Kathy Harrison

Our focus for this article will not be the investment aspects of real estate. This is not to say that we think that homes have ceased to be a solid investment. One must remember that even with the drop in prices during the past several years, homes have more than tripled in value since 1980.

In addition to the appreciation of real estate, one can add the tax benefits of owning a home as well as the fact that home mortgage payments do not increase as quickly as rent which makes the home a hedge against inflation. Many analysts are expecting rents to soar in the next several years in response to increased demand. Bottom line, in the long-run real estate will still be an important part of any financial plan.

Today we focus not on these economic advantages but on the psychological aspects of homeownership. Some time ago, mortgage giant Fannie Mae conducted a national survey regarding homeownership. Among other findings, they found that Americans would choose to work an additional decade in order to become a homeowner. Our interpretation of this answer really helps us see that there is more to homeownership than money.

Not long ago, an article appeared on the Internet that should remind everyone that the dream of homeownership extends far beyond dollars and cents. The article was written by a single mother who worked for a non-profit in a high cost of living area, Montpelier, Vermont. The Montpelier Pride’s editor noted: Single Mother Dorl Oatley writes about the thrill, pride and satisfaction of owning her own home. Here are a few quotes from the story:

Homeownership is a wonderful experience. The stability that owning a home offers a family is invaluable. To realize that in a year, you will be here… that this first Christmas or this first birthday celebrated here will be the beginning of many provides a feeling of consistency and a sense of home that is hard to describe. As a renter, between rising costs or a landlord’s decision to remodel or sell, I had moved a lot and never knew whether I would be celebrating the next year’s milestone in the same home…The opportunity to start a stable home for my daughter who is now thriving in middle school, is a wonderful blessing…there comes with owning a sense of pride that caught me off guard. I have given more attention to the aesthetics both inside and outside the home since I have become a homeowner.

Stability. Pride. Control. Permanence. These are all words that homeowners would use in describing their experience. With so many foreclosures taking place across the country, people again are being forced to move.

There are many stories about the financial losses of banks and individuals, but what about the psycho- logical damage of forced moves? What about the damage of not knowing if you will own again in the near future?

There is no doubt that those of us who are homeowners understand these feelings. It is one of the reasons that many immigrants want to come to our country. It is not only because the country is wealthier and perhaps may have more political and personal freedom. An important factor is the fact that, in many countries, homeownership is not possible.

Sometimes Americans take the right and ability to own a home for granted. Not so with immigrants. This financial crisis is an opportune time for all of us to take a second look at these benefits. As a matter of fact, as many have fallen behind with regard to their financial goals, being able to save their home is of primary importance from a psychological perspective. It is one thing to postpone retirement. It is quite another to change status from homeowner to renter at the same time, losing control of many other aspects of one’s life.

We also understand that the government must take actions to shore up the financial systems of this country to help us out of this financial crisis and to prevent future calamity as well. Yet, as they change the rules, we hope that facilitation of the American Dream of Homeownership is still a major goal of our government. We can’t afford to put too many barriers in place in the name of financial protections. The freedom and means to own a home is ingrained in our systems of democracy and capitalism. With the world in crisis, once again we must show the world the importance of our values.

The Weekly Housing Report

The chase to 2013 is on, and we are pleased by the prospects ahead. Given the upward progress of the 2012 housing market, many homeowners may find that their properties will be worth more next year. That's a nice change of pace for potential sellers, and for residential real estate as a whole, and is a direct result of
widespread improvements in the marketplace. Most of the positive trends we have seen in 2012 should persist into the new year. Let's take a peek at what's happening locally today.

In the Twin Cities region, for the week ending December 8:

∙ New Listings increased 3.0% to 942
∙ Pending Sales increased 12.6% to 788
∙ Inventory decreased 28.8% to 13,832

For the month of November:

∙ Median Sales Price increased 16.2% to $172,000
∙ Days on Market decreased 26.2% to 103
∙ Percent of Original List Price Received increased 3.6% to 94.2%
∙ Months Supply of Inventory decreased 40.0% to 3.4

Information provided by:  "The Skinny" Mpls Realtor Blog.

Here’s some information on the latest Modification scams out there:

Contact a trusted advisor with questions or concerns you may have.

Phony Counselors – Scam artists present themselves as “counselors” who will negotiate a deal with the lender IF the borrower pays a fee first.  Some scammers even require that all the mortgage payments be made to them while they negotiate on the borrower’s behalf.

Fake “Government “ Modifications – Scammers will claim to be approved or affiliated with the government.  Their documents and website will use terms like “federal” and “TARP”.  They will claim a fee is necessary to use the modification program.  Borrowers should call their lenders directly to find out if they qualify for a government loan modification.

Bait and Switch – The scam artist tells borrowers that by signing loan modification documents the existing mortgage will become current.  What the borrower is really signing surrenders title to the scammer in exchange for a “rescue loan”.

Rent-to-Own or Leaseback Schemes – Scammers tell borrowers that if they will surrender title to their home that they can stay there as a renter, and then buy the home back in a few years.  The scammer then raises the rent over time to the point they can’t pay.  The scammer evicts the borrower and sells the home.  Another variation is when the scammer has the borrower sign over title and move out.  They promise to find a buyer for the home and share part of the profit once the home is sold.  What really happens is that the scammer rents out the home, never making the mortgage payments and lets the lender eventually foreclose, while they walk away with all the rent money.

Bankruptcy to Avoid Foreclosure – The scammer promises to negotiate a refinance with the lender for a fee.  He pockets the fee and files a bankruptcy in the name of the borrower without the borrower’s knowledge to temporarily stop the foreclosure process.   The borrower thinks things are going well because the collection calls stop.

Online Security Awareness Tip

Avoiding Identity Theft

By Eric Andring, IS Risk Manager

Identity theft occurs when personal information such as your Social Security number or bank account number is taken without permission and used to commit crimes or fraud. Identity theft can be carried out via phone, email or through fraudulent websites.

Follow these tips to help prevent identity theft:

• Keep your billing and banking statements and other personal records secured, and shred them when they are no longer needed.
• Keep your confidential information to yourself. Never respond to phone calls or emails asking to confirm your personal information. Don’t leave PIN numbers, passwords or other personal information around for others to see.
• Practice secure postal mail practices. Use a public mailbox rather than your home mailbox to send payments and other mail containing sensitive information. Pick your mail up promptly and ask the post office to hold your mail while away.
• Review your bills and bank statements promptly. If you find any charges or debits that you didn’t make, contact your bank or the company immediately.
• Protect your Social Security number. Don’t carry your Social Security card or other cards that have your Social Security number on them unless you are going some-where where you will need them. Only provide your Social Security number when there is a legitimate need to do so.
• We recommend that you monitor your credit report for unauthorized activity. You are entitled to receive a free copy of your credit report once every 12 months. Request a report by visiting the official government site, annualcreditreport.com, or by calling 877.322.8228.

Here are some additional anti-identity theft tips for when you’re spending time online:

• Use anti-virus and anti-spyware software and a firewall on your computer, and keep them updated.
• Ensure the website is secure when you provide financial or other sensitive information online. The website address should change from “http” to “https” or “shttp.” A “lock” symbol may also indicate that the website is safe.
• Be cautious with suspicious e-mail messages by deleting them; they could contain harmful software or links that could lead to the exploitation of your computer and personal information.
• “Stop – Think – Click.” Stop and think before you click the attachment or link.
• Spam or phishing e-mails may look like they are from someone you may recognize. If any of the information sent to you seems suspicious, it is a good idea to contact the sender directly for verification before opening any attachments or clicking on any links. If someone hasn’t sent you an e-mail in a long time and suddenly sends you strange messages containing attachments or links, they may have a virus on their computer. Don’t open any attachments or click on any links from this sender. If you do, your computer and information could be at risk.
• Monitor your accounts online frequently. You can discover problems much faster online than if you wait for bills or statements to be delivered by mail.
• Never call a number provided within an email related to your personal information, unless you are sure it is valid. Always verify the number with a source you already know and trust. Fraudsters can set up temporary phones and may attempt to trick you into revealing personal information.
• Some common email subjects that fraudsters use to “hook” their victims within emails are:
• Failed Bank Transfer – contact the number below immediately or click on this link to “manage” your account.
• We suspect an unauthorized transaction on your account.
• Your order was processed. Your bank account will be charged $###.##. Click on this link to view your order. (This comes from a company that you didn’t order anything from.)

For more information relating to cybersecurity and identify theft, the following websites are very helpful:

• The Federal Trade Commission sponsors a website called www.onguardonline.gov. This website provides practical tips from the federal government and the technology industry to help you be on guard against Internet fraud, secure your computer and protect your personal information.
• Consumer Federation of America’s website contains helpful consumer protection tips such as identify theft. http://www.consumerfed.org/consumer-privacy/fraud
• The Department of Homeland Security provides cybersecurity tips and best practices. http://www.dhs.gov/files/cybersecurity.shtm

Protect Your Credit Score!

Jill knew she had to get her credit score "under control" before graduating from college if she wanted to avoid problems with signing an apartment lease or getting a loan.  "I want to get a car someday and I want it on my own without help from my parents" Jill said.

Jill cut back on her spending in order to pay down her credit-card debt faster.  Finally six months later and debt-free the 24 year old pays any balance in full each month.  Her credit score has gone from an average to score of 697 to an excellent score of 785. 

Jill is just one of the many twenty-somethings learning to importance of a credit score, a number used by lenders to determine if you qualify for a credit card, mortgage and other loans.  Your credit score is also used when you apply for an apartment lease and even for some jobs.

The credit score is the only grade that matters after you graduate from school some say.  It's "your number or grade" that follows you around for the rest of your life.

A credit score is comprised of factors including your payment history, debt amount & how much of your credit limit is currently used.  There are many credit scores, but the most widely used is the FICO score.  Depending on the information in your credit report, you could get a FICO score from each of the three major credit-reporting companies:  Experian, TransUnion & Equifax.  A FICO score ranges from 300 to 850, with a score above 725 landing you the best approval and interest rates, according to FICO.  A score below 560 deems you a credit risk.

Younger adults typically have a short credit history so blips can make a big impact on their credit scores.  To keep a good score intact or to revamp a bad score, focus on making loan and credit-card payments on time.  Also, try to pay more than the minimum amount each month.  Having a balance of more than 30% of your credit limit will hurt your credit score too.

If you'll begin to repay student loans later this year, set up automatic payments through the lender or online banking so you don't miss any payments. 

It may be tempting to cancel extra credit cards once you've paid off your balances, but doing so could actually lower your score.  If you cancel your oldest credit card it will affect the length of your credit history, one of the factors in stermining your score.  But also be careful about applying for credit cards or loans.  Each time a lender officially looks at your credit report and score, your score gets dinged. 

If you don't have a credit history, you can start to build one with a secured credit card, in which you deposit a sum into the card and can charge up to that amount.  It's a good way to build your credit history.

Whatever you do, just keep in mind that your credit score is used to analyze your finacial worthiness so, protect your credit and watch it annually.