More Trouble In Mortgage Land

The Boston Globe reports today what I have been seeing to be true: property appraisals are coming back at very conservative (read: low) values, and this is having a chilling impact on both sales and refinances of residential properties. A low appraisal may have the impact of reducing the dollar amount the mortgage company will permit you to borrow. Moral: whereas it used to be enough protection for a buyer to include a general mortgage contingency in an Offer to Purchase, these days it is prudent to include a specific additional contingency that the appraisal performed by the bank must indicate a value in at least the amount of the proposed purchase price.

The full text of the Globe article can be found here: http://www.boston.com/business/articles/2009/06/10/appraisal_discrepancies_put_some_home_sales_at_risk/

Rising Transfer Taxes in Barnstable County

Heads up, all of you Cape Cod homeowners. If you sell your Cape home, effective July 1, 2009 you will pay more tax for the privilege of doing so.

Throughout Massachusetts (except in Barnstable County), sellers of property pay a state excise tax (called "deed stamps") upon sale in the amount of $4.56 per thousand of stated consideration in the deed. Barnstable County has long assessed an additional county excise tax for any property sold within Barnstable County, with sellers paying a combined state and county excise tax of $5.70 per thousand. It has just been announced that the Barnstable County deeds excise tax will increase so that as of July 1, 2009, any sale of property in Barnstable County will cost a seller a combined excise tax of $6.12 per thousand of sale price. Seller beware!

More In The Scam World

Continuing on the theme of the last post, it seems that regulatory bodies are starting to crack down on the companies taking advantage of homeowners in trouble. The New York Times reports today that Andrew Cuomo, state attorney general, is going after loan modification companies who are charging high up-front fees and delivering no results. Good work, Mr. Cuomo! Here is the link to the article: http//www.nytimes.com/2009/06/10/business/10loan.html?emc=tnt&tntemail1=y

... And The Scams Just Keep On Coming

For some unscrupulous types, troubled times represent an opportunity to take advantage of people when they are at their lowest. In today's Boston Globe, reporter Eileen AJ Connelly reports on yet another type of scam that is being perpetrated against homeowners in financial trouble. This new industry of "foreclosure rescue companies" purports to offer troubled mortgagors assistance in working out loan modifications. They disseminate written materials which look like official IRS or governmental communications but in fact are not. These companies prey on unsophisticated homeowners who may be grasping at any way to keep from losing their homes. The full article can be found here:
http://www.boston.com/business/personalfinance/articles/2009/05/29/if_youre_in_trouble_with_your_mortgage_beware_of_those_who_offer_to_help/

Once again, let the buyer beware. Don't be fooled!

Thinking of Buying a Condo?

Secondary mortgage market lenders have implemented a new and stricter set of lending guidelines which may make it more difficult for some buyers to purchase a condominium. Some of the new regulations include:

1. At least 70 percent of units in a new complex must be sold or under contract for purchase as a principal residence or second home.

2. No more than 15 percent of units in a complex may be 30 days or more past due on condo fees.

3. Insurance requirements have been made stricter.

4. Buyers must make a down payment of at least 25 percent to avoid a higher fee or interest rate.

Read the full report in the May 23, 2009 issue of the Boston Globe at http://http://www.boston.com/business/personalfinance/articles/2009/05/23/new_rules_on_condo_loans_hindering_some_buyers/.

New York Times: Lenders More Open To Short Sales

When the value of a home is less than the amount of outstanding debt secured by the home, the homeowner is in an untenable predicament. In this circumstance, if the property is to be sold, the owner must either bring funds to the closing table to pay off the debt, or negotiate a "short sale" with the lender (see my blog post dated January 6, 2009). If neither option is available, the homeowner may face foreclosure. Lenders, particularly home equity lenders in second position, have been reluctant to agree to short sales, but the New York Times now reports that this method for escaping foreclosure may be getting a little easier to navigate. Whereas to this point second lien holders often resisted agreeing to short sales, mortgage lenders say they are now working more cooperatively on short sales, and proposed changes in the industry could increase the number of these transactions. To read this New York Times report, click here: http://www.nytimes.com/2009/05/17/realestate/17mort.html?emc=tnt&tntemail1=y.

Estate Planning for Blended Families

Estate planning in the best of circumstances can be a challenging process, but it can become even more complicated when dealing with the issue of blended families. In a time when divorce and remarriage are common, many families include children from previous marriages, and the decisions as to who will inherit what may be complicated by the complex relationships among parents, step-parents, step- and half-siblings and other family members.

It may be only natural to want to pass on your assets to your biological children, but you may also want to provide for your subsequent spouse and even stepchildren. Balancing these sometimes disparate considerations can be a complicated and challenging experience. Even when blended families get along, the potential for acrimony, disagreement and even litigation among the different family segments exists.

At a minimum, each spouse of a subsequent marriage should have a will. In the absence of a will, as a result of the laws of intestate distribution, assets are likely to pass in ways which are inconsistent with your intentions. Yet a better approach is also to establish a trust, which will permit you to provide for the surviving spouse and still protect a portion of your assets for your children of a prior marriage.

Issues to be considered when planning for a blended family may include the following:

1. Are your beneficiary designations up to date? Have you successfully removed your ex-spouse from receiving any of your assets? In certain cases a beneficiary designation may trump a divorce decree or the terms of a will. Be sure that you have removed your former spouse as beneficiary in all cases and designated beneficiaries consistent with your current wishes.

2. Determine what you wish to leave to your new spouse and stepchildren, and what you wish to leave to your children, whether of the current marriage or a prior marriage. Consider the needs of all parties and strive to ensure that the assets are distributed in a way that reflects your goals. Establishing a trust can eliminate the possibility that the subsequent spouse will have the authority to change beneficiaries and disinherit children from a prior marriage after your death.

3. Consider establishing a prenuptial or postnuptial agreement which sets out the distribution of finances and properties upon your death.

4. Consider the purchase of life insurance as an effective way to provide a known amount to children from a previous marriage.

The most important thing you can do when planning for a blended family is be honest and open. Communicate your priorities and your wishes, and speak frankly but openly with your spouse, children and step-children so that all understand your intentions in making the decisions that underlie the estate plan. Such communication is crucial to avoiding ill will and resentment among survivors after your death.