Sailing the Good Ship
At a special focus group meeting of the Atlanta Federal Reserve last week, I was privileged to hear from some of the brightest in the business. Topics discussed included insurance, housing and commercial developments. It was an incredibly informative day. While I did not hear any overwhelming positive news, I did leave the session heartened that such smart, experienced folks were working hard on solutions to the current real estate doldrums.
One of my happiest takeaways was the joy of knowing that we in Midtown Montgomery are not affected by the insurance issues that plague our neighbors in Mobile and Baldwin Counties and all along the Atlantic and Gulf coasts. The wind problem there has gotten so big, I learned, that Disneyworld Epcot’s Innoventions Exhibition even has a feature called Storm Struck.
We in Montgomery do have some fallout from hurricanes; and tornadoes are a persistent. But as a whole, wind damage is a minor issue here when compared to that experienced by our southern neighbors.
Another blessing we enjoy is the relative stability of our home values. In Atlanta, I heard that 10.7 million households in the U.S. have mortgage loans and that 25% of those households are “underwater.” That means they owe more than their homes are worth. The problem is even worse in five states, including Florida and Georgia.
Alabama homeowners, fortunately, are near the bottom of the list of “underwater” homeowners. Approximately 17% of mortgaged homes in our state have balances higher than current market value. Montgomery figures were not available, but I’m betting they are even lower.
The best idea to come out of the session was a concept called a SAM or Shared Appreciation Mortgage, introduced by Steven Nesmith, Senior Vice-President and Assistant General Counsel for Ocwen Financial Corporation. Under this plan, a homeowner’s debt is reduced to the property’s fair market value, with the balance being forgiven in even amounts over three years if the borrower remains current on payments. At the end of three years, or anytime thereafter, if the property is sold for a net profit, that gain is shared — 75% to the owner and 25% to the mortgage company.
Bottom line: It won’t be easy to turn the “good ship real estate,” and it’s probably going to take a lot longer than any of us would like. And smart folks are working diligently on finding solutions.
In the meantime, with rates and home prices at historic lows, there’s never been a better time to buy. And if you have a problem mortgage, there are lots of programs now available to help you. I’d love to show you the way.
Sandra Nickel has been listing and selling residential real estate for over 29 years, most with an intense focus on Montgomery’s Midtown neighborhoods. Sandra serves on the Mid-Alabama Coalition for the Homeless, the Cloverdale Business Coalition, Historic Southview, the Volunteer and Information Center, Landmarks Foundation and her own neighborhood Garden District Preservation Association.
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