KTS Message

Dear Friends,

We are pleased to announce that we have 2 new closing locations in Providence and Warwick, RI. In addition to our locations, we will perform closings at a time and place that is convenient for you and your clients.

As always, we welcome all of your comments.

Sincerely,

Jason Kane

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Last Months Trivia:

Who lived at 4222 Clinton Way?

Answer: The Brady Bunch

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HUD Lifts Cap On Reverse Mortgages

Federal legislators are divided on numerous topics in the nation's capitol, but expanding the possibilities for senior citizens to live more comfortably is not one of them. Members from both sides of the aisle are finally seeing the light on reverse mortgages, the once-controversial program that allows seniors to draw from the equity in their home without making payments or outliving their home's value. The first step was the recent passage of the Reverse Mortgage to Help America's Seniors Act by the U.S. House of Representatives, eliminating the cap on the number of reverse mortgages that can be insured by the Department of Housing and Urban Development.

The bill, sponsored by Reps. Michael Fitzpatrick, R-Pa., and Jim Matheson, D-Utah, amends the National Housing Act by removing the existing cap of 250,000 reverse mortgages that HUD can insure at any given time. Right now, there are about 150,000 Home Equity Conversion Mortgage (HECM) loans outstanding, according to the National Reverse Mortgage Lenders Association.

A Senate version of the bill, introduced by Sen. Rick Santorum, R-Pa., is pending approval and will be considered earlier this year. Both bills enjoy bi-partisan support in Congress and are endorsed by consumer groups, such as AARP, formerly known as the American Association of Retired Persons.

During the most recent federal fiscal year, ending Sept. 30, 2005, HUD insured a record number of reverse mortgages -- 43,131 -- for a fifth consecutive year. The federally insured HECM accounts for 90 percent of all reverse mortgages made in the United States.

When Congress created the HECM program in 1988, a cap was imposed so lawmakers could periodically monitor the program's performance and costs to the government. Now that the program has a track record, there's no continuing need for a cap because the HECM program generates sufficient funds to cover its costs through mortgage insurance premiums paid by borrowers.

After eliminating the cap on the number of HUD loans, lawmakers plan to take aim on raising the amount of cash seniors can pull from their homes. Two privately funded national studies showed that Puget Sound area participants were frustrated with the inability to fully tap their large and growing equity. Respondents noted their increasing property values and living expenses, as well as their difficulty in making ends meet with the current HECM loan limits.

Rep. Jay Inslee, D-Wash., who co-sponsored the elimination of the loan cap, said he plans to introduce a bill where the location of the home is not as big of a factor in determining the amount of a government-insured reverse. Lenders have been pushing for a single national limit so that home equity would be the main variable.

"I am working on a bill I hope at some point will pass, that will also go to a unified limitation in the dollar amount, the cap that now exists and limits the amount of equity that our seniors can get out of their homes," Inslee said. "Seniors are equity-rich but cash-poor in a lot of circumstances. We are also finding that seniors are using these reverse mortgages in new ways, to help their grandchildren with their college education, for their recreation, as well as the obvious reasons, for health care and assisted-living facilities and the like. So this has tremendous opportunity."

A reverse mortgage is a loan that enables homeowners 62 or older to borrow against the equity in their homes, without having to sell the home, give up title, or take on new monthly mortgage payments. Loan proceeds can be used for any purpose, and taken out as a lump sum, fixed monthly payments, line of credit, or a combination. The loan amount depends on the borrower's age, current interest rates, and the value and location of the home.

A reverse mortgage does not have to be repaid until the borrower moves out of the home permanently, and the repayment amount cannot exceed the value of the home. After the loan is repaid, any remaining equity is distributed to the borrower or the borrower's estate. A senior's home does not have to be owned free and clear to qualify for a reverse mortgage. Reverse mortgages are often used to retire existing debt on a home.

The early reverse mortgage programs got a poor reputation because some were flawed and contained huge appreciation shares for the lender coupled with big-time upfront fees. Now, with the federal government insuring a majority of the reverse mortgages with no lender equity shares, the concept has become more acceptable and recognized by consumers. Some of the negativity of the early reverses also was a result of the risk-adverse GI Generation, still the prime target for the next several years before the early boomers, or Silent Generation, come around the senior corner.

Source: The New York Times

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Is It Time For A New Kind Of Mortgage?

The lending industry has a lot of products including energy-efficiency, interest-only and VA and FHA loans to make homebuying easier for first-timers. Almost all mortgage loans are related to the value of the house, yet most refinance products are used by homeowners not to put back into their houses, but to eliminate credit card debt, send kids to college, and pay other expenses.

It's easy to understand that refinancing is a different kind of loan and a purchase loan, except that the same lenders offer both kinds of loans. That begs the question -- why can't lenders consolidate debt into purchase loans?

This may be the next step as the industry watches the fragile first-time homebuyer struggle to qualify for a mortgage loan with a mountain of student debt on their backs.

Finding accurate figures for student debt loads is frustrating. A 2002 survey of recent graduates by student loan company Nellie Mae found that the average student loan burden for a bachelor's degree was $18,900, up 66 percent from five years earlier. Yet, another survey found that the average cost of college increases at twice the rate of inflation, which means that public colleges cost an average of about $13,000 a year and private schools cost about $28,000. Add medical, law or other post-graduate studies, and student debt can reach the six figures.

That's a concern, but not one for mortgage lenders, suggests David Reed, author of Mortgages 101 and Who Says You Can't Buy A Home! "Well ... at first glance, a refinance will typically have some equity in the property," says Reed, "and most only allow up to 80 percent of the value of the home to be refinanced into a new mortgage. Equity is important for first lien lenders for lots of reasons and one of them has to do with the ability to recover their asset should the borrowers default."

Value: + $100,000
Current loan amount: - $50,000
Max cash out loan amount: - 80 percent of $100,000 (or $80,000)

"The lender still has some breathing room, albeit reduced to only a 20 percent equity position," says Reed.

Now look at this scenario:

Sales price: $100,000
Student loans: $20,000
Loan amount: $120,000

"The lender has no equity, and if something bad happens like foreclosure ... ," says Reed.

"Granted, there are equity lines that can go up to 100 percent of the value of the home, but they're in a second lien position. Should a foreclosure occur, the original lien holder would get first dibs at recovering their equity. Even still, both liens are secured by real property, typically up to 100 percent of the sales price of the home. A loan issued above the value of the house against secure and non-secure property is a horse of well, a different color."

Bottom line? "If I were a loan designer at a mortgage operation, I would not make a purchase loan above the sales price," says Reed. "On the other hand, I might not have a problem with a loan that had 20% down payment, the lender paid off the student loans with that amount and issued a 100 percent loan."

Source: Realty Times

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10 Ways To Take A New Listing

Imagine walking into a large supermarket. A well dressed clerk notices you as you come through the door and introduces himself. He is a nice enough guy, but what he tells you next is so shocking and so down right unbelievable that you almost fall over in your tracks laughing. What he just said can’t be true. It just can’t be or can it?

The store has sold out of inventory!

The friendly clerk proudly assures you that what he said is absolutely true. The eggs, the milk, the steak, and, yes, even the broccoli, has all been sold to eager buyers. But the clerk is still smiling because he has a solution. In fact he points outside to a shiny new car.

“How about I take you down to the next store and sell you some of their product?” he asks politely.

Sound crazy? It is, but this exactly the way that many agents and even some brokers operate their business. Ask yourself: If you were the consumer what would you do next? For most of us, the answer would be to get in your own car and drive to the store that has inventory to sell.

In the real estate business our inventory is listings, signed contracts with buyers or sellers. If we have a small inventory of high quality listings, our business may be living on borrowed time. So how we can take more listings? Use this quick list of 10 ways you can find a seller listing this week!

10 Ways to Take a Seller Listing This Week:

1. Contact 15 For Sale By Owners and Ask for an Appointment. Try using the stop-drop-knock method. Every time you drive by a FSBO, stop your car, drop what you are doing and knock on the door! If you’re using the phone, try using this script, after cross-checking with the Do-Not-Call list, www.fcc.gov.
   
   “Good Morning. I noticed that you have your home listed for sale by owner. My name is [Name], I work at [Office]. I’m not calling to ask for your listing, and I respect your decision to sell on your own. The reason for my call is that I am a relocation specialist with my company and I wondered if you folks were staying local or if you plan to move out of state?… May I offer you some free assistance?”
   
   
2. Contact 15 Expired Listings and Ask for an Appointment. Before making the call you may want to spend some time building an email pre-listing kit which explains your services and your qualifications. Once you have it built, try using this powerful script, after cross checking with the Do-Not- Call list, www.fcc.gov.
   
   “Good Morning, I noticed your listing is no longer being marketed on the MLS this morning. Are you still interested in selling? [If answer is yes…] Great! May I email you a quick booklet on my services; I specialize in helping people sell their home in [area].”
   
   
3. Contact 20 Sphere of Influence Members and Ask for a Referral. We all should be contacting members of our sphere of influence. Let’s all stop feeling guilty about it and just pick up the phone and do it! Here’s a quick easy script: (Do-Not-Call laws can apply here, www.fcc.gov.)
   
   “Good Morning. Hey, I was thinking about you today. [Talk about something of mutual interest.] Hey, before we hang up, I’m looking for some new listings this month. If you hear of anyone considering a real estate change would you send them my way?”
   
   
4. Contact All of Your Current Listings and Ask for a New Listing. Your current list of active sellers is like a field of small oil wells. Each listing should be producing a small but steady stream of leads to you every month. Why? Sellers are always talking about selling, and when the engage in conversations about real estate with their friends, neighbors, and relatives, inevitably they run into other folks who also ready to make a change. Try this script with your current list of sellers:
   
   “Hey, listen, my number one goal is to get your home sold, and one way that I can have more time to market your home is if you do me a huge favor. Just keep your ear to the ground, and if you hear of anyone who needs a real estate agent would you send them my way?”
   
   
5. Contact All of Your Current Buyers and Ask for a New Listing. Buyers are like real estate radio stations; all they do is talk about real estate. This a huge opportunity for the savvy marketer who understands that inevitably these buyers will run into friends, colleagues, and family who are also considering a real estate change. Try this script with all of your buyers:
   
   “Hey, I know you’re probably going to be talking about your real estate plans with all your friends. Could you do me a huge favor? If you hear of anyone considering a real estate change, would you mind having them give me a call?”
   
   
6. Contact Homeowners in an Area Your Buyers Like and Ask for an Appointment. Use this powerful technique when your buyers have identified a particular neighborhood that they have fallen in love with. With your buyers’ permission, use their interest in the area as a catalyst to begin your conversation. You may find sellers are much more receptive to this approach then a typical cold call. (Do-Not-Call laws can apply here, www.fcc.gov.) Try this script:
   
   “Good Morning. [Introduction.] I’m working with some buyers who would like to live in your neighborhood. They’re pre-qualified and ready to purchase a home but we haven’t been able to find them the right home. I was hoping you might know of someone considering a real estate change. [Discussion.] How about you folks? Have you ever considered a real estate change?”
   
   
7. Contact Homeowners Around Your Listings and Ask for an Appointment. The just-listed campaign has always been one of the easiest, most powerful prospecting techniques in real estate and yet most agents still don’t harness the power of this simple system. (Do-Not-Call laws can apply here, www.fcc.gov.) Try using this script around all of your listings:
   
   “Good Morning. [Introduction.] I’m just letting everyone in the area know that one your neighbors, [Name], has decided to make a move. I’ve put an information flyer in the mail to you about the listing, and I wondered if you could do me a favor. If you hear of anyone that is considering a move, could you send them my way? By the way, have you folks ever considered making a real estate change?”
   
   
8. Contact Homeowners Around a Home You Sold and Ask for an Appointment. One of the best ideas in the real estate business is to always build on success. Try using each of your sales as a tool to create even more sales, success creating even more success. It may sound simple, but simple works! (Do-Not-Call laws can apply here, www.fcc.gov) Try this technique:
   
   “Good Afternoon. [Introduction.] You have some new neighbors, [Buyer’s name]. They just purchased the home at [Address]. I’ll be sending out a flyer to the neighborhood with the sales data. Now that we have that property sold, I’m looking for potential new listings. Have you folks ever considered a move to a new area or a larger home?”
   
   
9. Contact Business People, Give Them a Lead and Ask for a Lead. One thing you can always count on when visiting with business owners is that they all want more business. Remember, to receive referrals you must send referrals. Ask yourself who can you send a lead to today? Once you have sent over that qualified prospect, follow up the conversation with this script:
   
   “Hey, listen, I know you’re going to do a great job with [Client]. Do me a favor and let me know how it all turns out. By the way, I’m always looking for new real estate clients. If you hear of anyone considering a real estate change would you send them my way?”
   
   
10. Contact Rental Owners and Ask for an Appointment. If you open up any newspaper and turn to the classifieds, you will seen a boat load of For Sale by Owners, but one area that is often overlooked is the rental market. Turn this huge opportunity into your own personal golden goose. (Do-Not-Call laws can apply here, www.fcc.gov.) Try using this dialog:
    
    “Hello. [Introduction.] I was calling about your rental ad in the newspaper. Is the property still for rent? I have a quick question : Would you folks consider selling this property if the price was right? Are you in the market for any more units?”
    
    There you have it—10 Ways to Take a Listing this Week. Did you notice anything about all 10 of the ideas? They require you to ask a question. If you want the business you have to ask for it!

Source: Jim Remley, Speaker, Author, Consultant

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