The rental market is up. In fact in Chicago the costs of renting are up and the costs of buying are down, so this makes 2, 3,4 units ever rosier. Many properties cash flow 15% ROI in year one with just 20% down even in “sexy” neighborhoods of near west and north and south.  Some of these properties are selling for 50% less then what they did 4-6 years ago, but the rents have held relatively stable in most areas from that same time period.

Wow, what a great time to buy.  Those who can buy are the lucky ones.  Most of the major indicators are stating we are at the bottom of this cycle.   With rates still hanging low it’s time to move … the deals are there. I have a systematized, award winning process to selling real estate. Call me and lets get to work!!!!!

What if the federal government spent years designing a tool to help consumers shop intelligently for mortgages — comparing lenders’ rates, terms and total settlement costs — but consumers ignored it or didn’t use it?????????????

No need to speculate here; it appears to have happened. A new survey of 1,000 American consumers suggests that the “good-faith estimate” (GFE) disclosures that all home buyers and refinancers receive at loan application to facilitate shopping are not getting the job done.

Federally mandated good-faith estimates spell out the lender’s charges, all anticipated fees for title insurance, escrow and settlement services, plus other key costs. The most recent version of the GFE, released at the beginning of last year, contains space for consumers to take one lender’s estimates and get competing quotes from as many as three others. It also requires lenders to stand behind their estimates, guaranteeing that some of them won’t increase by even a penny at closing, and that others won’t increase by more than 10 percent.

But the survey found that the GFE may not be improving shopping as intended. After receiving the disclosure, 56 percent of buyers say they did no comparison shopping among lenders. Twelve percent used the form to contact just one other lender, and 10 percent weren’t sure whether they used the GFE at all. Just 3 percent said they comparison-shopped rates and terms at four lenders or more.

The survey, conducted by market research firm TNS Global for mortgage lender ING Direct, also found that 53 percent of those buyers who looked at the GFE spent less than 30 minutes doing so. Twenty-six percent either never looked at it or don’t know whether they looked at it. Forty-nine percent of buyers said the GFE disclosure was too complicated, “a waste of time,” or they weren’t sure. Just 37 percent rated it “useful.” The survey had a statistical margin of error of plus or minus 3.2 percentage points.

Between 2003 and 2008, the Department of Housing and Urban Development proposed modifications to the GFE, but critics said the revised disclosure, at three pages, was too long and predicted that it would become just another part of the paper blitz that cascades over mortgage applicants.

Kurt Pfotenhauer, chief executive of the American Land Title Association, said that “if the [revised] GFE were a rocket, it would still be sitting on the launch pad. Not only has it failed to simplify consumer shopping, there is evidence that [it] is actually confusing shoppers.”

Phillip L. Schulman, a lawyer who represents mortgage lenders and banks, said the survey results “are not surprising” because the disclosure looks complicated and “doesn’t tell buyers what they really want to know: How much they’re going to pay per month” from a given lender, with all expenses factored into a bottom-line number.

Brian D. Montgomery, who was federal housing commissioner during the final years of drafting the revised GFE, said, “We believed that making shopping easier would be a benefit because there had been very little real shopping before. But obviously we didn’t have a magic wand” that would change consumers’ traditional behavior overnight.

Meanwhile, Congress has shifted responsibility for GFEs and other consumer mortgage disclosure issues to the new Consumer Financial Protection Bureau, which is scheduled to spring to life in July. The bureau said that streamlining the GFE and combining it with federal truth-in-lending disclosures will be one of its high-priority projects.

But given the glacial pace of federal rulemaking, the three-page GFE is likely to remain in use for many months, maybe a year or more, before any new streamlined version takes its place. So here’s a smart action plan for you as a consumer. If you want to shop intelligently for a home loan, buck the popular trend: Read your GFE. And use it to compare costs — line item by line item —among multiple lenders.

If you’ve been looking for a way to pay for energy improvements to your house, two little-publicized new mortgage programs could provide you the cash you need.

Both the Federal Housing Administration and mortgage investor Fannie Mae recently launched start-ups in the energy conservation arena. Here’s a quick overview, with some pros and cons:

The FHA’s new program is called “PowerSaver” and allows eligible owners to borrow up to $25,000 at fixed rates between 5 percent and 7 percent for as long as 20 years to finance high-efficiency windows and doors, heating and ventilating systems, solar panels, geothermal systems, insulation and duct sealing, among other retrofits.

Though it is officially a pilot program, Housing and Urban Development Secretary Shaun Donovan estimates that 30,000 PowerSaver loans will be closed in the next two years. It eventually could become a major national program for residential energy upgrades, with total loans extending into “the millions,” he says.

One important element in the program: energy audits. Although the audits won’t be mandatory, most participating lenders are expected to encourage owners to sign up for an energy-efficiency analysis by a certified specialist. The audit should pinpoint where your house is leaky or otherwise inefficient in energy use and should recommend the specific types of upgrades or additions that could help cut your bills and reduce greenhouse emissions.

The FHA will insure loans to cover the improvements up to the $25,000 maximum under the following guidelines:

- The house must be your principal residence, detached and single-family only. No rentals, no investor homes, no second homes.

- You’ll need to demonstrate that you are a solid credit risk. Minimum FICO credit scores of 660 are required, plus your total household monthly debt-to-income ratio cannot exceed 45 percent.

- Houses with negative equity will not qualify. You’ll need some level of equity in the property; there is no mandatory minimum stake, but the combined primary mortgage debt plus the PowerSaver second lien cannot exceed 100 percent of the appraised market value of the house. You could, for example, have a 10 percent equity position in a $200,000 home and still qualify for up to $20,000 in a PowerSaver.

- Lenders are likely to take an extra hard look at all your income and asset documentation because, unlike other FHA-insured mortgages, PowerSavers will cover only 90 percent of the lender’s loss or insurance claim in the event of a default.

Eighteen lenders around the country have signed up so far to participate, ranging from giant Quicken Loans — a top-10 national mortgage originator — to regional and local players such as California-based Sun West Mortgage, Seattle’s HomeStreet Bank, the Bank of Colorado, Stonegate Mortgage in the Midwest, Pennsylvania-based AFC First Financial and the University of Virginia Community Credit Union. A spokesman for Quicken Loans said the company hopes to offer PowerSaver in as many as 34 states during the pilot period.

Some pros and cons of PowerSaver: The biggest plus is its low fixed interest rate and long term, especially in comparison with most homeowners’ alternatives, such as bank home-equity loans and lines of credit, which typically cost more and may have less-favorable payback terms. The main potential drawback: Since the program permits total household mortgage debt loads of up to 100 percent of market value, there’s the chance that some borrowers could encounter payment problems if they experience even slight income declines or if property values in the area decrease, putting them into negative-equity territory.

Fannie Mae’s “energy improvement” mortgage add-on program is significantly different from the FHA’s. Rather than a separate loan to finance energy retrofits, Fannie folds the cost of the improvements — capped at up to 10 percent of the estimated market value of the home following the energy efficiency enhancements — into the mortgage amount itself.

In effect, Fannie’s program, which is now available through participating lenders nationwide, allows you to purchase an existing house and improve its energy usage significantly with one mortgage at current market rates. Most single-family properties are eligible for the program, except for manufactured houses and cooperative units.

Be aware that Fannie requires an audit by a certified Home Energy Rating Systems (HERS) expert upfront to justify the proposed modifications to the house as truly cost-efficient. The HERS audit must be paid for by the borrower, but Fannie will credit an extra $250 through the lenders to partially defray this expense.

Several years ago, lenders had one price for a borrower. If they qualified, they got the same rate, whether they had good, moderate or excellent credit.

They also got the same rate whether they put down 5% or 25%.  This has changed over the years and here is an example of how it works.  Mortgage Rates below are subject to change and purpose of the example is to illustrate how a slight difference in a credit score can impact your loan.

With a 740+ credit score, with 25% a down-payment at an interest rate of 5% on a 30 year fixed (that would be  at -0- lender points),

With a 700 credit score, the loan pricing would be 5% with 3/4 of 1 point (3/4% of the loan amount), or 5.25% with no points.  (Roughly, an increase of 1/4% in the interest rate covers 3/4 to 1 point in costs.

With a 679 credit score, the loan pricing would be 5% with 2.0 points or a rate of 5.5+% with no points

With a 659 credit score, the loan pricing would be 5% with 2.5 points or a rate of 5.75+% with no points.

The costs are the points to be paid by the borrower at closing, or the additional cost to be absorbed by the lender when the borrower accepts a higher rate.  A higher rate may me more acceptable if the property is to be held for a shorter term or the borrower may be short of liquid assets.

Is the Federal Housing Administration losing some of its post-boom, post-bust oomph????

Is the Obama administration’s plan to gradually throttle back the FHA’s home mortgage insurance volume already having effects? And if so, what might this mean to you as a buyer????

There are definitely signs that something’s brewing ………

Total applications for FHA-insured single-family mortgages are down 30 percent year to year through March, according to the agency’s data. Applications from prospective home purchasers are down 35 percent. The FHA’s popularity with buyers previously had sustained its high origination volumes.

The FHA put its second premium increase in six months into effect Monday. Higher premiums mean higher monthly payments for buyers and could have the effect of squeezing some consumers with tight budgets out of the market entirely.

The private mortgage insurance industry, which competes with the FHA for borrowers who make low down payments, is touting its newly resurgent conventional mortgage products, which may offer significant monthly savings when compared with the FHA’s.

Some of the agency’s long-standing advocates are wondering aloud whether the administration’s policy tilt toward more private-sector involvement in the mortgage arena may be hurting first-time buyers who can’t bring large cash resources or high credit scores to the table.

Higher down payments stems from the Obama administration’s February “white paper” on housing reform in which policymakers called for higher down payments across the board, including at the FHA. To date, no increases have been proposed by the agency, but some analysts believe that a move to a 5 percent minimum down — up from the current 3.5 percent — would not be surprising in the months ahead. The FHA’s maximum loan amounts might also drop significantly this October if Congress does not renew the current economic recovery law ceilings, which now top out in high-cost areas at $729,750.

Given these developments, how does the FHA financing stack up against rivals in the low-down-payment space right now? Private mortgage insurers have a quick response: They say their lower monthly costs already are winning back some of the business they lost to the FHA during the rough times of the recession.

For instance, Radian Guaranty, a major home loan insurer, claims that in the wake of the FHA’s premium increases, a conventional low-down-payment mortgage carrying its insurance coverage now requires monthly payments 15 percent lower than FHA-insured mortgages for borrowers with FICO credit scores above 720.

Radian provided this cost-comparison example to illustrate: Say you’ve got FICO scores above 720 and you need a $285,000, 30-year loan with 5 percent down at a 5 percent interest rate.

The FHA mortgage would cost $1,806 in principal and interest per month. The same loan insured by Radian would cost anywhere from $1,530 a month to $1,753, depending on the type of premium payment plan you choose. The cheaper alternative would involve an upfront cash payment of the insurance premium; the higher-cost alternative would involve standard monthly payments of the premium.

Brien McMahon, chief franchise officer with Radian, said in an interview that, as a general rule, private insurance on low-down-payment loans will now beat the FHA whenever the buyer puts down 5 percent and has a FICO score of 720 or higher or puts down 10 percent and has at least a 680 FICO score.

So does this mean that all buyers with low down payments should now abandon the FHA and switch to conventional loans? Hardly.

Majority of FHA users can’t fit into the private insurers’ high-FICO, strict underwriting model, so those vaunted savings may be illusory. The FHA, by contrast, continues to offer much higher and more flexible maximum debt-to-income ratios, far more generous underwriting and lower down payments, and will accept FICO scores that conventional lenders and private insurers won’t touch.

If you’re purchasing a home with a small down payment, check out both the FHA and the private alternative with your loan officer. It’s true that the FHA has just gotten a little more expensive, but it may still have the total package you need to do the deal.

When you pay $450 to $550 at settlement for an appraisal on a home purchase or refinancing, do you assume that all or most of the money is going to the appraiser who performs the valuation?

That’s logical, but probably not correct. Despite new Federal Reserve regulations, which took effect April 1, that require lenders to pay appraisers fair fees, growing numbers of them say they are still being offered $200 to $250 — even as little as $134 — for work that gets billed out to consumers on settlement sheets at $450 and higher.

Last year’s Dodd-Frank financial reform law mandated that appraisers receive fees that are “customary and reasonable” for their local market areas, yet the largest national appraisal organization, the 25,000-member Appraisal Institute, says that is not happening. Leslie Sellers, immediate past president of the group, said in an interview that “the average fees across the country today are about $225 to $250 — nowhere near reasonable or customary” in most markets.

Who’s getting the differential between what consumers are billed and what appraisers are paid? Sellers says management companies that connect lenders with local appraisers take a percentage for their services. But often lenders “turn [appraisals] into a profit center of their own off the backs of appraisers and consumers themselves.”

Should you care? Absolutely, for several reasons:

Accurate appraisals are in your interest as a consumer. They can be deal-breakers on a purchase if they are low-balled. But performed competently, they are accurate measures of your equity when you refinance or seek a second mortgage.

Most experienced independent appraisers refuse to work for $200 to $250 because they can’t pay their overhead at those rates. Less-experienced appraisers who sometimes have to travel long distances from their home markets tend to be more willing to work for the lower amounts.

It’s a matter of principle: You resist overpaying for products elsewhere, so why not for appraisals? Besides, federal law prohibits home real estate settlement-related charges when no actual services are rendered. What additional services are being supplied when an appraiser is paid half of what you’re being charged by the lender at closing?

Tom Kirchmeyer, president of Kirchmeyer & Associates — an independent appraisal management company based in Buffalo, with 8,000 affiliated appraisers around the country — says consumers often have no idea what they’re really paying for because “there’s no transparency” in the process. Kirchmeyer favors mandatory disclosure of how much the appraiser is receiving and how much the appraisal management company that arranged the assignment is receiving. So does Richard Hagar of American Home Appraisals in Seattle, who says that major lenders that own or are affiliated with appraisal management companies oppose it, because they “know that if [the financial facts] are disclosed, consumers are going to riot.”

In a hypothetical example, say the appraiser receives $250 and the management company receives $100. How can the lender, which is charging $500 for “appraisal services” as noted on the HUD-1 standard settlement sheet, justify the $150 difference?

It can’t, says Gary Crabtree, head of Affiliated Appraisers in Bakersfield, Calif. Worse yet, he says, employing “subprime” appraisers for low fees often leads to lowballed valuations that are harmful to homeowners and buyers.

As a recent example, Crabtree says an unhappy homeowner showed him a valuation performed by a low-cost appraiser hired by the appraisal management affiliate of a large national bank. The house was 4,000 square feet, sited next to a country club, and the owner had just spent $250,000 on renovations.

Crabtree, who refuses to do appraisals for the low fees paid by the bank’s affiliate, said the house should have been valued around $600,000. But the appraiser hired for the assignment valued it at just $320,000, using distressed sales and properties located outside the area as comparables.

How is this happening when Congress mandated higher “customary and reasonable” fees? Appraisers say much of the blame goes to the Federal Reserve, whose regulations that took effect April 1 created a giant loophole for lenders and management companies that wanted to keep playing low-ball games with fees. The Fed rule allows them to consider their own low payments in their calculation of what is “customary and reasonable” — a concept that was never part of the Dodd-Frank legislation.

The Appraisal Institute’s Sellers says his group and others are seeking to persuade the Fed to tighten its regulation. But in the meantime, consumers should demand transparency: Of my $500 appraisal fee, who got what? And why?

When you hear that the Obama administration plans to extend a policy that allows low-down-payment financing of “flipped” houses for 2011, your first reaction might be: No way. At this stage of the boom-to-bust-to-recovery cycle, is high-leverage house-flipping the type of activity the federal government should be encouraging?

Definitely, it is not. A classic real estate flip involves the quick resale of a house or condominium at a significantly higher price than the purchaser paid with only cosmetic improvements to the property, if any at all. Sometimes only the contract itself is being signed over to a new buyer at a higher price.

A transaction in Florida last year illustrates the concept: An investor bought 19 condo units in a financially distressed Miami development for $1.25 million. She closed on the deal and then resold the units barely 20 minutes later to another investor for $1.45 million-a $200,000 instant profit. “That was a pretty impressive flip, even for this market,” says Peter Zalewski, founder of Condo Vultures, a firm that tracks condo activity in the Miami area and advises investors.

The Obama administration plan has no connection with deals like these, though the word “flipping” is in its title. Here’s a little history: For years, the government had prohibited the use of FHA-insured mortgage financing by buyers purchasing homes from sellers who had owned the property for fewer than 90 days. The idea was to prevent speculators from defrauding the government through quick flips, deals usually involving straw buyers and corrupt appraisers, at wildly inflated prices.

One side effect of that policy, however, had been to stifle purchase-and-renovate projects by legitimate, small-scale investors who buy houses after foreclosures or loan defaults and then resell them in a substantially improved condition. In many parts of the country, first-time and moderate-income buyers often sought to buy these fixed-up houses using FHA-insured mortgages with 3.5 percent down payments but were prevented from doing so by the long-standing “anti-flipping” rules.

This, in turn, left large numbers of foreclosed, vacant houses sitting unsold and deteriorating, with negative effects on the values of neighboring properties.

In January, 2010, FHA Commissioner David H. Stevens announced a one-year suspension of that rule, permitting qualified buyers to obtain FHA mortgages on properties that were acquired by rehabbers less than 90 days before. The plan, set to expire at the end of this month, came with key safeguards for purchasers, including inspections and multiple appraisals in some cases to document the amounts investors spent on improvements.

Vicki Bott, deputy assistant secretary for single-family housing at FHA, confirmed that the agency expects to continue the policy for another year, and hopes to make a formal announcement soon. Not only have first-time buyers responded overwhelmingly to the opportunity to buy “turn-key” renovated homes with low down payments, she said, but they have performed well on their mortgage obligations.

“Obviously we have concerns about flipping in general,” Bott said, but FHA has seen none of the fraud problems, defaults and re-foreclosures that cost the agency millions in insurance payouts in earlier years. The challenge for first-time buyers, she added, “is that they often don’t have the money to do repairs. Even replacing the carpet can be a hardship. So when you can bring in investors” who will do the renovations before resale, “it makes a huge difference.”

What do investors think about the relaxation of FHA’s anti-flip rules? Not surprisingly, they tend to be enthusiastic. Paul Wylie, who with a group of partners and contractors specializes in acquiring, renovating and reselling foreclosed and distressed houses in the Los Angeles area, says the government’s policy “has been a very positive approach” because “it recognizes the role that [private investors] can play in helping the housing market get back on its feet.” In the L.A. market, Wylie said, FHA financing now accounts for 40 percent of all home purchases and 60 percent of purchases in predominantly Latino and African American communities.

Buying foreclosed houses “comes with a lot of risk factors,” he said. “There’s no title insurance; we don’t have a good idea of the extent of the defects” inside properties that have been sitting vacant or vandalized for months. Some houses come with delinquent property taxes to boot, which Wylie’s group typically must pay.

This is not a game for the faint of heart.

Then again, the profit opportunities can be significant as well. Most of the Wylie group’s houses sell for at least 20 percent more than what Wylie paid at acquisition-a quick gain that potentially works for buyers, sellers, neighborhoods, and yes, FHA itself.

Could the federal government’s booming FHA mortgage program be forcing homeowners to pay tens of millions of dollars of extra interest charges when they sell their houses or refinance loans?

Critics say yes. The government says the critics aren’t providing the full picture.

Those critics include Sen. Ben Cardin (D-Md.), who is sponsoring legislation that would prohibit FHA lenders from collecting a full month’s worth of interest from sellers and refinancers who pay off their mortgages — go to settlement — before the final day of the month.

No other major source of financing, not Fannie Mae, Freddie Mac or the Veterans Affairs Department, requires interest payments from borrowers beyond the date they pay off their loans. On an FHA loan, if you sell your house and go to closing early in the month, you are charged interest through the rest of the month.

To illustrate: Say you pay off a $200,000 FHA-insured mortgage on the fifth day of April. You’ll be charged an extra $820 to cover interest for the month’s remaining days, according to estimates prepared by the National Association of Realtors, which supports Cardin’s bill.

If the same loan is paid off on April 15, the interest levy would total $492.

Where does the money go? Ted Tozer, president of the Government National Mortgage Association, which bundles FHA loans into bonds and sells them to investors, says it flows to bondholders, who are guaranteed payment of interest for the full month even if the balance is paid off much earlier.

Tozer maintains that the direct payment approach has afforded FHA borrowers a slight discount on their initial interest rates, probably in the range of 0.10 percent to 0.15 percent, compared with conventional loans.

But critics charge that the extra interest taken from FHA sellers and refinancers exerts a far greater personal economic impact — often cutting their proceeds by hundreds of dollars — than the barely perceptible rate break they received on the mortgage itself.

“This is an issue of fairness,” Cardin says. “Homeowners should not have to pay interest on loans that they have fully repaid.”

His bill, the Reduce Excessive Payments Act, would prohibit the practice and require FHA lenders to compute payoffs on a per-diem basis rather than a full-month basis.

Real estate agents are especially critical of FHA’s interest-prepayment policy, because they say it squeezes money out of sellers who have little or no control over the timing of their closing transaction. Many have no idea of the FHA’s requirement, realty agents say, but even if they do, the buyers of their houses generally are in a better position to control the date of settlement because they are dealing directly with title and escrow companies.

The National Association of Realtors says the out-of-pocket costs to unwary consumers are huge. Citing the most recent statistics on early payoffs it claims it could obtain from FHA, the group says that during the year 2003 alone:

FHA borrowers paid $587.4 million in “excess interest fees” because of the full-month rule.

Only 16 percent of loans were prepaid during the final five days of the month.

The average “excess interest” payment from borrowers to lenders and investors was $528, but 425,000 homeowners paid an average $622 in extra fees.

Between January 2000 and January 2004, according to the Realtors’ analysis of FHA data, borrowers paid more than $1.38 billion in excessive interest. The corresponding amounts today could be significantly higher, because FHA has a much larger market share.

Asked for comment, Vicki Bott, who heads FHA’s single-family mortgage office, acknowledged the controversy and said that the agency is “examining this issue very closely” and actively considering a regulatory change.

In an interview, Tozer said the entire issue is up to FHA, and that his agency could readily sell its mortgage-backed bonds using the per-diem payoff approach that is standard in the conventional-mortgage marketplace. But investors would still need to be compensated for the full month’s worth of interest, he said, and that would probably require a slightly higher rate on the mortgage.

Where’s this headed? With pressure coming from Congress — notably from an influential Democrat who tends to be supportive of the Obama administration’s policies — FHA may move off its disputed practice.

In the meantime, if you have an FHA loan and plan to refinance or sell your house, try hard to schedule the closing at the end of the month. You could save a bundle!!!!