2010 Aug 6th

Half of All US Mortgages Underwater By 2011?

Deutsche Bank Expects the Worst

A recent article on HousingWire, a blog for the mortgage market, states that Deutsche Bank expects that due to continued declines in home values, 48% of all mortgages in the United States will be under water by the first quarter of 2011 for a total of 25 million homes worth less than the value of the underlying mortgage.  Deutsche expects that a bigger number of prime conforming and jumbo mortgages will be part of the mix.  buried treasure

Of course, this brings up the subject of “strategic default”, or those borrowers who simply choose to walk away from their mortgage even though they might be able to make their payments.   While some borrowers resist strategic default on moral and social grounds, it seems that strategic defaults are higher in the 11 states that are “non-recourse”, that is they do not provide for the lender to go after the borrowers’ other assets after defaulting.  New Jersey is a recourse state.

For more good news, Fannie Mae’s losses reached $1.2 billion in the 2nd quarter of this year, bringing the total U.S. Treasury funding to $84.6 billion.  Fannie said it “does not expect to earn profits in excess of its annual dividend obligation to Treasury for the indefinite future.”  No kidding.

Posted by Lori Turoff | Currently 5 Comments »

2010 Jul 29th

Think Your Condo is In Good Financial Shape? Think Again.

Fannie Mae Rules the Daypile of money

Since the credit crisis Fannie Mae has come out with new lending regulations that are having real impact on Hoboken condo buyers.  Here is a brief overview of the pertinent issues:

One entity cannot own more than 10% of the total property.   This is apparently to keep one party from having too much control and risk and to prevent “vulture buyers” from taking over the property.

There cannot be more than 20% non-residental space. Most mixed commercial-residential use projects, like Maxwell Place,  will be affected by this.

The Condo Association must have at least 10% of its budgeted income designated in a capital reserve fund for replacement reserves and adequate funds budgeted for the insurance deductible. This is an issue in many of Hoboken’s older condominium associations.  For years these associations, especially the self-managed ones, have kept woefully inadequate reserves and operating budgets. Many 2 and 3 unit condo buildings have no reserves at all.

Fidelity insurance will be required for condos with 20 or more units, ensuring that association funds are protected. This requirement is being extended to include established condominiums.

No pending litigation involving the structural soundness, safety or habitability. Borrowers may ask for a waiver if they can establish adequate insurance coverage for the litigation or otherwise little or no risk of loss to the association.

Borrowers must  obtain an HO-6 condominium insurance policy on their unit unless the condo master policy provides interior unit coverage; coverage may not be less than 20% of the assessed value. An HO-6 policy typically covers personal property, personal liability, and the physical unit from the walls and in. Many policies also include special assessment coverage or the option to include a special assessment coverage rider.

The Condo Association must have adequate flood insurance. Nowadays, that means replacement value coverage.  Few Hoboken condos have sufficient coverage.  The buyer/borrower may be able to buy a supplement to the condo policy to close the gap in coverage.

This is just a quick overview of the current rules.  Buyers often ask me what the maintenance fee includes or why it is so high.  This is part of the reason.   Paying a management company to professionally manage the building and be sure these requirements are properly met is another.  I have seen deals fall apart every day due to inadequate reserves,  insufficient flood insurance and lack of records.  While it may not matter much to you as a unit owner of you’re not selling today, owning in a building with financial inadequacies hurts the marketability of your property and thus its value.  So in the long run, it matters to all condo owners.

Posted by Lori Turoff | Currently 11 Comments »

2010 Jun 21st

It’s the Summer Solstice – Let’s Shine Some Light on Hoboken Tax Appeals

Did you File a Tax Appeal in Hoboken?

Summer Solstice

Summer Solstice

There is hardly a new listing out there that doesn’t say “taxes under appeal” these days.  Since the big tax increase of last year, filing a tax appeal has become quite common.  In fact, in Jersey City, the successful appeals have in and of themselves caused some fiscal problems for the city.  So here is my question – have you filed a tax appeal?  I’m very curious to know how successful people have been in the tax appeal process.  Does it pay to accept the offered settlement or is it worth it to go before the tax board.  What is the typical tax reduction?  Is it worth it to use a lawyer or is it better to do it yourself?  Let’s get this info out there for all of us to use and learn from.  If you filed a tax appeal, please  fill out the form below (you don’t need to give your name or address) and I’ll compile and post the results:

Posted by Lori Turoff | Currently No Comments »

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