June 2008 Vol. 3 No. 6
• Do ARMs Still Have Legs in a Changing Mortgage Market? • June's Home Value Improver • About Us

Do ARMs Still Have Legs in a Changing Mortgage Market?

With the housing boom of a few years ago came numerous creative financing options. One of the most popular programs was the adjustable rate mortgage, commonly called an ARM. An ARM is a mortgage loan in which the interest rate is periodically adjusted based on an index.

ARMs can be popular because the rates often start off lower than a 30-year fixed rate, so a person can "get into" an expensive house with initially low mortgage payments. ARMs were very attractive to purchasers who thought they would either sell the property or refinance it before the higher, adjustable rate payments began. (The rates usually readjust after five years.) However, given the recent changes in market conditions, many purchasers have found themselves unable to meet their adjusted mortgage obligations - hence the rise in loan defaults and foreclosure proceedings.

The problem has become so widespread that the federal government has been trying to help. Although most of the proposals focus on borrowers who financed a primary residence, it behooves real estate investors to be aware of them.

FHASecure is a refinancing option offered and insured by the Federal Housing Administration (FHA). To qualify, the homeowner must:

  1. Have a non-FHA insured ARM that has reset;
  2. Have sufficient income to make the mortgage payment; and
  3. Have a history of on-time mortgage payments before the loan resets.

In addition, a proposed amendment to Internal Revenue Code 108 would provide relief from discharge of indebtedness income for taxpayers who lose their primary residences to foreclosure.

Aside from generalized caution about choosing one's financing program carefully, what this means for real estate investors is that it will become even more difficult to purchase investment properties with creative financing.

Stricter controls on lending and increased governmental oversight of the lending industry will certainly impact the availability of funds to investors, and as the government assists more home buyers, purchasing properties from foreclosure may become subject to even more scrutiny as well.

June's Home Value Improver

The 1-2-3s of Kitchen Remodeling

"I'm getting a new kitchen." Doesn't that sound like the most wonderful thing? Of course it is wildly appealing to most people to be able to redesign the room they spend the most time in. If you're embarking on such a process, keep these 3 basic things in mind.

1. Work Flow. The kitchens of yesteryear (the 1950s) were designed primarily as individual triangular designs so that one person could get to the sink, refrigerator, and stove efficiently. This was efficient because women did not typically work outside the home, and they cooked from scratch.

Today's kitchen, by contrast, is more likely to be used by more than one person doing food preparation. Therefore, a kitchen that allows multiple workstations is often more efficient. An island is one way to create another workstation, as is being sure there is counter space between various appliances. In addition, research shows that people today do not often cook from scratch.

2. Storage. Have you seen any of those fabulous food pantries that appear to do acrobatics and hold amazing amounts of food in draws that fold, swivel, and roll? There's a good reason for that. Research from the National Kitchen and Bath Association revealed that a kitchen from the 1950s needed storage for 140 items. Today, a kitchen needs to store about 800 items!

Don't be discouraged if you don't have a lot of obvious space for storage. You can always hang pots and pans, add storage in a kitchen island, or Google some other creative solutions. Kitchen storage has been elevated nearly to religious status. Place of worship? The Container Store.

3. Clean-Up. It's not glamorous, but it has to be done - a lot. So, when you're thinking about the basics of your new kitchen, think about how you can make clean-up fast and efficient. Do you prefer a single or double-basin sink for clean-up? Be sure your dishwasher and sink are compatibly located. The trash barrel may not be at the top of your list of kitchen planning, but it is important that the trash and recycling bins be within easy reach.

Of course, these three topics will not complete your kitchen planning. But they will get you started.


Got questions about real estate financing? Contact Debbie at Debbie@westchester- mortgage.com or 617-965-1236. She'll consider them for inclusion in a future column. Debbie Siegel is president of Westchester Mortgage in Newton, MA. She is licensed in several Northeastern states.

The sudden death of Tim Russert last week left many of us shocked and saddened. Russert was known for his preparation for his Meet the Press interviews, his ability to see all sides to a story, and his positive outlook.

I realize that these are qualities that you deserve in your mortgage professional as well. When you're considering what is often the largest financial transaction you've ever handled, you need a mortgage partner on your team who prepares well, listens to your needs, sees the whole picture and stays positive in the face of the challenges that often arise.

I hope I can be that person for you, your family and your friends.

As always, please feel free to call or email anytime for more information on any mortgage topic!

Best regards,
Debbie Siegel
Westchester Mortgage

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