For most of us, weatherization is something we only think about as winter approaches and we head off to our local hardware store to buy caulk, weather-stripping and plastic for our windows. But this Earth Day, there are more reasons than ever to consider weatherizing your home this spring.
With funding for energy efficient improvements a key component to the President’s stimulus plan and a growing pot of funding from local utilities to incent homeowners to reduce energy usage, now couldn’t be a better time to save money on your utility bills and to reduce your carbon footprint.
The Department of Energy is set to soon award billions of dollars to state government agencies and local jurisdictions for energy projects – in my home state, Illinois, the State will receive over $100 million and the City of Chicago will receive tens of millions more. Moreover, our local utilities, ComEd and Peoples Gas, will spend more than $100 million collectively on energy conservation programs, including a significant boost in spend for homeowners’ efforts. In addition, Federal Energy Tax Credits are available for many types of energy saving upgrades.
The combined benefits can be huge. For example, in Chicago, if a homeowner decided to insulate their attic and seal around their window, doors, and vents, and switch to a high efficiency furnace, the combined costs likely would amount to $5,000 for a typical homeowner. The owner, however, would be eligible for $1,100 in rebates from the local gas utility and another $1,000 in federal tax credits. So, the net cost would be only $2,900 (even before receiving other rebates, likely from the stimulus funding); but the potential savings would be upwards of $400-500 annually on their utility bills.
If the homeowner was a participant in our Homeowners Energy Conservation Loan Program, we’d throw-in another $500 voucher towards a new ENERGY STAR rated refrigerator. In total, the rebates, tax credits and voucher would equal 50% or half of the cost of all the measures – while the homeowner gets to keep all of the savings and take satisfaction from knowing the environment is better-off and neighbors have been employed for a worthy cause.
With more than a million foreclosed and distressed properties expected to hit the market, buying a foreclosed home can be a good investment opportunity for the first-time home buyer and investors. While ShoreBank would rather make a Rescue Loan to help save a home, buying a foreclosed property helps stabilize home prices, strengthens a neighborhood and, at the same time, realizes the dream of homeownership for many.
However, potential buyers should not gamble when buying a foreclosed property. This is not a process for the faint of heart, but if one does their due diligence and goes about it in a responsible way, buying a foreclosed home can be a very good investment opportunity. To help home buyers purchase a foreclosed property and ensure sustainable ownership, I am sharing with you my 10 Steps for Buying a Foreclosed Home.
1. Search for foreclosure listings. Track foreclosures in your area to stay on top of the market so you are able to move quickly when they become available. Use an electronic tracking service like RealtyStore or look for listings in real estate magazines, newsletters, newspapers, and government agencies such as Fannie Mae.com; check public records at the county clerk’s office. 2. Find a real estate agent experienced in foreclosures. Some sellers will not accept offers from unrepresented buyers. 3. Find a real estate attorney. Proceedings and laws can be complex and difficult to understand. Do some homework on foreclosures laws and procedures. Start by using Google or another search engine to research foreclosure laws in your state as well as to contact an attorney. 4. Choose a foreclosed home to invest in. Some factors to consider include how to purchase a home while minimizing risk and determining the safest home to go after However, bank-owned properties carry the least risk for investors seeking foreclosed homes. When the bank takes ownership of the foreclosed property, you know there are not any taxes or liens to contend with and that the home is empty of homeowners. 5. Tour the property. And inspect it as closely as possible. It’s best to bring along a professional inspector to determine the property’s condition. Some foreclosures–unlike fixer-uppers–are in fairly good shape, while others may be way behind in maintenance from sitting empty for an extended period of time that could be quite costly to remedy. 6. Line up financing. To qualify for buying a foreclosed home you will need a good payment history with current creditors. If you need to improve your credit, sign up with an experienced credit counseling agency to help budget and to negotiate on your behalf while settling delinquent accounts. Smaller banks are usually more open to working with buyers who have tarnished credit histories. Check your credit report and correct any existing defaults or outdated information. Get pre-approved for a mortgage–speak with three potential lending institutions to obtain a responsible loan. Most sellers of foreclosed properties require a cash offer or pre-approved letter in order to make an offer. 7. MLS Search/Comps. Have your real estate agent check nearby or comparable homes to see if the asking price for a foreclosed home is, in fact, a bargain. 8. Do your homework. Check to see if a foreclosed home has any liens on it, such as unpaid property taxes. Find out who is liable for those costs. 9. Make an Offer. This step involves having your real estate agent or attorney prepare a contract offer to purchase the property with bank financing, bid at a foreclosure auction, or submit a sealed bid to the owner after the foreclosure sale. The key is to decide what the offer or bid price ought to be. You don’t want to pay more than the assessed value, based on the condition and location of the property. The goal in buying a foreclosed property is to buy at a low cost so that you can quickly begin building equity. Foreclosed homes are often sold at discounts of 30 percent or more. 10. Prepare paperwork. Be prepared to deal with more paperwork with a foreclosure than you would with a conventional purchase, particularly when a government agency is involved.
Additional valuable information:
• Find out how foreclosure works in your state. Procedures and legal requirements differ, so get a sense of how soon you can go after a home that appeals to you.
• Be particularly aggressive in negotiating with a bank. Banks are very interested in selling a foreclosed home fast when it’s just sitting on their books doing nothing.
• HUD and other agencies often auction foreclosed homes. However, buyers are frequently unable to inspect any property before making an offer. With so little information, the higher the bid for the property, the higher the risk that you may end up with a money pit.
And finally, it’s important to remember to look for an experienced agent, suitable properties, and outstanding lien issues and be prepared to review a mountain of paperwork.
As President Obama made clear in his speech in Phoenix, the on-going foreclosure crisis is having huge ramifications for the entire economy. Not only are responsible homeowners at risk of foreclosure being hurt, but the situation is negatively impacting their neighbors—who may not even have a mortgage or own a home, local businesses and the communities in which we all live and work. A landmark Chicago study cited by President Obama in his speech found that for each foreclosed home on a one quarter-mile radius block, the home values of adjacent properties can decline by up to 9 percent. The crisis means that cities and towns are losing tax revenues, which means everyone who depends on their services is hurt. This crisis is no longer—if indeed it ever was—limited to “a bunch of irresponsible people who bought or sold more home than they could afford.”
The President’s Home Affordability and Stability Plan substantially enhances Fannie Mae’s and Freddie Mac’s ability to help homeowners whose loans they own or guarantee, and establishes a system under which all lenders and servicers—including those, like ShoreBank, who hold loans on their books—will be incented to work with homeowners to provide affordable modifications for loans on the house they live in. ShoreBank already has a loan modification program in place, so if you are a homeowner with a ShoreBank loan that you are having trouble paying, please get in touch with us as quickly as possible. One of the valuable lessons we have learned since we started our Rescue Loan Program in 2007 is that too many homeowners, for whatever reason, wait until it is too late to take actions that could save their home from foreclosure. And while we view bankruptcy as a last resort, we agree with President Obama that the Bankruptcy Code needs to be modified to allow judicial modification of loans on a primary residence.
Going beyond what President Obama has announced, I hope the additional $200 billion the Treasury will make available to Fannie and Freddie will encourage them to buy more of the loans on the books of ShoreBank and other lenders. That will enable us to make loans to new homeowners—the new loans that are so critical to stabilizing the housing markets.
The speed and efficacy with which the President’s entire program will be implemented depends on the capacity and willingness of servicers and lenders, as well as borrowers, to make use of these new tools and to work together. And that, in turn, depends on both stopping the hemorrhaging of jobs and stabilizing the banking system. We’re pleased this Administration is working hard on all these fronts.
For additional information on how the plan may help you, click here. Or listen to this.
If you are considering buying a house, one of the first decisions you need to make is whether buying a house instead of renting one is right for you. Many people think that buying a home is one of the smartest financial decisions they will ever make. According to the Federal Reserve’s Survey of Consumer Finances, there is a significant gap between the wealth accumulated by homeowners and that accumulated by renters. But in this topsy-turvy marketplace, does this piece of conventional wisdom still hold true? Let’s take a look at some of the issues you should consider when making this decision.
There are distinct advantages to buying if the following are true:
1. You plan to stay put at least three years and preferably more. It can take three to six years for a home to appreciate enough to offset the costs of selling and moving. If you know your job or other circumstances will force you to relocate in less time, it’s probably better to rent.
2. You’re psychologically prepared. Home ownership means dealing with whatever comes up — from noisy neighbors to leaky plumbing. You can’t just call the landlord for help or pack up and move as easily as when you were renting.
3. You have some extra savings. Home buyers who spend every dime they have buying a house can be blindsided by repairs, maintenance and all the other costs of owning a home. It’s important to have some savings after your purchase to be able to meet these expenses. 4. You manage your money well. Home ownership builds wealth through the forced savings of paying down a mortgage, and through appreciation — the rise in the home’s value over time. That forced savings aspect only works if you leave the equity in your home alone, and only tap it for important things or emergencies. Otherwise, it’s too easy to drain away your wealth with home equity loans and lines of credit.
If you answered yes to all four questions, then homeownership could be right for you. Despite the downturn in the real estate market, homeownership is still the way most people start building their personal wealth. In addition to providing shelter, homeownership also gives families a sense of security and is the foundation for vibrant, stable neighborhoods. First-time homebuyers have a particular advantage right now with home prices at their most affordable level in years. In my next blog, I’ll write about the issues all first-time homebuyers should know before they buy a home.
The scale of the foreclosure crisis threatens the dreams of many homeowners in ShoreBank’s communities. In my last blog, I wrote about what makes a mortgage a bad fit for consumers. The reasons vary, but if someone you know has the wrong mortgage for their circumstances, remember that there are solutions. One is a Rescue Loan.
The most important thing to remember if you’re having difficulty making your monthly payments is to take action right away. It’s easier to recover if you haven’t missed more than one or two monthly payments. As the foreclosure process moves along, the size of the delinquent debt owed, and the bank legal costs that customers are usually charged, mount.
Curing a foreclosure is a little like curing cancer — the sooner you catch it, the better your chance of survival. Acting sooner rather than later, keeps more options open for you, minimizes costs and protects your credit. The first step is to contact your lender as soon as you think you cannot make a payment. Look for the lender’s toll free number on your monthly statement. Do not ignore telephone calls or written notices from your lender. Borrowers who try to ignore their financial problems — and their lenders’ phone calls — will likely lose their homes.
ShoreBank’s Rescue Loan Program offers fixed-rate loans to homeowners at risk of losing their homes. Who should consider applying for a Rescue Loan? To be eligible for a ShoreBank Rescue Loan you must:
• Have a subprime mortgage or other adjustable rate mortgage
• Open a ShoreBank auto debit account at the time of application
• Qualify for sustainable mortgage payment
• Be no more than 90 days past due on your mortgage payment
We look at many factors when considering a customer for a mortgage. We consider your income; your monthly mortgage payment as a percentage of your income; your total debt situation; employment history; property appraisal, and of course, your credit history. This is different than your credit score. ShoreBank will work with you if you’ve had credit difficulties. For example, let’s say you had a rough patch, and lost your job and fell behind on your payments. That would lower your score. But as soon as you could, you worked to catch up on your bills. That’s a good thing, but your credit score may still be low, because those missed payments are on your record. We look at the big picture.
Unlike other banks, we don’t sell our loans. Perhaps you’ve had the experience of getting a mortgage from a bank you knew and then after a few payments, an unfamiliar envelope with your mortgage bill arrived in the mail from a bank you never heard of. That’s because the bank you got the mortgage from sold your mortgage. Now you have to deal with a “stranger” who doesn’t know you.
We don’t sell our mortgages at ShoreBank. We stay with you for the life of the loan. That also means we want you to be successful. It’s not as important to the other banks that sell your loans if you take out a bigger loan than you might be able to handle in the future, because they’re going to sell that loan. If you can’t make payments, it will be someone else’s problem.
So we work with our customers to fit our mortgages to their needs. We want that mortgage to be successful for them (and consequently successful for us). That’s why we’re not in the same position as many other banks today. ShoreBank is safe, secure and strong. We’re not going to be bought out or taken over by the government. Your money is safe with us.
To help fund the program, ShoreBank launched a high interest online savings account, www.shorebankdirect.sbk.com. The interest paid on the online account is currently 3.50% *APY.
Call us if you have a mortgage that is wrong for you. We’ll work with you to help put you back in control of your finances.
* Annual Percentage Yield (APY) is accurate as of June 4, 2008. Rates may change at anytime and without notice after the account is opened. Fees could reduce the earnings on the account. A minimum balance of $1.00 is required to open the account and obtain the stated APY.
Over the next few blogs, I’d like to address the issues related to responsible lending that can help people accomplish their goals of successful homeownership. The headlines are filled with stories of families caught in “bad mortgages.” Many have already lost their homes or are on the verge of losing their homes. Some people blame irresponsible homeowners for the high rate of foreclosure, and feel that these borrowers should have known better, or that the homeowners were not credit-worthy in the first place. The answers are complicated and there is blame that can be shared by lenders, borrowers and regulators. However, despite the current economic situation, homeownership is still the best way to accumulate wealth. Homeownership provides a sense of security and forms the cornerstone of healthy communities.
“Subprime” has now taken on a very unsavory connotation. The difference between a subprime loan and a conventional loan is quite simple.
• Subprime lending was originally designed as a financing alternative for people with challenged credit or other high risk characteristics.
• Conventional loans were designed for lower-risk borrowers.
Borrowers usually are offered better rates on conventional loans with less flexibility in underwriting. Subprime loans were purported to allow greater flexibility. During the last few years, many families got caught up in sub-prime or “designer” loans, with low teaser adjustable rates and interest-only features. These are not necessarily bad mortgages, but not well suited to the borrowers.
What makes a mortgage a bad fit? A bad fit is when the mortgage doesn’t match the borrower’s financial profile and/or isn’t structured for their long term success. What are the signs of a poor fit? Look for:
• Mortgage payments that are too high for the borrower’s income and expenses
• Adjustments that do not limit future increases in payments
• Lack of security on the borrowers’ ability to make timely payments in the future
• Mortgages in which one is not paying any principal, or little principal, so that there is little or even negative equity
• Mortgage agreements that do not include taxes or insurance. These lump sum payments are hard for working class families to make.
Many banks don’t take the time to tailor a mortgage to meet the needs of the borrower. They simply sign them up for the biggest loan the bank thinks they can handle. When someone comes to ShoreBank for a mortgage, we make every effort to help them. Sometimes that may mean that they don’t walk out with a mortgage approval. However, we’ll work with our customers, even if they’ve had credit difficulties. We will provide an honest assessment of their current situation and offer tips on what will get them ready to accomplish their goals. If someone doesn’t have the credit to purchase a home now, we tell them what they need to do to be able to purchase a home in the future. We’re committed to ensuring that our borrowers fully understand the commitment and responsibility of homeownership, including paying property taxes, insurance, and maintenance. In fact, despite these difficult times, our mortgage default rates are well below the industry average, even in neighborhoods where other lenders have high delinquency and default rates. Our Rescue Loan Program is designed to help unsuspecting borrowers, who are caught up in sub-prime loans. This program is also able to help first time borrowers avoid these unscrupulous lending practices. We are committed to helping more families keep their homes. I’ll be talking more about rescue loans in future blogs.
ShoreBank’s capacity to help families stay in their homes and to keep neighborhoods vibrant is a result of the deposits our socially responsible investors place with us. As our deposit base grows, we continue to reach out to struggling families to help them achieve and keep their piece of the American dream.
For most of us, weatherization is something we only think about as winter approaches and we head off to our local hardware store to buy caulk, weather-stripping and plastic for our windows. But this Earth Day, there are more reasons than ever to consider weatherizing your home this spring.
The Department of Energy is set to soon award billions of dollars to state government agencies and local jurisdictions for energy projects – in my home state, Illinois, the State will receive over $100 million and the City of Chicago will receive tens of millions more. Moreover, our local utilities, ComEd and Peoples Gas, will spend more than $100 million collectively on energy conservation programs, including a significant boost in spend for homeowners’ efforts. In addition, Federal Energy Tax Credits are available for many types of energy saving upgrades.
4. You manage your money well. Home ownership builds wealth through the forced savings of paying down a mortgage, and through appreciation — the rise in the home’s value over time. That forced savings aspect only works if you leave the equity in your home alone, and only tap it for important things or emergencies. Otherwise, it’s too easy to drain away your wealth with home equity loans and lines of credit.
