Article 1 (Sub-Prime Loans: What Are They?) Article 2 (Identification Rules: It?s Essential To Adhere To These Requirements) Article 3 (Does "Moving Up" Make Dollars & Sense) Article 4 (Q&A with Michael Merrill) Article 5 (The Names of the Neighborhoods of Brookline) Article 6 (E-Signature Law Gives New Meaning To Signing On The Line) Article 7 (FYI, PMI Can Be Avoided With Some Creativity)

Sub-Prime Loans: What Are They? By Eric Erickson, partner in Viking Mortgage Company. He has been helping homeowners and real estate investors close their mortgage transactions for the past 8 years. He can be reached at 1-888-738-3350. You may see different mortgage ads that refer to people with bad credit. Some of the many euphemisms used by my industry that refer to bad credit are: slow, less than perfect, A- to D, or low credit. What these euphemisms boil down to are loan products that have been created for the borrowers that don?t meet Fannie Mae or Freddie Mac credit guidelines. Fannie Mae and Freddie Mac are considered the definition of ?A? paper or prime mortgage loans. Most ?A? paper mortgage loans are derived from these two agencies? guidelines. So if your credit doesn?t fit the ?A? paper criteria you are considered by the industry to be a ?sub-prime? borrower. But I haven?t explained anything yet. What is ?A? paper? This used to be a relatively easy question to answer. In the past loans were traditionally underwritten. All of the information on a borrower including running a credit report was gathered. Then, all the factors that would affect a borrower's ability and willingness to repay the loan were taken into consideration. A borrower's credit was only one of the factors that affected the loan decision. With a good letter of explanation for any adverse credit and other compensating factors, a loan could be approved. Conversely, if a borrower showed no willingness or ability repay their debt then they were denied. The mortgage process was slower when traditional underwriting was in place. The advent of technology in the mortgage process has brought about a big change in the speed of the process. The need to improve the speed of mortgage approvals and the desire to reduce paperwork has created a new monster. Today we have what has become the all-powerful credit scoring system. In residential lending, all loans are now scored by statistical models using the credit information stored at the three repositories: Trans Union, Equifax and Experian. These are the three national credit bureaus that receive and compile the credit data from different lending institutions (credit card, loan, mortgage, banks etc) and public records found in courthouses. The mortgage industry in recent years has embraced credit scoring as the major factor in approving or denying loan applications. Credit scores have become a double-edged sword in the mortgage industry. The model of scoring a borrower?s credit is proprietary to the lender and credit bureau. Therefore it is hard to pinpoint why scores may differ widely between each repository or between seemingly identical credit worthy borrowers. An example is a person that has never had a late payment in their credit history can score low and a person that has filed for bankruptcy 4 years ago could score high. This is one problem that shows the models aren?t perfect. Many new programs have been created which have benefited borrowers who are considered to have ?good scores? but have also left poor scoring borrowers out in the cold. The exception to this is a poor scoring borrower who is willing to consider a sub-prime loan. Let face it, most people know how well they have handled their credit. There are many reasons for a person having bad credit. Again, this is why the sub-prime loan market exists, to help those borrowers who in the past would not have been able to buy a home. Sub-prime encompasses all credit situations. Some examples are: persons who have filed for bankruptcy protection, had a foreclosure in the past, have let their charge accounts go to collection, or are just consistently late in paying their bills. Others are persons who are self-employed and can?t verify all their income as well as have poor credit. Or maybe the money used for the down payment can?t be traditionally verified. Basically the sub-prime market is large and all encompassing for the many that fall outside of the ?A? paper box. Many of the sub-prime lenders do not use credit scoring to make the loan decision. Believe it or not a good thing is every sub-prime lender is different. A borrower who may be considered a ?B? credit risk at one lender is considered an ?A-? at another. So if you find that you are wanting to buy a home and don?t fit into the ?A? paper box you should find a good mortgage broker. A good mortgage broker will send your application to 3 to 5 different lenders to get different credit grades so that he can get the best program for your situation. Most of the time if you do close with a sub-prime loan, it will be structured for a short period of time (generally 24 to 36 months), giving you time to rectify your credit situation and refinance into an ?A? paper loan in the future.

Identification Rules: It?s Essential To Adhere To These Requirements By Robert HB Buckner, New England Division Manager for Asset Preservation, Inc., a subsidiary of Steward Title Company. Questions regarding exchanges can be directed to him at 877-845-1031 or hbbuckner@earthlink.net. The identification period in a delayed exchange begins on the date the Exchanger transfers the relinquished property and ends at midnight on the 45th calendar day thereafter. To qualify for a §1031 tax deferred exchange, the tax code requires identifying replacement property: In a written document signed by the Exchanger; Hand delivered, mailed, telecopied, or otherwise sent; Before the end of the identitication period to; Either the person obligated to transfer the replacement property to the Exchanger [generally the ?Qualified Intermediary?] or any other person involved in the exchange other than the taxpayer or a disqualified person. The replacement property must be unambiguously described (i.e. legal description, street address or distinquishable name). The type of property should be described in a personal property exchange. ADDITIONAL ISSUES Exchangers acquiring a property which is being constructed must identify this property and the improvements in as much detail as is practical at the time the identification is made. Exchangers who intend to acquire less than a 100% ownership interest in the replacement property should specify the specific percentage interest. Exchangers should always consult with their tax and/or legal advisors about the specific identification rules and restrictions. Any properties acquired within the 45-day identification period are considered properly identified. An investor has the ability to substitute new replacement properties by revoking a previous identification and correctly identifying new replacement properties as long as this is done in writing within the 45-day identification period. Although Exchangers can identify more than one replacement property, the maximum number of properties that can be identified is limited to: A. Three properties without regard to their fair market value (?3 Property Rule?); B. Any number of properties so long as their aggregate fair market value does not exceed 200% of the aggregate fair market value of all relinquished properties (?200% Rule?); C. Any number of properties without regard to the combined fair market value, as long the properties acquired amount to at least ninety five percent of the fair market value of all identified properties (?95% Exception?).

Does "Moving Up" Make Dollars & Sense By Jay McHugh, RE/MAX Affiliates, 2077 Centre Street, West Roxbury, MA. Questions should be directed to Jay at 617-323-5050 or faxed to 617-323-4040. E-mail JAYMCLB@aol.com or visit www.jaymchugh.com. The kids are warring over bedroom space – even the dog wants more room! So one Saturday you innocently load everyone into the car, in search of a larger home. Emotionally, it makes sense. But financially, are you prepared to part with some of your hard-earned equity (not to mention a bit more of your paycheck) in order to purchase a larger home? It's going to cost you money to move up. Simply explained, equity is the difference between what you owe on your home (all its mortgages, liens, etc.) and what you could obtain on the open market LESS YOUR COSTS OF SALE. (And the last part of that sentence is often overlooked by overzealous move-up buyers!) But looking before you leap can make the difference between a financially prudent new purchase and a haunting economic disaster! Let's evaluate the costs. 1) Some increased costs of purchase are obvious: you'll be paying a larger mortgage payment monthly to own a larger home (depending on your down payment) your taxes will increase, and yes, even your homeowner's insurance will be more. And if your down payment isn't at least twenty percent of the purchase price, you may even have private mortgage insurance to pay. It all adds up; but 2) Some increased costs of purchase aren't so obvious: What about upkeep and maintenance? Utilities? Even the extended period of time it takes to clean the home on the weekend, taking time away from your family and other "fun" things – are you prepared for that? 3) One category most of us overlook when taking the "move up" plunge is to evaluate the chunk of equity it will cost us to sell our existing home, pay our buying costs, and move into another. Since 80% of all sellers hire a broker to sell their existing home (often saving money overall in doing so), you'll no doubt benefit by that cost. You'll add to it the additional sales costs of title insurance, transfer taxes, deed preparation, tax proration – basically all the costs paid by the seller when you purchased the home. So should you move up? The answer depends on what you're trying to achieve. If you're purchasing a home that will appreciate faster than your current one, gives you more space, is in a better neighborhood, and/or will make you psychologically happier, it may make sense to move. It's true that happiness becomes the overriding factor to the move-up buyer. Yes, you may want different features than you have in your current home, but you also know that housing is housing – but being happy where you live is paramount! The bottom line is that homebuyers purchase with their "gut" and justify the purchase with their wallet. Long after you've crunched the sales cost numbers and consulted with an expert to evaluate a new neighborhood, you're still likely to follow your gut instincts and purchase the home that tugs hardest on your heart strings. After all, it's what living the American Dream is all about.

Q&A With Michael Merrill By Michael Merrill, of Merrill & McGeary, a real estate attorney. Questions should be mailed to his attention at Six Beacon Street, Boston, MA 02102 or call 617-523-1760. Q: I want to purchase a condominium unit and I think I know where I want to live. Now I am going to focus on particular buildings. People tell me that I should make sure I know about the condominium I am purchasing ?into.? For example, they say I should read the condominium documents and learn about the condominium?s finances. This makes sense to me, but I am not really sure what they mean. What should I be looking for when I read the condominium documents or when I attempt to analyze the condominium?s budget and finances? L.T., Boston A: You are getting good advice. You definitely should not purchase a condominium unit without knowing about the condominium?s finances and operating rules. With today?s high real estate prices and the expenses related to acquisition you should minimize your risk. It is not easy, quick, or cheap to unload a condominium that you have purchased in error. That being said, the most important points to focus on in the condominium documents are the restrictions on the use of the unit. For example, is leasing allowed? Are there limits on the number of unrelated persons who can occupy the unit? Are pets allowed? Can an owner have a home office in the unit? If so, can the business be advertised as being located at the unit? Can clients come to the unit frequently? If you violate any of the condominium?s rules, you may be subject to fines and possibly court action. All costs of enforcing the terms of the condominium documents, including the condominium?s legal fees can be charged to you. Other issues to review include the responsibility for maintenance and repairs within the unit and building and any exclusive use areas such as parking, storage, and/or roof rights. On the financial side, you should verify the condominium is not in debt and that there is an adequate reserve fund. The budget and projected common charges should be sufficient to meet the expenses of the condominium. Also, find out if there are any major capital improvements planned which will require a special assessment or an increase in common charges. You should obtain the answers to these questions by speaking directly to the property manager or to the Chairman of the Board of Trustees. Finally, verify that there is no significant litigation pending which might affect the budget. If you do not have time or the inclination to deal with these issues yourself, ask your real estate attorney to find out the answers. Michael W. Merrill Q: I am a trustee in a condominium. Next door to our building is a single family house. Between the two buildings is a passageway. The owner next door has placed a fence across the front of the passageway where the access to the street is. He keeps the gate and the fence locked and then uses this area for personal parking. Recently, the city cited our building for the trash that has accumulated in the area. We cannot clean the area because we do not have access. This just adds insult to injury. What do you suggest? A.S., Boston, MA A: You need to know who actually has the right to use the passageway. You can ask your neighbor to provide proof of his ownership or, in the alternative, you can commission title searches of the properties to determine the boundaries of each lot. Generally, if each lot is bounded by the passageway, then each party would have the right to use the passageway to the mid-point. Not abutter would have the unilateral right to block access to the passageway. Michael W. Merrill

The Names of the Neighborhoods of Brookline By Sara Rosenfeld, Sr. Vice President, Co-manager of the Brookline office of Coldwell Banker-Hunneman. 617-731-2447. Many of the neighborhoods of Metro Boston have specific names known by the residents and the real estate agents, but not by many of the buyers and prospective tenants. You may be reading ads that say the name of the neighborhood and you do not know where they are! Here is a brief description of some of the neighborhoods for your future reference. Lower Beacon Street is the area around Beacon Street adjacent to the Boston line, close to Kenmore Square. This popular area consists of two neighborhoods: Cottage Farm to the north of Beacon Street, and the area surrounding the Longwood Mall to the south of Beacon Street. Cottage Farm, a local historic district, is a lovely section in the northeast corner of Brookline. It abuts Armory Park, Halls Pond, and the bird sanctuary on the western borders. Boston University and Boston neighborhoods are situated to the east. The Longwood Mall and the Longwood neighborhood are located close to the Boston line where you will find the Longwood Medical Area, home to Harvard University Medical and Dental Schools and its many teaching hospitals. The Longwood T stop of the D line of the MBTA is located in this neighborhood. The Longwood Mall is a National Historic Register Park consisting of the largest collection of antique beech trees in the United States. Coolidge Corner is the neighborhood surrounding the intersection of Beacon and Harvard Streets. It is also a T stop on the C line of the MBTA. The neighborhood residents consider themselves living in Coolidge Corner since the commercial district influences them all. Northwest of Coolidge Corner is the area known as Corey Hill. Corey Hill is the area around Summit Avenue, north of Beacon Street to the Brighton line. Corey Hill Park, at the top of Summit Avenue, has some of the most spectacular views of Brookline and Boston. JFK Crossing is located on Harvard Street, less than half a mile north of Coolidge Corner. This commercial and residential area is named for its proximity to the birthplace of President John F. Kennedy on Beals Street. Washington Square is at the intersection of Beacon and Washington Streets and is another T stop on the C line of the MBTA. This is another intersection whose name is also used for the neighborhood?s name since it is in close proximity to the commercial district. Southwest of Washington Square lies Fisher Hill, a neighborhood of larger distinguished single family and condominium residences and the campus of Newbury College. Brookline Village is the area surrounding the intersection of Washington and Harvard Streets. It is the site of Brookline?s town hall, the Pierce School, police headquarters, the main fire station, and the main branch of the public library. It also has a T stop on the D line of the MBTA. Brookline Village is considered to be the area north of Boylston Street (Route 9). Pill Hill, a local historic district, has some of the finest collections of large Victorian-style homes in the area. It is south of Brookline Village and Route 9. Its name comes from the fact that the neighborhood attracted many doctors as its residents due to its close proximity to the Longwood Medical Area and other hospital sites no longer in use. South of Pill Hill is the area known as The Point. This neighborhood abuts the Boston community of Jamaica Plain. Sargent Estates is a ?gated? community to the west of The Point. It consists of large homes situated on very large parcels of land, plus it has its own pond, Sargent Pond. Chestnut Hill is a postal district (02467) and a section of Brookline. Olde Chestnut Hill, a local historic district, abuts the area surrounding Boston College and the Chestnut Hill Reservoir to the north, Hammond Street and surrounding area to the west, and Boylston Street (Route 9) to the south. South of Route 9, you will find the neighborhood surrounding The Country Club. Further south of this area is the part of Chestnut Hill called South Brookline, the area adjacent to the Boston Community of West Roxbury. For a better and more complete description of the neighborhoods of Brookline, please contact our office at (617) 731-2447 for your copy of our newly published community guide, ?In and Around Brookline.?

E-Signature Law Gives New Meaning To Signing On The Line By Shari Marquis, GRI Marquis GMAC Real Estate. 384 Washington Street, Brighton, MA 02135. 617-782-1234, e-mail smarquis1@aol.com. Director of GBREB, MLS-1 & MAR Chairman Technology Committee, MLS-1 Realtor of the Year, Greater Boston Real Estate Board and the Massachusetts Association of Realtors. For homebuyers and sellers, new e-signature legislation, recently signed by President Clinton, will create noteworthy efficiencies by encouraging the location of essential home-transfer instruments – financial disclosures, contracts, mortgages, escrows, appraisals, titles, insurance forms, and the like – in a single electronic neighborhood. Convenience and accessibility will soon characterize transactions that were once perceived as formidably complex. Realtors who have embraced technology welcome the federal law that finally endows electronic signatures with the same legal clout enjoyed by orthodox pen-and-ink agreements. The real estate industry will be among the first to take full advantage of this innovative legislation. Among the benefits it offers both real estate professionals and consumers is savings in time and money since it will help reduce costs and red tape, minimize mistakes and misunderstandings, and even help the environment by sparing a few trees that would otherwise be pulped for traditional paperwork. However, the new and sophisticated e-signature will not abruptly displace the old and familiar pen and ink mode of signing agreements. It is important to remember that nobody, absolutely nobody, will be forced to use an electronic signature. Choice is the operative word here. If one of the parties to a transaction feels more comfortable using a pen-and-ink signature on paper documents, then that option will always remain available. In this sense, the ?e-signature? is simply another choice. Typically, the sale or purchase of a home involves real estate professionals and banks to send scores of documents to buyers and sellers, who must then examine them, make changes if necessary, and then mail the whole package back to the bank for its approval – and that's just the first step in a grueling march through avalanches of official paper, but digital signatures and e-mail can easily reduce this process to mere days or even hours. Once signed electronically, these various ?documents? are indelibly set in stone, for they cannot be changed without scrambling the encryption of the digital signatures and setting off alarms. The new law also is expected to make the financing of home purchases faster and cheaper. Loans will now be sold to Fannie Mae and the secondary mortgage market virtually at warp speed via e-signatures. In addition, banks will be empowered to move inventory in and out of their ?warehouses? much more quickly. The end result is: commitments can be smaller, the risks all along the line can be reduced, and the ultimate rates and fees charged to the consumer can be radically slashed. These are the kinds of efficiencies that will shoot straight to the bottom line of the home-buying transaction. The new law contains language that establishes a federal pre-emption in order to make certain that its provisions apply uniformly across the country. If a state passes a bill consistent with the federal statute, then the state measure will prevail; if not, then the federal statute will rule.

FYI, PMI Can Be Avoided With Some Creativity By Rick Fedele, President of Summit Mortgage, a mortgage company with offices in Boston?s Back Bay and Wakefield, MA. Summit Mortgage is an affiliate of Pacific Guarantee Mortgage Company (PGM), the largest mortgage broker in the United States with an annual volume in excess of $8 billion. PGM has more than 40 offices and 135 loan originators throughout the country, and brokers its loans to a network of more than 200 nationwide lenders. For additional information, please call (617) 859-0900. Bigger is better, right? Not always. In the mortgage world, the big name banking institutions have a near stranglehold on the market and control nearly 90 percent of all loans written in the United States. But the big banks? clout and buying power doesn?t necessarily translate into a ?good deal? for homebuyers. Take Private Mortgage Insurance, for example. Despite what the behemoths of banking would have you believe, all it takes is a little creativity and customer care to make PMI charges very much avoidable. Private Mortgage Insurance is actually a bit of a misnomer. To start with, it is more of a surcharge than an insurance policy. And it offers the homebuyer no protection for his or her premiums. It is an insurance policy for the lender taken when a downpayment is less than 20 percent. As a rule of thumb, most lenders prefer to see a 20 percent downpayment made by the buyer. For reasons that remain as statistically unclear as they are arduously defended, it is seen that buyers who plunk down anything less are more likely to default or have trouble meeting monthly payments. The merits of this concept aside, PMI is levied as an added monthly charge to mortgage payments to protect the lender. The money is used by the lender to pay a private insurance company for a policy that covers their losses in the case of default. For average buyers, PMI charges can range between $500 to $2,000 a year and these fees, unlike interest, are not tax deductible. In a market where Jumbo loans are more frequently the norm, the added .5 percent can be a budget buster. On the surface, this all seems reasonable. All the more so because the charge is supposed to diminish as equity rises. But for decades, mortgage lenders have employed unclear standards when it comes to PMI. Last summer, President Clinton signed into law legislation aimed at curbing PMI abuses, the most prevalent of which was the lender?s ?oversight? when it came to informing borrowers that their rate had been reduced or, more egregiously, that they were past the point that it was required (due to property appreciation). Fortunately, Massachusetts has fairy comprehensive statutes of its own when it comes to PMI. But major lenders still persist in their demand for PMI, even if this extra coverage can be escaped. Many small lenders, whose competitive edge against the impersonal big banks has always been individual attention and fast turnaround, can work closely with homebuyers to work around PMI requirements, whereas most banks don?t even offer such programs. One alternative is to take out two loans, using a second mortgage to reduce the primary loan. These are often referred to as 80/10/10s, because the second loan, for 10 percent the property?s value, reduces the downpayment to a more manageable 10 percent. Other arrangements to reduce the downpayment even more are also possible, such as an 80/15/5. The caveat is that these second loans will come at a higher rate with a shorter term and qualifying guidelines may be somewhat stricter. But saving the cost of PMI charges will lower the overall cost and, because interest on the second mortgage, unlike PMI, is fully tax deductible, the benefits are even greater. The big name banking institutions, with strict, form-driven guidelines for qualification based upon income, credit and other factors, would rather avoid such alternative loan offerings. But independent mortgage companies are more than willing to work with customers and offer the flexibility and terms that make such a financing plan possible. This is exactly the point. Contrary to what the big banks would have you believe, homebuyers do have options beyond their cookie-cutter loan programs. To best save money, time and aggravation, smaller independent mortgage companies can offer the personalized service needed to assist homebuyers with their full range of options. In an era of fever-pitch banking mergers, there is no need to line their coffers with your hard-earned cash in the name of PMI.