Florida Mortgage | Loan Servicing ~ What Consumers Need to Know in this Market...

Bad economic news tops every news broadcast with big lenders like American Home Mortgage, Geneva Mortgage, Homebanc and many more completely cease all operations.  This change in the game is leaving many homeowners worried about what is going to happen to them now that their lender is KAPUT!

 Do not fret... don't worry at all... in fact, get ready to make your September payment as scheduled.  Just keep your eyes open for your letter regarding who will be servicing your loan from now on.

You see, many of the lenders that you are paying your monthly payments to are in fact only servicing your loan.  They are not holding the note, but instead they are collecting and distributing funds for the actual mortgagee - typically an institutional investor.

A lender that holds loans is called a Portfolio Lender.  Meaning that the loan is part of their investment portfolio much like we would keep stocks, bonds or a mutual fund in our retirement portfolio.  Most lenders do not portfolio loans, they sell them on the secondary market instead.

 The Secondary Market is made up of investors like Pension Funds, Insurance Companies, FNMA (Fannie Mae), and FHLMC (Freddie Mac).  These investors have contracts with lenders to service loans on their behalf.

A lender that services loans performs certain tasks for a Portfolio Lender or Institutional Investor.  These tasks are:

• Collecting Payments - the most visible function
• Collecting Escrow payments
• Maintaining appropriate Hazard Insurance - including fire, hazard, windstorm and flood
• Paying Real Estate taxes
• Collecting Private Mortgage Insurance (PMI) payments
• Paying Net Proceeds to the Investor/Lender

Other tasks that these service lenders provide that are not as evident are:

• Sending out compliance documents - like the escrow analysis forms
• Preparing Mortgage Interest Tax Deduction forms for your taxes
• Disclosing the principle and interest due and paid monthly and annually
• Dropping the Mortgage Insurance when it reaches appropriate levels
• Calculating payoff amounts upon sale

and finally... (what we're seeing so much in this market)

• Accelerating the note and foreclosing on the borrower in the event of default
• Taking title to the property and liquidating the collateral on behalf of the Investor.

So in this market when we see some big name "lenders" going under, many times they are not the ultimate mortgagee... but instead the servicing entity.  Despite the servicing entity's demise, the investor will have another lender contracted out very quickly so they do not lose the revenues.

Unfortunately, there is little or no transparency in this area of the lending industry to show you who you ultimately owe your money to...

So... as I mentioned before... be ready for your next month's payment.  It will be due to someone even if your "lender" shut its doors. 

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David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

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Florida Mortgage Loans | Condo-Hotel/Condotel Rental Income Rules

Condo Hotels or Condotels continue to grow in popularity in Florida, especially in hot tourist areas like West Palm Beach, Fort Lauderdale, Orlando, Tampa, Bonita Springs and Miami.  Because of this, it is important to keep in mind what Lenders are requiring in their lending guidelines concerning this unique property type.

One major issue that comes up with Condo Hotels is the rental pool.  Part of the allure of the property is the ability to allow the hotel to rent the room out to guests while it is not being used by the owner.

Unfortunately, Lenders require that the rental pool be voluntary.  Involuntary rental pools are to be classified as Timeshares. 

What this means is that when the owner of the Condotel unit wants to rent out their unit, they must make sure they put the unit into the rental pool... it isn't automatically rented without their say so. 

Considering issues like seasonality, major local events, and discount room rates/sales, there is no valid way to forecast the actual income that will be shared by the hotel and the room owner. 

An owner that does not want to rent their Condo Hotel room at all has that option under a voluntary rental pool.   While this might bother some hotel operations that want the room to rent, this is the only way that financing can be obtained.

The voluntary rental pool also affects the potential net income.  A buyer cannot be promised $10,000 a year return on a property if they are only going to make it available for 6 months out of the years or only on weekdays.

Realtors (listing agents) and Developers are therefore strictly prohibited from advertising rates of return, cap rates or even offering investment advice concerning Condotels.  Any potential rate of return could only be hypothetically based on an assumed usage rate that may never be reached.

Because of this, any rental income will not be counted as part of the qualification income for the Condo Hotel Loan.  To the borrower, this means that their debt to income ratios will not benefit from any potential cash flows from the property. 

Given this information, it is prudent that Realtors and Mortgage Brokers advise their clients who are interested in purchasing Condo Hotel properties that they will need to be able to qualify for this purchase on its own with all their other current debt. 

If they are unable to meet the Lenders' Debt to Income Ratios with their current debts and current primary residence, then they will likely not qualify for a Condo Hotel Loan.

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David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

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Florida Mortgage Loans | Equity Line for Hurricane Preparedness

Hurricane Season is upon us once again in South Florida.  People are checking their rations, stocking up on bottles of water, vital medicines and cans of tuna, buying batteries by the case and trying to meet the Hurricane VIP - the neighborhood roofer!  All the while they are forgetting to have ready CASH in an emergency - cash that could come from a Home Equity Line of Credit (aka HELOC).

The HELOC is a life preserver when there is a sea of people out there all clamoring to get their home repairs done.   Having ready access to cash is essential to quick repairs.  Many contractors will be very busy and turn away business if they have to offer financing.

When a homeowner does not have cash available, we see the all-too-familiar blue tarps for months until finances catch up to repair costs...

...and when there are major repairs to do, it may be hard to get financing!   A lender may not write a loan on a property in need of hurricane repairs

A Home Equity Line can solve this issue which is why I recommend one to all of my clients.

Advantages of having a Home Equity Line

Low Cost

• There are typically two options, the Low Cost Home Equity Line and the No Cost Home Equity Line.  Both have their advantages but neither will have anywhere near the closing costs associated with a Conventional Mortgage

Interest Only

• The payment is low because it is an Interest Only payment.  This helps the borrower afford the payments when cash is tight.

Easy access to funds

• A HELOC will have a checkbook associated with it and often even a credit card.  These checks and cards draw money from the line rather than a checking account.  This gives the borrower 24/7 access to their money.

Tax deductible

• The repairs are always deductible when a state of emergency is issued.  The IRS has a box to insert the repair costs due to a Hurricane.  The interest paid may qualify for mortgage interest deduction as it is technically being used for home improvement.  Consult with your tax professional to make sure.

Easy Processing

• Typically the Home Equity Line is an easier program to process with less time needed. 

Loan Amount

• The HELOC can go as high as 95% Loan to Value in many cases.  I prefer to see a 90% Loan to Value which leaves some equity in the home to pay for expenses in the case that the borrower needs to sell the property in the next few years.

You can evacuate

• FEMA guidelines are pretty strict.  If you were able to evacuate and did not stay in the home or a FEMA shelter, then you will likely be denied assistance.

 

Caveats to Home Equity Lines!

No discussion of mortgages could be complete without the pitfalls!

• The HELOC payment will be in addition to the current mortgage payment on the property so you will need to qualify for the combined payment.
  
• Using up too much your Home Equity can flip you upside down should the market drop.
  
• Almost all HELOC's have some sort of prepayment penalty.  It is usually small but there nonetheless.
  
• Home Equity Lines are Prime-Based Loans.  That means that the interest rate on the loan will be determined by what the Prime Rate is at the time.  Prime is currently 8.25%.  There are teaser rates offered by many banks but make sure to read the fine print!
  
• HELOCs are Adjustable Rate Mortgages and will adjust as Prime Adjusts.  There are loans that are fixed as well.  You should ask about fixing the rate as an option if possible.
  
• HELOCs are not ATMs.  The money should be used for home improvement or debt consolidation and should be budgetted carefully.

Don't wait until it is too late.  Consult with your Florida Mortgage Professional today to talk about your options before the storm is in the box!

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David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Mortgage | Foreign National Homebuyers: Europe has come calling!

Wow... the Sun Sentinel has finally caught wind of the Europeans that are buying en masse in South and Central Florida these days!

The article speaks of why Western and Northern Europeans are growing fonder of the area for both the lifestyle and climate.

They printed this map showing that most of the European Buyers are from the UK.

There are also many from Denmark and Holland.

Right now, Mortgages for Foreign Nationals are at an all time high. It is easier now than it has been in years to get financing at attractive rates.

That was actually a point missed by the journalists. Loan Programs are available from far more banks and lenders. Also there are new options in foreign exchange that are making the conversion of funds that much quicker and easier.

Some of the other factors that are influencing the current investment boom is the strong Euro. Based on the Dollar, the Euro is dominant... and the British Sterling is even stronger.

So what does this mean to Europeans? It means they're making much more on their investments than US citizens.

How? Foreign Exchange Rate Hedging...

The Dollar has long been an international standard in currency. Even people with stronger currency have a tendency to sock some away in US currency. It was actually causing a panic a few years ago when the US believed that so many bills were out of circulation and sitting in foreign floorboards and safes that we would eventually run out ourselves.

• The Dollar has also been volatile - as volatile as our politics and financial markets.



• As the dollar has dipped - much like a stock, foreign investors have bought the dollar.



• As the dollar has recovered - the investors would sell the dollar back and take the profits.



• So... while the dollar is LOW, investors are buying up Dollars with their Euros.

Then they buy a property here in the US.

Over time, the property itself increases in value. The dollar also becomes stronger over time as we recover economically.

Then when the foreign investor sells the property, they make a profit in appreciation. They then take the Dollars and exchange them for Euros and make a profit on the appreciated Dollar!

So if they buy the US Dollar and the House.

• They put $100,000 down on a $500,000 house (20%).



• The House appreciates 15% over 5 years to $575,000.



• and the Dollar gains 5%, to $105,000 (equity CAN appreciate in this instance).



• The combined profit is $80,000 on $100,000 invested or 80% in 5 years!



• subtract out the debt service and depreciation to get a true IRR

How's that for some fancy European Math!

So... who wants to start marketing overseas with me??

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David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update - How the Retiree Community may get helped and hurt

Florida has long had a reputation for Shuffleboard and the Early Bird Special to contrast the month of March when the state is riddled with High School and College Co-ed Debauchery, namely Spring Break.

The State has grown up a lot in the past 50 odd years though... and growing pains have left us where we are now - in the middle of a huge tax dilemma.

One demographic that has been brought to the forefront of this debate is that retirement community that the State may be neglecting in their planning as thus far nothing in the news has touched on how they will benefit directly.

Sure, they'll get a tax break with possible double homestead exemptions and rolling back taxes to their assessed levels of 4-5 years ago... but some of these people have been in their houses for 20+ years and the caps on their taxes have certainly been broken a few times...

Think about it... if you get a 3% maximum increase yearly over 20 years, you're talking some major compounding!

So now with Grandma and Grandpa as Art Blanchet and Bill Quigley refer to them well past the days when their pensions ran out and living on a VERY fixed income are watching their taxes go up and their crown molding fall down... how do they deal with the idea of higher taxes on their everyday shopping AND the fact that maybe their kids who are about to retire may not be in a place to join them in Del Boca Vista (Seinfeld-ism)?

The fact is... they ARE paying more than their fair share right now. They are not making an active income yet they are getting taxed on their properties in lieu of income tax.

Then with the measure to raise sales tax, their cost of living will be somewhat contained but their fixed income is still getting taxed despite the fact that it isn't taxed directly.

Many Florida homeowners simply have it easy. WHAT?!? Blasphemy!

NO... listen up... Florida has no State Income Tax so many people come here because Property Taxes are much lower than they'd pay if they stayed in their home-state or even home-country! I said it! YOU HEARD IT! Millionaires and Foreign Investors!

For instance... American Express was the subject of a news story specifically regarding the Centurion Card. No...99% of the people in the world have NO clue what I'm talking about. Some people have heard of it but think it is an urban myth... I know it exists. Why? Because I've held them in my hand. Yes - I've touched several REAL Black Amex Cards. There are only 1500 in the world... why do I bring them up? The highest concentration of Black Amex Holders in the world live in Palm Beach County, Florida.

What in the world does that have to do with nothing whatsoever?

well... Grandma and Grandpa live in a $125,000 condo that they paid $30,000 for 20 years ago. They're paying $2500 in Income cum Property Taxes to live there...

But... Millionaires with great credit - because that's what you have to be to get an invitation to apply for a Black AMEX after 5 years of spending $5-10K minimum PER MONTH on a Platinum AMEX - don't pay income tax on their passive and active incomes. And they live in $12.5Million Condos on the Beach... 100 times the pricetag but making FAR more than 100 times the income in MANY instances.

Oh... that's just a drop in the bucket sayeth Lawmakers.... yeah... they're right... THEIR BUCKETS.

(Ironically while this is up for debate, Former Congressman Mark Foley is paying for his defense with the millions of dollars in leftover campaign monies... why aren't those going back into the state since he's NOT campaigning?!)

Let's say ONE Black Amex holder at $5000/mo spending has to pay 2% more sales tax... Write it on paper with me people!... yes... that's $100 more per month. Oh... yeah.. .they'll feel that.... but $100/month times 12 for a year is $1200/year or Half of What Grandma and Grandpa pay in taxes! Oh yeah... and the IRS lets you deduct State Sales Tax if your State has no Income Tax!!

These people are SPENDING more in two weeks than Grandma and Grandpa are being Taxed!

So it is boiling down again to the Haves vs the Have Nots.

Grandma and Grandpa HAVE NOT so they're Taxed in their Retirement...

The HAVES are still going to get tax breaks regardless... and the net effect of their increased spending being taxed will really not amount to much at all.

So why go that route?

Because there is no State Income Tax to identify where monies are really coming from.... what?!

The Millionaire demographic is harder to identify than Grandma AT THE STATE LEVEL.

No... I'm not pretending to be Robin Hood... I don't wear tights. What I'm saying is that the issue isn't property tax, nor is it sales tax....

it isn't about EQUAL treatment of all citizens... it is about EQUITABLE treatment...something far different and far harder to create except in Utopia... an island off of Never Never Land.

That's where lawmakers just can't seem to dig in this... how do you identify taxpayers that should be paying more or less?

Income Tax

Believe me... I don't want to pay it either... but it is definitely a place where a RETIREE EXEMPTION Could be enforced!

Your Mortgage Advisor is WHO???

Today's Mortgage Industry is a vast, complicated landscape of amortization, interest calculations, equity lines and bond prices.

People are clamoring to get in on the profession but soon find that it is far more education intensive than they ever would imagine.

Just keeping up with the ever changing progams offered by the major lenders is a challenge, but to keep up with a whole slew of smaller, more diverse and cutting edge lenders and the effect the mortgage backed securities market has on their rates is something better left for a pro.

My main concern as a Mortgage Broker is... who are borrowers going to for their mortgage advice?? and why aren't they mortgage brokers?!

They say you can't spend 10 minutes in a restaurant in Boca Raton, Florida or any other volatile real estate market without hearing some conversation start up about real estate. From the first time homebuyer to the retiree living on rental incomes from an industrial park complex, everyone wants to talk about it.

The thing is... that's GREAT for me... it means that there are people thinking about transacting and I want to know them!

The problem is... when everyone is talking about it - no one is LISTENING about it!

Far too often I'm hearing someone call me to tell me what loan fits their needs rather than going through a brief but thorough fact finding mission to determine which of the THOUSANDS of loan products out there fits their needs best.

• All I want is a 30 year fixed, no points, 5.5% on a Mobile Home
• Don't even bother me with that talk about Interest Only
• Option ARMs are only talked about by Thieves
• I don't want any of that Negative Amortization stuff
• My friends went bankrupt because of their ARM

WHOA... hold the bus!

It is GREAT to know what you want... and to do some research into different loan programs... but I don't operate like that. Why? because you are UNIQUE and my goal is to take your unique financial situation and pair it with a specific loan program that will effectively and efficiently meet or exceed your needs for the entire life of the PROPERTY - NOT the just Loan!

HOGWASH!? NO... and don't listen to anyone that tells you otherwise! I MEAN IT!

Look... here's the skinny.

• Who are you?
• How old are you?
• What stage are you in your life?
• What stage are you in your family?
• What stage are you in your career?
• What is your salary like today... and next year?

Those are all things that all your research can't help you distill with the help of a Banklate or SpendingTree. They are questions that I, your friendly neighborhood Mortgage Guy will ask you.

Wikipedia, MSN Money, Mortgage-X... none of them can help you sort through who YOU are to arrive at the right program for you... instead they let you bring your biases and those of your trusty advisors with you.

You know... Mom and Dad, Your friend the family attorney, Your grandfather's accountant, your rich older (much older) sibling, your family's stockbroker, your Realtor... all the people that would answer all the questions above VERY differently than you.

So why are THEY telling you which loan to get? How are they, all of a sudden, masters of the information that will help you get the program that fits YOUR needs properly?

Well...sorry to say... I'm BLUNT so I'll say it anyway... THEY ARE NOT the people you should be listening to for Mortgage Advice. Most of the time they aren't even the ones you'll tell about your credit and salary issues when you're NOT buying a house!

Let's look at the facts.

• Mom and Dad are 50-60s, settled down, may have one more house in their future and it is likely smaller than this one, they have savings, pension, security and retirement planned. Even better, they have YOU out of the house so you're not draining their disposable income away from their leisure. So how are they poised to help someone starting out? much less understand one in this economic time/market?
• Your family attorney, in his 60's in his prime earning years, has a huge house on the affluent side of town, a condo by the beach, and a timeshare in Ireland for when he really needs a Guiness and a Sweater. He's got a few million in assets, partially liquid and his house is long paid off. How does HE know what you, the newly hired salesperson is going to need to get into the house and afford to stay in it??
• Grandfather's accountant... When I was your age, I paid $1,200 for my first house and I paid CASH because that's the way we did it! - do I need to continue??
• Your much older sibling, mid 30's, two cars, two incomes, two kids, too many credit cards...too condescending... you don't really talk to him about anything anyway!
• Your family stockbroker/financial planner... PLEASE... this is your home, there is no return on the equity in a home so leave it alone! We haven't covered that yet, sorry... Every dollar you put in that house is a dollar you're not putting in a mutual fund with him....move along.
• Your Realtor... well... they should at least be versed in mortgages to some extent, but the best Realtors won't talk loans with you because it is illegal and unethical for them to do so because of license laws!

What have I just illustrated?? There is an impartial person who has good advice, who knows the markets, who knows the products, who is just waiting for you to call and let him do his job... but... and this is a BIG BUT

But you've got all the advice you can handle in what is already an overwhelming and stressful life cycle event!

So... who do you listen to? Do you consider the scrutiny you'll endure if you pick something outside of what everyone else thinks is right for you?

DO YOU CARE?

Remember... everyone says, "Buying a home is the single, biggest investment you'll ever make..."

So why are you buying with other people's own needs and experiences when they probably do not reflect what YOU need??

Look... it is simple. I'm not telling you to tune them out and only talk to me. That's unreasonable. What is reasonable is to tune everyone out for a little while. Let them know you'll get to them. Then take the evidence to them that your Friendly Neighborhood Mortgage Go To Guy (or Girl) has to offer.

Relate to them the reasoning behind why you may want to consider an ARM, or the benefits to YOU of Interest Only, or the easy to afford minimum payment on the Option ARM, or the versatility of the Hybrid that is a combination of two or three loan programs.

Better yet, show them that there is someone else out there with your best interests in mind that is an expert in that field... nay a guru that you're willing to trust and so should they.

I'm not saying they'll trust me too... but with proof and logic, we can at least make them understand why the program I offer fits you better than the program they think you should have.

And isn't compromise what good, lifelong relationships are about?

So when the time comes that you're thinking of buying your first home, relocating to Florida, buying a Second Home with a Beach View, buying an investment property, buying a property to grow your business... call me...

We'll sit down and have a coffee... and I'll LISTEN...

After that, we'll know your entry strategy, exit strategy and have a good idea of what you want life to be like in your new loan. Then I'll get you pre-approved so you can call your favorite big sister/new realtor and let her drive you all around town to find you a new property!

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update - HOUSE BILL REJECTED!

Breaking News from the SunSentinel.com regarding the Florida Property Tax: This didn't take long at all. Instead of waiting until this morning to make a resolution on the Florida House's property tax reform bills, the Senate rejected them all yesterday morning as their first order of business!

I guess the State Senate read my post yesterday about how I felt the House did not understand the "Time is of the Essense" clause of Real Estate!

The Florida State Senate has decided that perhaps the House plan is a little too radical and offsets the property tax with too high a state sales tax.

So the Senate's bill would work like this:

1. Roll back taxes to the 2003-2004 level (sound familiar) instead of 2000-2001
2. First time homebuyers that have been left in the lurch for so long would get a double Homestead exemption for a total of $50,000
3. Businesses (woo hoo!) would get a $25,000 Tangible Property Exemption which definitely helps the small business owner and since 90% of jobs are created by small businesses i.e. middle income business owners, this should offset the burden that was going to plague small businesses
4. Portability! Biggest YAY of all. Meaning that people can carry their tax basis with them. If someone is in a $200,000 start home and moves to a $500,000 family home, then they will not have a 250% higher tax basis any longer! This especially helps the struggling middle class! This will also help people that have been in their homes for a long time to move without taking the burden of today's property assessments with them which also benefits the retirees.

Now the House and Senate will be sitting down to try to work out a compromise between their plans. Their goal is to complete their unified plan by May 4th when they are supposed to Adjourn for the summer.

The issues on the table that I believe will be most likely to carry through from this plan will be

• Double Homestead
• Compromised Roll back
• Portability
• Maybe the business tangible tax exemption

The bills from the House that will likely carry through are

• Sales Tax Hike - but likely compromised
• Assessment practices is definite
• Cap on Local government add-ons

In other news that could benefit a more aggressive plan, in a former post I noted Gov. Crist was signing a pact with the Seminole Nation to secure more slot machines with them in return for tax monies from them... a first for the Seminole Tribe in Florida. Now it appears that the State and Gov Crist are looking to expand gambling in the state, further expanding the taxable revenues from these casinos! This should definitely help with the revenue crisis that these tax bills are sure to create by providing more money to schools.

Still what is really interesting is that Republican Governor Charlie Crist has not weighed in officially...

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update - Republican Bill Passes in the House

Breaking News from the SunSentinel.com regarding the Florida Property Tax resolutions are still not addressing the immediate needs of those hardest hurt by the high cost of property taxes throughout the state.

 

 

As the Republicans control the Florida House, there was little doubt that their bill would get the majority.

Unfortunately, the "Time is of the Essense" clause of Real Estate did not seem to compel these Florida Law Makers to affect a change any sooner than 2009 if this becomes a true Amendment to the Florida Constitution. 

The Florida House, in its infinite wisdom has proposed the Florida Tax Bill go on the ballot in the 2008 elections if it gets passed by the State Senate... which it probably will as they're a Republican Majority as well.

The Republican Bill centers around the now notorious Property Tax for Sales Tax Swap that Art Blanchet focused a post on... the actual impact of this PHASE of the Tax bills in session would cut $25 to $35 Billion from the State revenues over the first five years.... and this is even with the proposed sales tax increase!

The article in the SunSentinel.com noted that this Amendment would officially make Florida the ONLY State with no Property Tax AND no State Income Tax!.... but it would also be the State with the highest Sales Tax!

The other bills in session? (HB=House Bill)

• HB7001 - would roll back property taxes to their 2000-2001 levels and cap them.  This bill passed unanimously.
  This would have a dramatic effect on the ability of people to upgrade from a starter home to a family home.
• HB261 - this one affects Nick M The Appraiser ... it modifies assessment practices. 
  In a prior post I mentioned the feud between the Palm Beach County and Broward County appraisors over assessing property "As Developed" the Broward County Stand vs "Potential Use" or Highest and Best Use as the Palm Beach County Stand.  Obviously assessing a house for its current usage rather than future (potential) usage will mean that the property is valued more fairly.  The problem really lies with lower income areas where eminent domain is an issue.  A property that houses Section 8 might be in the Path of Progress and all of a sudden the people can't afford to hold the property and rent it out because taxes are too high.  The property is still worth what it is worth but all of a sudden the land is worth a fortune.
• HB1483 - this limits local governments abilities to increase taxes.  This is in reaction to several municipalities with add-ons to the main city or county taxes. 
  There are several municipalities (like Greenacres) which are more highly taxed than areas just 1-2 blocks away!  This is an unfair practice and creates undue financial strain on property owners in those areas.

All four of these measures go to the State Senate next...

But that's not the end of it!

The State Senate is voting on Friday on its own plan.  It would not be as sweeping as the House bill as it would only save $12.3 Billion in its first five years.  The plan would roll back taxes to their 2003-2004 levels instead of all the way to 2000-2001.

Now... here's where it gets really interesting. 

Bills are passed - Amendments are elected....

HB7001 could be immediate... but if voters in 2008 decide they like the forthcoming Amendment better than the bill, they can vote the Amendment in, which would immediately supercede the bill!  So if the Senate Plan passes as an Amendment, then the tax roll back would be defeated.

Getting back to Sales Tax... The immediate Sales Tax hike would be 1% going towards schools.  Then local governments would have the option of raising it another 1-1.5% depending on their needs.  The highest Sales Tax would be is 8.5%.

Now... I wonder how this will play out in the Senate on Friday!

The really interesting part is that the Democrats have the more sweeping ideas and favor a larger cut in taxes... The Republicans a smaller... but Republican Governor Charlie Crist has not weighed in officially... but sources have quoted him as saying "The Bigger the Better" (paraphrase)

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David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Florida Property Tax Update - Several New Ideas!

The news yesterday and today shows the heat is rising in the debate over how to "fix" Florida's property tax problems.

In short, the middle class is being choked out of Florida property. The reason is because there is no state income tax so there is a higher property tax. The Middle class is the upwardly mobile group that is upgrading from starter homes at 3bedrooms 2bathrooms to the family home at 5bedrooms 3 bathrooms... That jump in property NEEDS creates a new price point at which they can be taxed.

The method I've become comfortable with using to calculate property tax on a single family home is:

• Purchase Price - 20% for land = Improvement Taxable Base - Homestead $25,000 = Taxable Base x 1.75% (millage) = Annual Taxes


• For a condo, subtract only 15% for common area...

This debate is coming at a pivotal time for Florida and could cost the state hundreds of millions of tax dollars if instituted improperly.

What's on the Table:

• Republicans in the State Senate have proposed to roll back taxes to the 2001 levels. This would bring the taxable bases down significantly AND take off the 3% max annual increase for the past 6 years for another 18% potentially. This bill is seen to be controversial because some areas would see bigger drops than others due to appreciation, local millages, and local improvement. This is an interesting compromise to what I will detail below in the unrealistic area.


• Democrats are saying that the Republicans have a stupid idea and they need to have more time to review all options... Republicans are saying that further review increases suffering and stalling is actually hurting everyone. Democrats' assertions are that sweeping tax cuts will just hurt local services like libraries, police and an already hurting school system.


• Democrats announced yesterday that their solution is to reduce property taxes 30% across the board and raise sales tax 2%. That would put sales tax as high as 8.5%... which while reducing PROPERTY taxes, Renters will suffer as will small businesses renting office, retail and warehouse spaces. Services across the board could remain unhurt but big ticket product vendors might get squeezed.


• Republican Governor Charlie Crist wants to be very careful and look at other forms of income for the state so there is no huge drop in budget dollars. One thing that is in the works is a lawsuit against the US Government by the Seminole Indian Tribe. Currently gaming regulations have not allowed them the same gaming rights as their local competitors. In Florida, the Seminole Tribe owns 8 casinos - 4 in South Florida. Their most recent acquisition has been the entire chain of the Hard Rock Cafe, Hotels and Casinos brand. They have two such resorts in Florida - Tampa and Hollywood/Ft Lauderdale. In their casinos they are only allowed poker, video poker and bingo style slots - they are suing for equal rights to Las Vegas-style slots which will allow them to gain some of the casino-dollars lost to the local off and onshore slot machine venues like Gulfstream and Calder Racetracks. Gov. Crist is backing their claims of unfair competition and in return he hopes to work a deal to acquire tax rights to the new Vegas-style slot machines that they install. Currently the state has a 50% tax on Slot machine profits statewide ... except at Seminole Nation Casinos. This would be a first level of gaming taxation the Seminoles would accept but would ultimately profit their enterprises and the State of Florida.

What's Unrealistic:

• Leaving taxes where they are is creating a brain drain in several ways. First, the middle class is creating a virtual exodus to surrounding states where they can be transferred and have more space and not be burdened by such high cost of living due to property taxes. It is also creating a drop in enrollment in colleges statewide due to high housing costs around college towns.


• The first bill which saw praise but was incredibly unrealistic was to do away with property taxes altogether and just raise sales tax 2%. The estimated loss in revenue would be $800,000,000 to the state budget!! How much could 2% make up for that enormous a loss! That would require $40,000,000,000 in taxable goods and services sold just to come up with that many tax dollars....

What's an outside hope:

• President Bush arrived in Sao Paulo, Brazil yesterday to widespread protest. One of the best bits of news for Florida in this trip is his negotiations to create a Bio-Fuel Alliance with Brazil - the world's largest producer of Sugar, a by product of production is Ethanol from the leftover Cane. In Brazil, I saw Ethanol sold at all the same stations that sold gas ... and for 1/2 the price. As Florida is also a huge Sugar cane producer, the alliance would provide the Ports of Miami and Port Everglades the opportunities to receive the importation of Ethanol fuels from Brazil to sell in the US. This will create a new Biofuel Trade Zone and Mini-Economy based in South Florida! Taxes could be levied to benefit the State and as the FlexFuel industry grows - so shall the tax dollars for Florida.

There is a lot at stake in these debates. The issues are stifling but the Republicans are seeing this as an opportunity to make sweeping changes prior to the 2008 elections which would not take effect until Jan 1, 2009. In the 1.75 years until then, the whole state will feel the pressure - and this is what lawmakers are trying to relieve.

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

Second Homes - What are they??: Lending Information from The Mortgage Go To Guy!

What makes a Second home a 2nd Home?

• That it came in 2nd Chronologically in the purchasing order?
  Well... semantically YES... technically NO
• That it isn't where you live??
  Well... technically YES ... Semantically NO

So we're fighting Technicalities and Semantics now, eh?

Why do I ask these tough questions?? Because - we Real Estate Professionals in South Florida are surrounded by Second Homes and sometimes the people that own them! Why sometimes? Well... they're called Seasonal because they're here for "Season"... Get it?

No?? People have different measures of season depending on the demographic... suffice it to say, Season here in South Florida is roughly September to April....sometimes more sometimes less - depending on the weather.

We call these people Seasonals or SNOWBIRDS.

In Charlevoix, Michigan, they call people with 2nd homes there FUDGIES. They claim that the out of towners only come for the fudge. Let me tell you this about Charlevoix's TOWNIES... they overestimate their fudge producers and underestimate the beauty of their Lakes, Sunsets and Stargazing places!

What are other names for 2nd Homes?

• Weekend Homes
• Weekend Retreats
• Summer Cabin
• Winter Getaway
• House in the Hamptons
• House on the Shore
• Cottage in Maine
• Ski Lodge in Aspen
• Beach House

From a Lending standpoint - these names all have some commonalities that help us classify them as Second Homes and NOT Primary Homes or Investment Properties. Can you pick them out?

1. First of all... notice LOCATION LOCATION LOCATION. Typically a Second Home is considered to be Fifty (50) Miles or further from your Primary Residence. So the person in Long Island that buys a Condo in Boynton Beach is further than 50 miles from their Primary during Season eh?
2. Second of all... Notice Ski Lodge, Hamptons, Getaway, Beach... Those are descriptives that help qualify the property as SIGNIFICANTLY SUPERIOR. What? That 700 square foot hotel room that we bought in South Beach Miami is superior to our 5000 square foot Highland Park, IL house on Vine?... well...Superior means something different... it means BEACH. It means Room Service... it means maid service. Sure, you may have a chef and maid on the payroll but BEACH is locationally superior to Suburb! It doesn't even matter that the square footage or even amenities are less if it if a VACATION home the location makes it Superior.
3. Third of all... and this is the tricky one... it isn't an investment property!!! What?! I can't Rent it? well... that's where things get grey. Can you rent it is what plagues the equation. The answer is technically NO. Could you let people pay you for staying there for a week or so at a time... well... that really depends on the deed restrictions and how many weeks you actually live there versus rent it out. Technically renting it makes it an investment property.
4. Fourth... you're really committed to the property being a place that you will use for part of the year and set it up to use it like a second residence. If you buy it and someone else furnishes it for their use - not yours then it isn't right. Now, Condotels come furnished all the time... and some houses do and that's OK. Condotels are pretty much known to be partial year rentals anyway. This is hard to qualify but intent is intent.

What kind of snake oil and I selling?? Well... the type that will hopefully shed some light on this property type for Realtors and mortgage brokers and consumers!! Why? Because it is a

GREAT TIME TO BUY SECOND HOMES IN SOUTH FLORIDA!

Eh?? What's that??

• Rates are LOW!
• Market is DOWN!
• Plenty of Inventory to Choose from!
• Your Baby Boomer friends are already looking! (gotta keep up with the Joneses)
• Hurricanes are a figment of your imagination (riiiiight)
• You've got that money sitting in your house as equity and it isn't doing ANYTHING for you. (and won't do anything for you stuck in the house!)
• The dollar $$ is still weak to the British Pound and Euro (i.e. buy now, enjoy, when the dollar comes up and the market does your dollars appreciate as does your property!)
• Latin American investors are looking HARD at South Florida again!
• UPDATE: I forgot to mention - check with your CPA - most of them claim that you can deduct the Mortgage interest on a 2nd home - so long as you finance it within 90 days of purchase!
  

Look No Further than South Florida for a great 2nd Home Value!

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More Real Estate News You Can Use from
David A. Podgursky, MBA

The Mortgage Go To Guy!

Your Source for Residential and Commercial Mortgage Loans in Florida