The move is meant to stimulate the U.S. economy.

When the Federal Reserve changes the Fed Funds Rate, it often takes 9 months for the changes to work their way through the economy. 

On a broad scale, therefore, we won’t know if the cut truly “worked” until Summer 2009.

But, as it relates to Americans in general, the rate cut spurred two immediate changes.

First, because Prime Rate is directly tied to the Fed Funds Rate, Prime Rate fell by 0.500 percent today, too.  That means that interest rates on credit card debt and home equity lines of credit are now lower, reducing monthly interest costs for the majority of American households.

The second change is that mortgage rates are rising today.

The Fed’s actions today sparked optimism in some corners of Wall Street and money is now flowing into the stock market at the expense of bonds.   Because mortgage rates move in the opposite direction from bond demand, mortgage rates are higher this morning.  A client here in Indianapolis saw a increase in their mortgage rate this afternoon from this morning from 6.375 to 6.5%. Granted, it’s not much; but the rates are headed up.

As always, mortgage markets and mortgage rates remain on edge.  Therefore, rates are subject to change.  And quickly.  If you see a rate and payment you like, be ready to commit to it because it likely won’t last long.

(Image courtesy: USA Today)

Not being one to publish political views on my blog, I have been debating for over a week about whether to post this video here. Ultimately - I decided the general public should see the video and make their own conclusions.

Even as a REALTOR, I wonder, how did the climate of the real estate market change so dramatically in such a short period of time. I believe this video answers the question best. The simple answer is, supply and demand. When the supply of “easy” loans were made available, the demand for such loans increased. As more people qualified, homes were quickly purchased, decreasing the supply of inventory, which increased the demand. Everyone seemed to jump on the bandwagon and money was easy to get.

Although Indianapolis did not have the same appreciation as many of the hotspots around the country, we are, nevertheless, experiencing the effects of the changes. We have our share of foreclosures and short sales, just not on a grandiose scale as some areas. We have other issues here such as property taxes, which have affected homeowners. Still, the supply of easy money was the beginning………along with the belief that real estate values would not go down.

Watch the video for the informational value, not the political opinion.

In 2007, these 3 lenders represented about 10 percent of the mortgage market and their subsequent failures are confusing American homeowners.

The most prevalent question:

If my mortgage lender fails, are my payments still due?

And the answer is an unequivocal “yes”. If a mortgage lender is seized, goes bankrupt, or is otherwise closed, it doesn’t change the terms of the bank’s mortgages whatsoever – just maybe the mailing address.

This is because a mortgage (and its corresponding note) is a legal contract between the lender and the lendee, signed on the date of closing. It is binding and cannot be altered by either party.  The only way to “end” the contract is to pay the loan in full. 

This can happen in one of 3 ways:

1. The home is sold and the mortgage is repaid
2. The home is refinanced and the mortgage is repaid
3. The home loan is paid down to $0 balance by the homeowners

So, if a mortgage company fails, its doesn’t cause the loan to be paid-off and, therefore, the mortgage contracts is still valid.  Payments are still due. 

However, because its mortgages are an asset, the failed lender will usually transfer them to a new lender’s servicing department.  This means that homeowners will write the same check for the same mortgage but to a different company.

To reduce confusion around transactions like this, the government puts two safeguards in place.  First, it requires the former lender to send a 15-day advance notice of the change to the homeowner.  And second, it requires the new lender to do the same.

In situations like this, the onus is ultimately on the homeowner to open and read his mail, and make changes accordingly.  It’s especially important for people who pay their bills online as opposed by paying them manually; you likely won’t get notified if you’re sending payments to the wrong place.

Of course you can’t! I wasn’t rude, I just wasn’t going to allow two complete strangers into my home to look around. Regardless of whether my home is sold or not, they were not getting pass the threshold.

I wanted to take a minute to remind all home sellers; please do not let anyone into your home unless they have an appointment. I mean, really, who walks up to someones home and expects an open invitation? I am assuming it is not your normal person and you certainly don’t want an abnormal person waltzing through your home.

Because of circumstances beyond my control (movers, moving trucks and the day the buyer chose), I had to be home when the buyers came through for their final inspection of my home. My REALTOR did ask if I wanted them to come by, but…..Hey, I’m a big girl and besides that, I’m a REALTOR; I know to just stay out of the way, give them the receipts for the repairs and let them inspect.

Well, not so fast there – I still have an emotional connection to this place I have called home and I know the work we have put into it. If they want to know how the pool works or what day the trash gets picked up, well, I can answer that. The question I wasn’t prepared for caught me off guard and left me wondering what happen to the professional REALTOR I am. So my emotions got the best of me, but, at least I waited until the new buyer left. Now there’s the professional in me 

What was the question? What’s underneath the carpet in the fire-pit conversation area around the fireplace? A seemingly innocent question, until, they tell me they plan on taking out the carpet, level the floor, replace the flooring, tear out a wall, remodel the kitchen, take out the pantry……………………etc.

It’s not that I don’t believe this home needs some more updates or remodeling. But, today, it is still MY home and I wanted to believe someone bought my home because they would love it as much as I do.

The truth is, they will come here and make it their home – I just didn’t want to hear about it – at least not today.

Home sellers, get out of the house when the buyers come by and inspect. Leave them a nice note and imagine how much they will love your home. I guarantee you’ll be glad you did.

If you haven’t been out to the Villages of Heritage Hills, let me tell you, this is some beautiful land. Gentlly rolling hills surrounded by 100 acres of nature and wooded home lots. Lots range in size from one-third acre to over one acre.

This week, custom home lots are priced from $39,000 to $105,000.

Villages of Heritage Hills is conveniently located just west of County Road 200 off of State Road 267. Just a few miles from the new Ronald Reagan Expressway and Highway 74.

Choose your builder and lot and make your dream home a reality.

Click here to view the neighborhood show.

Today was an early morning as I got my youngest daughter on a plane and now I sit here at the Indianpolis International Airport, waiting for my flight to join my daughter in Phoenix. It is a vacation of sorts. My son will fly in for the weekend, as we have one last hooray at our Phoenix home. If you remember, we were supposed to have that last blast back in January, but time got away and we didn’t put the house on the market until June.

A Home Sold

I intended to chronicle the details along the way – but somehow time passed and the specifics don’t seem quite as important. Yes, my husband and I had differences of opinion about the price, when to reduce the price and how to respond to the offer, once we received it. It was not all that exciting to me, being a REALTOR, but I know every detail was important to my husband. I think REALTORS should sell their own home occassionally to remind themselves of the impact the whole process has on our clients and their family.

While, I have been able to rationalize price reductions in light of the reality of the current market, it wasn’t easy. We had two price reductions and an offer within days of the last price reduction. Yes, I wanted to make more money, but am glad I don’t face the prospect of having to bring money to close. I feel blessed in that respect. 

So far, I have been able to keep an emotional distance. Not so, today!

A New Life

Yes, we sold our home, but we also sold every spring where my husband would plant another plant or buy another yard ornament. We sold every summer where the pool and patio became a place of relaxation, a place where family and friends gathered. We sold the home where our last child became an adult. We sold a part of our lives which we both cherish and miss.  Our memories are deeply planted in our hearts, soul and a few thousand pictures, but the loss; it’s still the same.

On Tuesday – I will step into my clients shoes with a bitter sweet victory. Sometimes selling a home is a happy occasion; other times not so much. It’s always a transition. Along with every other transition life brings us, we will move forward with hope, optimism and another chapter in our lives. We have our new life in Indianapolis, another home to create memories together, this time with grandchildren.

It’s difficult moving on., but there’s another door waiting to be opened.

Effective October 1, 2008, it’s repealing those changes.

Partly to keep FHA home loans affordable, and partly to comply with new laws, the FHA is rolling back its up-front fees and ongoing mortgage insurance requirements and replacing them with new ones.

The new up-front FHA fees are as follows:

• 1.750% : All purchase and “standard” refinances
• 1.500% : All “streamline” refinances
• 3.000% : All FHASecure programs for delinquent mortgagors

These fees are paid as a one-time cost at closing, and are calculated by multiplying the loan size by the fee.  A $200,000 FHA purchase, for example, now carries a $3,500 one-time charge.

Ongoing mortgage insurance requirements have changed, too.  These changes are based on the loan type and the amount of equity in the home.

• 15-year fixed with 90% borrowed or less: 0.000% annually
• 15-year fixed with more than 90% borrowed: 0.250% annually
• 30-year fixed with 95% borrowed or less: 0.500% annually
• 30-year fixed with more than 95% borrowed: 0.550% annually

Mortgage insurance premiums are calculated by multiplying the initial loan size by the annual premium.  The same $200,000 FHA purchase outlined above, using a 95% 30-year fixed mortgage, would require a monthly mortgage payment add-on of $83.33 until the loan is paid in full.

FHA-insured mortgages have grown in popularity this year because, while the guidelines of other mortgage products have tightened, FHA guidelines have remained relatively loose.  FHA allows 3.500 percent downpayments on purchases, for example, and allows “cash out” refinances to 95 percent.

Fannie Mae and Freddie Mac do not.

Put it ‘in” the Market

Really, I mean that! Probably not the way you think I do, though! See, there’s a huge difference between putting your home on the market and placing it “in” the market.

I’ve written before, not too long ago, actually, about pricing your Indianapolis home to sell. I honestly admit I do allow my clients to test the market “for a time”, especially if there are not enough comparable sales in their neighborhood or if they have an outstanding or unique home. I also let them know we must be ready to adjust the price based on activty, feedback and lack of offers. It rarely earns me bonus points, but I prefer honesty above all else and have walked away from listings I knew I had no chance of selling when the homeowner is stuck on their price.

A Current Example

So, why do I write this again? I have to tell this story; it is exactly the type of homeseller who needs to take their home off the market.

This particular seller is wasting their time and their agents time! It is a home I was personally interested in buying. I made an appointment, but was turned down because it was an inconvenient time. Hmmm……in this market, if you can possibly accomodate a buyer, you really should.

At the time, the home had been on the market for almost one year and they were on their second agent. So let’s look at the history:

Agent #1 had the home listed at $###,###. for 4 months. The information provided was accurate. The pictures used to market the home were just okay. The agent didn’t use a wide angle camera, which failed to capture the true beauty of the home.

Agent #2 did a fabulous job capturing the beauty of this home with professional photography which made you want to make an appointment to see the home. It made me want to go see it! It was originally priced at $###,### with agent #2 and reduced by $15,000 over the next six months it was listed. $15,000 represented less than 4% of the original listing price.

And…………………………..it expired last week without selling.

This week it came back on the market, listed with another agent, who is only marketing with 6 outside pictures, nothing impressive and here’s the big difference – they raised the price $10,000 more than the price it was originally listed for with agent #1, which is $35,000 more than the price when it expired with the last agent.

It Still Won’t Sell

If they really wanted to sell, this is NOT the way to do it. They should just take it off the market, because they are not “in” the market.

Raising their price will not sell this home. Now, though, it has been on the market for over a year, which makes homebuyers wonder what is wrong with the home. It also tells me they are stubborn about their price. This homebuyer – that’s me, will not look at a home where it is apparent the sellers are stubborn AND overpriced.