Hello Out There...Is Anyone Paying Attention

Here are some statistics from the August 21, 2006 issue of Barron's. I think we'll see single-family, residential foreclosure rates continute to rise throughout the remainder of 2006 and well into 2007.

• 32.6% of new mortgages and home-equity loans in 2005 were interest only, up from 0.6% in 2000.
• 43% of first-time home buyers in 2005 put no money down
  15.2% of 2005 buyers owe at least 10% more than their home is worth.
• 10% of all owners with mortgages have no equity in their homes
  $2.7 trillion dollars in loans will adjust to higher rates in 2006 to 2007.

These number sound preposterous, but the reasoning behind them is worse. Lenders have encouraged people to use the appreciation in value of their houses as collateral for additional loans.

Now the house is the bank's collateral for the questionable loan. But what happens if the value of the house starts to drop? The answer, at least from banks, is already clear: Float the Loans.

The following figures are from Washington Mutual's annual report: At the end of 2003, 1% of WaMu's option adjustable rate mortages were in the negative amortization (payments were not covering interest charges, so the shortfall was added to the principle). At the end of 2004, the percentage jumped to 21%. At the end of 2005. the percentage jumped to 47%. By value of the loans, the percentage was 55%. Every month, these borrower's mortgage balance increases and some or most of them may not know it. There is no strict disclosure requirement for negative amortization.

My advice: if you have an adjustable rate mortgage and you're within the "conversion window" to a fixed loan, run the numbers to see if converting make sense. Simply divide the cost to convert (say $1,500 for arguments sake) by the increased mortage payment (say $150 per month) and your breakeven point is 10 months. If you plan on living in your home for more than 10 months, this may be a good financial decision.

But you have to do the calculations yourself.

Off the Wall

An empty house really highlights every scuff and mark on the walls. What looked spotless during the showings now may look worn and dingy.

Try washing the walls thoroughly to see if you can make them look fresher before you decide to paint. Here are some useful tips:

• Before washing the walls, wrap a strip of cloth around your wrists and secure it with rubber bands to keep drips from running down your arms.
• Move furniture to the center of the room.
• Cover picture hooks and nails with a piece of sponge. This will protect your knuckles and all you need to do is rehang the pictures when finished.
• Cover the floor with a drop cloth.
• combine 1/4 cup washing soda (laundry additive), 1/4 cup white vinegar and 1/2 cup of ammonia to a gallon of water to create a wall-cleaning solution.
• Crayon markings can be easily removed with lubricating oil and a paper towel. Just spray on the oil and wipe. Use a toothbrush and lubricating oil on textured walls. Work the brush into the grain. Finish by wiping the wall down with a dollop of undiluted dishwashing liquid on a damp cloth (work the liquid into the cloth before wiping the wall).
• Scuff marks can usually be cleaned with a dry gum eraser. But for stubborn scuff marks, try non-gel toothpaste and a damp cloth. Add toothpaste to the cloth and then wipe the marks away. For really tough marks, add some baking soda to the damp cloth, work it in and then wipe the marks away.
• Use a natural sponge (hardware store) to wash the walls. Work from the bottom up, making sure to keep the solution clean and dunk the sponge frequently. Be sure to clean the entire wall or you could leave wash marks.

Click here for more information.

Light Done Right

Lighting can do wonders for the look and feel of your house, both inside and out. Artificial lighting does more than brighten a dark room. Lighting sets a mood, draws the eye to special architectural details and makes your house's entrance inviting long after the sun has set.

Lighting offers yet another plus: when done correctly, lighting helps you showcase your house's best features and speeds a sale. When preparing your house for sale, highlight areas in which you'd like buyers to envision themselves going about their daily lives. Task lighting can turn attention to a granite countertop or an undermount sink. Accent lighting can make the Colonial-style fireplace stand out.

Now for the outside. One easy way to expand a house is to make the backyard and deck visible from the house, especially at night. Outdoor lighting can accent pools, gardens, trees, walkways and entryways. Safety can be an after effect.

Click here to visit lighting.com and obtain more information at your leisure.