Foreclosures are rising in many parts of the country, fueled by a slowdown in home sales, slumping real-estate prices and rising payments on adjustable-rate mortgages. Homeowners who have lost a job or faced another economic crisis are finding it hard to refinance or take out home-equity lines of credit to bail themselves out, analysts say.

The Detroit, Fort Lauderdale, Fla., and Denver areas posted the nation’s three highest foreclosure rates for the third quarter of 2006, replacing Indianapolis, Atlanta and Dallas, which had been the top three markets for the two previous quarters. The Indianapolis area was the only one of the three to see the high rate of foreclosure rates dip, edging down 2%. (more…)

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When Ed Lewis and some of his neighbors bought property on a scenic Tennessee mountain, they knew they didn’t own the mineral rights to the land, but they assumed a coal mining revival was unlikely. They never imagined anyone would try to claim ownership of all the ordinary mountain rocks on their land. Demand for the rocks has surged across the country as stone has become more popular in houses, commercial buildings and landscaping. Now, the former owner of Lewis’ property who retained the mineral rights wants to harvest the rocks.

Lewis and his neighbors in Sequatchie County — located in just north of Chattanooga — say if the mineral rights owners are allowed to take the rocks, their scenic bluffs and mountain land covered with hardwoods and evergreens will be ruined by blasting and bulldozers. Now a court must decide if the sandstone, fieldstone and flagstone on Fredonia Mountain are minerals. It’s a legal fight that could have implications for many landowners who don’t own the mineral rights in their land. An attorney for Lewis and the other property owners, Keith Grant of Dunlap, said he was not aware of any precedent case that sets up rules for when rocks could be considered minerals. Separate ownership of surface rights and mineral rights is fairly common in this region, due to the coal mining history. Even some residential neighborhood developers may not have mineral rights, Grant said. (more…)

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It doesn’t make financial sense to pay for points to buy down the cost of a mortgage only to refinance the mortgage before reaping the advantage of the buy down. Apparently, however, that’s what virtually all home buyers do when they elect to include points to lower their interest rate with plans to save money over time, according to “Do Borrowers Make Rational Choices on Points and Refinancing?” a special mortgage study by Abdullah Yavas, an Elliott Professor of Business Administration at Penn State’s Smeal College of Business and Freddie Mac analyst Yan Chang.

Only a tiny fraction, 1.4 percent, of borrowers who bought points held their loans long enough to make them pay off. Of those who didn’t buy points, only 1.5 percent would have been better off purchasing them, according to the study an examination of 3,785 mortgages originated between 1996 and 2003. Each “point” is 1 percent of the value of the mortgage. That is, if your mortgage is $200,000, one point is $2,000. Some points are called origination points — charged for originating or writing your mortgage. (more…)

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Activity drops more than 14 percent as 30-year fixed-rate mortgage climbs to 6.12 percent, industry trade group’s weekly index says. Mortgage applications fell as interest rates rose across the board, an industry trade group reported Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended Dec. 22 fell 14.2 percent to 555.8, from 647.6 a week earlier.

The 30-year fixed-rate mortgage rose to 6.12 from 6.10 percent last week. The group’s seasonally adjusted refinance index fell 18.5 percent to 1604.6 from 1968.8 the previous week, and the purchase index decreased 10.6 percent to 390.2 from 436.5 one week earlier. The refinance share of mortgage activity decreased to 48.8 percent of total applications from 50.8 percent the previous week. Fixed 15-year mortgage rates increased to 5.84 from 5.82 percent. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.87 from 5.82 percent. (more…)

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Randy and Jennifer Rimstad of Minnetonka, Minn., refinanced their mortgage in 2004 to replace a 50-year-old furnace and pay for their youngest daughter’s wedding. In May, their interest rate jumped to 8.55% from 5.55%, pushing their monthly payment from $1,654.81 to $2,295.68, and the Rimstads buckled under an adjustable rate mortgage they say they didn’t understand and could ill afford. Then came the collection nightmare that tacked on another $700 or so in monthly payments.

Millions of other families in the U.S. could soon find themselves in the same dire straits. Some $1.2 trillion in adjustable mortgages will shift to higher rates in 2006 and 2007, more than half of which are to borrowers with less-than-perfect credit, or subprime borrowers, like the Rimstads. These loans already are defaulting at unprecedented rates. Lenders are in large part responsible because they sold risky and unsuitable mortgages to unsophisticated borrowers. In some cases, of course, careless borrowers shoulder some of the blame. But some say there’s another force at work: aggressive servicing tactics. (more…)

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As a weak housing market nudges the foreclosure rate higher, next year is looking promising for investors in distressed real estate. So far, the U.S. housing slump hasn’t produced a bonanza for such investors, but lenders stuck with foreclosed property are becoming more inclined to slash prices or sell properties through auctions, industry experts say. “We’re all going to have to be more creative in the next 12 to 24 months” in selling foreclosed homes, says Chad Neel, president and chief operating officer of Fidelity National Asset Management Solutions, a unit of Fidelity National Information Services Inc., Jacksonville, Fla. Mr. Neel’s company helps lenders manage and sell foreclosed homes.

In the first half of 2006, REO properties accounted for 3.1% of all U.S. home sales, up from 2.4% two years earlier, according to a study by First American Real Estate Solutions, a unit of First American Corp., Santa Ana, Calif. The study found that those homes sold at a median discount of 14% to their estimated value in the first half, compared with 12.5% two years before. The discounts reflect the gap between the actual sale price for the homes and the value estimated by a computer model, which takes into account sales of comparable homes nearby and price trends. It has taken a while for foreclosures to mount. The housing boom of recent years reduced foreclosure rates because most people who fell behind on their loans could refinance or quickly sell their homes for at least enough to pay off the loans. (more…)

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Home buyers may now need to pull out their calculators when tackling a common dilemma: what to do if they don’t have enough money for a 20 percent down payment. In recent years, piggyback loans, low-cost and easy to get, have been the product of choice for many cash-strapped consumers eager to purchase homes. But with short-term interest rates now sharply higher — currently above 8 percent — piggyback loans are less appealing. Now, there are signs that some borrowers are giving traditional private mortgage insurance a second look.

New federal tax legislation expected to be signed by President Bush Wednesday gives some consumers even more reason to turn to mortgage insurance. The new law makes the insurance premiums tax deductible for some borrowers who take out new mortgage-insurance contracts in 2007. That is in addition to the tax deduction homeowners can already take on the mortgage interest they pay. What’s more, new guidelines issued recently by bank regulators could make it tougher for some borrowers to get piggyback loans, particularly if these are paired with exotic types of mortgages that may increase risk. Some lenders have already seen higher delinquencies on piggyback mortgages. (more…)

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In good markets or bad, real estate broker Ralph R. Roberts reveals in “Flipping Houses for Dummies” how he acquires run-down houses, fixes them up, and then either “flips” (sells) them for a profit or holds for long-term investment. Roberts, a highly respected real estate author, trainer and broker, shares his techniques along with advice on how to minimize the tax bite on profits.

As a longtime real estate broker, Roberts knows all aspects of the home brokerage business and he doesn’t hesitate to share his insider secrets. For example, he says, “Nothing on the MLS (multiple listing service) is the gospel truth. Sellers and real estate agents alike often estimate room sizes or make mistakes when entering details. Approach all prospects with a discerning eye.” Even if you are not interested in “quick flip” real estate profits, this is a great book to study because the author shares so much of his real estate knowledge which he gained, starting at age 19, over more than 30 years in the real estate business. Maybe Roberts is getting a little “salty” in his old age, but he exposes secrets most Realtors would never share with their clients. Examples include how to obtain a “listing history” of a property, how to determine what the seller paid, how long the property has been on the market even with more than one listing, and if the property is difficult to “unload.” (more…)

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Scott Patterson, a college dropout-turned-real estate investor, flings open the door of a vacant bungalow in north Charlotte and shouts to scatter any vagrants who might linger inside. The run-down house emits a musty odor, its walls are grimy and rust covers the bathroom fixtures. Patterson likes what he sees. “You never know which house will be a moneymaker,” he says.

In a city remarkable for its can-do economy and penchant for business deals, Patterson and others like him fill a special — and risky — niche. They snap up dilapidated houses and duplexes for less than $100,000, long before the neighborhoods become popular with newcomers and urban pioneers. They renovate and sell the properties for more than $300,000 in some cases. “Everybody’s trying to predict what the next hot area will be,” said Mike Jaffa president of Graham Investment, which writes loans for some of the city’s biggest individual speculators. In some neighborhoods, real estate investors have reduced blight, raised property values and lured young professionals to long-neglected areas. But not everyone is thrilled. (more…)

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December is a time when most Americans will run up at least a little extra debt in order to celebrate the holiday season. Now, if we only saved up our money the other 11 months of the year, this wouldn’t be a problem. But we don’t. In fact, for the last two years, Americans as a whole have been spending more than we save. That hasn’t happened since the Great Depression. We are officially living on credit. Americans have become used to living on credit. We think nothing of whipping out the plastic to get those things we “need,” like iPods and flat-panel televisions.

Americans generally understand that we have a serious problem. They just don’t know how to fix it, or are unwilling to take the measures to fix it. It’s not easy. There are no quick, painless solutions. We simply need to stop spending the money we don’t have, and deal with the resulting economic fallout, which will be significant. We can’t stop the pain, but we can keep adding to it. For one thing, we should work to come up with an alternative energy source to oil, which will keep hundreds of billions of dollars from flowing to the Middle East, money that is used to fund wars against us, which further erodes our treasury. Not only could we stop the oil dollars from flowing out, we could reverse the process and export energy to the world. (more…)

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The easing market may be worrying those who invested in real estate this year, but to avoid facing even more financial pain at tax time, those investors should consider the following year-end tax strategies. Keep in mind that real-estate investment tax tips are a bit different from standard investment tax tips, given that real estate is not as liquid as other investments. “There are some things you can do, but for the most part real estate works a little bit differently than some of the other areas where you normally do year-end tax planning [such as] selling some dog stocks from your portfolio,” said Eric Kea, a director of the real estate taxation practice at BDO Seidman.

If you bought real estate this year, consider having an expert evaluate your property piece by piece in what’s called a cost-segregation or component-evaluation analysis. Each piece of your building is put into various categories, each with different depreciation timelines. If, instead, you depreciate your building and its contents as a whole, you’re forced to do that over 27-1/2 years for residential rental property and 39 years for a commercial property, Lechter said. By using a cost segregation analysis, you can “depreciate parts of the building over a much shorter lifespan. It greatly increases your depreciation deduction, therefore reducing your taxable income,” Lechter said. A professional cost-segregation analysis might be too expensive for a real-estate investor with just one small property. If that describes you, consider creating your own analysis based on your property-tax bill, said John Michel, a national real estate tax partner in the Cincinnati office of Grant Thornton, based in Chicago. (more…)

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Lifestyles of the twenty-first century have radically changed from fifty years ago. The clamor for big lots and single-family houses has been replaced by a demand for condominiums and planned communities (generically called “homeowner associations” or HOAs). The growth of HOAs has been nothing short of phenomenal in the last decade. In many urban areas, upwards of 75 percent of all new residential housing is in the form of a homeowner association. Mixed used HOAs combine residential and commercial together. For instance, retail and office units often occupy street level space while residential units occupy upper floors.

HOAs are essentially governmental corporations controlled by the members through an elected board of directors. The HOA has authority to make and enforce rules and regulations and to collect HOA fees from the members to support the HOA operation and maintenance responsibilities. Like the IRS, the HOA has significant power to enforce its will through liens and, in extreme cases, foreclosure. When homeowner associations are properly conceived and constructed, they work very well. When they are haphazardly implemented, trouble and discontent follows. The success or failure of an HOA begins at the beginning … with the developer. (more…)

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More and more often, natural disasters from summer hurricanes to winter snow storms don’t blow through without leaving injuries and deaths in their wake — not from the event itself, but from misusing power generators to keep the lights on when the power goes out. After Hurricane Katrina left much of the Gulf Coast in the dark last year, a dozen deaths and scores of carbon monoxide (CO) poisonings were blamed on portable gas-fired generators in the hands of those unfamiliar with their proper use.

An early winter snowstorm in the Buffalo, NY area just months ago turned out the lights for hundreds of thousands of residents and half the six storm-related deaths were attributed to CO poisoning from gas fired portable generators. Area hospitals reported dozens of cases of CO poisonings caused by the appliances. After a snow storm with hurricane force winds knocked out power to 1.5 million customers in the Pacific Northwest, including homes and businesses, hospital officials said CO poisonings reached “epidemic” levels. Just a week before Christmas, at least one man died of inhaling the colorless, odorless gas, more than a hundred were treated at area hospitals and dozens were sent to pressurized hyperbaric chambers which forced oxygen into their blood. (more…)

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More American homeowners are slipping behind on their monthly mortgage payments, especially those who had subprime credit histories and scores when they applied for their loans. Roughly one of every 20 homeowners with a mortgage — 4.7 percent — was at least 30 days late during the third quarter, according to the Mortgage Bankers Association’s national delinquency survey released last week. The survey examined payment performances on over 42.6 million active home mortgages.

Though the overall trend in delinquencies is upward, Mortgage Bankers Association chief economist Doug Duncan said the slightly higher rates were expected as the housing boom wound down. They are also well below the recent high points reached during the 2001-2002 period. The subprime late payment jumps, however, “were noticeably larger” than projected, “particularly for subprime adjustable rate mortgages.” The reason for the spike: “subprime borrowers are more likely to be susceptible to the cumulative increases in (short-term) rates we’ve experienced, and the slowing of home price appreciation that has resulted,” said Duncan. But “it is important to remember,” he added, “that delinquency and foreclosure rates have been quite low the last two years.” The national foreclosure rate of 1.05 percent during the third quarter was up slightly compared with the same period the year before. But today’s rate is well below the 1.6 percent level reached in early 2002, when subprime foreclosures hit 8 percent. (more…)

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Despite the recent fluctuations in real-estate prices nationwide and sale prices that have fallen short of sellers’ expectations, homeownership has proved to be a good long-term investment, financial experts agree. Buying a home is the largest investment most people will ever make, said Shrikant Nadkarni, a certified public accountant, certified financial planner and shareholder at WithumSmith+Brown PC’s Somerville office. “Owning a home over a long period of time is generally a good investment idea,” Nadkarni said. “It brings financial obligations and forces savings through paying down the mortgage while building equity.”

Homeowners, though, have to be mindful of tax savings from mortgage interest and property taxes, and costs of things needed to keep a house in good condition, like reroofing, repainting and updating appliances, aAnd timing and market conditions are key to whether buying a home will end up being a profitable endeavor, as history shows. People who bought in the 1980s had to wait until 1998 to match the 1988 peak-of-market prices. Recent price downturns are nothing new in real estate. But people are cautioned people about the more exotic mortgages available. which enable people to buy with no money down or with adjustable rates (ARMs). When the housing prices do dip a bit this is going to be a deadly thing. . . . Their monthly payments will go up. It’s just too bad that the criteria is not a little more stringent to make sure that these people can afford to continue with these houses. Surely people should buy, but they should be qualified to buy. (more…)

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Early next year my husband Gerry and I will reach two milestones in our finances: Our mortgage’s outstanding balance will drop below $100,000 and, more significantly, more of our monthly payment will go toward principal than interest. With the passing of both of these milestones, Gerry and I will be that much closer to paying off our 20-year fixed-rate mortgage, a process we’re hastening by making additional principal payments of $195 a month. (Why the odd figure? I’ll get to that later; the short story is that it is part of $395 a month in spare cash we debated over where to invest. )

Some people believe paying off a mortgage is a stupid move, and would advise us to forgo the mortgage prepayments and invest that $395 a month elsewhere. This school of thought holds that the wisest financial move you can make is to get mortgages with the lowest monthly payments possible — refinancing as rates decline — and never pay off the loans, a strategy that improves your cash-flow and lets you benefit from potential home-price appreciation. (more…)

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Of all the confusing and expensive things about buying a house or refinancing a mortgage — and there are plenty — title insurance just might take the prize. “A lot of customers don’t understand title insurance,” said Samuel Ingram, president and CEO of myclosingspace.com, a Wall company that offers title insurance and other house-closing services. “It’s the largest component of your closing costs, and yet people don’t know anything about it.”

They should start learning about it, because title insurance, which protects homeowners’ property ownership rights, is drawing scrutiny from state regulators and other critics. They charge that: title insurance prices — and profits — have unfairly soared, because they’re based on house prices, which skyrocketed from 2000 to 2005. “The real estate boom has been very profitable for title insurers,” said J. Robert Hunter, director of insurance for the Consumer Federation of America. (more…)

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