Given such huge losses should the money you pay for homeowner’s insurance go up?

A firm “no” comes from Joanne Doroshow, executive director of the Center for Justice & Democracy.

“The damage from hurricanes is already modeled, planned for, and paid for by homeowners premiums,” said Doroshow, “and rates are not supposed to rise after these events.” In other words, insurance companies are supposed to understand risk, collect cash in advance, invest cautiously and have reserves available to pay off claims when something like hurricanes Katrina or Hugo come along.

Doroshow explained that “in the wake of Hurricane Andrew in 1992, insurers changed the way they set prices for hurricane coverage.In lieu of using the prior 20 to 40 years of recent history to set the prices by state, the industry adopted scientific modeling. These models project, by segment of the coastline called reaches (the anticipated storm damage for different category hurricane storms). The projections are for at least 10,000 years of virtual experience based on the best hydrological, meteorological, actuarial and other inputs available.

“This means,” said Doroshow, “that the 10,000 years of projected experience includes periods of many and very large hurricanes (like a category 5 storm making a direct hit on Miami and causing $200 billion of insured loss) and also periods where no hurricanes make land fall, like recent years.”

The bottom line is that insurance companies employ lots of actuaries and weather professionals to set their rates. Huge reserves should be in place. If company predictions preparations are wrong the result should be smaller dividends rather than higher premiums.

Why Home Insurance Rates Should Not Soar After Hurricane Irene is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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On Monday, May 11th, HUD posted Mortgagee Letter 2009-15 which explained that “Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans– secured only by the anticipated tax credit due the homebuyer as collateral.”

Immediately the letter was removed from the site. However, we have a copy of HUD Mortgagee Letter 2009-15.

It is not clear if HUD has changed its policy or if the letter will be back. As of early May 18th, the letter has not been re-posted on the HUD Mortgagee Letter site.

If the policy is to allow state and non-profit groups to use the $8,000 first-time buyer credit created by the Obama Administration as a downpayment, then such purchasers would be able in many cases to buy a home with nothing down or close to it.

For instance, FHA requires 3.5 percent down. If a home is purchased for $225,000 the downpayment would be $7,875. Closing costs would be extra, but in today’s market it might be possible to get a seller to pay some or all of the closing costs because the FHA allows a 6-percent “seller contribution” from owners. Please speak with lenders and real estate brokers for specifics.

Stay tuned — we’ll follow up as more information becomes available.

Will HUD Allow FHA Loans With No Money Down? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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My interest in real estate and money began in high school. I worked during vacations for a real estate management company located near New York’s Wall Street and was greatly impressed by what I saw: Each morning piles of envelopes stuffed with rent checks would be delivered. The checks were credited to each tenant, sorted by property ownership, bundled with rubber bands, and then dropped into a large brown grocery bag. Bag in hand and with me tagging along, one of the owners would then go to several banks each day to make deposits. After a round of banking it was then off to lunch, through the eyes of a teenager a great way to make a living.

Since then I’ve managed to meet a range of people who have amassed substantial real estate wealth — ranging from those who have owned a few houses, to folks who have controlled thousands of apartments, and on to those who have vast numbers of commercial properties and measured their personal wealth in terms of eight, nine, and perhaps even ten figures.

What are the secrets?

The barkers on late-night television argue that you can make millions in real estate without cash or credit, but my conversations with those who have made it suggest otherwise. I think they would likely agree with the following principles:

• Start early. Real estate fortunes are generally made over a period of years, decades and generations. The earlier you start, the more time you have to accumulate property and benefit from appreciation.
• Live long. A little appreciation each year multiplied by many years can produce enormous wealth. Some real estate entrepreneurs have succeeded because they bought in their 20s and 30s and are still alive in their 80s.
• Save. One mogul, who built a realty empire that included dozens of shopping centers and more than 100,000 acres of land, once explained that “the hardest thing in life is to accumulate the first $10,000. After that, it’s easy.” His point, corrected somewhat for inflation, is that you can’t invest if you can’t save. Forget about fancy cars and big houses — at least at first.
• Listen to others, decide for yourself.
• Risk is real. Not every investment pays off, and some are absolute flops. But tomorrow is another day.
• Honor commitments — even if the result is a loss or something less than the best deal. Contracts and lawyers are nice, but your word is what counts and the only way to establish long-term business relationships.
• Never take the last penny from the table. When the another person prospers, you prosper.
• Book learning is great, but street smarts can’t be ignored. One gentleman, whose bank — the story goes — had to be sold to pay the estate taxes when he died, bought a piece of Florida land that was largely underwater. You can bet that a few people laughed. He and a partner filled it in and that piece of dry land today includes a major shopping center and thousands of apartments.
• Live simply. Someone who owned dozens of New York buildings lived in a modest two-bedroom apartment. Curiously, the Florida developer also lived in an apartment that many mid-level managers could likely afford. In both cases, each owned only one car.
• “You can only eat so much,” Perry Bass told The New York Times (“The Break-Up of the Bass Brothers,” Nov. 24, 1991). “You can only wear so many clothes. I’ve got some nice paintings. Now I’m not buying any more. I don’t have a place to hang them.”
• Keep quiet. For reasons of modesty, privacy, and personal safety you would have a hard time finding many of our richer citizens. But if you look carefully, you might see that some folks seem to travel more, own their own businesses, and generally live well but not extravagantly.
• Help others. Donations — sometimes prodigious sums — should be quietly provided to help various causes. Perhaps the most famous case involves Julius Rosenwald, an early builder of Sears Roebuck. Rosenwald helped establish more than 5,000 minority public schools and some 4,000 libraries for minority students in 15 states before his death in 1932, a contribution needed because public funds were hardly available for such efforts. (See: Shaping an American Institution, Robert E. Wood and Sears, Roebuck by James C. Worthy)
• Have values. Money is great, but money is not a substitute for friends, family, good health, leisure, personal decency, and the other markers which define a truly successful life.

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Published originally by Realty Times on November 24, 1998 and posted with permission.

Secrets of Real Estate Wealth Revealed By Masters is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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The issue is not that wealth is somehow evil — or that great wealth is somehow more evil — but rather that the distribution we now see leaves many people without the benefits of our booming economy.

It used to be that being a millionaire made one a member of an elite fraternity, a group at the very top of American finance and thus American society. But now we find that being a millionaire is no big thing — CNNfn reports that 8 million of us are millionaires, in rough terms about three out of every 100 people you see on the street.

Forbes magazine tells us that in 1982 we had 13 billionaires whereas today 267 of us have personal fortunes in excess of $1 billion. The magazine also says that at least 5 million households now have a net worth of $1 million or more, and that the number households in this category should quadruple in the coming decade.

Meanwhile, on the other end of the scale, not everyone has joined the ranks of the financially well-endowed.

Edward N. Wolff, an economics professor with New York University, delivered a paper last April (“Recent Trends in Wealth Ownership”) which offered a series of money facts that ought to be sobering.

“Financial wealth,” says Prof. Wolff, can be defined as “net worth minus net equity in owner-occupied homes.” In other words, to determine your financial wealth you add up your assets, subtract your debts, and ignore anything related to your residence.

Given this measure, Wolff found that 15.5 percent of all households had a net worth of zero or less (they owed) in 1983, a figure which rose to 18.5 percent in 1995. Despite all the talk of billions and more billions, Wolff’s study shows that “median financial wealth was less than $10,000 in 1995.”

The top 1 percent of all households control 47 percent of the national financial wealth, says Wolff, while the top 20 percent manage 97 percent. Alternatively, the bottom 40 percent of all households held a mere .9 percent of our financial wealth in 1983, but only about .5 percent in 1997.

“The only group to enjoy positive gains in real income over the period from 1983 to 1992 were households in the top 20 percent of the income distribution,” says the professor. “Within this group, gains were greatest for the top one percent of households.”

The result, says Wolff, was that “growth in the economy during the period from 1983 to 1995 was concentrated in a surprisingly small part of the population.”

So what’s the problem?

None really — if you have a rental business. The current income distribution assures that we will have a permanent pool of renters as far into the future as anyone can see.

But if you assist others in the purchase and sale of residential property, then you may wonder how much more business could be generated if more people were qualified to buy homes — in other words, if our vast national wealth trickled down a little further. Maybe entry-level purchasers wouldn’t buy the biggest homes in town, but a larger number of buyers would mean more sales, more demand, and more people moving up — qualities which everyone in brokerage should favor.

The real estate community greatly prefers the accumulation of more wealth — that’s the impact of home values which rise faster than the rate of inflation and also mortgage balances that fall year after year. Perhaps the time has come to favor with greater energy more loan programs with little down; an end to mandated minimum lot sizes; more local control of housing programs; less government and less regulation; FHA MIP fees that automatically terminate after seven or eight years with good payments; and reduced state and local transfer taxes.

The wealthy would not be poorer as a result — they likely would not miss a single meal. Meanwhile, those who are less-than-wealthy would gain a greater stake in our expanding economy, something that on many levels would benefit us all.

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Published originally by Realty Times on January 3, 2000 and posted with permission.

Money & Houses: A Time For Perspective is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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The reason is that we measure the value of goods in cash. The catch is that when inflation strikes, individual dollars buy less. Seen another way, it takes more dollars to buy a given item, thus prices appear to “rise.”

To see inflation at work imagine that you could have bought a loaf of bread for $1 last year. This year the loaf “costs” $1.25. If you think about it you can see that the loaf is unchanged, it has just as many slices. What’s changed is the buying power of the dollar — it buys less and so goods seem to have a “higher” price.


If we say that we want “real wealth” after inflation, what we actually mean is increased buying power. We’re looking for a property that appreciates faster than the rate of inflation.

We also want financing which can be re-paid over time and with cheaper dollars. If we have a fixed-rate loan, and if inflation erodes buying power, then such financing favors borrowers. Adjustable rate mortgages (ARMs) provide less protection against inflation for borrowers since rates can rise to reflect current borrowing costs.

In all cases, of course, it should be recognized that real estate, like other investments, is subject to both price increases — and price decreases. All investments represent some level of risk to the investor, a good reason to study the market with care before buying.

How is real wealth created in real estate? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Traditionally, lenders have refused to accept mattress money from home buyers. However, Freddie Mac has said that in some cases it would allow buyers to use cash kept at home providing they do not have a savings or checking account.

The new rule makes sense because 13 percent of all U.S. households to not have such accounts, according to one study by the Federal Reserve.

Can I Buy A House With Mattress Money? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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What if someone contracts to buy a home today with $20,000 in cash due at closing in 60 days — money to be generated from the settlement of a suit. And what happens if the suit is delayed? Money at closing is still required and if the buyer does not close there could be substantial damages — and maybe another suit….

Can I buy a house with an award from a lawsuit? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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