In the recent months it has become extremely apparent that many people bought homes in 2003, ‘04, and ‘05 that they could not afford. In fact, many of these people should not have been able to purchase a home at all.  The reason that they were able to purchase said homes was becuase of great deals on ARM (Adjustable Rate Mortgage) loans.  Many of these loans had introductory teaser rates like 2% that made it easier for people to qualify. Most of these loans had a fixed rate for either 1,3 or 5 years and after that they can go up. Some can even go WAY UP.

These loans are coming out of their fixed rates currently, and that is why we are seeing such a hike in foreclosures. The bottom line is that many of these people should not have purchased homes that they couldn’t afford. But to that same token, banks should not have loaned them the money if they were not qualified. So here we have a pickel.

Foreclosures not only cost banks thousands and thousands of dollars to do, (anywhere from $30,000-$70,000) depending on the price of the home. They also reak havoc on the lives of many families. The recent numbers run show that if a signifcant amount of the ARM loans coming due go into foreclosure, it could create a national recession on the economy. And what is the last thing that we want? An Economy Recession!!

So whats being done to help? The Bush Administration has put forth a plan to have mortgage companies “Freeze” the rates on these ARM loans. Providing a Win-Win situation.

Example: Lets say that John Smith purchased a home in early 2004 for approx $250,000 @ a rate of 4%(which is a great rate). Of course, it was 2004, so Mr. Smith probably had to put little or no money down on this loan, making it 100% financed. That means that Mr. Smiths mortgage payment (excluding taxes and insurance) would be approx. $1,190/month. The bank is earning interest on this loan amount and Mr. Smith can afford his payment. Well in early 2008 Mr. Smiths 3/1 ARM loan comes to its first adjusted payment. Rates are still decent, but not what they once were. Mr. Smiths interest rate jumps to 6.5%. Now Mr. Smith is paying out a mortgage of approximatly $1,500! A $300+ increase!  In our example Mr. Smith barely was able to qualify for the loan payment of $1,190/month. Now, with the larger payment coming due, he won’t be able to pay it.

Here is where the problem lies. Mr. Smith will loose his home, and any credibility with lenders for the next 7-10 years. The mortgage company will spend thousands of dollars to foreclose this property. Only to have it sell for far under market value because of the foreclosure status and current market fluctuations. So that home that has a $250,000 mortgage will cost the banks approx $50,000 to foreclose on. Making the banks vested interest $300,000. Well, the market is tough, and the home has been neglected during the foreclosure process, it needs minor cosmetic repairs and a new lawn. Therefore its current market value is only about $220,000. Factor in the cost of Real Estate brokerage fees, and closing costs of approx $20,000. Now the bank is left with a property that they have lost $100,000 on, and thats if it sells at full asking price.

Altough the bank will not make as much money on a homes’ interest rate becoming locked; they will save hundreds of thousands per home to keep the current owners in it. This is where it becomes a Win-Win situation. The Smith Family keeps there home, at a payment they can manage. The bank makes a moderate amount of interest off of the loan, and they do not incur any legal or carring fees for the property. Both parties are safe from financial ruin. It may not seem like the bank would care enough to do this, but remember, if they lose $100,000 on 100,000 properties in 1 year, they lose $10 Billion dollars. Thats enough to put them out of business.

All in all the propsal is a great step towards stopping the foreclosure process. Sure, it has its flaw, but as a whole it makes a tremendous impact.

Two weeks ago the Jacksonville Food Bank challenged my brokerage office to collect food for the area shelters for the upcoming holiday season.  As much as we all helped it didn’t put a dent in what was needed to help our area. Jacksonville is a big city. There are a lot of mouths to feed.  So last week I decided to take action.  I reached out to one of my top communities that I work in: Savannah Glen.

Savannah Glen is a small subdivision on the Clay County side of Orange Park, a city just outside of Jacksonville.  It consists of about 275 homes. I challenged them to help me collect non perishable food by placing what they could in a bag under there mailbox lastnight. 

This is a THANK YOU going out to all who participated. You have helped make someones holiday season warm and fulfilled for so many in need. Thank you for all of your support!

Those of us who live in the beautiful Sunshine State of Florida have a lot of perks living here.  We have major cities around every corner, more theme parks than one week can handle, and access to the best beaches in the country. 

However, in the last few years the cons have begun to outweigh the perks.  Forcing many families to leave their homes.  Summers riddin with hurricanes have raised home owners insurance rates through the roof.  Many companies will not even right a policy in the state anymore.  Property appreciation has raised the taxes to a monthly rate that nearly DOUBLES most mortgages. 

The Save Our Homes Act of 1992 (Amendment 10) was designed to help families be able to afford decent housing and maintain their lifestyle their without the fear of property taxes overwhelming them.  Well, for the most part it has.  With only a modest 3% Increase allowed annually it has served that purpose.  But with the recent boom in property prices these same owners now feel “trapped” in their properties.  Knowing that if they buy a new home, taxes will sky rocket.

In south Lee County FL a home bought around 1997, with 4beds/2.5 baths and very moderate upgrades could be purchased for under $150,000.  Today to buy that same home you would pay nearly $600,000!!

Floridians have been talking…and thankfully the house leaders have been listening.  In a February 21, 2007 press release from the Florida House of Representatives House Speaker Marco Rubio, Chairman Ray Sansom, and other House leaders this morning unveiled a comprehensive property tax relief proposal designed to cut Floridians’ property tax bills by nearly 20 percent this year.

Meaningful Property Tax Relief This Year

• Effective July 1 of this year, property taxes for Floridians will be reduced by nearly 20%. 
• With an adjustment forward for a reasonable increase in the size and cost of government, local government millage will be reduced to a rate generating the same tax revenue as was generated in the previous year. 
• The rate of growth for government will be determined by population growth plus inflation set off a base year of 2000-2001. 
• Local governments may choose to raise revenues above the capped rate through a unanimous vote of their governing body. These limits do not apply to taxes levied for school districts, for bond repayments, or for a two-year period when authorized by a vote of electors. 
• School district revenues would not be rolled back.

Property Tax Reform Constitutional Amendment 

• In a 2007 special election, voters would have the option of eliminating all property taxes on homestead property. 
• In addition to eliminating property taxes on homestead property, starting in Fiscal Year 2008- 09, state revenue growth would be limited to a reasonable amount that would be allowed under a prescribed formula that accounts for population growth and inflation since 2001- 2002. 
• For the first time, Medicaid revenues would be placed within the revenue growth limitation. Currently these revenues are excluded from the state’s revenue limitation. 
• The state revenue limit may be exceeded in any year by a 2/3 vote of each legislative chamber. 
• The constitutional amendment would also limit the continued rapid expansion of local government by containing millage to a rate that produces the same tax revenue as was generated in the previous year plus population growth and inflation, excluding new construction and annexation. The revenue cap may be exceeded through a unanimous vote of the governing body. 
• School districts would not see their budgets reduced under the House’s plan. The future growth of school district budgets from property tax revenues would be limited by the amendment, but state government could choose to put more state revenue into schools.

Abolishing Property Taxes on Homestead Property 

• If the elimination of taxes on homestead property is passed by the voters, the state sales tax will be increased by 2.5 cents on all transactions subject to sales tax to offset revenue losses to local governments, schools and other entities that used property tax revenues. 
• This additional sales tax will be used to replace revenues lost due to the Constitutional Amendment. 
• This replacement revenue will only be implemented if voters approve the Constitutional Amendment that exempts homestead property from property tax

For Floridians’ property tax relief is about more than money…it is about saving our families’ dreams.

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