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Freddie Mac Could Earn $3.4 Billion Profit From Expanded Repurchase Review

Freddie Mac could receive between $2.2 billion and $3.4 billion in more profits from forcing lenders to buy back “a significantly larger” number of soured mortgages, according to the Federal Housing Finance AgencyInspector General.

Up to $1.2 billion in new profits could go to the GSE this year alone. The FHFA IG said the estimates are based on a review of 350,000 more loans than before.

“Freddie Mac has been carefully monitoring its own activities, modifying its plans, and updating its estimates of results based on its month-to-month experience in reviewing nonperforming loans,” the inspector general said in a report released Thursday.

FHFA Deputy Inspector General for Evaluations George Grob said in a letter to the watchdog that the agency was developing plans to align how both Freddie and Fannie Maereview repurchase requests.

The “contract harmonization initiative” is expected to launch at the end of 2012, Grob wrote.
Lenders had to buy back $1.2 billion in problem home loans from Freddie in the second quarter. Another $2.9 billion in repurchase requests are still outstanding as of June 30, according to its financial filing.

The FHFA IG raised concerns one year ago about repurchase oversight at Freddie, when its regulator began monitoring how the GSE would manage repurchase claims in a $1.35 billion settlement struck with Bank of America in January 2011.

Up to 100,000 mortgages originated in just 2006 could have been reviewed under broader criteria, the watchdog found. Freddie was reviewing only loans that defaulted in the first two years after origination. One senior examiner said most loans sold to Freddie during the housing boom defaulted after this time period, leaving many loans overlooked.

In October 2011, less than a week after the report was released, Freddie senior management proposed going after more loans, and the FHFA gave the go-ahead. The GSE alerted its lenders in March.

The inspector general said the final results of the expanded review would not be realized until next year or even until 2014. Freddie has drawn more than $72 billion from taxpayers since entering conservatorship in 2008. The Treasury Department said in August it would end the 10% dividend payments and begin sweeping all future profits back to taxpayers.

On Tuesday, the FHFA released repurchase guidance on loans the GSEs buy starting Jan. 1. For mortgages financed after that date, the GSEs will release repurchase risk once the borrower makes three years of consecutive payments.

More Renters Are Finding It’s Cheaper to Buy

With rising rents, more renters are being swayed into home ownership.

For example, one Phoenix renter said he started looking into owning a home when his landlord tried to increase his rent by 13 percent when his lease was up for renewal. He found that he could buy a home and get the same amount of space for cheaper than continuing to rent, plus he’d be building equity.
Other renters are starting to see that buying may be a better option for them, too.

Rents are increasing at about the same pace that home values were dropping, says Stan Humphries, Zillow’s chief economist, who says, according to their surveys, home prices have dropped 3.1 percent year-over-year whereas rents have increased 2.5 percent.

“Herein lie the seeds to eventually more interest in buying on the part of consumers, which will help put a floor under home prices,” Humphries told Investors Business Daily. Recent housing surveys, including Zillow’s, are showing home prices are starting to rise in recent months.

Affordability in housing has been at record highs from the combination of falling home values and record-low mortgages. Humphries says that housing prices have rolled back to 2003 levels.

“That increased affordability in the face of rising rental prices will begin to get buyers off the fence this year,” Humphries says. “What’s been keeping buyers on the fence is a crisis of confidence. People who don’t have a job, or who are worried about losing their job, don’t buy homes. They also don’t want to buy an asset they think is rapidly depreciating.”

National Association of REALTORS®’ Chief Economist Lawrence Yun says the tighter restrictions from lenders are also preventing many potential buyers from securing financing in order to buy. But for those who are able to qualify, Yun says “it’s better to get in now” than wait.

Position Realty now offers buyers a 1% down programs for Phoenix Renters with limited cash reserves but they still want to buy. This is an excellent program because it could allow you to purchase a larger home or make improvements to the home. For the same price as a $1,000 security deposit you could purchase a $100,000 home. For additional information….CLICK HERE

Sean Heidemen, Broker ~ Office: 480-213-5251 ~ Sean.Heideman@PositionRealty.com

How To Rent Higher and Keep Tenants Longer

If you handle your rental business, like a business, it will make you money, like a business should. Your properties will bring in money instead of costing you money.

The following are some ideas that I use to keep tenant maintenance to a minimum and eliminate problems before they happen. Nothing is perfect, but following a good plan can cut problems in half or eliminate them all together.

Getting Tenants to PAY ON TIME …

Treat Tenants with Respect – This is the most important piece of information anyone can give to a landlord. If you respect your tenants and treat them well, they will be more likely to treat you and your property with the same respect. Their respect will not be limited to the property, but should extend to paying rent on time. You must demonstrate this respect by some of the following

1. Repairs – When something is broken, fix it and fix it fast. Yesterday afternoon a tenant called to say their water was not working. I got on my motorcycle and took time to find out what was wrong. I rode to the tenant’s apartment and checked. It turned out the city disconnected the water because the tenant hadn’t paid. They were very apologetic and offered to “Pay me for me gas.” My tenants like me because I go the extra mile.

Note: When was the last time a tenant offered to pay for YOUR Gas?

2. Communication – Keep your tenants informed on any changes with the property, including rent changes and maintenance. Don’t change the rent without asking the tenant what they can afford. Here are some good examples of notes I send to tenants

  • “You’ve been here a year and I have your One Year Tenant Appreciation Gift.” Also, I need to notify you of a rent increase, can you afford an additional $50 per month? (I only want $25, but will be happy with less) My tenant likes the gift and likes, even more, the fact that I am asking them what they can afford.
  • Perform regular maintenance checks on your houses. At least once per year, you should visit your property and do a Walk Through.
  • Write letters to your tenants once per quarter. Just say “Hello” and thank them for being your customer.

3. Respect – They are people just like you and me. They deserve all the respect that we do. In addition, they deserve all the respect we would give to any customer, if we had a retail business. Our tenant are the reason we are able to make a living.

Getting Tenants to PAY MORE In Rent …

Rent Comps – Realtors and Property Managers can give you rent comps and this will give you an accurate idea of what OTHER Landlord are charging; however, this does NOT HAVE TO BE WHAT YOU CHARGE.

Sell yourself to the tenant. Explain why they are better off renting from you.

1. What makes your property worth more than other people’s? YOU DO!!! It all goes back to respect and upkeep. If you are better than the average landlord, you are worth more. If you’re worth more, you should be paid more.

2. When they say your price is too high. Tell them what to look for and how to protect themselves. In doing this – sell yourself. Here are some things to say, that make you and your property worth more, in the tenant’s eyes.

  • Make sure the landlord compensates you if repairs are not made in a timely manor – I do. If your rent is late, you pay. Why shouldn’t the landlord pay if the repair is takes too long?
  • You are bringing business to your landlord, make sure they give you something for that – I do. I give my tenants a gift for moving in and then another gift every 12 months. In fact I just got a new computer system for one tenant.
  • Make your landlord treat you with respect – I do, because I used to be a tenant. I know what it’s like.

3. Don’t speak badly about other landlords. Build value in you and your property.

Getting Tenants to STAY LONGER …

Keep your Tenants – Your goal is to stand out from everyone else. You want to be different from all the other landlords in the area. Besides, if a tenant wants to leave, they will. Your goal should be to keep them from leaving without giving you a 30-Day Notice.

Instead, give them something, if they stay. If a tenant has already given you a deposit, they are not “losing” anything, if they leave. They just aren’t getting it back (from their viewpoint). They’ve already “lost” the deposit. However, if you promise them something, if they stay, they are less likely to leave, until they get their gift.

Free Gifts, Month-to-Month Leases, Paying tenants if repairs are not made, “In a timely manor”, Etc; make sure you promote yourself as different, let them know you’re not the ordinary landlord.

Move in Gift – Anything that is free is good. A free gift, worth fifty bucks means a lot to a tenant that is living paycheck to paycheck. My tenants get something

1. I give a DVD / VHS Player as a move in gift. My tenants are thrilled. Most have a DVD player, but now they have one for the bedroom, also. Then I tell them about the next gift they get.

2. The One Year Gift, which they get when I do my annual Walk Through, is a “Big Screen TV”. (23” Color TV from Wal-Mart for $149) Is it worth $149 to keep you tenant one year? What is it worth to keep them for two? That’s a small expense to keep from having to find a new tenant.

3. Three years is worth A New Computer System, which I pick up for $199 from www.TigerDirect.com. Again, this is a small price to pay to get someone to stay two years.

4. I have not been a landlord four years, so this gift has not rolled around yet, but I have one tenant that I am going to send on vacation, soon. For less than $300, I can send my tenant to the beach for a weekend, with accommodations and dinner for two. My tenant already knows he getting this, and has asked what he gets for 5 years.

In three years, I’ve spent $400 to keep a tenant. If I have one vacant month, it will cost more than that. My tenants are thinking about that next gift.

Repair Penalty – Most tenants have lived somewhere that the landlord neglected them and the property. That’s always a fear in the back of there mind. Let your tenant know that you will charge them, if they don’t pay their rent on time, but they can charge YOU if you don’t fix things in a timely manor. For example, Plumbing and appliance repairs should be 24-48 hours. Electrical and HVAC repairs could take 72 hours. Don’t get scared, if it takes longer, you’re covered.

IF the repairs are going to take longer than usual, I notify my tenant, in writing, with the reason and the expected completion date of the repair. As long as I do this, in writing, I am not going to be penalized; however, if I don’t make the call and I don’t write the letter, then the tenant gets a $10 per day discount on the rent for that month. This assures them, their needs will be attended to quickly.

Make Tenants feel some Responsibility …

Repairs – My tenant is responsible for the first $50 of any repair, no matter what the cause or who is at fault. HVAC goes out, they pay the first $50. If their child puts a toy car in the toilet, they pay the first $50 (they would be responsible for this whole bill). My lease covers repairs and who is to pay for what.

1. Plumbing – If the problem is above the floor, the tenant pays the whole bill. If the problem is below the floor (in the main drain line) the tenant pays the first $50 and the landlord pays the balance. However, in three years, I have never had a problem that has been below the floor of my houses or apartments.

  • Leaking sink – Tenant
  • Overflowing Toilet – Tenant
  • Shower or Bath Problems – Tenant
  • Clogged Drains (“P” Traps) – Tenant
  • Clogged Drain Lines – Landlord

2. Other Repairs – Some items in a house will wear out over time but if the tenant is wearing them out, they should be responsible for the repairs.

  • Storm Door Squeaks – Tenant
  • Doors or Windows Don’t Close Tight – Tenant
  • Appliances Break – TENANT (The appliances are in the property ar on “Loan” and “The rental payment specifically EXCLUDES all appliances of any kind…” If they don’t work, I’ll remove them, but not replace them.
  • d. Bugs Show Up – TENANT Pays Whole Bill
  • e. Hot Water Heat quits – Landlord (After the first $50)
  • f. HVAC Goes Out – Landlord (After the first $50)

Rent – One of the biggest concerns is getting rent paid on time. What is “On Time”? Your contract outlines what the rent is and when it’s due. It also outlines what happens when rent is late. Rent should be due on the first of each month, but … it’s not late on the 5th, it’s late at 5:01PM ON THE 1ST!!! If you give the tenant until the 5th, they will take it (that’s five extra days, they keep their money).

1. Due Date – MY rent is due on the 1st day of the month, by 5:00PM. If the first is a weekend or a holiday, the tenant is responsible for having the payment made early. If the payment is made on the following Monday, it’s late.

2. Late Date – Late is any time after 5:01PM on the due date. And, if it’s paid late, there is a late charge. My late charge is 10% after 5:01 PM and $10 per day until paid in full.

3. Eviction Date – I start eviction proceedings on the 2nd. A letter goes out that says, “You’re late and you’re going to be evicted, if you don’t pay.” Most of the time, this is enough to motivate the tenant to pay. If it doesn’t, I’m ready to file papers on the 5th, when most landlords are just getting started.

4. Rent Discount – My goal is NOT to evict. My goal is NOT to get a late payment fee. My goal is to get my money – ON TIME. I encourage them to pay early, by offering a discount. If I want to rent my apartment for $550 per month, I increase that to $600 and offer a discount for paying early. If they pay “on time”, I get $50 more.

Rents Continue to Climb, Make Buying Even Better

As demand increases, rents continue to rise, increasing 5 percent over the past 12 months. Meanwhile, the asking prices for homes fell 0.7 percent in that time, according to a new report released Thursday by Trulia Inc.

“Buying a home is more affordable than renting now in almost every part of the United States,” says Jed Kolko, Trulia’s chief economist.

The national vacancy rate for apartments during the first quarter fell to its lowest point since late 2001, according to a report by Reis Inc. Cities that have the lowest number of available rental units are seeing some of the largest increases in rents.

“A lot of people who were owners lost their homes in the bust in these places,” Kolko says. As such, many of these former home owners have turned to renting, which has been ramping up demand and driving up rents across the country.

Nationally, the median rent was $1,350 a month in March — up from $1,285 a year ago, according to Trulia.
Rents have risen the most the last year in markets such as Sarasota, Fla. (12.9 percent); Miami (12.1 percent), San Francisco (11.1 percent), Middlesex County, Mass. (10.6 percent), and Edison, N.J. (10.5 percent), according to Trulia.

The demand for Phoenix az rentals has increased substantially due to the number of people losing their homes to foreclosure. Phoenix rental rates are also increasing and makes purchasing a home a more affordable option to consider. If you are able to purchase, then now is the time to get out from under paying your landlords mortgage and start earning some equity.

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