So what happens when a company is doing so bad that the market begins believing it might have to file bankruptcy? They get acquired of course! Bank of America announced today that it would but Countrywide Financial for $4 billion (with a ‘b’). But the fact that Countrywide was willing to take a deal that valued it shares 8.3% below trading levels reveals just how desperate the firm was.

Can you tell when the announcement was made?

Of the deal, Stifel Nicolaus analyst Christopher Brendler said:

“This deal comes together because no one wanted to see Countrywide fail; it is a win-win for everyone involved, but doesn’t indicate that the mortgage problems are behind us.”

But it does mean that BofA will likely become the nation’s largest mortgage lender. Brendler also said Countrywide is no sure bet for BofA. The company still has a dicey portfolio, with $80 billion in high-risk mortgage loans. Several months ago, many of these loans were not considered high risk, but the deterioration of the markets now makes them so

So let’s all give BofA a round of applause for helping to stabilize the lending market (and pick up a a major lending company at WalMart prices) and wish them luck with their new prize!

Real Estate Toolbox

Unfortunately, many people took the grasshopper approach, and didn’t bother preparing for an increase in interest rates. Without the ability to meet the higher mortgage payments, many homeowners were forced to foreclose, with banks taking a bit hit. Some lenders took such a big hit that they were forced to file bankruptcy, forcing the market to “freak out” (yes, that’s a technical term).

The blame has already started, of course. Many people blame the lenders for being overly aggressive and lending to anyone who walked through the door. Others blame borrowers (who I think are ultimately to blame) for overstating incomes, or trying too hard to buy a home they couldn’t afford to begin with.

But recently, President Bush outlined ways the federal government can help troubled borrowers keep their homes in an effort to address rising foreclosures fueled by the mortgage crisis. In a move also backed by Ben Bernanke, Federal Reserve Chairman, the government isn’t going to “bail out speculators or those who made the decision to buy a home they knew they could never afford.”

Bush said the Federal Housing Administration, a government agency that provides mortgage insurance to borrowers through lenders in the private sector, would soon launch a program called FHA Secure. The program would let homeowners who have good credit histories but can’t afford their current mortgage payments to refinance into mortgages insured by the FHA.

Bush also urged Congress to modernize and improve the FHA so more homeowners could qualify for the mortgage insurance provided by the agency. Last year the House passed legislation to modernize FHA, but Congress has not yet sent a bill to the White House.

And in one more effort, Bush also pledged to work with Congress to reform a key housing provision of the federal tax code, which will make it easier for homeowners to refinance their mortgages. Under the current rules, if the value of your house declines by $20,000 and your adjustable rate mortgage payments have grown to a level you cannot afford, the bank might modify your mortgage and forgive $20,000 of your loan. But the tax code treats that $20,000 as taxable income. And when your home is losing value and your family is under financial stress, the last thing you need to do is to be hit with higher taxes.

But I wonder if this help isn’t too little too late? Has anyone ever seen a mortgage document? It’s like 100 pages long full of legalese and loopholes that practically nobody can understand. In my opinion, a large effort should be put into improving lender education. Let’s get that mortgage document down to 10 pages of plain English, and mandatory education classes for new homeowners. The government wouldn’t have to step in and help refinance homes if people were properly educated and knew that an adjustable rate mortgage is not the best move when buying a $1 million home with a $85k income.

But what do you think? Has the government done enough? Should they do more?

CreditDemystified is actually a site sponsored and presented by Countrywide Home Loans. The goal of CreditDemystified, other than to promote Countrywide Home Loan products, is to educate and inform anyone interested in credit or credit-related topics.

Lets break it down:

Looks: As always, a site needs to make a good aesthetic first impression before I spend anytime looking beneath the surface. Call me shallow, but it’s true. When I first visited CreditDemystified, I didn’t really know what to make of it. From the homepage, I counted 4 large Countrywide Home Loan ads shouting “Call Now!” It was only later that I realized that they were not only an advertiser… but that they were the only advertiser. But, other than the huge banner ads asking you to call for a loan quote, the rest of the site is set up just like any other blog - with numerous posts under each of the categories - Improving Your Credit, Credit Learning Center, Credit Quotient Quiz, Credit Scores, Home Loans, and Library.

Amount of Content: If you couldn’t already tell by the number of “topics” that CreditDemystified covers, the site has information on just about everything related to Credit. I was impressed, however, with the way in which the site was organized - so that the amount of information wasn’t overwhelming. The site has not only a “Tag Cloud” on the homepage but the information is organized in an intuitive manner.

Let’s say that you were thinking about buying a car and needed some sort of loan. Simply click on Credit Learning Center and you’re presented with a laundry list of credit types - from Mortgages and Home Loans to Types of Business Loans. Drill down further into Auto Loans (for this example), and you’ll learn about the different types of auto loans and how to shop for one.

I should say that I was a little nervous about Countrywide Home Loan giving advice on how to shop for a loan - since the entire point of the website is to get you to take out a loan… from them. But I was impressed with the unbiased information they presented to users. The advice is practical, if not common sense.

Quality: If you’re looking for specific things you can do to improve your credit score after a bankruptcy… keep looking. But if you are interested in finding overall ways to improve your own credit score… this is the perfect place to start! Start by taking the Credit Quotient Quiz (I got a perfect 10!). You’ll get an idea of how much (or little) you know about credit. As a result, you’ll know where to start looking for more information. For example, did you know that you can get a free credit report from each of the three reporting agencies each year? Or do you know the definition of the word “Principal?” (I’ll give you a hint… it isn’t the man you visited during Elementary school)

One of the most interesting parts of the site is its Library. The library of CreditDemystified.com is unique in that it offers a number of PDF informational “guides” on popular credit topics. These guides would be perfect to email to a friend or family member who might be thinking of buying a house, or having credit problems. The library also includes a few podcasts on life-changing events that might alter your credit situation. However, I wish the site had built this section out a bit further - with more interesting podcasts and other PDF guides, it does provide a firm foundation for further study.

Now that we’ve left that college town and are actually considering our investment options, it’s time to seriously consider an investment in student housing - but is it a good idea? Apparently off-campus student properties are providing good returns around southeastern and southwestern campuses, especially at public universities. But taking what you know about college students, would you want to maintain a house full of them?

One expert in the field of student housing ownership, Michael Zaransky, states “that for at least 20 years there will be a boom in the population turning 18 and a large percentage of them are choosing to go to college.” But do a large number of college students automatically mean that student housing is a good investment?

One suggestion is that your individual investment decisions should be made first on the ratio of university-owned beds to total enrolled students. The lower the ratio for the campus, the greater need for privately constructed student housing - and the greater demand for your off-campus property.

Another suggestion is to purchase property for your own children while they attend college. To help you purchase this type of student housing, the Federal Housing Administration offers something called a ‘kiddie condo loan’. This loan program is designed to allow both students and non-students to purchase a home with a blood-relative’s good credit standing and cash, according to MSNBC. These homes qualify for all tax advantages of a primary residence and require only 3 percent down. The owner-child can build a positive credit history as they escape from university dorm life.

But what happens when your son’s roommates are late on the rent? Can you deal with that awkward situation?

Although my wife and I are still researching the subject, student housing still looks to be a good real estate investment. Student housing properties bring in a steady positive cash flow (even after maintenance and insurance) and can even bring in enough to cover your mortgages. But when looking for college towns to invest in, look for areas with increasing rent prices that you can take advantage of - even if your child will never attend that school.

Zillow.com is a combination of publicly-available housing information and Google Maps. The site, which is currently in beta, claims to have over 65 million homes indexed. Although I can’t vouch for all 65 million homes, I have used the site to research real estate in several different states and have always found the home or neighborhood I was looking for.

The site is very clean, bright, and uncomplicated. The first screen simply has a text box for entering in the address you’re searching for. After entering a street address or neighborhood you’re presented with a satellite map of the area with boxes outlining the different properties. You can zoom in and out just like any other mapping program while viewing the maps in a street-only, satellite, or hybrid view.

The prices of each home hovers above the property, but by clicking on each house you can quickly see the number of bedrooms, bathrooms, and the square footage. You can also click to see the home’s details or view other comparable homes.

The detailed view is my favorite part of Zillow. But again, the information is presented in a very clean and user-friendly way. From the detailed view you can see:

• Home facts - including # stories, lot size, year built, heating and AC details, etc.)
• Zestimate rating - a quick statistic on how many homes have a higher or lower value than this one
• Recently sold comparable homes - including this home’s $ per sq. ft. and the comparable average
• 1 week change in price
  

• Value change graph - my favorite feature is the ability to see graphically how the value of the home has changed over the past 1, 5, or 10 years
• Sale history
• Latest property tax information including the value of the assessed value of the building and land

As you can see, Zillow.com is full of features that are invaluable to anyone! Those looking to buy a home can compare prices with neighboring homes. Home sellers can get help trying to place a value on their own home. And owners can track their most valuable asset. Be sure to also check out their “How-to” section which includes a list of links to how to get the most out of the site. But I must warn you… Zillow is addicting!

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After making a number of phone calls trying to schedule appointments to view my list of apartments I have come to a realization that supply and demand affects attitude and customer service - and in my case it results in a poor attitude and crappy customer service.

My theory is that because the landlords in the Bay Area know that people are desparate to find affordable housing (demand is high), they can do whatever they want (because the supply is low). It doesn’t matter if they’re rude, have outlandish requests, and never return your phone calls because there is always someone desparate enough to jump through the hoops. I’ve had several problems with the rudeness that comes out in this season of high demand and low supply…

First of all, I can’t get a hold of anyone! Regardless of whether or not the listing includes “office hours” nobody seems to be working during those hours. I’ve spoken with more answering machines the past few days than actual human beings. And even after leaving countless messages, can you guess how many landlords have called back? Zero!

When I do get a hold of someone they act like they could care less whether or not you’re interested. “Umm… does the apartment have washer & dryer hookups?” you may ask. “Hmmm? What? Oh, ummm…. I don’t know.” These people don’t know anything!

The most frustrating part about this process has been the large number of different “procedures” (aka hoops) that you have to jump through to even apply. One landlord I talked to told me he couldn’t show me the apartment until I had applied and been approved. But why in the world would I go through the trouble to fill out a 5 page application (literally) for an apartment that might be a rat-infested hole-in-the-wall?

Most businesses, even when demand for their product is high, still understand that someday the demand will drop off and customer service in the “good times” will help keep customers close. Landlords don’t seem to realize this. Perhaps when the housing bubble in the Bay Area bursts (oh how I pray for that day…) they will realize that being a jerk to me will only make me hang up on you and call a different apartment. Yeah, and perhaps hell will freeze over…

SAVE LIKE CRAZY!

Granted, that is the #1 tip I can give you, but there are some other (more specific) things you can do. I wouldn’t leave you hanging like that

1. Set a Goal: Your goal, as I mentioned before, should be 20%. How much is that? That’s where your friendly neighborhood lender will come in handy. Sit down with them and find out with your credit rating how much of a house you can afford. Then subtract $15-20k from that - and that’s how much house you may be able to afford. I say “may” because there are some other factors that should come into play - the biggest being how much do you feel comfortable borrowing. This is the point at which all that talk of budgets comes in handy - because you’ll know what you can afford (or not).
2. Open Up a Separate Account: By setting up a separate account you can keep better track of how much you have saved and it will help quench any thoughts of using that money. The best thing to do is to set up an automatic withdrawal from your checking account so that you “force” yourself to save. I would also recommend, if you can, to set up your account at a high-yielding savings account such as the internet options I’ve posted about previously. This way, you’ll make a little money while you save.
3. Get Help: Nearly 23% of first down payments come as gifts from relatives and friends, according to a recent survey by the National Association of Realtors. While assistance from mom and dad is great, there are also other places you can look (that may be better for your relationship as well). There are many down-payment assistance programs for first-time buyers that are offered by banks, local governments and charities. Many are open only to low- or moderate-income buyers and some are targeted to specific communities.

   Some programs lend buyers a substantial portion of the down payment. For example, the California Housing Finance Agency can provide eligible first-time home buyers in Los Angeles 3% of a home’s purchase price as down-payment or closing-cost assistance. The money must be repaid when the buyer sells the home, refinances or pays off the loan.

4. Check and Clean Your Credit: To obtain the best mortgage rate you need the best credit you can get. Since you’re going to be saving for a little bit, you will have time to check your credit and repair or change any mistakes. The faster you do this, the better because it might take some businesses a while to report back to credit agencies, etc.
5. Check Mortgage Options: Lenders increasingly offer creative loans, such as interest-only loans (which I despise) and certain types of adjustable-rate loans, that can reduce your monthly payments — at least for a while. But these alternative loans can be much riskier than fixed-rate loans, because monthly payments can jump after a few years. A general rule of thumb is that your monthly mortgage payment shouldn’t exceed 28% of your household’s gross monthly income. Check out some mortgage calculators at Dinkytown.net to calculate what your monthly payment would be with different types of loans.

Well, that’s my advice. But I know that there are a few readers here that are realtors and I would really like to get their opinion as well - so feel free to chime in with your own advice for saving up for your first home.

Major source: WSJ

Here are some startling facts regarding negative equity:

• Nearly one in 10 households with a mortgage had zero or negative equity in their homes as of September 2005, according to First American Real Estate Solutions, an arm of title-insurance company First American Corp. The study of 26 million homes in 36 states and the District of Columbia found that one in 20 home borrowers was upside-down by 10% or more.
• The situation is even grimmer for recent borrowers. Of those who bought or refinanced homes in 2005, 29% had zero or negative equity, and 15.2% were underwater by 10% or more.
• Interest rates on about a quarter of all mortgage loans outstanding, or $2 trillion, are scheduled to reset this year and next, according to Economy.com. Homeowners who opted for extremely low teaser rates in recent years could see their payments eventually double, said Christopher Cagan, First American’s director of research and analytics.
• Defaults and foreclosures are already on the rise, thanks in part to higher interest rates, cooling real-estate markets and overextended borrowers. Nationally, 117,259 properties entered some stage of foreclosure in February, according to foreclosure-monitoring firm RealtyTrac, a figure that’s up 68% from February 2005.

This is a real problem that every homeowner should be aware of. Any homeowner with negative equity faces foreclosure if hit with some emergency - such as a job loss, death, or severe illness. I’ve always hated zero-down mortgages and am a strong pitchman for putting 20% down on your house - and this latest trend of negative equity just backs me up. So if you’re thinking about buying a a house soon, take a lesson from these unfortunate series of events and be sure to put some equity into your house so that this doesn’t happen to you.

“2006 should be the big price correction,” for rents, said Greg Willett, vice president of research at Carrolton, Texas-based M/PF. “Everything is really underpriced in many markets around the U.S.”

Need someone to blame for the rising rent? Try these culprits:

1. Condo-Conversion Craze: many areas have seen an increase in the number of condos being built, causing the number of apartments to become increasingly scarce.
2. Building Constraints = Pricy Rents: The three priciest rental markets were in some of the tightest markets with the biggest hurdles for new construction: New York City, San Francisco and Los Angeles. (To see a list of the 58 most expensive cities for renters, click here.)
3. The Katrina Effect: areas around Katrina-damaged areas will be affected due to the increase in displaced residents

Source: MSN Real Estate