The night air is turning cooler in the mid-atlantic region.  The early autumn warm winds have turned cool as we move closer to Halloween.  It is a great time to get outdoors and spend a little time with Mother Nature as she sheds her summer wardrobe and prepares us for the fall.

There is much to be learned from a walk in the park.  It is the time of the year when mums strut their stuff. Each plant preening for just one more visit from the butterfly.  Most of the butterflys have gone. A wiser man than I might know where they go. I just enjoy them

They don’t seem to fly……no, they flit………from here to there and back again. One day they are here and then….gone again.

I was just sitting on a rock, watching the last butterfly of the season. I thought …. one small creature creating so much beauty and grace as it moves through it’s own life cycle.

I realized that love is like that butterfly.  It shows up and dazzles you with beauty and grace. You sit in wonder. You enjoy every movement. Days can be spent pondering the ease with which it captures your spirit.

Then the fall comes, as it must.  The butterfly is gone.

It was never yours anyway.

Butterflies, like love, are to be enjoyed for the moment.  They should never be taken for granted.  They should never be expected to more than they are…………butterflies.  Love is the same.

Don’t despair………fall will turn to winter and winter will turn to spring.  Spring will bring flowers and if you are lucky, a butterfly again.

This too shall pass . . .

If you dig around the bottom of the oak tree long enough, even a blind squirrel will stumble across an acorn.  I was doing my normal morning reads of blog entries and reports on line and came across the best overview of why the housing market has probably NOT reached bottom. The information is vital for anyone that wants to understand what the future might hold. No one has a crystal ball. Everyone can grasp that a train travelling at 100 mph will destroy whatever may be in it’s path that is sitting still 10 feet away.

All the rosey reports from the administration and all the positive statements from the National Association of Realtors are not, I repeat, are not a light at the end of the tunnel.

I ask that you read this blog in total. I ask you because I believe that everyone has a right to all the information. I won’t even try to persuade  you that one side or the other is telling the truth. I will merely present the facts that I have culled from different sources. I will leave you to ponder the post and at the very least be in the position to have a better understanding about what is really on those tracks.

Most people out there probably know somebody who is behind on their mortgage payments, looking for alternatives and likely also just finding out that their home’s value has dipped below what they still owe on the home.  I know some within my own personal and professional circles  Some of them ask me to advise them as a professional or a friend because all the data is very confusing. They are in a tough spot and don’t understand what has happened or if there is a way out of their dilemma. These are very tough times for the families that are behind in their mortgage or have no plans to sell but have seen their equity vanish overnight. The two most frequent questions asked are “when is this going to stop and where are we heading?”

The answer is up in the air? There are trends and information that give an indication of what is going on behind the headlines. These are a few graphs that show the trends nationally with regards to mortgage delinquincies:

This chart is by quarter – Single-family mortgages set a new record delinquency rate in the second quarter of 2009, according to a quarterly survey by the Mortgage Bankers Association. We all  see the foreclosure process unfolding in our neighborhoods  but the looming delinqency-to-foreclosure issue is far, far larger.

The Wall Street Journal on 8/3/09 reported the following quote: “While subprime mortgages sparked the first round of housing problems two years ago, now “troubles are lurking further up the food chain,” says Joshua Shapiro, chief U.S. economist at MFR Inc. White-collar job losses have accelerated while more adjustable-rate loans to prime borrowers are resetting to higher payments. ‘You put all that together, it leads me to believe that the next leg down on home prices is going to come from the top,’ he says.”

Now you might read that and  say “yes, but historically those who are delinqent usually get their act together and come current on the mortgage after a while”.  That WAS true, but not anymore! We call that the“Cure Rate”, that is the rate of delinquencies that go back to current.  The Wall Street Journal reported on 8/24/09 about a Fitch analysis that found that the Cure Rate from 2000-2006 was 45% (which means about half of people fix their delinquency).  However, as of July 2009 the rate had dropped to just 6.6%!  That means that over 90% of delinquent customers are going to foreclosure.  Please take a moment and consider the implication of that fact. Take a look again at the above chart…

The next thing someone will say is “well, that’s in those hard hit areas’ and not where I live”.  Here’s the chart for all 50 states showing the same breakdown of delinquencies and foreclosures.  Most states have a significant problem, especially compared to historical figures. The problem exists in the North, South, East and West. It exists on the coasts and in the middle of the country. It my friends is everywhere.

Now some may say is “aren’t those loans going to get ‘fixed’ by a loan modification?” I know several people right now who are applying for a  loan modification but are waiting and waiting.  I hope it works out for them…

In reality, loan modifications are hardly making a dent. Why arent banks being more aggressive in giving customers the option to extend their loan and/or reset to a lower rate?  Why are they being SO difficult? The people I know don’t want to be foreclosed.  They CAN make payments.  They just need the terms redrawn to allow them to catch & keep up.  Loan modifications are not helping us get this crisis under control.

It would seem that loan modification is window dressing on a house and senate full of no answers. What are the causes of all these delinquencies?  Here’s a chart that is enlightening:

We hear a lot about adjustable rate mortgages being the culprit, but in reality it’s the loss of jobs and the tanking real estate market that’s the perfect storm.

You don’t have to ask why I continue to point out the negative equity problem. You might be better off asking your elected officials what their plans are to resolve this problem.

I have to thank  Jeff Geoghan for bringing lots of this information to me in a post on Active Rain. If you would like to contact Jeff, let me know and I will point you in the right direction.

We are a nation of many faiths and some that profess no faith.  Each faith celebrates holy days. As a nation, we celebrate the Christian faith’s Christmas (although in a rather crass commercial fashion).  I personally enjoy the Christmas season. I don’t mind the long lines, I prefer to consider that the majority of people are buying a gift for someone else and there will be happy faces Christmas morning. I can even tolerate the commercialism of the day. Maybe I am just ensconced in the mixture of the spirit of Frank Capra’s “It’s a wonderful life” and the holiday classic “Miracle on 34th street” from the pen of Valentine Davies, with a solid dash of  Charles Dicken’s “The Christmas Carol”.

It is a time of giving.  Oh, I know some will loosely connect the thought of God giving us his only Son or they will point to the gift of the three wise men as the basis of the gifts.  In another life, when I was sort of an associate pastor of a church, I wrote a wonderful sermon about Jesus, the wise men, the spirit of Christ (SC) and Santa Claus (SC).  It was a self serving, I can tie it all together homily. In reality, there are two events sharing the same date and name.

As we approach the fall, the chill in the evening air brings thoughts of the holiday season. We seem to pack so many into a short period of time. Usually we have just gotten past the secular Labor Day and Muslim’s worldwide have endured their month long Ramadan.  The young ones are just back in school and thoughts of trick or treat are being offered in every retail establishment.  Football season has just begun and that signals we have begun the procession to the feast of Thanksgiving.

Can we back up a moment?  The feast of Ramadan is pretty much overlooked in the USA. If you are not a Muslim, you may only give it a passing thought. If you stop and read about it, you might be surprised. During Ramadan, Muslims ask forgiveness for past sins, pray for guidance and help in refraining from everyday evils, and try to purify themselves through self-restraint and good deeds. This is a month long observance.  According to the earliest hadith, this refers to the Jewish practice of fasting on Yom Kippur.

Yom Kippur falls on this monday. It is the highest of holy days in the Jewish faith. It is the day of atonement. Its central themes are atonement and repentance. Jews traditionally observe this holy day with an approximately 25-hour period of fasting and intensive prayer, often spending most of the day in synagogue services. Yom Kippur completes the annual period known in Judaism as the High Holy Days.

I have always admired Muslims and Jews for celebrating in this fashion.  It is a wonderful spiritual concept that you designate one period of time each year for introspection and admitting your faults, accepting your fallibility and taking the next step in asking forgiveness for your transgressions. I would not suggest that you limit this to one time a year. Neither of these faiths limit the practice to just once a year.  The holy day attempts to bring focus back to the core principals. It is a good thing.

It is not a hidden fact that Christianity has seen declines in church attendance and membership. It is also not a secret that most of the holy days in Christianity have been secularized and commercialized.  Christmas is painted with images of Santa Claus and presents under a tree,  Easter is a time of bunny rabbits and candy filled Easter baskets. The refraining from eating meat on Fridays in memory of Good Friday has been reduced to not eating meat on Good Friday.  Recently, many of the traditional saints have lost their stature and confusion has arisen regarding what days are special and what days are no longer special.  The feast of All Souls and All Saints has given way to trick or treat and visions of ghosts, goblins and witches.

I was born into a Christian family (Catholic to be specific). I was raised in a traditional Christian environment. I have seen the power of tradition and faith give way to the power of t.v. and commercialism. I can’t change it.

I can only dip into my friends beliefs and practices. I can only marvel that 5,770 years of tradition still holds strong. I can only be humbled that for one day, my friends will fast and seek atonement.  For my part, I too will consider the things I have done and not done this year. I will pledge to do better. I will ask forgiveness.  I will be thankful that I live in a country where religion is practiced freely and I have had the opportunity to learn so much. I will end with a prayer and hope that people everywhere recognize the wonderful beauty in our differences and that they will realize that for all our differences, we are very much alike in our belief and faith.

Oh, and for my Jewish friends………..   May you have an easy fast.

Sometimes, while perusing email from my kids, I get a gem. This one was pretty frightening. I read it once and then again and thought I would have to share it with anyone that reads the blog.

“Hi Guys,

This is not a rezoning issue but seems very important to get info out.  Several weeks ago, my wife and daughter were driving on route 32, and my wife’s entire drive train locked up and she lost complete control of the vehicle in relatively dense traffic at 55 miles per hour. The vehicle locked into a skid for about 200-300 feet, ultimately spun backwards miraculously without hitting anyone, and went off the road into some weeds, up a hill backwards and came to rest.  This was a complete miracle that they are still alive and unhurt.

When the tow truck came, they had to drag the vehicle up onto the road and could not unlock the drive train.  This vehicle was an under warranty Toyota Highlander which is a relatively common vehicle for hauling groceries and kids.

A lot of weird things happened during getting to the bottom of this catastrophic mechanical failure. The service mechanic said he had never seen this happen before.  But we sensed something was wrong from their
explanations and started digging into them, and by the time we got to the
bottom of the strange service dept behavior and double talk, service ticket
notes given us that did not make sense (cost was not a factor because its
under warranty), we finally learned that this is a factory defect, and that
there is a Technical Service Bulletin on it issued from Toyota to the
dealers, and the bad part is that the defect is cured only upon specific
customer complaint! Well how would you know until the failure actually
occurs, and then you, or your family, might be dead?  This is a very
frightening catastrophic failure where your wheels literally lock up without
warning at any speed and you lose all control of the vehicle.

Specifically, there is a potentially defective seal in the drive train on
Toyota Highlanders and Siennas between 2004 and up until 2009.

We have found on the net where others have reported major accidents because of this. It looks like Toyota is walking the line between a recall decision to fix, versus how much it might cost in lawsuits when someone gets killed.

The seal blew out all at once in our case and apparently spewed fluid all at once. It does not drip, we never saw any fluid spot in the driveway and this vehicle had just been in to Toyota  dealer service dept 3 weeks prior for its pre-scheduled maintainence. It happens all at once.

There is an initial funny smell, and then a high pitch whine for a second or two, and then apparently a gear tooth breaks loose and drops into the gear drive mechanism and literally locks up the drive train completely.  Your wheels lock up at whatever speed, and in an instant you have no braking or steering control of the vehicle. My wife said, and the skid marks all over route 32 confirm, that its just like having locked up wheels on ice and being completely out of control at high speed in traffic. This all happens within seconds while you might still be wondering whats that smell?

If you have a Toyota Highlander or Sienna, you need to look into this right away. Its very dangerous and the dealers and the service people are not
telling you, even though we have our vehicle in under warranty for its
prescheduled service right on time and faithfully according to the manual
since it was new.  We know that both Antwerpen in Clarksville where the
vehicle was towed knows this (they acted very weird and cagey even though
they were not our dealer or service center), and we know Fitzgerald in
Gaithersburg knows this because that is where we bought it and is our
service center, we ultimately delivered the vehicle to them for final
inspection with Toyota corporate rep.

Finally they both showed us the TSB after some hard pressing. They kept the vehicle for two weeks in the shop. We also know that the regional corporate Toyota rep knows this, because he was brought in and shown and photographed it.  They all know about this TSB, but since it says only for customer complaint, they are not going to say anything even though this is a potentially very dangerous failure that can get you killed. They did not want to tell us what it was even after it happened to us, it was all a bunch of double talk that made no sense until I grilled them over a few days down to the truth.  My wife and daughter were driving right next to a tractor trailer on rt 32 when this happened at 55 mph, only minutes before they were coming across the bay bridge from visiting her mother in Kent Island. She said she came within an inch of slamming into the tractor trailer while out of control in the skid and fortunately the vehicle went to the right and spun and went off the road backwards and up a weedy hill to come to rest without hurting either of
them.  If you have a Highlander or Sienna, you must look into this right
away.  There is no warning and the dealers and service people know about it,
and can fix it before it happens.

Sorry to take up the space on unrelated topic, but this vehicle is very
common around Mt Airy and this is something that can kill , and its
irresponsible of Toyota, which I have always regarded as an otherwise good
company, to let this go this way. They can fix it just fine. Maybe because
of the economy they are trying to get by, but either way, very
irresponsible.  Get this fixed if you have one of these vehicles.  The
service people, after everyone came clean, said that they ultimately expect
a recall possible on this problem, but you cannot afford to wait and see,
its potentially really dangerous right now.

The TSB (Technical service Bulletin) is for Highlanders and Sienna vehicles,
from 2004 through 2009. The (TSB) bulletins were issued from Toyota on June 11, 2007 and again on November 3, 2008 (TSB-0335-08). They can tell from your VIN number prior to 2009, when they finally seemed to fix this on the assembly line, if your vehicle has this defect. Even if your vehicle is new,
and you have had it religously serviced, you must complain to get this taken
care of even though it is potentially life threatening.”

So as a public service and in hopes that if you are driving one of these unguided missiles you will have it checked, I share the note.

I receive daily emails from all sorts of vendors. If anyone wants verification that the housing industry drives our economy, they need only check the inbox of any real estate agent. I receive mail from lenders, home inspectors, home improvement contractors, power washers, insurance agents, movers, electricians, auto dealers, etc. The list goes on and on.

I will be honest. I can not read them all. It is not spam, although I don’t really know everyone that writes. It is email that falls into that grey area of “open if the need is current”.

This morning, I was perusing email and opened one from a lender.

Now, most folks reading the email would be amazed that rates remain do dog gone low. Here it is a full year since that fateful day in September of 08 when the financial world was rocked to the point that John McCain suspended his bid for the White House. Many insiders have been prepared to see the usual spike in rates that accompanies inflation. We have been waiting and waiting and waiting and waiting. I will point out, just like the zealots that camp on a mountain top waiting for the second coming, we sit and wait because WE KNOW that rates have to go up.

This is the only version of a stimulus plan that is left to issue. Every taxpaying American will be issued their own personal money printing machine. The Feds can not possibly keep up with the demand.

Now, I am not a certified economist. I have lived long enough to understand that the example set by the government ….”deficit spending” …………does not work for the average consumer. One of the big factors in the collapse of the housing industry was directly related to people getting loans that they could not afford. People got loans that were not really tied to their ability to repay. Lenders used appraisers that were overwhelmed with the accelerating housing prices and took their best guess at property values. Homes were sold with a value that was what they might be worth if prices continue to rise.

Faced with the rising prices, lenders figured well, the asset is gaining value and it will be worth more the day after we use it as collateral. I can only imagine that some genius decided that with the housing industry soaring, individual income would rise as well.

The lenders pondered how can we make use of the potential income. The lenders pondered how can we snare these people and measure them on what they will earn in two years, three years or five years? The ARM, a program in limited use, was expanded to cover everybody. Lenders could use the “teaser” rate to qualify applicants and then hope that house prices continued to increase or salaries skyrocketed as well.

It takes a lot less income to qualify for a loan at 3% or 4% than it does to qualify at the eventual upwardly mobile rate. Buyers had greater purchasing power. The rate would go up further down the road. They were advised (I promise you that I use that term loosely here) that “don’t worry, the value of homes is rising. When your rate adjusts in a few years, you will have lots of equity and you can just refinance the loan.”

Opps………………………….then the bottom fell out of the housing market and prices crashed!

This is just one area of the country. It is not much different that any other area. Prices crashed. Income did not go up. Jobs are being lost. Those numbers reflect what some folks call Lost Equity.

The process of qualifying borrowers on a low rate in order to increase their buying power is patently wrong. If you qualify them at the rate that a loan will adjust to at the end of the adjustable period, you will reduce their cash out lay for the adjusting period of the loan. Consumers will be in a position to get accustomed to home ownership, save money, pay for initial repairs, etc. during the adjustable period. When the loan reaches the adjustable point, it will be in line with their income at the inception of the loan. If income has remained stagnant, they will not have to move out of their home. If income has risen, they will be better off. This is not rocket science…it is just plain common sense.

Imagine my surprise when I read this …

Weekend rates

FHA to $417,000 – 417k to 729k- call for quote but usually 1 point add-on. (to points not rate)

4.50%             2 pts     30 year fixed

5.00%            0 pts      30 year fixed

3.875%      1.75 pts    5/1 ARM – Qualify at Start rate. Great loan for move up buyer.

After everything that has occurred, after TARP, after the crash of the housing industry, after the recession began, after employment figures are down, after damn near everyone in the industry has taken a horrible bath, after all this………lenders continue to use “teaser” opening rate, ARM loans to entice buyers to borrow more than they can afford on their current income.

There ought to be a law . . .

THE LONG & FOSTER® COMPANIES NAME NEW PRESIDENT AND COO

Chantilly, Va., September 3, 2009 — P. Wesley Foster, Jr. chairman of The Long & Foster® Companies announced today that Jeffrey S. Detwiler (47), has been selected as the new president and chief operating officer.  The Long & Foster® Companies is the parent company of Long & Foster® Real Estate, Inc., Prosperity Mortgage® Company, Walker Jackson® Mortgage Corporation, Long & Foster® Settlement Services, and Long & Foster® Insurance Agency, Inc.

Before joining The Long & Foster Companies, Detwiler was the chief production officer of the Institutional Mortgage Services Group for Countrywide Home Loans. He led three divisions: correspondent lending, warehouse lending, and landsafe origination services.

“Jeff will be a great asset to our company,” said Foster. “He brings extensive industry experience and expanded competencies to our growing company.  With a recent uptick in housing sales and our other products and services, and a highly skilled executive team, we are looking forward to an exciting year ahead,” concluded Foster. George T. Eastment, III, vice chairman, added “Jeff brings 25 years of senior level business experience and sales force management expertise on a national level.”

Prior to his work at Countrywide, Detwiler was recruited by Donaldson, Lufkin Jennrett (DLJ) to create a conduit purchase business that would leverage financial strength on Wall Street. Credit Suisse First Boston (CSFB) bought DLJ and Detwiler led the initiatives for understanding the financial markets, cost structures and risk profiles. He designed a business model that was implemented by other Wall Street firms such as Morgan Stanley, UBS, Goldman Sachs and Numara. Under his leadership, CSFB developed the sales organization and capacity to fund $1 billion a month. Detwiler also managed the warehouse lending business, oversaw the servicing operation, and designed and built the conduit. Before DLJ, Detwiler was a senior executive at GMAC-RFC.

He is a graduate of Princeton University, and is relocating from California to Northern Virginia. Detwiler is married and has four children.

The Long & Foster ^® Companies is the parent company of the largest, privately owned residential real estate company in the U.S., Long & Foster® Real Estate, Inc., and is the Mid-Atlantic region’s leading provider of homeownership services. In addition to its real estate arm, The Long & Foster^® Companies consist of Prosperity Mortgage^® Company; Walker Jackson® Mortgage Corporation; Long & Foster Insurance Agency, Inc., and Long & Foster^® Settlement Services. The total 2008 sales volume and sales equivalents for all The Long & Foster Companies was $48.9 billion.

Let’s not overlook that there is some money available for first time buyers in Montgomery County, MD. The Housing Opportunities Commission ( HOC) has a program that is designed to help first time home buyers. It is the “5 For 5″.

The requirements are below. Only approved lenders have access to the fund.  We will be glad to speak with you and point you in the right direction.

“5 For 5” program – 5% of Sales Price up to $10,000 for down payment or closing costs.

· At least one borrower must be working in Mont County
· Must be a 1st time home buyer – no property ownership in past 3 years (3 yrs tax returns needed)
· Sales price up to $429,619
· Income limits of: One Person Household – $86,268
Two Person “ – $123,240
Three Person or more – $143,780
· Must attend “Homeownership Education Class”
· Must have a ratified property before funds can be reserved
· Rate on 10k loan is 5% and is 2nd trust paid off in 10 years
· Home inspection required prior to loan approval
· Regular FHA guidelines

With a 10k loan your buyer can buy a $285,000 house with little or no money if you can get the seller to pay closing costs. If you have to pay closing costs, you may need as much as 3.5% of the sales price saved.

NOTE:  These programs do not have limitless funds. Other programs are now out of money. If you wait, hoping that prices will come down, you may lose this opportunity. The choice is yours. The money will not be available forever.

We are ready to assist you…..301-509-5111

You will be hearing about these two acronyms (HERA / HOEPA) a great deal in the coming months. The way that lenders deal with their clients changed drastically on July 30, 2009. Truth in lending was altered and the requirements will impact every mortgage loan made. The time lines needed to comply will impact everyone that is purchasing a home.

As the end of November draws near, decisions made about purchasing a home need to include the impact of this legislation. The new regulations may extend the period of time needed to close by as much as two weeks. If you do not allow for this change, you may find that you do not close in time for the $8,000 tax credit.

PricewaterhouseCoopers has published an informational document: “Understaing the Housing and Economic Recovery Act of 2008 (HERA) and new regulations under the Home Ownership and Equity Protection Act (HOEPA)” .

Contents of the informational brochure include: “The heart of the matter . . . New regulation brings sweeping change to the mortgage lending industry.” This is not just an adjustment to business as it has been done. This is a big change. I have included the link to the Price Waterhouse document.

Read the document by clicking HERE.

There are SIGNIFICANT changes to mortgage loans, how they are obtained, compliance of the mortgage lenders — and if you’re in the mortgage lender industry, you WILL need to be in compliance. Period. If you are borrowing money to buy a home, you have to understand the impact. If you are selling your home, you have to understand the impact. This is a major change.

If you’re a real estate agent this will affect you and your clients as well. There maybe indirect changes to closing dates, FHA guidelines, and your time frames, among other things.

If you have questions, feel free to contact Tudela-MacArthur Knows at 301-509-5111.