Legislation

Indiana Governor Lobbies Realtors for Tax Cap Amendment

Indiana Governor Mitch Daniels came to Merrillville Indiana last week seeking support of Question 1 on the November ballot. The referendum would make the current Indiana state law regarding real estate property tax caps part of Indiana’s State Constitution and consequently almost impossible to repeal in the future.

In 2002 the State of Indiana was forced by court order to reform it’s real estate property tax structure to a “value based” system.  Under this new method the market value of a home now determines how much tax liability you pay into the county, townships and local municipal governments.

As with any change that major, it did not go smoothly and equitably at first for homeowners throughout Northwest Indiana. One complication occurred during the real estate price run-up in 2004 and 2005. As values of homes jumped up “on paper” long term homeowners found their real estate property taxes going into the stratosphere. Seniors and people on fixed incomes in Lake County Indiana and Porter County Indiana found even paid-off homes almost unaffordable due to these bloated valuations making their real estate property taxes triple and quadruple.

So the concept of capping real etate property taxes was born. In order to smooth out whipsaw swings and establish a maximum percentage the real estate property caps became Indiana State law.  Under the current law the formula’s maximum rates works like this:

• 1% Residential owner-occupied homes, primary residences
• 2% Residential property other than owner occupied (apartments, rentals, etc)
• 2% Agricultural land
• 3% Other real property (such as 2nd garages, pole barns, etc)
• 3% Personal property

Tax rates can still fluctuate up and down since the rate is a function of both the tax levy (how much governments need in revenue) and the assessed value of all the properties in those local jurisdictions. But capping the values is universally accepted as a method of holding local officials accountable to taxpayers because they can no longer live beyond their means.

Indiana Governor Daniels called the drive an “authenticate citizens movement” which lowered local taxes by 36 percent statewide.  While the proposal appears popular with Northwest Indiana voters, Daniels wants to make sure that the current law is codified into the Indiana State Constitution. He explained to the Greater Northwest Indiana Association of Realtors that homeowners “will always be vulnerable” until the caps are solidified, and went on to say “without caps there is no pressure to do what needs to be done.”

The governor also took the opportunity to compare this initiative to other items on his agenda. Claiming the State was virtually bankrupt when he assumed office, he stressed his successes in fiscal management and took credit for Indiana’s current solvency; the State’s  great business climate compared to neighboring states;  that Indiana’s property taxes are “8th lowest and going down“.  Acknowledging the necessity for “squeezing and innovation” Daniels joked to the Realtors present the real secret to his success was “we spent less money than we took in.”

Whether you are one to get involved with politics or not, this November will impact you if you currently own a home or plan on buying a home. Let your voice be heard this November and vote YES on Question 1.

Legislation

Top Real Estate and Mortgage Headlines for September 16th

It’s Thursday and it feels like late fall already. Here is today’s top real estate headlines according to the National Association of Realtors.

• 10 Reasons to Buy a Home
  Clear away today’s problems and you see a fundamentally strong market that makes as much sense today as always.
• 70 Percent Say Buying Now is Good
  Survey respondents’ optimism is up from earlier this year.
• Most Large Metros See Economic Improvement
  In a good sign, many of the top areas saw growth in manufacturing jobs.
• J.D. Powers: Builder Customer Satisfaction Up
  Wieland, Standard are top two builders by quality in latest assessment.
• Regulator: Banks Should Help Bail Out GSEs
  A key lawmaker agrees the federal government should recoup some of its costs from the banks that sold the companies bad loans.
• Repossessions Rise as Defaults Drop
  Lenders took possession of about 100,000 houses last month.

These are the top real estate and mortgage headlines for today, September 16, 2010.

Want to know how these national real estate headlines could impact you right here locally in Crown Point Indiana? Subscribe to this blog, Today’s Real Estate Reality, and let my years of experience in Crown Point Indiana guide you to an informed and successful real estate transaction.

Legislation

New FHA Guidelines Will Be Tougher and More Expensive

Securing an FHA mortgage is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.

For consumers in Northwest Indiana, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, FHA has appealed Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, homebuyers in Chesterton, Crown Point, Highland, Munster, Portage, Saint John, Schererville and Valparaiso should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”.  Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months in Northwest Indiana, consider moving up your time-frame.

If nothing else, you’ll save some money at closing.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Legislation

Who Cares About the BIG 3

On my drive to work this morning, I noticed the flashing digital sign in front of our local Pontiac/Buick dealership. All the advertisement declared massive reductions on prices. MSRP $29k…NOW $21k. MSRP $18.5k…NOW $15k. MSRP $23k…NOW $17.9k. You get the hint.

While taking in the blitz of markdowns, the talk on CNBC radio was the 2nd day of congressional hearings about General Motors, Ford & Chrysler (aka the BIG 3). I began to ponder the following question: What is all the clamor on capitol hill about the viability of the BIG 3?

In a normal business model, if you can’t get the execution right you will ultimately fail. Why would it be any different for the BIG 3? If they have a viable business model, go through legal options of bankruptcy and restructure. Learn from the mistakes and rebuild a better company.

If history is any indicator, the BIG 3 has had a reluctance for change which has led to its dwindling prowess in the auto industry as a whole. At the end of the day, what kind of message would you be sending to consumers if all they saw was that you are no longer worth it?

Legislation

Word of the Day – Modify

It seems as if every news item surrounding the housing market entrenches the word modify. Therefore, what does modify mean. According to Dictionary.com Unabridged (v1.1) the word modify is defined as:

1. to change somewhat the form or qualities of; alter partially; amend: to modify a contract.
2. to reduce or lessen in degree or extent; moderate; soften; to modify one’s demands.

Every piece of legislation has been modified in the last 24 hours to buoy the housing industry and frustrated homeowners on the brink of foreclosures. Let’s take a look at some of the prominent headlines.

• HOPE for Homeowners Program of the Home Economic Recovery Act 2008, which became effective October 1st has had minimal participation. It was noted that only 42 applications out of the 400,000 the program was targeted were received in the first 2 weeks. Accordingly, the program is in the process of being modified to be more friendly to banks to want to move forward. NY Times, Nov. 12, 2008
• Henry Paulson announced today that the $700 Billion TARP Program was being modified to be more accommodating to the changing needs of the financial market. Paulson stated “Over these past weeks we have continued to examine the relative benefits of purchasing illiquid mortgage-related assets. Our assessment at this time is that this is not the most effective way to use TARP funds, but we will continue to examine whether targeted forms of asset purchase can play a useful role, relative to other potential uses of TARP resources, in helping to strengthen our financial system and support lending. But other strategies I will outline will help to alleviate the pressure of illiquid assets.” CNBC, Nov 12, 2008
• Streamlined Modification Program was announced yesterday by the Federal Housing Finance Agency in conjunction with the efforts of major banks. The objective is for servicers to take a proactive approach to assisting homeowners who are in risk of losing their homes. The main purpose of the program is to create a managable housing payment no greater than 38% of total debt to income. MarketWatch, Nov. 11, 2008
• The Department of Housing and Urban Development today New Mortgage Rules to curb costs and provide greater clarity of fees. Not only is the Good Faith Estimate and the HUD-1 Settlement Statement getting a modified look, but also a 10% cap on the adjustment of certain fees from the initial estimate. The new rules go into affect January 1, 2010. HUD No. 08-175

With all of the changes throughout the legislation landscape, you must wonder if the consumer is really being serviced. It is tough enough for professionals to absorb and comprehend the impacts of all the changes. Does Congress and Capitol Hill honestly believe that consumers have a clue on how they can initiate and benefit from all of the legal modifications?