Monday, October 29, 2007

Phoenix Homeowners and Personal Responsibility

This is a subject about which I have often been tempted to put pen to paper, but have shied away from it for various reasons. However, an article in a prominent Arizona newspaper recently has forced me to re-think that decision.

Once again, we are told how a young couple, trying to get ahead in this world, were duped by some big, bad lender. Apparently, they were approached by a lender who told them that he could move them into a much bigger house and that at close of escrow they would receive $20,000 in cash. The article also stated that they signed loan docs in a parking lot and that they were not notarized at that time. The article then goes on to state that even though they could not afford the payments, the lender “promised” he would help them refinance within a couple of months to obtain a more affordable payment. Well apparently the lender subsequently went missing, and now, boo hoo, they cannot keep up the payments. Well, cry me a river!
There were so many warning signs in the above scenario; what could possibly have caused the buyers to overlook them. Oh right, that perennial standby-greed.

I am reminded, in this case, of the many people who are duped by Nigerian internet scams who end up sending vast sums of cash to those predators. They whine how they were taken advantage of, when in many cases the scammers openly admit that they are taking money that is not theirs, and need your “help”. In both instances the “victims” are overwhelmed by their own greed.

Unfortunately, it is a result of the general sense of entitlement that many people possess today. Do you really “own” a home if you are putting no money down? Do you really “own” a home if you get cash back at closing as legal as that may be and therefore have nothing invested in said home? We make it too easy for people to buy homes they cannot really afford, which makes it too easy for them to walk away when times get tough. This is one of the reasons the real estate market in Phoenix, indeed in the U.S.A., finds itself in the perilous state it is today.

Do not misunderstand me, banks are extremely willing co-conspirators in this whole scheme. Watch how they scream for federal assistance as their greed comes home to roost.

Ultimately, if a deal sound fishy, it probably is. If it seems too good to be true, it probably is. Exercise some restraint and take responsibility seriously.
Unfortunately, for some folks who crave the ultimate American dream of homeownership, their zeal and greed impedes their ability to exercise caution, turning the whole exercise into a nightmare.

Please act carefully and responsibly.

Wednesday, October 03, 2007

Reverse Mortgages Help Phoenix Homeowners

A few days ago, Mrs. K was talking on the phone to Grandma, who was lamenting the fact that Grandpa never "believed" in life insurance so he had never taken out a life policy. Later, as we discussed it, I pointed out that while there had been no insurance windfall after his demise, he had provided for his spouse by ensuring that their home was paid off in full. In fact, Grandma has not had a mortgage payment in twenty years.

It is unusual for a realtor to cover this subject as it is somewhat out of our area of expertise. Which is Realtor-speak for "I don't make any money from this." It's like when your mechanic says of the mystery squeak "They all do that" is mechanic speak for "I don't know how to fix it".

I digress; eventually the conversation led to reverse mortgages and people's perception of them. Most folks think it is a scam. And they could not be more wrong. I do not intend to cover all the intricacies of a reverse mortgage in this article, but I will provide links at the end so that you, dear reader, may undertake further research.

Very simply put, if you are over the age of 62 and, either, own your home outright or have sufficient equity to pay off the loan and still have equity remaining, you are in business. You must also live in the home.

You may never be kicked out of your home or owe more than its value. You can receive the equity in any of the following ways: As a single lump sum, as a credit line account from which to withdraw funds or to be left to grow as an interest-bearing fund. You may elect to collect a fixed monthly stipend for as long as you live in your home. Or, you may concoct a combination of all of the above to best suit your needs.

From a practical standpoint, the only other requirements are that you keep both taxes and insurance on the home current.

Remember that this is a H.U.D. program under the auspices of the F.H.A. If a member of your family is sceptical, and they have a right to be cautious, reassure them that this could be a way to ease their financial burden.

In fact, our Grandma decided to downsize from her 2 acre property to a more manageable condo. The surplus cash will be invested wisely to provide a monthly income, thereby preserving all capital whilst still retaining the flexibility to obtain a reverse mortgage in the future if needs require it.

Anyway, that nice Jim Rockford advertises them on T.V. so how bad can they be?

Resources used:
http://www.rmaarp.com
http://www.hud.gov
http://www.ftc.gov