by Kevin Whatley (NMLS #113781)

For the seventh consecutive month, foreclosure activity in the U.S. was dominated by a tiny subset of states.

As reported by RealtyTrac.com, more than half of September’s foreclosure-related activity occurred in just 4 states:

1. California
2. Florida
3. Nevada
4. Michigan

These states represent just 22.05 percent of the total U.S. population.

Overall, foreclosures are up 29 percent from September 2008 and, while, the data seems negative, defaults are creating some interesting buying opportunities.

Foreclosed homes often sell at a discount as compared to non-foreclosed homes. Cheap prices, low mortgage rates and willing buyers have helped to spur home sales in many U.S. markets. In August, “distressed homes” accounted for one-third of all existing home sales.

That said, buying foreclosures isn’t for everyone.

First off, foreclosed homes are often sold “as-is” and may be in perfect condition, or may be inhabitable. If the property falls into the latter category, it’s important to get estimates for the work needed to make the home livable. Suddenly, the home may not seem like such a “steal”.

And, secondly, buying a home in foreclosure can be a 3-month process or more. For some people, this is just too long.

Buying a home in foreclosure is fundamentally the same as buying a “regular” home — there’s a contract and a closing. But most of the steps in between are different.

Read the complete foreclosure report, plus take a peek at foreclosure heat maps on the RealtyTrac website. If you like what you see, talk to your real estate agent about what to do next.

When you own a home with a spouse or partner, the issue of what’s mine, what’s yours, and what’s ours can be a divisive one.

Each household has its own money management methodology and, according to financial talk-show host Suze Orman, most leave significant room for improvement.

In this 4-minute piece aired on NBC’s The Today Show, Orman talks about co-managing finances with topics including:

• How to determine how much money goes into a “personal” spending account versus a “family” spending account
• The importance of both parties taking an active role in bill-paying
• How to manage the money when one partner doesn’t earn an income

Being aware of money is the first step towards protecting it.

Mortgage markets worsened last week as investors responded to a recovering global economy.

Despite briefly touching their lowest levels since May, mortgage rates ended the week dramatically higher.

It’s the second straight week that rates soared on a Friday.

For several months, Wall Street has been in limbo; undecided whether the economy is truly showing signs of improvement. Negative news has tended to sink rates while positive news has tended to do the opposite.

Lately, investors have been in search of signals anywhere signals can be found. Last week — sans hard-hitting economic data — those signals came from the worlds’ Central Banks.

Shortly after Australia raised its interest rates by one-quarter percent, Fed Chairman Ben Bernanke suggested that the Fed may raise rates sooner than expected. Stock markets rallied on the news and mortgage bond markets tanked.

When bond prices fall, rates go up.

This week, data returns. Expect more volatility.

Mortgage rates have been very low lately, but they remain jumpy. Rates change fast and if you’re not ready for them when they fall, you’ll likely miss your chance to catch the bottom.

Rate shoppers in need of a lock should remain in ready-position. As we’ve seen over the last 2 weeks, when rates start to rise, they tend to rise in a hurry.

According to the Freddie Mac weekly mortgage rate survey, the relative cost of a 5-year ARM is dropping versus its 30-year fixed-rate cousin.

During the first 5 months of 2009, the products ran neck-and-neck. Today, they’re a half-percent apart.

On a $200,000 home loan, that’s a difference of $60 per month.

Adjustable-rate mortgages aren’t for everyone, but for the right household, they can be a terrific fit. A few scenarios that warrant consideration of a 5-year ARM include persons:

1. Buying a home with an intent to sell within 5 years
2. With a 30-year fixed mortgage and plans to sell within 5 years
3. Interested in low payments and comfortable with longer-term interest rate and payment uncertainty

Additionally, with homeowners with existing ARMs may want to consider taking on a new ARM, if only to extend their initial, fixed rate period.

Before choosing an ARM, make sure to speak with your loan officer about how adjustable-rate mortgages work, and what causes them to adjust. Although conventional ARMs are limited in how far they can adjust, it’s important to know the risks.

An escrow account is a designated savings account into which funds get deposited for a specific purpose.

With respect to real estate and home loans, escrow accounts are used to pay real estate tax bills and homeowners insurance payments.

Escrow accounts are managed and disbursed by lenders.

When a homeowner “escrows” his mortgage, along with his scheduled monthly mortgage payment, he must also send an additional payment to the lender equal to 1/12 of the home’s annual real estate tax bill plus 1/12 of the annual homeowners insurance bill.

By sending a pro rata portion of the tax and insurance bill each month, the homeowner’s escrow account will always, in theory, have enough funds to make payments in full as tax bills and insurance premiums come due.

Beginning November 17, 2009, the FHA will make it harder to qualify for its popular Streamline Refinance program.

Available exclusively to homeowners with existing FHA home loans, the streamline program is meant to help homeowners reduce mortgage payments as simply as possible.

As such, the program carries minimum eligibility requirements.

In fact, the FHA Streamline Refinance is more notable for what it doesn’t require from applicants.

• There’s no income verification
• There’s no asset verification
• There’s no employment verification
• There’s no appraisal required

The two biggest qualifiers, really, are that the homeowner meets a minimum credit score and that the new loan doesn’t exceed the original balance of the old loan.

The new program guidelines, however, are much stricter.

Effective next month, among other requirements, applicants must show evidence of employment and income, plus proof of cash required at closing.

Furthermore, homeowners can’t finance closing costs into the mortgage without a complete home appraisal. In areas of declining value, this may render refinancing with the FHA impossible.

Therefore, if you’re a homeowner with an FHA mortgage, consider contacting your loan officer before the November 17 deadline to explore your Streamline Refinance options. Mortgage rates are low and you never know for what you’ll qualify.

The worst thing you can do is to wait too long to find out. Once the deadline passes, the old guidelines will be history.

Buoyed by a generous tax credit, affordable homes, and low mortgage rates, the Pending Home Sales Index posted its seventh consecutive monthly gain in August.

It’s the longest winning streak in the index’s history and the highest reading in 2-1/2 years.

It’s also another signal that the housing market is in recovery.

“Pending home sales” are a forward-looking indicator, measuring the number homes under contract to sell, but not yet closed.

Historically, 80% of homes under contract close within 60 days. Most others close within 120 days.

It’s no wonder home values are rising in so many markets.

Home buyers — take note. If you’re plan to purchase a home between now and the New Year, expect that the recent run in pending sales will turn into run of closed sales which, in turn, should pump prices up and drop home inventory.

With mortgage rates hovering near 4-month lows, the best way to find a value in housing may be to act sooner rather than later.

Mortgage markets rallied for most of last week, but ended Friday on a sour note.

After touching their lowest levels since Memorial Day, mortgage rates spiked to close out the week.

Despite pricing getting worse by 1/4 percent Friday afternoon, however, mortgage rates still managed to fall for the second consecutive week.

There were two main storylines last week on Wall Street. The first was data-driven.

After several months of better-than-expected results, the September Non-Farm Payrolls report fell well short of expectations.

According to the government, another quarter-million jobs were lost last month, raising the 12-month tally to 5.75 million. Additionally, consumer confidence figures dropped.

The stories are related and it brings us to the second storyline. Without job growth, some analysts are openly wondering how the economy will ever start to expand. Especially with the Holiday Shopping season getting underway.

The negative vibes were enough to shake off an overwhelmingly positive series of housing reports. Both Pending Home Sales and the Case-Shiller Index continue to gain.

This week, without much economic data set to release, look for market psychology to play an important role in the direction of mortgage rates. The last two times that mortgage rates fell to these levels, they quickly reversed.

All the pieces are in place for that to happen again.

It’s a sensational headline — “The Sellers’ Deadly Sins” — but the message is clear. Home sellers make mistakes that not only cost themselves thousands, but sometimes cost the sale, too.

NBC’s The Today Show lays it out cleanly in this 5-minute video:

1. How to respond to an “insulting offer”
2. How to handle the first purchase offer you receive
3. What do when you can’t leave your home for its Open House
4. What room in the home should be kept the neatest

But, be aware. At the video’s end, there’s a piece of advice that may sound extremely self-serving coming from a real estate professional. Don’t let it turn you off. The video’s overall message is spot-on and the advice is real-world tested.

Selling a home is a process. Make sure to do it properly.

The government’s First-Time Home Buyer Tax Credit program expires November 30, 2009 — a scant 60 days from today.

Considering it can take up to 60 days to close on a home, first-time buyers have 2 weeks at most to find a home.

Buyers not under contract by October 15 have little chance of meeting the November 30 deadline and, therefore, little chance of claiming the tax credit.

This is especially true for purchases involving short sales and foreclosures.

Congress passed the First-Time Homebuyer Tax Credit program as part of the 2009 economic stimulus plan. IRS Form 5405 outlines the program criteria and includes the following stipulations:

• Buyer may not have owned a “main home” in the past 36 months
• The home may not be purchased from a parent, spouse, or child
• Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers

The credit is capped at $8,000 or 10% of the purchase price, whichever is less. And don’t forget — the First-Time Home Buyer Tax Credit is a true tax credit. It’s not a deduction.

This means that a tax filer who claims the full $8,000 and whose “normal” tax liability is $5,000 would receive $3,000 cash from the US Treasury when their tax return is processed by the IRS.

If you can’t close by November 30, 2009, though, you can’t claim the credit.

The clock is ticking. If you’re planning to use the First-Time Home Buyer Tax Credit, the time to act is now.