But with more than 11,000 sq. feet of living space, including 6 bedrooms, 9 bathrooms, a sauna, theater, and even a wine cellar, this estate was bound to attract a buyer. The Los Angeles Times now reports that the mansion, which was also owned by Tom Jones and Dean Martin, has sold for $10.5 million.
Compliments on your remodeling efforts are always a welcome payoff, but nothing beats seeing your home value rise as a result of your hard work.
It can be tricky to determine which home improvement projects are worth the sweat and which aren't. To gain the most from your improvements, select projects that do more with what you already have.
Projects that add value:
Less-profitable projects share one of three flaws: they cost too much, they involve a space that isn’t used every day or they reflect too much of your personal taste.
Projects that won't raise your home's value include:
Take a look at the sweat scale and see how some of the most popular home improvements rate:
The Sweat Scale
$ - You’ll break a sweat trying to break even at resale.
$$ - Probably not worth the sweat you’ll put into it.
$$$ - Sweat the cost or style details to make money on this project.
$$$$ - A good bet for turning the sweat of your brow into sweat equity.
$$$$$ - You’ll be making money before the sweat dries.
Kitchen Update
$$$
Doing a kitchen update instead of a kitchen remodel is like getting Botox® instead of a face-lift – it’s cheaper, it’s faster and it can hold you over for years. Got a kitchen so outdated that Martha Washington would be comfortable cooking there? Go for the full-blown remodel.
"If you have to overhaul the plumbing and wiring or you have galley kitchen that can be transformed into an open kitchen, go ahead and completely re-do," says Realtor Maggie Sanders, an agent with Coldwell Banker Residential Real Estate, Inc., Naples, Florida.
For the biggest returns, focus on simple, inexpensive modern touches: recessed lighting, updated pulls, new plumbing fixtures, a solid surface countertop and tile or resilient flooring.
Bathroom Update
$$$$$
If you want to build real sweat equity, forget the bidet and the hand-blown sink when you remodel your existing bathroom (unless you live next door to Paris Hilton). Keep the plumbing where it is and focus on updating outdated fixtures. Strip the bath to the studs and put in a porcelain-on-steel tub with a tile surround, a tile floor, a durable solid-surface vanity, updated lighting, fresh plumbing fixtures and a new toilet.
"If you have a small bathroom, do a shower only and no tub," says Real Estate Broker Mark Riley of Mark P. Riley Luxury Real Estate Group, Sarasota, Fla. "Slate colored tile will add allure, luster and an expensive look to a bathroom. It looks great with brushed nickel fixtures.
Replacing siding
$$$$$
Give your house a new outfit by replacing the siding and you’ll reap the rewards at resale. According to the National Association of Home Builders’ Cost vs. Value, replacing 1,250 sq. ft. of vinyl siding and trim returns 95.5 percent of cost – and that’s the cost when a contractor does it for you. Upscale siding made from either fiber-cement boards or cellular polyvinyl chloride (PVC) lumber has an even more astounding 103.6 percent return.
Subtract the cost of the contractor from the profit equation and you could actually make money installing your own siding before you sell your home.
Interior Paint
$$$
Painting can be a great investment in your home or a horrible mistake. It all depends on the color you choose. Pick right and you earn a big payoff. Pick wrong and you devalue your home.
Don’t think you can escape the issue by painting the walls white. "Too often, homeowners think it’s best to paint the house all the same color, but there is no pizzazz with white walls," says Realtor Lynn Anderson of ZipRealty, East Bay, California. "Soft, muted colors such as pale green or muted beige with white baseboards can still be neutral while greatly improving the look and feel of each room."
Rejuvenate Landscaping
$$$
Your house never gets a second chance to make a first impression. Shabby shrubbery and a patchy lawn make people assume the inside of your house looks as bad as the outside.
"Keep improvements on par with the other homes in your neighborhood," says Pam O’Connor president of RELO/Leading Real Estate companies of the World. One RELO client in Atlanta transformed his large backyard into a soccer field. "When he sold the house, the owner didn’t recoup his investment because the new owners didn’t care for his choice of landscaping," she says.
Stick to the basics. Trim or replace overgrown shrubs, plant colorful flowers to highlight your home’s best feature and install a new front door, garage door and mailbox, if necessary.
Screened Room
$
Turning a deck, porch or carport into a sunroom or screened patio creates a great space for entertaining, but it won’t add equity to your home. In fact, you can’t even count that additional square footage as part of the house unless it’s insulated, heated and cooled for year-round use, points out Realtor Nancy Jones, an agent with Hunt Real Estate ERA, Williamsville, NY.
"A nice sunroom addition on a great house in a highly saleable
By Stephanie Armour, USA TODAY
With a tax credit for first-time and repeat home buyers expiring next week, a report Thursday suggests the stimulus hasn't been as effective as a similar credit that dramatically increased home sales late last year.Existing-home sales rose 6.8% to a seasonally adjusted annual rate of 5.35 million units in March from 5.01 million in February, according to the National Association of Realtors. That was also about 16% higher than in March 2009.Last fall, home sales peaked at a 6.5 million annual rate, according to Moody's Economy.com. This spring, they're expected to peak at a 5.7 million annual rate in May.
MORTGAGE RATES: Unchanged from last week."This credit appears to be a shadow of the November credit," says Mark Zandi, chief economist of Moody's Economy.com.The national median existing-home price was $170,700 in March, up 0.4% from March 2009.Distressed homes, typically sold at a 15% discount, accounted for 35% of sales last month - unchanged from February, the National Association of Realtors reported."It doesn't look, at least, that there's been the kind of boom we had last time," says Joel Naroff at Naroff Economic Advisors. "But we have to give it one more month. We have to see April."Total housing inventory at the end of March rose 1.5% to 3.58 million existing homes available for sale, which represents an eight-month supply at the current sales pace, down from an 8.5-month supply in February.The tax credit, which requires a binding contract be signed by April 30 and a deal that closes by June 30, wasn't the only factor behind March's gains. Better weather than in February is believed to have helped, too.In addition, the Federal Housing Administration announced that it is increasing its mortgage insurance premium from 1.75% to 2.25% of mortgages it guarantees. This premium increase, which took effect in early April, was behind a recent five-week surge in mortgage applications, says Brian Bethune at IHS Global Insight."I don't think (the tax credit) has had any impact at all," Bethune says. "You do see it boosting sales a little bit. Maybe it's had a quarter of the effect that the other one did."The current tax credit provides up to $8,000 for first-time home buyers and up to $6,500 for move-up buyers. An earlier tax credit of $8,000 for first-time buyers expired Dec. 1."The biggest benefit is to first-time buyers, and a lot have already taken advantage of it, so we have a smaller potential pool in this go-round," Zandi says.
There’s good news and bad news about the state of public education in the United States. While the greatest gains have been made in Math and Science education from 1995 to 2003, most Americans still only give public schools a below-average grade. Take a graphic look at America’s Report Card on Education to see how public education in the U.S. stacks up against the rest of the world.
Along with hubbie Alan Hamel, Somers has been working on this huge, 65-acre desert compound outside Palm Springs since 1977. "Les Baux de Palm Springs" mixes the charm of the French countryside with Hollywood touches like Zebra skin rugs (lots of 'em) and massive chandeliers. Even after dropping the price by more than $22 million this property is still on the market, with the current price "available upon request". (Source)
Are there any mega-celebrities out there who live in simple, tasteful homes? Certainly not Nicolas Cage, whose old-Hollywood tudor in Bel Air reminds us of the sprawling Xanadu compound from "Citizen Kane". Actually, it's not so much the house as the crap it's filled with. Anyone want a life-sized Mickey Mouse? How about a boulder-sized amethyst geode? The good news is that the property is now being offered at a 50% discount. Anyone got seventeen-and-a-half million bucks lying around? UPDATE: Is this house about to be auctioned off on the courthouse steps? Has Cage defaulted on his mortgage? (Source)
Eddie Murphy's seven-bedroom Englewood, NJ mansion known as "Bubble Hill" may be only ten minutes outside of Manhattan, but that doesn't mean he's had an easy time finding a buyer. Bubble Hill has been on the market for at least 5 years. Pro: it's got a bowling alley and a recording studio. Cons: $200k a year in property taxes. UPDATE: Looks like this house keeps dropping! 12.75 million and falling fast. (Source)
Another celebrity gets divorced, another mega-Tudor hits the market! This Greenwich, CT mansion was designed by architect Charles Lewis Bowman and built in 1926. It's actually a very tasteful home (we're glaring at you, Nic Cage), if you can get over the fact that Mel Gibson has a reputation for being a huge prick. You know you're a jerk when you drop the price of your house by $10 million but still nobody wants to buy it. UPDATE: Looks like somebody finally bought this place, though the purchase price remains undisclosed. (Source)
Why did it take nearly 6 months and a ten million dollar price drop to sell this home? Are there not enough wealthy, single men out there who would pay almost anything for a pimp shack adjacent to the Playboy Mansion? Let me repeat that: you can literally stroll over to the Playboy Mansion in your silk pj's for a round of Texas Hold 'Em with the bunnies. We truly live in strange times. (Source)
Mike Tyson. 50 Cent. You. What, you don't think you can fill shoes that big? 50 Cent reportedly spent $10 million on renovations alone fixing up this Farmington, CT mega-mansion that he purchased from Mike Tyson's ex-wife. I guess there aren't many people looking for 52 rooms... one real estate agent went on record saying he'd be surprised if this place sells for more than $5 million. Ouch. (Source)
It's no secret that Julian Schnabel's Palazzo Chupi units at 360 West 11th Street in Manhattan's West Village have sold poorly. (The units that have sold at all!) Only one big-name sucker took the plunge: Richard Gere. But the star of "Pretty Woman" and "Chicago" never even moved in before the apartment was re-listed at nearly $18 million. More than a year - and several price drops - later, the place finally sold for $11 million. (Source)
This old stallion may not regularly trim his famously thick body hair, but he certainly knows how to trim the asking price on his Hobe Sound, FL mansion. The listing has already dropped by about 40%, but without a buyer look for it to continue heading southward. This Mediterranean-style compound borders a wildlife refuge, so watch out for alligators if you take a tour. (Source)
Unlike Meg Ryan's reconstructed nose, her 1931 Spanish-style estate is practically flawless. A real movie star house, with ocean views and all that good stuff. Celebrity couples David & Victoria Beckham and Ben Affleck & Jennifer Garner reportedly took tours of the house, but no one was willing to fork over nearly $20 million. For $5 million less, though, it's hard to believe that this house is going to be on the market for very long. (Source)
A-Rod had to drop the price of his Trump Park Avenue apartment by $4 million before it sold, but even a price drop of nearly $5 million on his Coral Gables home hasn't lit a fire under buyers' checkbooks. Why sell? Looks like Rodriguez is trying to focus on baseball for once, rather than his well-known extracurricular activities. Or maybe the price of a hot dog and a beer at the new Yankee Stadium is just a little too steep? (Source)
By all accounts a beautiful residence, McDermott has had major trouble selling this Spanish hacienda-style home in Brentwood, even with a steep price cut. McDermott picked up the house back in 1999 from Melanie Griffith and Antonio Banderas, who bought it in 1997 from Michelle Pfeiffer and David E. Kelly (creator of "The Practice", in which McDermott had a starring role). I'm not saying I've got the cash, but I'd love to live in this house. (Source)
The falling price on this seven-story Notting Hill, London residence proves that even the UK is being hit hard by the housing crisis. The Victorian property was built in the 1850s and has six bedrooms. It was first listed in the summer of 2008. (Source)
This house has a history of selling for less than what its sports superstar owners would like to charge. When Drew Bledsoe owned this Medfield, MA home he tried to unload it for $9 million, but eventually had to settle for $4.5 from fellow Boston-area hero Curt Schilling. Schilling had been trying to get rid of it for $8 million, then dropped the price to $5 million. Update: the price has dropped again to $4.5 million. I guess that's really what this house is worth? (Source)
Marino never won a Super Bowl, and he isn't much of a real estate champion either. He's been trying to unload his Weston, FL compound for nearly four years, dropping the price and throwing in freebies like $1.5 million worth of designer furniture and a signed football. A signed football? Wow! That's worth, like... four hundred bucks. (Source)
Scarlett Johansson purchased her 1931 Spanish-style home in LA's Outpost Estates neighborhood in 2007 for $7 million bucks. Now it's been listed for just under $5 million... that's $2 million actual dollars that Scarlett is waving goodbye to. Ouch. (Source)
Kimora may be living "Life in the Fab Lane" as a reality TV star and CEO of Baby Phat, but her real estate woes are the stuff of legend. Along with ex-hubbie Russell Simmons, she's had to drop the price of her Saddle River, NJ home by $7 million. She also cut the price of her own Beverly Hills home by nearly $2 million, but the house has recently been de-listed for lack of an interested buyer. (Source)
Armstrong's 447-acre ranch in Dripping Springs, TX includes Deadman's Hole, a beautiful swimming hole that has a giant waterfall. The 7-time Tour de France winner celebrated the birth of his fourth child last year, so maybe he's thinking about keeping the toddler far away from unguarded bodies of water? (Source)
Does anyone really have the energy to listen to one more word about Britney Spears? I didn't think so. Let's just call her a (real estate) loser and be done with it. (Source)
Jennifer Lopez and Mark Anthony have sold their understated Bel Air home to a hedge fund manager for $1 million below the asking price. With as much money as they have, do you think they'll even notice? Of course, they were forced to throw in $1.3 million of furniture to close the deal, adding a bit of insult to injury. (Source)
"Keeping Up with the Kardashians" may be a hit reality TV show, but as we've seen before that hardly insulates you from falling real estate prices. This house was even featured on the first few seasons of the show, but finding a buyer required a 12% price cut. Then again, just like the power couple featured at #19, do you think anyone with the last name Kardashian is going to worry about $400,000? (Source)
The Short Sale World is Spinning 2MP,
HAFA and Second Chance Can HAFA Work With 2MP?
First, the news on 2MP, Treasury’s second lien modification program that works in tandem with HAMP. As we mentioned here last week, Wells Fargo signed on to the program. In January, Bank of American was the first major servicer to formally agree to participate in the program. Today, Chase committed to the program, leaving only Citi, of the big four, yet to commit. One has to believe that Citi will announce very soon.
While the 2MP program has been specifically drafted to work with HAMP modifications, I have had conversations with representatives from Treasury who have indicated that coupling 2MP with HAFA is a logical next step. Treasury has yet to announce an official initiative to integrate 2MP and HAFA. To apply 2MP to HAFA will likely require a new ‘Directive’, as certain provisions of 2MP would seem to be incompatible with a high percentage of HAFA short sales.
We expect to see a shift to the direction of coupling HAFA and 2MP soon, and we will keep you posted. In the meantime, we can draw a few conclusions as to how 2MP might work with HAFA and offer a couple of suggestions to agents working with homeowners looking to do a short sale who may qualify for HAFA, and possibly 2MP:
1. Work with the homeowner on trying to keep the 2nd from getting charged off. Work with the servicer on the second to agree to some payment arrangement that keeps it out of charge off. Charged off seconds may be tougher to settle through 2MP, and we all know they are tougher to settle now. Note: in most cases 2nds become seriously at risk of being charged off at the 180 days delinquent mark.
2.Get educated on both the HAFA program and on 2MP. There will be a great deal of confusion as to how the programs will operate and which loans, and which homeowners are eligible. Even Treasury describes the programs as complex, so go to a trusted source and get thorough training on how the programs work.
A ‘Second Chance’ at Homeownership?
Interesting article in American Banker today. A proposed Lender’s ‘Second Chance’ plan is discussed – well I assume it is discussed since I don’t pay the rather heavy subscription fee to receive anything other than a teaser from American Banker – that would make potential borrowers eligible for mortgage loans two years after a foreclosure. My immediate reaction was to naïvely believe that the Mortgage Bankers Association was looking to do a good deed here. Then, I read the headline: “Can Rehabilitating Homeowners Buoy the Mortgage Market?” In other words, if we help those folks that have suffered through the pain of mortgage hell, we could probably ramp up sagging revenue. Sorry for the digression. The fact that the issue is being placed on the table is important. It has been my feeling for some time, in fact as early as 2006, that policy makers and the mortgage industry would have little choice but to find a way to get many of the borrowers who went through foreclosure back into a mortgage – likely sooner rather than later. Agents, stay engaged with all your clients – past, present and future. Look for ways to add value by providing information and industry updates that will have them thinking about homeownership. Whether they weathered the storm and may be ready to move up, suffered a setback and are ready to re-enter the market, or flourished and may be ready to look at buying a duplex, your client database should be a primary focus when you are business planning.In an announcement today, the White House announced some big changes / improvements to the HAFA plan. The changes are vast and in some cases a huge improvement upon the earlier HAFA version. Key points include:
One of the best explanations of these updates as well as great links to HAFA related material comes from Carrie Bay of DSNews. Click here for full story.
This morning, DSNews.com reported that First American CoreLogic's recent study shows that some areas in the U.S. have properties that are in a present negative equity scenario that will not see positive equity until 2020. Many of us knew it would be a while, but 2020? Their stats are based on data extracted from research done in many areas across the U.S.
So what does this mean for us in the real estate industry? Well, firstly, that short sales will be around in some capacity for a long time. Agents that are on the fence about short sales will need to surrender and take the plunge...or face a probable business failure. Agents that have already built up their business by getting certified and helping homeowners sell their upside down properties in the pre-foreclosure state will have a head start.
What does this mean for defaulted or soon to be defaulted homeowners? The study mentioned states that "The latest numbers from First American CoreLogic show that more than 11.3 million, or 24 percent, of all residential properties with mortgages were underwater at the end of the fourth quarter of 2009". Wow! That's almost a quarter of the mortgages in the U.S.! Furthermore, "Among the new housing initiatives announced by the administration Friday was assistance for borrowers with negative equity. In order to deter these homeowners from strategically defaulting, the Treasury will begin requiring servicers to consider principal write-downs as part of their Home Affordable Modification Program (HAMP) evaluations for borrowers whose loan balance is more than 115 percent of the property’s current value. The plan also includes a Federal Housing Administration (FHA) refinancing program for negative equity mortgages."
Ok, so we are expecting defaulted homeowners to "strategically default" on their loans due to the fact that there is no light at the end of the tunnel...equity speaking. That could create a disasterous effect on the housing market, which is already poised for future foreclosure waves in mass volume. So what is the governments answer to this potential epidemic of massive "strategic defaults"...principal write-downs (reductions) via loan modification for borrowers whose LTV is more than 115%. There is a lot of chatter about these principle write-downs and it will be very interesting to see how this plays itself out. Bank of America unveiled a plan on upside down defaulting HELOC's (that are in junior position) called "Earned Principle Write-doowns". With this program, the borrower would have to make the new modified payment for 5 years before the loan principal would be permanently reduced.
PartnerFirst members, chime in here or in the discussion/open forum area about your thoughts on these matters.
Article Link: http://www.dsnews.com/articles/print-view/how-long-will-negative-equity-last-2010-03-29
Recently I had the privilege of interviewing Troy Huerta, an active agent who closed 200 short sales in 2009, during one of our Partner First educational webinars. (also one of our PSC Trainers) During our discussion he commented on how in many cases he and / or his team encourage the Selling agent to go back to the Buyer, lower the price slightly, and ask for some closing costs to be paid for by the lender. The logic was that
a. The Buyer was possibly going to be more loyal if he / she could purchase it at a lower price (starting off on the right foot),
b. The additional closing costs might increase the Buyers patience and loyalty (and excitement), and the big one...
c. Most of the time, the lender will ask for a bump in the price anyways, so why not build it in to the transaction (which is a major reason for short sale failure, Buyers not willing to wait, nor increase the price based on the lenders instructions)
Since that call I have been asked if I agree with this practice and what my sentiments were. Firstly, far be it from me to discount the business practice of a highly esteemed colleague who's success speaks for itself. And secondly, let's look at the foundational principles that are likely in question.
1. Is lowering the price slightly in the Sellers best interest?
As a listing agent, our fiduciary duty and legal obligation is to act in the best interest of our client, the Seller. If Troy's vast experience serves as our ruler, and most of the time the lender does come back with a slight increase / bump in price, and that is a major cause for short sale failure...then let's look at that point. If doing something that increases the chance of short sale success is in the seller's best interest, then why would that be in question. My gut feeling is that many agents feel it is not normal, and thus must be wrong. Wrong to whom? The lender? The lender who is still going to get every bit of the amount they demand (based on their BPO)? How could it be wrong to them? It is merely a strategy that helps all parties achieve their goal...short sale success!
2. Can the Lender / Servicer demand the highest amount be offered?
My answer is "no". They are not the Seller, they are merely servicing the loan for the investor with the goal of minimizing the loss severity. They are in a passive position prior to the offer submission. Now, would they prefer that the higher offer be sent right away? Possibly, but not in all cases. Many times, even in my experience, the lender / servicer (i.e. loss mitigation) is actively assisting our team in finding creative solutions to satisfy all lien holders. As long as they receive their bottom line, what difference does it make how we got there? Remember, we do not have a legal obligation to act in the best interest of the lender / servicer, but of our client. This is not to say anything should be done underhandedly. Everything should be on the HUD-1, and full disclosure should be made to your client. But the means of achieving the desired result may require strategies such as this.
Always ask yourself, is what I am proposing to do in my clients best interest. If it is not, don't do it. If it is, make sure there are no RESPA, DRE, State, local government violations and proceed cautiously and intelligently.
Navigating through these choppy waters is not for the casual agent. We can learn a lot from our colleagues.Mortgage companies are more likely to foreclose on homeowners than modify their loans because they make more money off foreclosures, argues a new report by a consumer advocacy group.
While homeowners, lenders and investors typically lose money on a foreclosure, mortgage servicers do not, says report author Diane E. Thompson, of counsel at the National Consumer Law Center. Servicers are the companies that manage the mortgages and collect payments.
"Servicers may even make money on a foreclosure," she writes. "And, usually, a loan modification will cost the servicer something. A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified and no penalty, but potential profit, if the home is foreclosed."
Thompson attributes this to a system of perverse incentives created by lawmakers and rulemakers in the market, like credit rating agencies and bond issuers. The private rulemakers typically dictate how a servicer can account for potential losses and profits. They hold enormous sway over securitized mortgages, which are owned by investors. More than two-thirds of mortgages issued since 2005 have been securitized, notes the report, using data from the industry publication Inside Mortgage Finance.
In those cases, the servicer is empowered to handle virtually all aspects of the mortgage, from collecting the monthly payments to initiating foreclosure proceedings. While they're obligated to do what's best for the ultimate owners of the mortgage -- the investors -- servicers have some latitude in deciding what course of action to pursue, be it a foreclosure or loan modification.
When a homeowner is delinquent on a mortgage that's been securitized, the servicer must front the late payment to the investors. When a home is foreclosed, the servicer is typically first in line to recoup losses. But if a mortgage is modified, the servicer typically loses money that isn't necessarily recoverable.
"Servicers lose no money from foreclosures because they recover all of their expenses when a loan is foreclosed, before any of the investors get paid. The rules for recovery of expenses in a modification are much less clear and somewhat less generous," she said.
That's part of the reason why the Obama administration created a $75 billion program to limit foreclosures. The money is to be distributed to servicers who successfully modify home loans, with the hope that the incentives to modify outweigh the incentives to foreclose.
Thompson's report outlines eight specific steps to reverse this trend. They include mandating that servicers attempt to modify a loan before initiating foreclosure proceedings and reforming bankruptcy laws so judges can modify distressed mortgages.
The $8,000 credit is expiring Dec.1.
“It is clear that the federal tax credit for first-time homebuyers is working, as evidenced by the spike in home sales in recent months,” said CAR President James Liptak. “This tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the housing market.
“Because the tax credit has helped so many first-time buyers become homeowners, it is critical that Congress extends the credit beyond the Dec. 1 deadline and includes all buyers, not just first-timers,” he said.
“While affordability has improved in California over the past two years, it is still lower than affordability nationally. As a result, the tax credit is an even bigger factor in California compared with elsewhere in the country,” added Mr. Liptak. “Going forward, the credit will be even more important to the housing recovery.”
While the deadline is not until Dec. 1, buyers need to put in their offer by the end of September in order to qualify, according to the National Association of Realtors.
Sen. Johnny Isakson, R-Georgia, and Senate Majority Leader Harry Reid, D-Nevada, introduced Senate Bill 1678 extending credit to June 1, 2010.
***
Analysts are expecting another wave of foreclosures due to the readjustment of many option ARM mortgages.
An adjustable-rate mortgage is a mortgage loan where the interest rate on the note is periodically adjusted.
It can be adjusted for a variety of reasons including rates on one-year constant-maturity Treasury securities, the Cost of Funds Index and the London Interbank Offered Rate.
Adjustable rates take some of the risk from the lender to the borrower and tend to be used when unpredictable interest rates make fixed rate loans difficult to obtain.
