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What’s the Mortgage Count?

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Posted On: 01/14/2009

Q: Does anyone know how many mortgages we have in the U.S.?

A: According to the Mortgage Bankers Association, roughly 35 percent of all homes are owned free and clear, while about 50 million residential properties secure mortgage financing. Some homes, however, have multiple mortgages – think of a property with a first lien and a second lien in the form of a home-equity line of credit.

A huge percentage of all home loans are owned by Fannie Mae and Freddie Mac. According to their regulator, the Federal Housing Finance Agency, as of June 30, 2008, they held 30.6 million mortgages. Of this number, 25.4 million were prime and 5.2 million were nonprime.

Q: Home values in our area have declined. I would like to get into the market but worry that prices may go down further. How will I know when the market has hit bottom?

A: Just as with the stock market, it would be great to know when prices are at their lowest and highest points. But if there’s one thing we’ve learned during the past year it’s that whether predictions come from economists, Wall Street analysts or fortune tellers, no one knows what will happen in the future and therefore no one knows when prices will peak or plummet.

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Instead of marketing timing, try these questions: What’s the best way to get the shelter I need in my circumstances for the lowest cost over time? What’s the value of tax benefits to me? Will I stay in this community long enough to justify the purchase of a home? Can I get sane, sensible fixed-rate financing? How much can I put down? Et cetera.

Speak with local real-estate brokers and ask about foreclosures in your area. Is the inventory growing or shrinking? Until we reduce the number of unsold REOs – real estate owned by lenders – there is little chance that home values will rise.

Q: I’m a real-estate broker. I have a written buyer brokerage agreement with a purchaser, and I found a home that she would like. She has now asked that I lower my fee. What should I say?

A: Imagine if your heating system needed to be replaced. The contractor gives you a bid, you accept, he or she comes over and does the work and then you say, “well, gee, I just got a big bill for my car so I’ll have to pay you less.” No one would think that was right. The contractor already did the work and you got the benefit of that labor and skill.

In the same sense you are on very good grounds to flat-out tell your client no. First, you have a written agreement, and she knew the fee in advance. Second, she is asking you to reduce your fee after you have found a home for her, after you have performed a portion of the task for which you were hired. That’s not right. Third, there is something in this world known as “contract sanctity.” That means you’ll honor your agreement – and she should too.

The practical problem is different. You may be in a market where sales have slowed and you really need a commission check. Or, it may be better to finish the transaction, get paid and move on.

Truth is, it doesn’t matter what decision you make. The relationship has been soured. If you say no she’ll be unhappy, if you say yes you’ll be displeased. There are no winners.

What to do? A lot of brokers would stick to the agreement and gently explain that they too have costs – some not so gently. Either way, the problem is then in the buyer’s court, where it belongs.

Q: We’re renters. We really like the house that we lease, and our landlord has been very fair with us. The problem? We’re going to be late with the rent next month. What can we do?

A: Tell the landlord as much in advance that the rent will be late. Explain when the rent will be received. Apologize for the inconvenience. The lease may say that you have to pay a late fee. If so, don’t argue; just pay it.

Read your lease. Potentially, the penalty for being late could be eviction – the acceptance of a late payment may be at the landlord’s option. Eviction, however, usually doesn’t make a lot of sense for the landlord if you’ve maintained the property in good condition and consistently paid on time. In fact, if you’ve been a responsible long-term tenant a savvy landlord might even waive the fee. Why? Good PR.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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