 2nd mortgage in the amount of $25,000, thus the 1st lender was offering them $2,500.  US Bank said “they would disapprove the sale unless they received $5000″.  Provident Bank, the first lender, said “their hands were tied as Freddie Mac (the secondary market banks) only allow 10%”.  The Real Estate companies involved were willing to contribute via their commissions, even the buyers were willing to come to closing with the extra $2,500 and neither bank would budge.  I can almost forgive Provident as Freddie Mac does control the buying of packaged loans on the secondary market, but US Bank IS the problem!!  Not to mention my associate (who helps me with the short-sale process) last phone conversation involved the US Bank loss mitigation rep saying that the only answer was for someone to mail them $2,500.  If money is exchanged in a real estate transaction, isn’t it “mortgage fraud” if it’s done outside of escrow and not acknowledged on the final HUD-1 statement?  This stubborn nonsense will force Provident to go through a costly foreclosure process and US Bank will get nothing!!  But, they don’t care.  My seller will now have a foreclosure on her record, the buyers don’t get the home they wanted and several real estate agents worked for months for nothing.  What kind of “kinder, gentler, wiser, more diligent” banking system is this????