Monday, June 23, 2008

Employers Offer Aid To Avert Foreclosures

Some Companies Provide Loans, Grants and Counseling To Workers Mired in Mortgage Debt; Co-Workers Pitch In

Last December, 36-year-old Marta Rosario was on the verge of losing her single-family home in Miami to foreclosure. That is, until her employer, Baptist Health South Florida, stepped in to help.

The five-hospital health-care system loaned Ms. Rosario $5,000 interest-free, allowing the cardiology nurse to catch up on her mortgage payments. She'd fallen two months behind after a work injury last year forced her to take a lengthy leave of absence at reduced pay. "If it wasn't for Baptist, I don't know where I'd be," says Ms. Rosario, a single mother of three who also cares for her elderly parents.

In the wake of the mortgage crisis, a small but growing number of workers are getting help avoiding or coping with foreclosure from an unlikely source: their employers. So far, a handful of companies -- from small manufacturers to large companies like home-financing behemoth Fannie Mae -- are offering assistance, such as interest-free loans, grants and support in securing rental properties. They're also beefing up their employee-assistance programs, or EAPs, and adding more educational seminars on personal finance.

A January survey of 329 human-resource professionals showed that in 2007, 20% of employers said they received more requests from workers for pay advances than the year before, reports from the Society of Human Resource Management. Thirty-nine percent of respondents also saw an uptick in withdrawals from retirement savings -- widely seen as an indicator of financial woes.

Productivity tends to wane when workers are suffering from financial or other pressures, says Laura Wallace, manager of work/life programs at SAS Institute Inc., a business-intelligence software company. Providing help "just makes really good business sense," she says. "If you're worried about losing your home, your creativity is going to go out the window."

Baptist Health executives say it became clear that many of its 12,000 employees were struggling with mortgage problems late last year, when requests for loans from its Sunshine Fund surged. Launched in 1986, the program, funded by employee and matching company funds, was designed as a way for workers to help their fellow colleagues through emergency financial hardships -- and it was in danger of drying up for the first time. "If we grant all these requests, we'll run out of money," Brian Keeley, Baptist Health's chief executive, says he recalls thinking.

The chain's hospitals are located throughout South Florida -- where foreclosure rates are among the highest in the nation, according to foreclosure-tracking firm RealtyTrac Inc.

Faced with a growing number of desperate employees, the nonprofit established a new fund dedicated to helping workers who face foreclosure. The fund now has $280,000 -- employees contributed $10,000 of that -- and has helped more than 100 employees with mortgage-assistance loans averaging between $3,000 and $5,000 in the first five months of 2008. Employees have two years to pay back the interest-free loans.

Quality Float Works Inc., a manufacturing concern with 28 employees, also recently loaned two workers at risk of losing their homes $2,000 each interest-free. The money is being repaid in weekly installments automatically deducted from their paychecks, says Jason Speer, vice president and general manager of the small maker of hollow metal balls and valve parts in Schaumburg, Ill. "We treat our employees like family," he says. "We try and do what we can to make their lives easier."

In February, Fannie Mae set up a confidential email "hotline" for its employees with mortgage woes, says Joy Cianci, vice president of grant, program and volunteer initiatives. Since Fannie Mae is in the mortgage business -- it buys mortgages from banks and other lenders and packages them as investment securities -- the company can help qualifying employees quickly pursue a mortgage restructuring.

For workers who must sell their homes, Fannie Mae in March began identifying low-cost rental properties near its Washington, D.C., headquarters. And since these workers could have trouble securing a lease because of credit problems, the company also works with landlords to ensure they'll be paid through a monthly payroll-deduction plan. Employees who can't afford a security deposit for a rental property may be eligible to receive a financial-hardship grant.

Many employees are seeking counseling to help them navigate financial issues. At Cary, N.C.-based SAS Institute, 665 SAS employees have attended the company's financial-advice seminars so far this year, twice as many as in the first half of 2007, says Ms. Wallace. In reaction to the housing crisis, the global software provider recently added lectures on the topic. Inc., an online shoe and accessories retailer, also runs free on-site seminars about financial issues for its 800 Las Vegas-based workers. "We're hearing a lot of employees being concerned about their future," says Rebecca Ratner, director of human resources. "In Las Vegas, we have one of the highest home-foreclosure rates in the country." According to RealtyTrac, one in every 96 Las Vegas households received a foreclosure filing in May, more than five times the national average.

To that end, employee assistance program providers say they're seeing a notable increase in demand for confidential phone counseling. "Two years ago, we got one to two calls a week. Now we get two to three a day," says Zachary Meyer, senior vice president and general manager at the LifeWorks unit of Ceridian Corp., an EAP provider in Minneapolis that serves 38,000 corporations. "Housing concerns are the No. 1 financial reason people are calling us." In the past, callers seeking financial advice mainly asked about debt management, he adds.

Most U.S. employers -- about 87% -- allow workers to make hardship withdrawals from their defined-contribution retirement plans, according to the Profit Sharing/401k Council of America, a national association. But many of those that don't are now starting to consider offering the option, says Stacey Carter, vice president at Segal Co., a New York benefits and human-resources consulting firm. Helping workers avoid foreclosure is the primary reason, she adds.

Indeed, more workers have in recent months been making hardship withdrawals, which don't have to be paid back but are subject to taxes and penalties. In the first quarter of 2008, Fidelity Investments in Boston saw a 16% increase from the same period in 2007 in 401(k) hardship withdrawals. Still, this represents just a small fraction of Fidelity's 13 million plan participants, according to a spokeswoman for the financial-services provider.

Other employers, ranging from universities and technology firms to service providers say they're also grappling with how to help employees save their homes, but say they've yet to find a way to help.

Peter Ronza, a compensation and benefits manager at the University of St. Thomas in St. Paul, Minn., says at least six employees have approached him since April with concerns of losing their home or having to file for bankruptcy. "It's not that we don't want to help," he says, but creating a loan program would first require setting up a committee to determine who qualifies. Plus, rejections might cause friction among the school's 1,500 employees, he explains. He has also had to deny requests for cashing in accrued vacation time for mortgage assistance because it's against school policy.

Still, some employers say the mortgage problems workers face aren't a workplace matter. "If you got over your head in a mortgage because you were too uninformed to understand or you stretched too far, an employer doesn't have an obligation to fix your mess," says Jay Whitehead, president of Crossing Media LLC, a business-magazine publisher in Edison, N.J. The company has 20 employees and Mr. Whitehead says he recently rejected one person's request for help with a mortgage. "It's an equity and fairness issue," he says.

By: Sarah Needleman
Wall Street Journal; June 17, 2008

Friday, June 13, 2008

Home Mortgage Update

The home-mortgage industry takes advantage of consumers' confusion to charge some people much higher fees than others, according to a study prepared for the Department of Housing and Urban Development.

The study by Susan Woodward, a former chief economist for HUD, also found that loans arranged by brokers typically carried higher fees than those obtained directly from lenders.

The report is based on an analysis of 7,560 fixed-rate home-purchase loans completed in May and June 2001 and insured by the Federal Housing Administration, an arm of HUD.

The study says lenders typically make better offers to borrowers in neighborhoods with higher general levels of education, and/or borrowers who obtain a home warranty.

Total fees paid to the lender and broker averaged nearly $3,400 on loans with an average initial principal balance of $105,000, the report said. For brokered loans, the average fees were $4,000, compared with $3,150 for loans made directly by the lender. Those fees are a combination of upfront charges and additional funds brokers and lenders get for selling loans with relatively high interest rates. However, homes with home warranty coverage may reduce interest rates, as the home becomes more reliable.

For brokers, these additional payments are known as yield-spread premiums. Brokers often defend yield-spread premiums as a way for borrowers to reduce their upfront fees in exchange for paying a slightly higher interest rate. But the study found that the yield-spread premiums mainly benefited the brokers. For every $100 extra they paid in higher rates, the borrowers on average received only a $7 reduction in upfront fees. Banks also typically kept most of the benefit when borrowers paid above-market interest rates, the study said.

Borrowers who paid "discount points" to lower their interest rates typically didn't benefit from a corresponding savings in their interest costs, the study said. It found that borrowers who chose "no-cost" loans -- in which all fees are built into the interest rate -- typically paid the lowest effective fees.

Roy DeLoach, executive vice president of the National Association of Mortgage Brokers, said that the study relies on "stale" seven-year-old data and that other studies have shown consumers save money by obtaining loans through brokers.

Wednesday, June 11, 2008

More Home Buyers Working More Closely With Home Inspector

Is your home inspector a deal killer? I hope so, for your sake as a home buyer. But I doubt your real estate agent would agree.

A deal killer is a home inspector who reports everything found — everything — so you can make an informed decision about the house you are thinking of buying, and either negotiate a lower price with your eyes open or walk away from the deal.

Some real estate agents resent home inspectors who do "too good" a job. They feel that they have worked hard to present a home their buyers want to buy, or their clients want to sell. Then the home inspector screws up the deal.

Let's face it: If potential buyers are having an inspection done, they already love the house. If a home inspection reveals that minor fixes are necessary, then buyers will feel more confident paying the full price and won't walk away. But if it turns out that there is something more serious — and expensive — wrong that kills the deal, then real estate agents should be grateful for that information.

It will allow agent and client to either correct the problem before putting the house back on the market, or adjust the price so the cost of repair is reflected. No one wants to sell a home with hidden defects; that can lead to legal and insurance claims and damaged reputations.

Some buyers don't really want to believe the ugly truth about their dream homes. They'd prefer to stick their heads in the sand, and are receptive when an agent minimizes the problems.

But you need to listen to your home inspector, especially when he gives you bad news. Don't fall for a lipstick-and-mascara cover-up of a house that looks good but is rotten underneath.

Your home inspector isn't trying to scare you, he is educating you. And you need to listen.

A home inspection isn't just some game or a strategy to reduce the house price. This is your chance to learn about your home: what's good, what's bad, what needs repair now and what can wait a while.

In a seller's market, buyers often feel they have no time to wait for inspections. They might be in a bidding war and are afraid to lose. But what they should be afraid of is buying a house at an inflated price either without an inspection or not listening to what the inspector says.

But as the buyer, you need to take responsibility. Don't be rushed because your agent wants to close the deal or you think you'll lose your dream house in a bidding war. There are other houses. And if you don't slow down and check out the building before you purchase it, your dream home may end up a nightmare.

Pre-sale inspection

Sometimes a seller will have a pre-sale inspection done to make sure the house is up to standard, so that when it is evaluated by the buyer's home inspector it passes with flying colours.

This is not fluffing for sale or baking bread in the oven so the house smells good. This is real nuts-and-bolts stuff, solid information a seller can offer about what might need repair or improvement in the house.

Your home inspector can educate you about the deficiencies of your home, before potential buyers find them, so you can set a realistic price or fix the problems before you list the house.

Don't forget, most buyers of resale homes will want an inspection. They'll discover those deficiencies (if they have a good inspector, of course) and be able to use them as a bargaining tool to reduce the price.

New Home PDI

Many first-time buyers choose a new house, thinking it will be problem-free. They are afraid that a resale might present problems that must be repaired even before they unpack. The truth is, many new houses have all kinds of problems, big and small.

You shouldn't assume every new house is built properly. Many aren't. And if you move in and find problems, you'll need to take them up with the builder and the home warranty program.

How long do you have before the warranty is up on certain things in your new home?

Before buyers take possession of a home, they conduct a PDI (pre-delivery inspection) along with the builder. This is to make sure there is no outstanding work, and that any deficiencies are identified.

Many buyers do this on their own, but this is where it makes sense to hire a professional home inspector, with knowledge and experience in new-home PDI. Buyers might notice only the cosmetic problems, because they usually don't have technical construction knowledge and experience.

The problem is, some builders won't allow independent home inspectors to be present during the PDI. You have to wonder why. What are they trying to hide?

Do you think your builder's representative is going to disclose poor workmanship, building code violations or defects during your PDI? I doubt it.

If you haven't signed on with a builder yet, find one that allows a professional home inspector to accompany you on your PDI.

If it's too late and your house is being built, remember that until your new home changes hands, the builder still owns it.

Make sure you conduct an inspection as soon as you take possession, before it's too late to file a claim under the builder's warranty.

By: Mike Holmes
Globe and Mail; May 30, 2008

Wednesday, June 4, 2008

Secrets of the Home Sale

With the inventory of unsold homes at continued high levels, homeowners are going to great lengths to differentiate and distinguish their home. According to experts, there are a few simple tricks that can help create a more appealing space and a more attractive listing in today’s increasingly competitive market.

* Listing: What’s in a word?

When putting your home on the market, the right phrasing in your listing can be the key to attracting potential buyers. According to the 2008 MSN article, “What’s ‘beautiful’ worth? About $12,500” researchers have found that listings with the words “beautiful” or “gorgeous” sold homes 15 percent faster, while “landscaping” bumped sales 20 percent faster and “move-in condition” expedited the sale by 12 percent.

Contrary to popular belief, sellers should steer clear of words that highlight desperation such as “motivated” and “must sell.” The study found the inclusion of those words in the listing slowed sales by up to 30 percent.

* Branding: If you’ve got it, flaunt it.

Brand names create a point of differentiation and should be used as selling points for your home. There is no doubt that buyers will put more weight in brands they trust. If choosing to make upgrades before listing your home, consider quality, recognizable products because they will ultimately provide the best return.

* Staging: The ultimate showcase showdown.

When getting your home tidied up for potential buyers, there are some specific tips that will help your home appeal to a wider range of buyers.

* Cleaning:

The number one rule of staging is to get rid of unwanted and unused items. Whether packed away until the sale or permanently donated, de-cluttering allows buyers to see more of the home. This also includes moving furniture out of rooms that may seem overcrowded. Less is always more.

* Neutralizing:

When getting your home ready to sell, going neutral is the best way to go to appeal to the most buyers. Painting is one of the most cost-effective ways to transform a room back to its natural state. Warm neutral colors tend to be a stager’s preference because it keeps walls inviting while adding a touch of color in the room. Buyers can better imagine themselves living in a home when it is neutral.

* Landscaping:

Although the inside of the home can create atmosphere, the first impression can be a lasting impression. The outside of the house will set the tone for what a buyer perceives is inside. Create a pleasant yard that is well-kept and full of life. Plants and flowers also should be brought inside the home to help accessorize and accent high traffic areas such as the kitchen and living room.

Drop in Home Prices Accelerates to 14.1%

Fewer Americans Plan to Buy Soon, Putting Off Bottom

Home prices are falling at an accelerating pace, new data show, while a separate report found a shrinking share of Americans plan to buy a home anytime soon, suggesting more price declines in the months to come.

The Standard & Poor's/CaseShiller index for the first quarter showed prices for existing homes nationwide declined 14.1% from a year earlier, compared with a year-to-year drop of 8.9% in the fourth quarter.

A separate S&P index that tracks 20 major metropolitan areas on a monthly basis showed home prices dropped 14.4% in March from a year earlier and 2.2% from February.

Meanwhile, sales of new homes last month rose 3.3% from March. But sales remain well below year-earlier levels and, with a glut of unsold homes on the mar- . ket, any significant improvement in the market remains down the road.

The steepest declines in home prices came in cities that had experienced the sharpest run-ups this decade; prices in Las Vegas fell 25.9% in March from a year earlier, compared with declines of 24.6% in Miami and 23% in Phoenix.

Prices rose in just two cities: Charlotte, N.C., and Dallas. In Charlotte, prices increased 0:2% in March from February and 0.8% from a year earlier, the only annual increase among the 20 cities surveyed. In Dallas, prices increased 1.1% in March but declined 3.3% from a year earlier.

David Blitzer, who oversees indexes at S&P said a turnaround in prices won't be visible until several more cities start showing monthly price rises. "Given the massive amount of supply that's out there, I'm not convinced we're at the bottom yet," Mr. Blitzer said. "It'll be at least a few more months."

Home prices nationwide are now 16% below their peak in the second quarter of 2006. Prices rose almost 90% from the beginning of this decade to that peak and now are at levels seen in the third quarter of 2004.

Despite the declines, prices are still almost 60% higher than at the start of the decade.

Many analysts expect prices to decline an additional 10% or more before hitting bottom as the housing market is battered by tighter lending standards and a wave of foreclosures that is boosting supply.

The rise in sales of new homes, which is a smaller part of the market than existing homes, doesn't mean the housing market has hit bottom.

The 3.3% gain, to a seasonally adjusted annual rate of 526,000, was partly offset by a downward revision of the March figure, which dropped 11%, rather than the 8.5% initially reported. On a year-to-year basis, new-home sales were down 42% from April 2007, the Commerce Department said.

The median price of a new home rose 1.5% to $246,100 in April from $242,500 a year earlier. But the gains aren't expected to continue, given the glut of unsold homes. Inventories fell 11,000 to 456,000, but that still represents 10.6 months of supply.

Consumers' expectations about the economy has grown especially pessimistic. The number of people expecting their incomes to decrease during the next six months outweighed those expecting gains. Assessments of labor-market conditions also worsened, with fewer people saying jobs are plentiful.

Consumers' souring mood about the economy is contributing to the weak outlook for housing. In a survey of 5,000 households by the Conference Board, just 2.1% of respondents said they plan to buy a home in the next six months, down from 2.5% last month and 3.4% in March. However, if you are selling your home, many experts would recommend a home warranty. Home warranties make a home look better to a potential buyer, which retains and improves the value of a home. If the home you are selling is warrantied, the new home owners are protected against many unexpected repairs and replacements of items in the home.

The housing market in general may be weak at this point in time, but there are many individuals who are looking to buy a home, due to the major drop in pricing.

Tuesday, June 3, 2008

Home Sales Rise in Hard-Hit Areas

Buyers Snatch Up Foreclosed Properties After Big Price Cuts

Home sales are rising in some U.S. metropolitan areas where lenders have slashed prices on foreclosed properties.

Generally, home sales remain weak. The National Association of Realtors reported last week that sales of previously occupied homes in April were down about 18% from the already depressed year-earlier level.

But sales are up sharply in some of the areas hit hardest by foreclosures and falling prices. They include: Las Vegas; Sacramento, Calif.; Fort Myers, Fla.; and inner-city Detroit.

Though Americans remain wary of further drops in housing prices, the data from these areas show that some buyers are trolling for bargains. Sellers "have moved into the acceptance mode" and are pricing homes more realistically, says Thomas Lawler, a housing economist in Leesburg, Va. "I think it is the first stage of good news for the market."

Lenders' inventory of foreclosed homes has steadily increased in the past couple of years and is believed to total around half a million homes. Many lenders initially were slow to slash prices, partly because they hoped to avoid huge losses. But more lenders have been capitulating as it becomes clear that delays often merely result in lower proceeds and higher costs for taxes, insurance and upkeep.

That doesn't mean housing is poised for a quick recovery. In much of the U.S., there is still a huge glut of homes for sale, and foreclosures continue to dump more property on the market. Realtors reported that the number of single-family homes on the market in April was enough to last 10.7 months at the current sales rate, the highest since 1985. During the housing boom of the first half of this decade, the supply typically was four to five months.

For the first four months of this year, home sales in Detroit, excluding suburbs, totaled 3,360, up 48% from a year earlier, according to the Michigan Association of Realtors. The average price dropped 56% to just $20,514. That average is so low because many of the sales involve decrepit homes in neighborhoods with few jobs.

Most of the recent sales in Detroit involve investors buying foreclosed homes, says Carl Williams, president of the local association of Realtors. The homes are selling, he says, because "the prices are dirt cheap."

Sales of "normal" homes, those that haven't been foreclosed, remain very slow, Mr. Williams says. Still, he sees it as a good sign that lenders are finding buyers for the foreclosed homes. To the extent that investors can renovate and find tenants for vacant houses, neighborhoods can start to heal.

In California's Sacramento County, sales of single-family homes totaled 1,669 in April, up 41% from a year earlier, according to DataQuick Information Systems, a research firm. The median sales price was $226,250, down 34%.

Alan Wagner, president of the Sacramento Association of Realtors, says the rise reflects more aggressive pricing by lenders. "They've got to liquidate inventory. They're taking that house and dropping $100,000 off the price, and all of a sudden they've got multiple offers," he says. Some homes that sold for more than $400,000 a couple years ago now go for $225,000 to $260,000, Mr. Wagner says.

That means some renters previously priced out of the market finally can afford homes -- if they can qualify for mortgages. That has become much tougher because lenders have tightened standards, but Mr. Wagner says the growing availability of U.S.-insured loans insured by the Federal Housing Administration is helping.

In the Las Vegas area, sales of single-family homes in April were up 30% from a year earlier. The Greater Las Vegas Association of Realtors says properties being sold by lenders account for more than half of recent sales.

By: James Hagerty
Wall Street Journal; May 27, 2008