Dawn Rivera’s Fremont & East Bay Real Estate Blog

Every day, more people are headed closer to foreclosure, and toward the day they may have to leave their home. What should you do if you are soon to join the people getting a foreclosure notice?

First and foremost, you should forego the natural human tendency to freeze and do nothing. Face the problem head on and prepare, for hours and hours, weeks and weeks of making phone calls and writing to people who may be able to help.  Don’t think it’s too late to do anything, As long as you are residing in the home, you probably have some opportunity to keep your home.

People facing foreclosure have more avenues to pursue than they might realize, for instance they have more options than (pay up or move out) that many homeowners think is their only choice.

- Negotiating a Loan Modification.
- Refinancing the loan.
- Have an agent List the home for a possible "short sale."
- Selling the home to an investor.
- Declare bankruptcy.

Short sales, are where the lender agrees to accept less than is owed on the home, to avoid the expense of a foreclosure-typically are handled by real estate agents, which at least takes some of the pressure off of a stressed homeowner. Many professional Realtors are completing more short sales these days and have many buyers looking for bargains, though the process can be slow and frustrating.

January 10, 2009-As homeowners recommit to their current house in the economic and housing downturn, they’re looking for ways to find more space to make the most of what they have.

"People are saying, ‘We’re here for a while, so what can we do to make this place more usable and give us space?’" says Laura VanSickle who with her husband, Eric, owns Closets by Design in Charlotte, N.C.

The recession has been bringing people to her doors, VanSickle says, as homeowners look for ways to make their cluttered homes feel roomier.

But finding more space is often harder than installing a few bookshelves or cleaning out a closet. We asked area storage and organization experts for their best tricks to adding more square footage to your home without adding a room.

1. Think up. There’s often plenty of space up high in closets and pantries for another row of shelves — and often we don’t fill the ones that are already there.

"We’re really good at maximizing the horizontal space, but we forget about the vertical space," says Carson Tate, founder of the Charlotte organizational services company Living Simply. She recommends using the backs of doors to store items like shoes or accessories, and even the roof of a garage can be fitted with shelves to keep Christmas decorations or rarely used items such as car-top carriers.

2. Try to get some items off the ground if possible to free up floor space and make your rooms seem bigger. Would a lighted wall sconce work, instead of a table with a lamp on it? Do you need an entire bookcase, or would a few wall-mounted shelves suffice? In an office, install shelves 12 to 18 inches below the ceiling and line the walls with books. Add a small ladder and it’ll have a library feel. And wall-mounting a flat-screen TV eliminates the need for a big media center.

3. Have a bonus room? Put every inch to use. "They’re big, odd-shaped rooms and you don’t know what to do with them," Laura VanSickle says. The trick, she says, is to carve them up into smaller spaces. Buy a wrap-around desk and fill it with office supplies to become your kids’ homework corner. Use low shelves to create a nook for toys, and another nook for video games and all the gaming accessories. "It’s amazing how you can squeeze a lot of use into a room," VanSickle says.

4. Transform your guest room into an office, exercise room or living area by adding a Murphy bed. Murphy beds flip up for vertical storage inside a cabinet, and are ideal space savers because they are just 18 to 20 inches deep — in some cases even allowing your bed to transform into a wall of bookshelves.

Today’s Murphy beds are far more comfortable and easy to use than those of decades past, and much prettier, too. Now, Murphy beds accept regular mattresses and can be flipped open or closed easily with one hand. One Charlotte-area Murphy bed retailer, Buy Bye Beds, sells Murphy beds starting at $1,599, including the mattress. The company also sells cabinets that contain fold-away "drop tables" ideal for crafting, sewing or other projects that you don’t need out every minute.

Murphy beds are making a comeback in urban settings — Buy Bye Beds has been hired by developers to install them in some condominiums in uptown Charlotte, says owner London Scialdoni.

5. In kids’ rooms, don’t toss toys into giant toy bins, but instead give them low bookshelves with small containers for different types of toys. Says Tate of Living Simply: Don’t stack books on a bookshelf, because young kids often have trouble inching one book out and putting it back correctly. Instead, place a stack of books in a large square basket where they can be flipped through.

6. Choose furniture wisely. Skirted tables are perfect for stashing almost anything, and can be placed in almost any room of the house. A bench with a hinged lid is perfect for the foot of a bed or under a window, and is nice for storing linens, towels or clothes. Use long, flat storage boxes to keep items under beds or buy a set of ready-made steel bed risers to hike the bed up and allow for more storage. Leather storage ottomans do double duty in family rooms as seating or storage.

7. Got a small, useless space? Fill it in with cabinets. Master bathrooms tend to be huge in newer homes, and open walls are ripe for an extra cabinet to store necessities such as medicines, towels, linens or bath supplies, VanSickle says. One client asked her to create a built-in vanity in the corner of an odd-shaped closet.

8. Install a hanging bar in your attic. It’s the perfect place to hang tablecloths that are used only a few times a year, Tate says. Buy a canvas bag at a storage or discount store, toss in some cedar chips and hang the linens. "They’re out of the way and they stay nice and crisp and fresh."

9. Create more space in your closet. Tate recommends having just one kind of hanger in your closet, as it makes clothes easier to see. Her choice: the slimline hanger (www.slimlinehangers.com). The hangers are slim, so they take up little space, and they’re covered with a velvet-like material that won’t allow your clothes to slip off. They’re strong, so they won’t bend even under the weight of a winter coat, she says.

Dec. 12, 2008-Like many retirees, Marlene Laffoon, 73, watches in dismay as both her home’s value and her investments slide southward. And yet everyday costs for this former bookkeeper aren’t falling correspondingly.

So Laffoon’s spirits rose last month on an unexpected windfall of good news: Loan amounts on reverse mortgages have been increased and the fees decreased.

A reverse mortgage allows homeowners 62 or older to borrow up to $417,000 of their home’s equity to use any way they wish; the old limit was $352,790. They don’t have to repay it as long as they stay in the home.

Laffoon promptly asked her reverse-mortgage officer, Jerry Dawson at Frontier Bank in Everett, Wash., how much cash she could get if she took out a new reverse mortgage to replace the one she got several years ago.

"I really don’t want to touch anything in my investments now, and yet I can’t wait 10 years to have something to draw on," says Laffoon, who used funds from her original reverse mortgage to remodel the bathrooms and re-roof her Snohomish County, Wash., home of 43 years.

Reverse mortgages have been growing in popularity for some years now, with more than 100,000 homeowners nationally taking them out so far this year. They’ve been offered by private lenders, by quasi-governmental mortgage backer Fannie Mae and by the Federal Housing Administration.

Following the turmoil in the mortgage industry, both private-lender and Fannie Mae reverse mortgages have either ceased or cut back substantially, says Darryl Hicks, associate director of the National Reverse Mortgage Lenders Association in Washington.

That leaves the FHA as the biggest player on the block. It recently announced the new across-the-board national $417,000 limit for its reverse, called Home Equity Conversion Mortgage, or HECM for short.

"It’s going to allow those people who own higher-priced homes to access a lot more of the equity of their homes for whatever need they may have," notes Hicks.

A borrower’s age and home equity determine the amount of money available. There are no income or credit score requirements, and a homeowner who’s already had a reverse mortgage can get another.

The older the borrower, and the more equity they have, the more money they can pocket. They can take it in monthly payments, in a lump sum or as a line of credit to be drawn on as needed. The amount of a reverse mortgage has to be paid back once the homeowners move out of the house-even if the house isn’t sold.

The typical borrower is in his or her 70s. Getting a reverse mortgage doesn’t affect the borrower’s ability to get Social Security or Medicare.

A home needn’t be paid off for its owner to get a HECM reverse. However, the owner must pay off the outstanding mortgage balance as part of the process.

.The FHA requires counseling for those considering a reverse so they clearly understand the pros and cons.

The Urban League of Metropolitan Seattle is one of the approved counseling agencies. A. Linda Taylor, its housing director, says there are a lot of misconceptions about reverse mortgages, which counseling clears up.

A common fallacy: Homeowners who get a reverse mortgage are signing their house over to the government or a loan company. That’s incorrect; they still own it.

Another one: Owners will have monthly mortgage payments. That’s not true, nor can the seller (or the seller’s estate) ever owe more than the total loan amount (including interest, which can be either variable or fixed).

However, Taylor suggests that homeowners and their families consider the reverse issue carefully because getting one isn’t always the best answer.

The loan, which requires all the normal closing costs plus mortgage insurance, can be expensive relative to the amount borrowers get, particularly if they’re near the minimum limit of age 62 or they have little equity in their home.

And finally, a reverse may not be the best solution for a cash-strapped homeowner.

Taylor recalls an elderly man who came with his large family for counseling.

"He was worried to death" about his finances, she said, but also concerned that getting a reverse would use up home equity he’d hoped to leave to his children.

A frank family conversation revealed the man was struggling to secretly pay a family member’s bills. When they others learned of this, they prevailed upon that family member to stop relying on the elderly man for support.

They also did the repairs the man’s home needed, repairs that would have consumed his reverse mortgage money.

So in the end, he found he didn’t need a reverse mortgage at all.

A reverse mortgage, which allows homeowners to cash out some of their home’s equity, is available to those 62 and older who own and occupy a single-family house, a condominium, town house, co-op, manufactured home or two- to four-unit building. (Some limitations may apply.)

Consumer Reports magazine suggests homeowners educate themselves by visiting these websites:

AARP, at www.aarp.org/money/revmort/, has thorough information about reverse mortgages, plus a calculator that allows homeowners to estimate how much money might be available to them.

The National Reverse Mortgage Lenders Association, at www.nrmla.org, has mortgage information, plus a list of approved lenders who subscribe to its code of ethics.

Housing and Urban Development, at www.hud.gov, has information plus a list of HUD approved housing counseling agencies.

Federal Trade Commission has information on its site, www.ftc.gov, as do some banks’ sites.

January 12, 2009-Less than 24 hours after members of the 111th Congress were sworn into office, the National Association of Home Builders (NAHB) launched an all-out effort to make housing a centerpiece of the massive economic stimulus package that lawmakers are expected to complete by mid-February.

More than 80 builders from across the country converged on Capitol Hill yesterday to meet with the congressional leadership and key members of the banking and tax writing committees to convey the message that a housing stimulus is urgently needed and that restoring demand for housing is the fastest and most effective way of reviving the economy.

The key ingredients to the recovery plan call for Congress to support enhancements to the home buyer tax credit, to provide below-market interest rates on 30-year fixed-rate mortgages and to continue foreclosure prevention measures such as those advocated by Federal Deposit Insurance Corporation Chairman Sheila Bair.

Underscoring the urgency of the situation, in a briefing to builders before their meetings with lawmakers, NAHB Chairman Sandy Dunn said: "Our industry stands at a crossroads and our efforts here today are vital to the housing industry’s ability to weather this storm and come out the other side healthy and in a position to grow."

"Congress must understand that housing is central to the economic crisis, that housing has led our nation out of past recessions and that it can do so again," she added.

"Over the next year, the stimulus plan will increase economic activity in every state as vacant homes are absorbed, households are able to relocate to new jobs, home values are stabilized and local property tax revenues return to their pre-recessionary levels," said NAHB Chief Economist David Crowe.

This year alone, Crowe said the plan would result in 200,000 additional new home sales, 1 million more existing home sales and a boost in expected housing starts from 649,000 to 908,000, on par with last year’s level.

In addition, the plan this year would create more than 539,000 jobs, generating $26 billion in wages and salaries, $21 billion in business income and $28 billion in federal, state and local tax revenues.

Under Bair’s plan, the federal government would provide $24 billion in loan guarantees that could help as many as 1.5 million home owners modify their existing mortgages and avoid foreclosure.

Putting the situation in starker terms, Crowe said that barring any significant federal action, 4 million strapped borrowers could lose their homes this year. "There are at least 1.5 million excess empty homes on the market today. That does not include homes people live in and want to sell," he said.

In order to stabilize the marketplace and put a floor under declining home values, NAHB and the Fix Housing First coalition are calling on Congress to pass short-term, targeted incentives that spur demand and encourage Americans to buy homes.

Specifically, a temporary, expanded home buyer tax credit is needed to reduce excess inventory and encourage fence sitters to enter the market. The Fix Housing First legislative proposal calls on Congress to enact a stimulus plan that would reduces mortgage interest rates to as low as 2.99% on 30-year fixed-rate conventional loans purchased between Jan. 1, 2009 and June 30, 2009. The interest rate would be 3.99% for contracts that close between July 1, 2009 and Dec. 31, 2009.

At the same time, lawmakers need to make the current $7,500 home buyer tax credit much bigger and better, eliminating its current recapture provision and making it available to all purchasers. The coalition is calling for a credit amounting to 10% of the home’s price, capped at 3.5% of local FHA loan limits. This would range between $10,000 and $22,000.

The key is basing the credit amount on prices in each locality.

"Obviously, you don’t need a $22,000 credit in Bozeman, Mont. but a $22,000 credit will just get you into the marketplace in California," said Howard.

The tax credit and interest rate buy-down are not new ideas, Howard added. "Congress enacted a similar housing solution in the mid-1970s when the nation was in recession. The plan led us out of recession then, and it can do it again."

Bolstering the visits to Capitol Hill, more than 17,000 telephone calls and e-mails in support of the Fix Housing First proposal were received by the Congress from members of NAHB and the coalition.

To learn more about the coalition, go to www.fixhousingfirst.com.