The Facts About Shadow Inventory

Shadow Inventory is a term that refers to real estate properties that are either in foreclosure and have not yet been sold or homes that owners are delaying to put on the market until prices improve.  Shadow inventory can create uncertainty about the best time to sell (for owners) and when a local market can expect full recovery. 

Also, shadow inventory typically causes reported data on housing inventory to understate the actual number of inventory in the market. With the unprecedented number of foreclosures stemming from the subprime mortgage crisis of 2007-2008 and the overall housing market collapse during that crisis, lenders were left with significant real estate holdings. Many lenders were slow to put their inventory up for sale for fear of flooding the market and further driving down prices, which would in turn lower their potential ROI. 

According to CoreLogic, a leading provider of U.S. real estate analytics, in September, there were 1.7 million shadow units not yet on the market, up 55% over September 2008. The pending supply of this shadow inventory is at 3.3 months, up 37.5% from last year. In real estate terms this means that these pending homes withheld from the market by banks would hold back economic recovery. And this inventory could eventually hinder the beaten-down U.S. housing market, which has been showing signs of stabilization after a three-year slump.

More inventories equate to more short sale opportunities for buyers. Are you looking for a great deal? Let the professionals at Tammy Mitchell Hines & Company assist you in your dream home purchase. Call today 618-281-HOME (4663) or 618-939-HOME (4663).

Perhaps the number one reason for refinancing a mortgage loan is to lower your monthly payment. Fluctuations in income such as: reduced pay or hours & layoffs can cause a financial strain when needing to make mortgage payments. Refinancing will reduce monthly payments and make it easier to meet obligations. But there is more to mortgage refinance than lowering your monthly payments.

Piggyback second mortgages can be eliminated. Consolidating the two mortgages (1^st & 2^nd) when interest rates are low lets you combine your main mortgage and an outstanding home equity loan to realize a lower overall monthly payment. Plus, you’ll have only one mortgage payment to make each month.

Move from an ARM (Adjustable Rate Mortgage) to a fixed rate. ARM rates fluctuate with changing economic conditions, so although the initial rate may be low, it just makes sense in a mortgage refinance to go from an ARM to a fixed-rate loan during a low-interest rate environment.

Change your mortgage term. If you decrease the term of your mortgage in a refinance by going from a 30-year to a 15-year, you’ll pay a lower interest rate and shorten your total interest costs. You’ll build home equity more quickly, and pay off your loan sooner, even though your monthly payments go up.

Accumulated Home Equity = Ca$h.  With a cash-out mortgage refinance, you can turn an intangible asset (accumulated home equity) into a tangible one.

Need help making a sound decision concerning your real estate situation, call the professionals at Tammy Mitchell Hines & Co.  You will receive prompt and courteous attention for all your real estate needs. Call 618-281-HOME (4663) or 618-939-HOME (4663)

 The new real estate boom is…Rentals.  Surprised? Home prices and sales may be flat, but the rental industry is booming. The percentage of renters is on the rise, the number of households is increasing and more Americans are downsizing, all of which point in a single direction: rents are on the rise.

At the peak of the housing boom, homeownership in America reached an all-time high at 69.2 percent. In 2009, nearly 25 percent of single-family detached rentals had been owner-occupied two years earlier. Today that number has plummeted to fewer than 67 percent, which may not sound like a huge drop, but that represents roughly 3 million households that were owner-occupied and are now tenant-occupied.

More home owners who are unable to sell their home or afford to drop the price any more are opting to rent out their homes until the market improves. But some “accidental landlords” are now having regrets. While home owners are turning their homes into rentals to generate cash flow, many say it’s not enough. They say the cash flow being generated from the property is hardly enough to cover expenses, and in some cases, they’re even losing money. Accidental landlords also say the role is time-consuming and can be stressful, as they have to worry about everything from finding tenants to handling any repairs, collecting rent and sometimes eviction. Instead of cutting their losses, as a traditional investor might, many of today’s ‘Accidental Landlords’ say they won’t walk away from their former homes because of their emotional attachment.

Need to know the best options for selling your home? Call Tammy Mitchell Hines & Co and let the professional staff guide you towards making a knowledgeable and informed decision. 618-281-HOME (4663) or 618-939-HOME (4663)

Labor Day is an annual celebration of workers and their achievements. For a lot of folks, Labor Day means two things: a day off and the end of summer. It is celebrated in cities and towns across the United States with parades, picnics, barbecues, firework displays and other public gatherings.

Its origination dates back to the late 1800’s during the height of the Industrial Revolution, which has been called “the most dismal chapter in the history of American labor.” During this time period the average American worked 12-hour days seven days a week and barely made a basic living. Even children as young as five worked in mills, factories and mines across the country, earning a fraction of their adult counterparts’ wages. People of all ages, particularly the very poor and recent immigrants, often faced unsafe working conditions, with insufficient access to fresh air (in mines), sanitary facilities and breaks.

The first Labor Day in the United States was observed on September 5, 1882, by the Central Labor Union of New York.  It became a federal holiday in 1894. On May 11, 1894, employees of the Pullman Palace Car Company in Chicago went on strike to protest wage cuts and the firing of union reps. On June 26^th, the American Railroad Union called for a boycott of all Pullman railway cars, crippling railroad traffic nationwide. To break the strike, the federal government dispatched troops to Chicago, unleashing a wave of riots that resulted in the deaths of a number of workers at the hands of the U.S. military and U.S. Marshals during what is known as the Pullman Strike.                   

President Grover Cleveland put reconciliation with the labor movement as a top political priority. Fearing further conflict, legislation making Labor Day a national holiday was rushed through Congress unanimously and signed into law six days after the end of the strike. All U.S. states, the District of Columbia, and the territories have made it a statutory holiday.

From all the staff at Tammy Mitchell Hines & Company

On October 1, 2011 FHA will implement new single family loan limits as specified in the Housing & Economic Recovery Act of 2008 (HERA). As a result, FHA loan limits will be reduced in approximately 669 counties across the country, out of a total of 3,334 jurisdictions in which FHA insures home loans.  The Housing and Economic Recovery Act of 2008 (HERA) was enacted on July 30, 2008 and designed primarily to address the subprime mortgage crisis. It authorized the FHA to guarantee up to $300 billion in new 30-year fixed rate mortgages for subprime borrowers if lenders write-down principal loan balances to 90 percent of current appraisal value. It was intended to restore confidence in Fannie Mae and Freddie Mac by strengthening regulations and injecting capital into the two large U.S. suppliers of mortgage funding. States were authorized to refinance subprime loans using mortgage revenue bonds.

Until three years ago, FHA mortgage limits were set at 95% of the median price house price for each particular area. But the maximum could not exceed 87% of the ceiling placed on the government sponsored enterprises or go lower than 48% of that ceiling. In February 2008, however, Congress changed the formula in an effort to mitigate the economic downturn by temporarily setting the limit at 125% of the area median but not to exceed 175% of the limit of $417,000. Five months later, though, lawmakers changed the rules again when they passed the recovery act, this time by assigning the task of setting the conforming loan limit to the newly created FHFA.

Many mortgage professionals have voiced their concerns in regards to the lower limits. Homeowners in high cost regions will be unable to refinance with FHA as the new limit will be $625,500. The pending change in federal loan limits will have a much larger impact on FHA home loans than on those purchased or securitized by either Fannie Mae or Freddie Mac.  These loan limits are crucial in high-cost areas such as San Francisco, Los Angeles, New York and New Jersey. Click here to find the FHA limits on counties in Illinois.

Should you have any questions on how the new limits for FHA could affect you, call the professionals at Tammy Mitchell Hines & Company and let them take care of all your real estate needs. 

618-281-HOME (4663) or 618-939-HOME (4663)

The term “Amortization” refers to the elimination of debt over a period of time with regularly scheduled payments. A mortgage is calculated by using the loan amount, the interest rate and the numbers of years to pay back the loan. When you make a monthly mortgage payment, a portion covers the interest on the loan and a portion goes toward the principal to pay down the balance of the loan. The majority of each payment at the beginning of an amortization loan pays for interest. As time goes on, more and more of each payment covers your principal. You are then “amortizing” the loan. So what exactly is negative amortization? Mortgage payments on a negative amortization loan are not even enough to cover the interest costs, the interest not paid is added to the loan balance. One way of looking at this is that each time you make a payment, you owe the bank more. A negative amortization loan actually increases your loan over time, so you “un-amortize” the loan.
With the shifts and changes in an unstable real estate market, it has become increasingly more difficult for new homebuyers to become homeowners without considerable down-payment money or substantial monthly payments to get a foothold in the door. Enter ARM’s (Adjustable Rate Mortgage) and other alternative mortgage products that permitted borrowers to pay little or no interest each month and sometimes less interest than required. As rates adjusted upward and payments grew, many borrowers found themselves in deep trouble and unable to afford their constantly increasing mortgages.      
The reason negative amortization loans exist is to lower monthly payments. Some buyers use this alternative financing to get into a home they couldn’t otherwise afford with the belief they will have more income in the future (As in the instance of a young professional just starting a new job/career). Speculators, also known as flippers, may use negative amortization loans when they believe home prices will increase rapidly (although highly unlikely in today’s market). Experienced real estate investors that use this strategy understand their particular markets and properties so well that they can take on the risk of such loans because they know they'll be able to unload their investment on a specific timetable.
The bottom line? Negative amortization can be beneficial in certain instances:  As in loan products that offer initial low-payment options to cash-strapped borrowers and as a strategy to keep monthly payments low. While this may work wonderfully in theory, using a negative amortization loan adds risk and leverage.   Always consult with a professional to assist you in making sound financial decisions.

The professionals at Tammy Mitchell Hines & Co are at your service and always willing to help you make informed decisions and negotiate the best deal possible. Call them for all your real estate needs 618-281-HOME (4663) or 618-939-HOME (4663)