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Homeowners Insurance Bill Into Law

May 29th, 2008 2:16 PM

Crist signs insurance bill into law

TALLAHASSEE, Fla – May 29, 2008 – Gov. Crist yesterday signed property insurance reform into law, the so-called Homeowners’ Bill of Rights (SB 2860 by Sen. Jeff Atwater, R-N. Palm Beach). The final version of the bill included other bills that were added as amendments, and is the biggest insurance change to come out of the 2008 Legislative session. It offers a number of protections and upgrades for Florida homeowners.

In a letter issued by the governor, he says the bill “contains many important consumer protections that will help keep insurance costs more affordable for Florida’s homeowners.”

At the same time, however, Crist took the unusual step of vetoing one provision within the bill – a proposal to take $250 million from the Insurance Capital Buildup Incentive Program that covers Citizens Property Insurance deficits, and use it to entice private insurers to buy Citizens policies. While Crist says the “program is well intended,” the “funding source is inappropriate.”

The law becomes effective July 1, 2008, and makes the following changes:

• Extends the rate freeze for Citizens Property Insurance Corp., the state’s insurer of last resort, to January 2010. The freeze was set to expire in January 2009.
• Allows single-family residential properties and condos with a replacement value of up to $2 million into the Citizens insurance pool (up from $1 million, which was set to begin Jan. 1, 2009).
• Requires Citizens’ policyholders of property located in wind-borne regions and with an insured value of $500,000 or more to disclose the property’s windstorm mitigation rating to prospective buyers. (Language in an earlier version of the bill would have required all sellers to provide their property’s windstorm rating.)
• Increases fines for violations of the insurance code and for unfair trade practices by private insurers.
• Extends by one year to January 2010 a provision from last year’s insurance bill that requires insurers to get state approval before raising property insurance rates.
• Requires insurers to notify state regulators 90 days before dropping more than 10,000 homeowners’ policies in one year.
• Requires insurers to use state-approved methods to predict the risk of hurricanes, a key factor in setting rates.

Posted by Jim Cole on May 29th, 2008 2:16 PMPost a Comment (0)

Are we at the bottom of the housing market?

May 7th, 2008 6:03 PM

St. Joe sees bottom of housing market

JACKSONVILLE, Fla. – May 7, 2008 – Florida’s biggest landowner, the St. Joe Co., believes the housing market may have reached the bottom, pointing to stabilization in the residential inventory.

St. Joe Co. CEO Peter Rummell says buyers must be “retrained” to recognize the importance of making home purchases now. He notes, “We have trained people to expect that prices are going to be lower tomorrow than today if they just wait. So now people are going to have to learn that they’ve gotten to that point.”

Though the company posted a $32 million profit for the first quarter, only $9.8 million can be attributed to its residential operations. Much of the firm’s profits can be tied to the sale of “nonstrategic” land parcels in the Florida Panhandle, including 57,435 acres it recently sold to a group of buyers including sportsmen, investors and conservationists for $91 million.

Source: St. Petersburg Times (05/06/08) Thorner, James

Posted by Jim Cole on May 7th, 2008 6:03 PMPost a Comment (0)

Reverse Mortgage

May 4th, 2008 2:01 PM

REVERSE MORTGAGE IS IT RIGHT FOR YOU!

But it sounds like such a good deal.

Let’s look at the requirements. They sound reasonable. The

person(s) must own the property and occupy it as their primary

residence. Youngest owner must be age 62 or older. Property

must meet FHA property standards. Owners must agree to

maintain the property, pay the real estate or other lawful taxes

and keep up the insurance.

The loan (this a loan and the owner is actually borrowing

money with each payment) will be based on the lesser of the

appraised net value or the FHA insurance limit.

The initial amount of the loan will be determined

each week based on the interest rate set by the FHA.

There are hundreds of lenders so there is going to be a

slight difference in the amount paid to the borrower. That

difference will be the commission or fee charged for the

paperwork. This is negotiable so always get more than one

quote.

The homeowner may take the proceeds as a lump sum

or as monthly payments or some of each. The owners might

like a monthly payout with lump sums advanced when property

taxes become due or certain health care needs are required.

It can be made flexible.

The lender doesn’t care what you need the cash for as

he looks to the equity in the property for his guarantee of

payment. Each time the homeowner receives cash this

increases the debt accrual on the property plus interest. Mr.

Home Owner does not see this as he has been told the

maximum amount he may withdraw unless it is set up as a

monthly lifetime payment.

The sooner the person dies or moves out of the home

the better it is for the lender.

Here is the trap for the lender. If the owner lives a

long time the lender must continue to come up with cash.

The lender is hoping the value of the property will

increase so his return on investment will be greater.

The lender has not factored in two negatives. First a

possible continued decline in property values and second

the possibility the owner will not maintain the property.

Let’s take an example of a man age 80 with a home

appraised at $300,000 with a remaining loan of only $100,000.

His monthly check is estimated between $900 and $1,000 per

month. He lives for at least 10 years. There is no provision for

inflation or that real estate taxes will not increase. His

payment buys less each month. He may not be able to

maintain the property or do necessary repairs.

The borrower could maintain his purchasing power

if the reverse mortgage contract included a Cost of Living

Index annual adjustment. So far not one contract has. Selling

the home now may be a better option.

The ultimate outcome is the borrower must lower his

standard of living as inflation eats away his monthly check.

The lender will have a lien on property with a decreased value.

The potential for another “subprime” fiasco looms if

the lenders bundle these reverse mortgages and sell them

as MBSs – mortgage backed securities.

In the long run it is not a good deal for either party.

Posted by Jim Cole on May 4th, 2008 2:01 PMPost a Comment (0)