POCATELLO’S ELECTRONIC NEWSLETTER
April 1997
Volume 1 * Issue 4
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THE ECONONY & FINANCE UPDATE
by Larry Bell with First Security Bank
Real Estate Production Center
Email:
Site Address:
There has been a lot of information in the news media recently concerning private mortgage insurance and how long the private mortgage insurance should remain on a loan. I would like to first of all address what is private mortgage insurance then address the issue of under what conditions can it be dropped.
Private mortgage insurance is default insurance for the lender. This insurance protects the lender should the borrower fail to pay and the lender ultimately forecloses on the property. The private mortgage insurance company will step in and pay all or a portion of the loss a lender will suffer on the sale of the property. This insurance is required on all conventional loans where the borrower has a down payment of less than 20% of the value of the property. Some people may think that this insurance is unnecessary if a borrower has slightly less than 20% equity in the property. Lenders experience over the last twenty years has indicated that should a foreclosure occur once they calculate the cost of foreclosure the delinquent interest costs and marketing costs of the property they typically net approximately 75% of the original sales price of the property.
There has been several articles in newspapers and several feature stories on national television concerning the need for private mortgage insurance and at what time it should de dropped. Many consumer groups are pressing for legislation that would require the private mortgage insurance to be dropped at the time the loan amortizes to 80% of the original value. Many people would argue that this would provide sufficient security for the lender however the lenders would point out that property values do not always increase. The most glaring example has been the California real estate market over the last ten years. Some properties have lost as much as 35% of their value over several years. Should a lender foreclose on a property that has lost a substantial portion of its value and the private mortgage insurance had been dropped they would face a very substantial loss. This would defeat the purpose of a private mortgage insurance.
Many lenders have received calls over the last sixty days asking when their private mortgage insurance could be dropped. Generally speaking the private mortgage insurance is disclosed to the borrower at closing for the life of the loan. Under these circumstances the lender is entitled to keep the private mortgage insurance in force during the life of the loan. Each lender has their own policy concerning the dropping of the private mortgage insurance. In general most lenders will not consider dropping the private mortgage insurance until the loan has amortized to 80% loan to value based upon the original sales price. Most lenders at that time will require an appraisal, to be paid for by the borrower, to verify that the property values have not declined since the loan was originated. The cost of the appraisal is to be paid by the borrower before the lender processes the request to drop the private mortgage insurance. In addition to the appraisal fee most lenders charge an administrative fee to review the appraisal and consider the waiving of the private mortgage insurance. Many borrowers are reluctant to pursue dropping the private mortgage insurance once they see the cost associated with having the insurance dropped. The mortgage insurance premiums are typically substantially lower on an annual basis than the cost of an appraisal plus the lenders fee.
The policy stated above to drop the private mortgage insurance is the most liberal policy lenders will have. Some lenders will insist that the borrower stick with the original terms and keep the private mortgage insurance for the life of the loan. The good news for the borrowers is that nearly all the premiums are based upon the outstanding balance therefore as the loan is paid down the premiums reduce proportionately. Other lenders will consider dropping the private mortgage insurance as the loan balance declines below 80%. Many require that the loan be paid down to 70 or 75% of the original balance.
Should you have a loan that has private mortgage insurance and you would like to have it dropped the first thing I would recommend to do, is to see that the loan has been paid down to 80% of the original value. If it has not been paid down to this balance I am confident that your phone call will be a wasted effort, however should you have reached that point then be prepared to pay an administrative fee and an appraisal fee to have the private mortgage insurance dropped.
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PUBLIC SCHOOLS
by Chris Williams, Public Information Officer
School District #25
Email: mailto:williach@d25.k12.id.us
Site Address: http://www.d25.k12.id.us
DISTRICT RECEIVES "WHAT PARENTS WANT" AWARD
School District No. 25 has once again been touted as one of the nation’s top school districts.
That distinction comes from SchoolMatch, the nation’s largest school selection consulting firm, which, for the third time in as many years, selected School District No. 25 as one of America’s best. Only 11 of Idaho’s 112 school districts were awarded SchoolMatch’s highly-coveted "What Parents Want" Award this year and only 1,670 of the nation’s 15,843 school districts have a similar distinction.
"Because this is an unsolicited award, our community, teachers and other school employees can be proud to receive this positive recognition," said Superintendent Dr. David Peck.
The Columbus, Ohio-based school selection consulting firm hands out the prestigious award after rating school districts on the following criteria:
1-Competitive in academic test scores and are academically solid, but not so rigorous as to intimidate students;
2-Accredited;
3-Recognized for excellence by a national foundation or by the U.S. Department of Education;
4-Competitive in teachers salaries;
5-Above average in instructional expenditures on a national percentile basis;
6-Above average in expenditures for library/media services on a national percentile basis;
7-And known for small class size.
In a related note, only school systems that provide secondary school programs are eligible for the award.
The criteria used by SchoolMatch is based on more than 48,000 parent questionnaires completed by SchoolMatch clients regarding what parents most often look for in school systems.
SchoolMatch is a full-service educational consulting and research firm with an extensive database containing information on all 15,893 school districts in the United States. It collects data annually from auditable sources such as state boards of education, county and state auditors and
state taxing authorities.
It also assists corporate employee families find schools that match the needs of their children and helps corporations with site selection studies.
Such services are offered as an employee benefit by about 360 companies, including Fidelity, United Parcel Service, Georgia Pacific, Ernst & Young, Hewlett Packard and Nationwide Insurance.
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REAL ESTATE
by W. James "Jim" Johnston, Associate Broker
Coldwell Banker Landmark
Email: mailto:jimj@mykro.com
Site Address: http://www.HomeSpecialists.com
The Pocatello area in March has once again had a very strong sales month. Note these statistics:
The average number of days on the market for the previous month sales was 113 days. The average sales price was $88,255 with 107 single family homes sold. Not many multiple units have sold, but there are over 250 bedroom units being built for rentals right now. Pocatello has 265 single family homes for sale; 38 condos or townhouses; 36 multiple family units for sale and 177 lots to build new homes on currently.
Reasonable interest rates, a variety of wonderful financing programs and a healthy job market have been the key ingredients sustaining Pocatello’s growth.
What about the coming months? Interest rates are up slightly, but employment is fairly stable and the commercial sales are pointing to new growth in retail and small businesses. My predictions are for steady and smooth upward growth. Home sales will be above average for this time of year and both buyers and sellers will be happy. A definite win-win economy for all players.
Agriculture is such a key to our Southeast Idaho economy. We are seeing some farmers in a real money crunch right now. The prices of many cash crops, especially potatoes, have been low- forcing sales of some prime farms. Land prices are holding, but we may see some real bargains on farm land if we don’t get higher prices for crops this year.
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WEATHER HISTORY
by Steve Cannon, weatherman
KIDK TV 3
Email: mailto:kidktv3@msn.com
Site Address: http://www.srv.net/~kidktv3/homen.html
If April showers bring May flowers, what do May flowers bring? (pilgrims!)
April brings the first full month of spring. It also brings a marked increase in both the angle of sunlight and sunlight itself. April also brings the beginnings of Daylight Savings Time, blooming flowers and yard work, in earnest!
Temperatures climb in April; from a daily average maximum of 45.8 in March, to 56.8 in April. Overnight temperatures begin to average above freezing in April, with the average overnight low at 32.3. April is also one of the wettest months of the year, with an average monthly precipitation total of 1.16’’. Temperature extremes in April run from the very warm; 86 on April 25th, 1946, all the way to the lower teens… 11 on April 7th, 1930. It can still snow in April, as was evident in 1921, when 22.5’’ of snow was recorded for the month. The wettest April was all the way back to 1900, with 3.31’’ of precipitation recorded. In fact, the April snowfall for Pocatello occurred in 1921, with a 24 hour total of 14’’. Unfortunately, the snowfall recorded was so excited about the record, he or she didn’t record the date of the heavy snow!
Gardeners love April, because it marks the beginning of the planting season. Some hardy crops, such as peas and carrots can be planted in April. Also, April is the best time of year to plant bare-root trees. Even tender crops like tomato plants can be set out for a few hours in April… this helps to harden the plants for the eventual transplant to the garden. Flowers also start their show in April, starting with the crocus plants, followed by daffodils. April is a great time to start pruning trees and shrubs, but be careful. Check with your yard and garden professional before you start cutting. Some trees, like white birches, bleed heavily when cut this time of year.
If you haven’t already, use the early evening hours of the month to catch a glimpse of the comet Hale-Bopp. It’s nearly overhead in the early evening… in the western sky. About 45 minutes after sunset, you will see a bright ‘star’ in the western sky, low to the horizon. That ‘star’ is actually the planet Mercury!
If you have a birthday in April, you share it with such notables as J.P. Morgan, born on the 17th, 1837…. Shirley Temple Black, born on the 23rd in 1923; and Ella Fitzgerald, born on the 25th 1918. April 21st marks the day the ‘’Red Baron,’’ Manfred von Richtofen, was shot down and killed over France in 1918. Spain declared war on the United States on April 24th, 1898, and Thomas Jefferson doubled the size of the United States on April 30th, 1803… when he concluded the Louisiana Purchase! I don’t know what all that has to do with weather, but it makes it a nicer month, I guess.
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ECONOMIC SUMMARY- STOCKS & BONDS- INVESTMENTS
by Lynn Baldwin
Manager & Regional Trust Officer
U.S. Bank of Idaho
120 N. Arthur
Pocatello, Idaho 83204
email: f_baldwin@usbc.com
phone: (208) 234-5544
National Economic Summary
What, me worry? For the past two and 1/2 years, unemployment has been below it’s "natural" rate, which is the rate many economists see as inherent in our economy, no matter how robust it is. Combine that with low interest rates, low inflation, and moderate economic growth, and it’s no wonder the stock market has found little cause for worry and continues to soar.
Bull on Parade? With increased valuations, like the S&P 500 at nearly 23 times earnings, and continued massive inflows into the stock market, it’s easy to understand Federal Reserve Board Chairman Alan Greenspan’s reference to "irrational exuberance" when characterizing the stock market. What will it take to panic the bulls on Wall Street and send them running like the bulls in Pomplona? With sound market fundamentals, whatever short-term panic ensues should be a short-lived correction.
Goldilocks makes herself at home. Economists have called this a "Goldilocks" economy, not too hot and not too cold. Our outlook is for continued low inflation and steady, moderate growth through 1997, which may give the Goldilocks economy a chance to eat a little more stock market porridge. That is, unless the bears get home first.
A new Goliath on Wall Street. In early February, Morgan Stanley Group Inc. and Dean Witter, Discover Company agreed to merge creating the nation’s largest securities firm with over $20 billion in market capitalization. This merger explores a new environment on Wall Street in combining a premier investment banking firm with a retail brokerage giant.
Regional Briefs
The Portland Consumer Price Index (CPI) for 1996 showed an annual increase of 3.5 percent. This is higher than the 3 percent annual average increase reported for the nation. In Seattle the annual average CPI rose 3.4 percent. In both cities the second half figures were 4 percent higher than the same period in 1995.
The February Job Growth Update, which ranks states by year over year growth reported that in December Nevada was first, Utah was second, Oregon was third, Idaho was fourth, Washington was sixth and California was twelfth. Our "territory" had to be the strongest of any major bank in the nation.
Idaho Briefs
The early estimates for the value of Idaho crop production in 1996, excluding sugar beets, was $1.77 billion, down from $2.04 billion in 1995. The potato crop was valued at $588 million, down 29 percent from 1995 while the wheat crop was $471.5 million, which was 2 percent above the 1995 value.
At the Idaho National Engineering and Environmental Lab a 20 year project is starting that will prepare the wastes stored there for shipment out of the state to the national waste dump site, whenever that is ready. This may mean shipment to the Yucca Mountain site in Nevada sometime during the next century. Boise based Morrison-Knudsen is a subcontractor on the project.
Idaho’s January employment numbers show year over year growth of 4.4 percent or 20,900 jobs. The gains were concentrated in services (6,700), trade (5,700), government (3,800), construction (2,400) and manufacturing (1,600). The year over year declines were in banking, the federal government, lumber and wood products, utilities and printing.
Factoids
The Dow Jones Industrial Average closed at 7022.44 on Thursday, February 13, surpassing the 7000 mark for the first time! Remarkably, it only took four months for the Dow to climb from 6000 to this new high.
Money continues to flow into mutual funds. The net flow into mutual funds nationwide was $24 billion in January alone, compared to $200 billion for the entire year of 1996 and $100 billion for all of 1995.
The S&P 500 is valued at nearly 23 times earnings, while a Large Companies Value Fund’s average weighted price to earnings ratio is 17.5. Which one do you think will be hurt the most by a market correction?
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THE LAST WORDS
POCATELLO’S ELECTRONIC NEWSLETTER is published monthly by Michael James Johnston. Any questions, concerns, ideas or criticisms are to be directed to him via Email at mailto:editor@mykro.com
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