Lisa Barton

Flood Insurance covers a physical loss caused by “flood.” The National Flood Insurance Program says:

A flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow. Many conditions can result in a flood: hurricanes, broken levees, outdated or clogged drainage systems and rapid accumulation of rainfall.

Just because you haven’t experienced a flood in the past, doesn’t mean you won’t in the future. Flood risk isn’t just based on history, it’s also based on a number of factors: rainfall, river-flow and tidal-surge data, topography, flood-control measures, and changes due to building and development.

Thinking of buying a home that needs repairs?  Maybe you’ve spotted a “diamond in the rough” property that could be a dream home with the right repairs and remodeling. Wells Fargo Home Mortgage offers FHA 203k renovation loans that allow the borrower to finance the purchase price and the cost of improvements into the loan amount. As with all of these 203k products, they are only allowed in conjunction owner-occupied properties, either with a purchase or refinance transaction. We use the “after improved” value of the property, and it is a “single close” fully amortized loan. In my last entry, I spoke about the FHA Remodel Express program exclusive to Wells Fargo Home Mortgage——-that product is fantastic for cosmetic repairs and remodeling up to a cost of $35,000.  The work allowed includes repairs and replacements to roofs, existing HVAC systems, existing flooring, minor remodeling, new windows and appliances, etc… It has the normal 203k loan merits of one application, one approval process, one closing, and one payment, yet it is limited to “renovations” only that are non-structural in nature. It also restricts the borrower to using one national improvement company/contractor—-The Home Depot, Lowe’s, or Sears. 

While the FHA Remodel Express product is amazing, some borrowers need improvements that are “structural” in nature, which is where our Standard 203k product shines. With this product, improvements can include foundation repairs, roof replacement, new plumbing and electrical systems, and full room additions, to name a few. Here multiple licensed contractors are allowed, and there is no limit on the cost of the repairs (bearing in the mind the maximum total FHA loan amount for your area, which is currently $387,500 in northeast Florida). Also, the borrower is actually allowed to do the contractor work upon approval. In addition, Wells Fargo offers a Streamline 203k version, which caps the repairs at $35,000 and only allows non-structural repairs, but offers the benefit of allowing multiple contractors.

The 203k products are great ways to purchase bargain priced homes and/or larger homes in need of repair. The borrower gets to renovate them to reflect their tastes and needs, all while having one payment amortized over the life of the loan. 

Donald Ster, MBA, is a senior-level mortgage consultant working for Wells Fargo Home Mortgage.  He has been in the industry for 7 years, and resides in Jacksonville, Florida with his wife and daughter.

Last week I was showing homes to a couple from California. They were interested in golf club communities, so we were looking at properties in several of Ponte Vedra Beaches’ beautiful gated communities. The wife giggled when she saw a sign posted by a large lake that said “Please Don’t Feed the Alligators”. She asked if the warning on the sign was legitimate. Well, what can I say, but “YES”!

As a Florida native I’ve grown up knowing that where there is a body of fresh water there are most probably alligators. Usually, the old adage “they’re more afraid of you than you are of them” holds true, but not always. Alligators, which are native inhabitants in the southeast, are usually afraid of people and aren’t normally a threat. However, as people encroach on their natural habitats, they are coming into contact with humans on a very regular basis. Feeding any wild animal reduces their fear of humans. This is especially true of alligators—hence the sign I mentioned above.

We have to pay for what!? This re-occurring theme seems to take place everyday, multiple times, & for 100 different reasons when you are buying a home. At least, that’s what if felt like for me, so I know that every penny counts when it comes to purchasing your new home. The one thing you can’t do without is a home inspection. But, if you hire the wrong inspector, it could cause you serious financial problems. So, who has time to research this stuff? Many of us are too busy and worried about other things. So, if you can remember just one simple rule, it’s this: the fee does not reflect the service.

As we head in to the new year, especially with record setting low temperatures all over Florida, it is hard to image that hurricane season will be on us again before we know it. But we live in a state where catastrophic losses can and do occur so insurance will continue to be a major issue for Florida Homeowners. Here are some of the issues facing us as we move into 2010:

1. Citizens Property Insurance:  This year, the first rate increase at state-subsidized Citizens takes effect since a freeze three years ago. The state is trying to end artificially low rates and bring actuarial soundness to Florida’s largest home insurer. Citizens still has 1 million customers, approximately 413,000 of whom have homes in the high risk areas on the coasts. After nearly four years without a significant storm, Citizens’ surplus is only $3.9 billion. It will take a long time for rates to get where they need to be but at least the process has been started.

2. State Farm: Florida’s largest private insurer will be staying although they will be cancelling 125,000 policyholders and increasing premiums for many of their remaining customers. This is good news for Florida. 

3. New Insurers:  New, smaller insurers have captured an increasing share of the Florida market but many customers are worried about the quality of the companies. Their worries are justified.  First Commercial, Coral, American Keystone, Edison, and most recently Magnolia have all failed in the past two years, years in which there were no major storms. 

4. Asssessment: Policy owners in Florida will continue to pay a 1% catastrophe fund tax on their premiums for the next 5 years, a hangover from the 2005 season.  Citizens is charging all Florida homeowners, not just its customers, a 1.4% assessment for seven more years.

5. CAT fund:  Had a hurricane hit Florida last fall when the credit markets were in turmoil, the catastrophe fund, which provides insurance to insurers, had no hope of selling enough bonds to cover its commitments to insurers. The projected shortfall was $18.5 billion if there was a major storm. The Legislature ordered the fund to charge more to build up cash fast. The charge will add $750 million to the fund over the next five years. 

Big changes in the Federal Housing Administration (FHA) requirements for lending were announced yesterday by Federal Housing Administration Commissioner David Stevens. Stevens outlined the new set of policy changes created to strengthen FHA’s capital reserves.

The FHA proposed the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and downpayments for new borrowers; reduce seller concessions to three percent from six percent; and implement a series of measures to increase lender enforcement. U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.

Okay, so you have just signed the contract to purchase your new home. What next? One of the things you will need to do prior to closing is arrange for homeowner’s/hazard insurance. Fortunately for north Floridians there are many companies writing coverage in this area. We have not had a hurricane since Dora in 1964. 

The homeowner’s policy covers three basic areas:

1. Structure of the home and detached buildings on the property. 
2. Your home and buildings on your property are insured if they are damaged or destroyed by a covered peril.  Most companies require that you insure your home for at least 80% of the current replacement cost. Remember, this dollar amount represents the cost to replace your home and has little to do with “market value”. The most common insurance policy is the HO-3, a comprehensive policy that covers all perils except those that are excluded.  Homeowner’s insurance will also cover additional living expenses. This will pay your expenses if you must live elsewhere until your property is repaired or rebuilt due to a covered loss.

Foreclosures Weigh on Home Appraisals
Approximately 25 percent of real estate practitioners say low appraisals have broken up deals, according to the NATIONAL ASSOCIATION OF REALTORS®.

While foreclosed properties typically are not included in a comparable sales analysis, they account for about 40 percent of home sales—more than 50 percent in some markets—making it difficult for appraisers to value properties not in the foreclosure process.

Additionally, new industry rules that require mortgage lenders to order appraisals through in-house staff or appraisal management companies means more appraisers without knowledge of the local market are making valuations.

While Zillow.com says non-foreclosures are selling for upwards of 30 percent more than foreclosures, a study of 20 years of home sales in Massachusetts by Harvard University’s Joint Center for Housing Studies indicates that dwellings closer than 100 yards to a foreclosure lose about 1 percent in value.

Source: USA Today (01/04/10)

Fannie Mae (FNM/NYSE) announced today that it is undertaking a comprehensive review of hundreds of condominium projects in the state of Florida in an effort to allow additional projects to become Fannie Mae-eligible through a new “Special Approval” designation. First time home buyers who want to purchase a condo as their first home have historically been limited to only a few condo communities. That may change soon. The Federal Housing Authority has just issued a press release indicates that the Fannie Mae will be relaxing some of its requirements for condominium developments. This should make it easier for buyers to get into a new home while only having to put down a small downpayment and also help move some of the existing condo inventory. Good News for Buyers!!!

Oceanwalk is a terrific neighborhood in Jacksonville’s Atlantic Beach. This weekend (1/9) several local real estate agents will be holding their listings open on Saturday from 1:00-4:00. We’ll have hot chocolate, cookies, and the opportunity to see five different homes that are for sale. Please stop by my listing at 2338 Fiddlers Lane  for a map to all the other homes that will be available for viewing.