The Real Blog: A Dose of Real Estate Reality in the Santa Clarita Valley

Fannie Mae Announces National REO Rental Policy

2010-01-19T15:05:00.000-08:00

January 2009

Foreclosures continue to rise and Title Insurance Companies work with lenders like Fannie Mae to process REO transactions. This change in Rental Policy will better accomodate innocent victims of the foreclosure process and allow for property to stay in good condition as transactions are closed through the title and settlement service process with buyers of the properties.

Fannie Mae will establish a new National Real Estate Owned (REO) Rental Policy that will allow qualified renters in Fannie Mae-owned foreclosed properties to stay in their homes. The company currently has an eviction suspension in place through the end of January, which will allow for the new policy to be fully operational prior to the suspension concluding.

"Renters in foreclosed properties have often been a casualty of the foreclosure crisis the country is facing," said Michael Williams, chief operating officer of Fannie Mae. "This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates."

The new policy applies to renters occupying foreclosed properties at the time Fannie Mae acquires the property. Renters occupying any type of single-family property will be eligible including residents of two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing. Eligible renters will be offered a new month-to-month lease with Fannie Mae or financial assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code requirements for a rental property.

Information is courtesy of Derrick LeBlanc of Chicago Title

Resolutions? Make it a Plan... and clear the Energy Drains first!

2009-12-31T11:00:00.000-08:00

Do you know what you like? Do you know what is right for you? Brian Tracy says that it is important to know what is right for yourself before you think of what is possible. Do you know what brings you joy? If you do know, how often do these things show up in your life? Do you plan for them?

It is interesting - and powerful - to focus your attention on what you want in life… experiences you wish to repeat, attributes you wish to develop, goals you wish to reach and, fulfilling ways to spend your time and energy. When you keep your mind, time and energy on these things, there is little time for anything else - and the “anything else” fades away!

At this time of year it is traditional to decide on next year’s priorities. Do this very carefully. Make it a balanced plan with desires in each area of your life to move your physical, social, educational, financial, mental, emotional and spiritual self, forward. Once you have decided on the priorities, assign a daily, weekly, monthly or annual amount of time for each that will satisfy you. This is important. There is no right answer.

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“Experience is simply the name we give our mistakes. - Oscar Wilde

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What will cause you to feel good about yourself when you do it? It can be different for different people. Some folks want to run a marathon and that is what they mean when they are planning to improve their exercise program. That will take more time than for a person who wants to increase their time doing weight-bearing exercise to prevent osteoporosis. Know what your goal is and why. That will help you assign the appropriate amount of time to each priority.

Make sure that your goals are “do-able”. Build in success this way. Make them very specific, measurable and time-bounded. Your mind can capture a goal that says, “I will lose ten pounds by March 1 by eliminating ice-cream from my diet and walking three miles three times a week”, whereas it has difficulty understanding “I am eating less and exercising more.” Be specific.

Often, there are many things undone in our lives. Things we wish we had done, things we know are always sitting at the back of our minds draining our energy. These are ‘energy leaks’. You know the “(Expletive) I still haven’t ___________yet!” that hits you while you’re waiting for a red light to change. It’s a ‘leak’!

Here is a process that I find amazingly effective. Complete this Personal Integrity Checklist to start your year with no energy ‘leaks’. Download it at for free from
http://www.OptimizeInstitute.com/tools/pic.htm. Clearing away your energy leaks is a good preparation for being successful with your new plan.

Always remember - What you pay attention to expands!

[This came from http://www.progardenbiz.com/wp/lawn-care-business-advice/ but I don't know who wrote it. But it seems like a very good program to start the year! Now it's time for me to clear away my own 'energy leaks'! ~~ Ray]

Local Housing Market Needs Listings

2009-11-05T11:03:00.000-08:00

The local housing market continues to steam forward.

As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.

It’s the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006. A Pending Home Sale is a home under contract to sell, but not yet closed. It’s the precursor to an Existing Home Sale.

Trade group data shows that nearly 80 percent of “pending” homes close within 2 months. The majority of those remaining close within months 3 and 4.

When the Pending Home Sales Index rises, it tells us that market activity has picked up. September’s data confirms what we’ve been noticing since February — the Buyers Market is ending.

With more homes under contract in the marketplace, homebuyers typically face one or more of the following:

1. Competitive, multiple-offer situations
2. Reduced purchase price leverage over sellers
3. Fewer seller concessions

Therefore, if you’re buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales. The extension of the home buyer tax credit will tend to keep healthy activity in the housing market, boosted by expanded eligibility to existing home owners. All in all, we should see a result in stabilized if not higher home prices, over time.

Indeed, we’re already beginning to see it with multiple offers and price overbidding in some cases, although lags in appraiser values are tending to moderate prices after the bubble's irrational exuberance in home prices.

Right now, the Santa Clarita area active listings number is at near historic lows. Low inventory, especially in the under $500,000 price range, combined with still-low interest rates has resulted in too many potential buyers chasing too few available homes. Over time, if these conditions continue, prices will rise. However, many in the housing industry think that banks are still overwhelmed with foreclosed inventory that is being held off the market and will be offered for sale starting within the next few months. The so-called 'shadow inventory', as it is released, will tend to keep home prices at or near current levels.

So I would not count on any imminent large rise in home prices just yet. But it is a volatile and fragile market. Please give us a call to find out how you can best position yourself for continued changes in the housing market at 661-290-3750.

First-Time Home Buyer Tax Credit not complete

2009-11-05T10:18:00.000-08:00

First-Time Home Buyer Tax Credit Gets Obama Nod

An extension of the $8,000 first-time home buyer tax credit appears all but certain after the Obama administration called on Congress to give house hunters more time to claim the popular tax perk. The move comes shortly after Senate lawmakers stuck an agreement to not only push back the measure's looming deadline but expand it to allow current homeowners and more affluent buyers to claim the credit. "We welcome efforts taken by Congress to extend the first-time home buyers tax credit for a limited period," Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan said in a joint statement today. "This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide." Here are five things you need to know about the development:

1. Roots and impact: A tax credit of as much as $8,000 for certain qualified first-time home buyers was included in the Obama administration's sweeping economic stimulus package, which the president signed in mid-February. The measure was designed to stimulate additional demand for residential real estate and help absorb the overhang of unsold properties that was putting downward pressure on home prices. Along with cheaper home prices and attractive mortgage rates, the perk has helped reduce the glut of unsold properties. Mark Zandi, the chief economist at Moody's Economy.com, expects the tax credit to result in as many as 400,000 additional home sales by the time of its scheduled expiration at the end of November. But trade groups—like the National Association of Home Builders and the National Association of Realtors—have been lobbying Congress to push the deadline back, arguing that failing to do so would jeopardize recent signs of stability in the housing market. The NAHB, for example, blamed yesterday's weaker-than-expected new home sales report on the tax credit's impending expiration.

2. Extending the deadline: Although various proposals to extend and expand the credit have circulated in Congress for weeks, Senate lawmakers finally reached a deal in recent days. Under the terms of the agreement, the deadline for first-time home buyers to claim the $8,000 credit would be pushed back to April 30, 2010. But the term "deadline" doesn't mean the same thing as it does in the current credit. The Senate agreement stipulates that buyers must have a sales contract on a house by April 30 to be eligible, but it gives them an additional 60 days to close the purchase. That's much different from the current credit, in which transactions must be closed by November 30. Looked at one way, the effective deadline of the credit under this agreement is actually the end of June.

3. Existing buyers: But perhaps the most significant change is that current homeowners would become eligible for the tax perk as well. The current credit prevents home buyers who have owned a primary residence within the past three years from claiming the credit. The agreement, however, would allow current homeowners to claim up to $6,500 as long as the property they are vacating has been their primary residence for at least five years. Expanding the credit beyond first-time buyers is intended to boost home sales to "move up" buyers—those moving from one house to another—which some lawmakers, most notably Georgia Republican Sen. Johnny Isakson, argue is essential to a housing recovery.

4. More-affluent home buyers: The agreement also enables more affluent Americans to claim the tax credit. Senators moved to increase its annual income limits from $75,000 to $125,000 for single buyers and from $150,000 to $225,000 for married couples. These limits apply to both first-time and move-up buyers, although neither can purchase a home for more than $800,000 and still get the credit. Anyone taking the credit on a 2010 purchase can claim it on his or her 2009 tax return. And as long as home buyers live in the property they purchased via the credit for three years or more, the tax credit does not have to be repaid.

5. Credit controversy: Zandi estimates that the Senate agreement would generate more home sales than the current credit would. "It's broader, [and] the industry is geared up to take advantage of it now," he says. But first-time home buyer tax credits have already cost the government more than $10 billion in lost revenue, and Zandi expects that the Senate agreement would cost at least as much. And although it's been popular with those purchasing homes, some economists have called the credit an inefficient use of federal resources. Calculated Risk, a financial blog, has estimated that Uncle Sam has paid $43,000 for every additional home sale. And the Senate agreement—which enables households making more than $200,000 a year to claim the credit—could certainly appear overly generous in a time of trillion-dollar budget deficits.

At the same time, the credit has recently been linked to widespread abuse. Russell George, the Treasury Department's inspector general for tax administration, told a congressional panel last week that 19,300 taxpayers had claimed the first-time home buyer credit before they had even purchased a home. In another 74,000 cases—totaling more than $500 million—taxpayers claimed the credit despite evidence that they had owned a home within the past three years. And in at least one case, a 4-year-old claimed the credit, George said.

Although the agreement appears to have broad bipartisan support, it still has to get out of the chamber. Along the way, it could be stripped of certain generous provisions. But in light of the White House support, it appears all but certain that at the very least, the first-time home buyer tax credit will be extended beyond its November 30 deadline.

Brian Woolley
Prospect Mortgage
661.645.3499
bwloans@ca.rr.com

Senate approves extends and expands home buyer credit

2009-11-04T17:01:00.000-08:00

The measure is expected to be approved by the House and signed by Obama within days. It is aimed at giving the real estate market an added boost and would expand the credit to existing homeowners.

Reporting from Washington - The Senate today voted to extend and expand a tax credit for home buyers as an added boost for the recovering real estate market, and also approved a provision to continue giving aid to the long-term unemployed.

The measure, adopted on a strong bipartisan vote of 98-0, also would extend and expand a tax benefit for businesses with losses. The House is expected to follow suit within days, and President Obama is expected to sign it into law.

To keep fueling the real estate rebound, the legislation would extend the $8,000 tax credit for first-time home buyers to April 30. It now is set expire at the end of the month. More importantly, it also would provide a new $6,500 tax break for existing homeowners who want to move up to a new home, as long as they have lived in their current residence for five consecutive years out of the last eight.

The bill also would increase the level of qualifying incomes to $125,000 for individual tax filers and $225,000 for joint filers. Those earning up to $145,000 individually or up to $245,000 jointly would get a smaller credit that decreases as income rises.

The tax credits apply to home purchases of $800,000 or less.

"Every economist will tell you we have to steady the housing market before the economy will turn around," said Sen. Christopher Dodd (D-Conn.). "We can't afford to let this tax credit expire now."

With the unemployment rate at 9.8% and expected to go higher, senators voted to extend jobless benefits by 14 weeks in all states and 20 weeks in the hardest hit states, including California.

The $2.4-billion extension of unemployment benefits gained bipartisan support after it was written to cover all states, making it more appealing to senators. It would provide a longer extension of benefits in the 27 states now with unemployment rates of 8.5% or higher. California's 12.2% unemployment rate in September trailed only Michigan, Nevada and Rhode Island.

Congress included an extension of unemployment benefits in the economic recovery bill approved this year, but up to 600,000 people have already exhausted their benefits, and an additional 700,000 are scheduled lose them by the end of the year, according to the National Employment Law Project.

For all companies, the measure would allow them to use any losses this year or last year to offset taxes paid in the previous five years. A similar measure was included in the economic stimulus legislation approved earlier this year, but was limited to small businesses.

Depend on The Real Blog for real estate news you can use!

November 3rd Ballot Recommendation

2009-10-22T06:47:00.000-07:00

Please do not be confused by the ballot.

In order to get what YOU want on the November ballot you MUST vote NO on
two questions and YES on only one. IF you wish the City of Santa Clarita
to Annex your area you MUST vote No on A and NO on B and YES on C.

I grew up in this area and have seen the benefits of having local government close at hand and not is some far away place in downtown LA. This City of Santa Clarita works, however imperfectly at times, but in large part because it is locally governed it has become a great area to live. I highly recommend a VOTE of YES on C on your November 3rd ballot.

Only with a VOTE of NO on A - a VOTE of NO on B and a VOTE of YES on C ...
will they consider adding adjoining areas to the city of Santa Clarita.

The disadvantages NONE... Taxes will go DOWN. The various areas considering annexation will still be Tesoro, or Stevenson Ranch, or Castaic, but they will also be Santa Clarita. Just like Northridge is Northridge but ALSO Northridge
is in the City of Los Angeles. The HOA (if any) will still be your HOA, they will
still maintain the common area through the HOA fees.

City services come on a resident first basis as you know, if you are in those areas affected you are NOT residents until you VOTE YES on C, & the city annexes those area. When you are a Santa Clarita resident you go to the front of the line for Parks & Recreation services: Parks classes, sports and activities now fill by a first-come for City residents and the left-overs are for the non-residents, the outsiders. As residents you will be on the INSIDE for dance classes, swimming lessons, sports teams etc.

Increased policing services: The Los Angeles County Sheriff is currently
our policing agency. The city of Santa Clarita also has chosen the LA County
Sheriff... BUT within the city limits they are stronger, more Sheriffs and
their services, per person than outside the city.

A governing board that lives here: Supervisor Antonovitch is not a resident
& has over 2 MILLION constituents & is 27 miles away! The City Council meetings
are at NIGHT twice a month within 5 miles of our homes... NOT during the
day, 27 miles away!

Our tax dollars spent here: We produce more tax dollars here than are spent
here - therefore the extra goes to fund areas far away.

Local Control, Tax Dollars Spent Locally, More Services, LESS taxes: VOTE
YES on C (NO on A & B).

It does not matter what you think about Tesoro, Stevenson Ranch or Westridge
or Castaic, ONLY be concerned with where YOU live... the votes are counted
separately & the City will know what your area wants.

VOTE YES on C & (NO on A & B).

Washington Update: $8,000 Home Buyer Tax Credit

2009-10-12T14:03:00.000-07:00

by Kenneth R. Harney

Quick passage by the House last week of a bill extending the $8,000 home buyer tax credit next year for military, diplomatic and intelligence personnel serving overseas increases the odds that Congress will agree to an extension, maybe even an expansion, of the entire credit program well into 2010.

The White House is also signaling that it sees the overall tax credit program -- currently set to expire November 30 -- as an important element in cutting the unemployment rolls and stimulating new jobs next year.

After an economic policy strategy meeting last week in the Oval Office involving President Obama, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, congressional aides said Democrats generally support an extension of the housing credit. Reid already has made clear he wants an extension. He is co-sponsoring a Senate bill that would do so for six months.

Congressman Charles Rangel, chairman of the tax-writing House Ways and Means Committee, sponsored the one-year extension of the credit for military and other personnel serving overseas, and is reported by aides as favoring an extension for the entire program.

The White House has not publicly committed to an extension, but has confirmed that the President is seriously examining that option.
An unexpected development that emerged following last week's White House meeting was the possibility of opening up the credit to a broader group of buyers next year - people who sell their current homes and buy a replacement home.

Though details were scanty, Capitol Hill sources said one option on the table would be to provide a tax credit -- most likely at the $8,000 level -- to replacement home buyers whose incomes do not exceed some limit.

The current credit phases out for single taxpayers with incomes above $75,000, and married purchasers earning $150,000.

A politically sensitive issue hovering over the entire debate on extending the housing tax credit is its cost - what it would add to the federal budgetary deficit. Mark Zandi, chief economist of Moody's Economy.com, estimates that widening the credit to all buyers through next August could cost the government upwards of $30 billion.

Rangel's 12-month extension of the credit for service personnel is estimated to cost more than $300 million, but it's mainly being paid for through an increase in penalties levied by the IRS on taxpayers who fail to file corporate or partnership returns.

The New York Times reported that one possible solution to the cost problem would be to divert money not yet spent out of 2009's $800 billion stimulus legislation.

Published: October 12, 2009

$8000 Tax Credit for First Time Buyers Ends November 30

2009-09-16T12:23:00.000-07:00

First time buyers are a large portion of the market pool, particularly since the federal government initiated an $8000 tax credit for first time home buyers. Unfortunately, that program ends on November 30th and it is uncertain that the program will be extended.

If you are a first time home buyer, which by the program's definition is that you have not owned a home within the past three years, you need to take action right now. Here's why: your home purchase must close escrow by 11/30! Since most escrows that upwards of 45 days to close after there is written agreement for the sale between the buyer and seller, you have just a couple of weeks to find and buy a property. Later may well be too late!

Please call us at 661-290-3750 today so that we can get started!

Home Insurance Basics

2009-09-16T12:17:00.000-07:00

One of the largest investments you will make in your life is buying a home. To protect your investment, you need a homeowners insurance policy. More importantly, you need to know how to choose one that meets your particular needs. You can get homeowner's insurance to cover a multitude of situations.

A) The standard policy will usually cover things like fire, smoke, frozen pipes, ice, snow and theft. It also provides coverage for liability claims and legal or medical costs if you find yourself in a lawsuit. For example, if your dog bites the mailman, or your kids friend falls from a tree on your property and breaks his leg, your insurance will cover the medical expenses. The most common liability coverage is $100,000 but it is important to consider whether that amount is sufficient for you. Home insurance offers a variety of deductibles averaging from $500 to $2000, so shop around and decide on what is best for you.

B) Things that are not covered in a standard policy are flood, earthquake and damage caused by an act of war, such as a nuclear accident or terrorism. If you find yourself needing any coverage for these types of things, most companies offer special endorsements, but they cost extra. An endorsement is not an additional policy, but an addendum to the one you already have. If you want coverage for things like jewelry, art and antiques, sports equipment or collections, you will need to request a Personal Property Endorsement. It is a good idea to have these items appraised beforehand. Remember to tell your agent about special security features your home has. This may get you a discount on your premium. Dead-bolt locks, security systems, storm shutters or fire-retardant roofing may lower your premium too.

C) Purchase enough coverage to replace what you are insuring. Replacement Coverage gives you the money to rebuild your house based on the value at the time of the loss. You can also get Extended Replacement Coverage which will pay the cost of the dwelling and/or appurtenant structures if the property is damaged beyond repair. The alternative to Replacement Coverage is a Cash Value Policy which is cheaper, but pays only what your property is worth at the time of the loss, less depreciation for normal wear and tear.

Why is INFLATION in the News?

2009-08-03T14:12:00.000-07:00

AND WHAT DOES IT MEAN TO INTEREST RATES?

If you've seen the news lately, you know concerns about inflation are increasing. But what does this really mean to you?

Let's start with what it means in general. The Bureau of Labor Statistics defines inflation as the "upward price movement of goods and services in an economy." There are a variety of indices that measure different aspects of inflation-including the Consumer Price Index, whose latest reading showed that the cost of living in the US rose more than forecast due largely to a jump in energy costs.

The fact is that inflation is a very serious issue that many traders, legislators and lenders are concerned about because it will likely be on the rise as 2009 proceeds.

How Does Inflation Impact Interest Rates...and Why?

The bottom line is that as inflation increases, home loan rates will rise too. That's because lenders know that a rise in inflation actually diminishes the value of the money they receive over the life of a loan, as the money they receive for payment simply won't go as far. So when they see changes in inflation or even anticipate a rise, they increase their interest rates to make up for the loss in future buying power that will happen as a result of inflation.

Two Resources to Learn More...

To help you learn more about this important topic, take a look at two important links.

The first link takes you to a short news clip featuring the nation's foremost mortgage industry expert, Barry Habib. In this video, you'll learn how inflation impacts interest rates and what the outlook is for down the road.

The second link is as much educational as it is fun.

The Bureau of Labor Statistics has included a CPI inflation calculator on its website. This easy-to-use calculator allows you to see how much your money was worth in an earlier period-and vice versa. Simply type in an amount of money, select the years you want to compare, and hit the "calculate" button. The results are instantaneous...and may surprise you!

For instance, did you know that $33.66 in 1979 had the same buying power as $100 in 2009? That's a huge change in the last 30 years. This is a great way to see how inflation impacts your buying power. You can even use the CPI inflation calculator to have a discussion with children about inflation...and show them how much the value of a dollar has changed over the years.

What Should You Do?

Work with a real estate professional who pays close attention to what's going on with inflation-not only with the reports that come out, but also with the rumors and concerns that legislators and lenders express. After all, lenders may raise rates to protect their money as soon as they feel the tide turning.

More importantly...if you or any of your family, friends, neighbors or co-workers have been considering a purchase or refinance, this is a great time to act as home loan rates could be on the rise. The good news is that home loan rates are still near multi-year lows and present a great opportunity for those people who act quickly.

Please contact me today to discuss your specific situation, and feel free to forward this email to other people whom you think might benefit from it as well.

The $8,000 First-Time Home Buyer Tax Credit Expires December 1, 2009

2009-07-22T14:27:00.000-07:00

If you're planning to claim use the credit and haven't started looking for a home, your clock is officially ticking. You must be closed on your new home on or before December 1.

Because purchase closings come 60-days standard, therefore, your $8,000 is in jeopardy unless you go under contract prior to October 2, 2009. That's 73 days from now.

Use it or lose it. The First-Time Home Buyer Tax Credit is part of the American Recovery and Reinvestment Act of 2009. In it, Congress authorized a first-time homebuyer tax credit of up to $8,000 for home buyers meeting certain qualifying criteria. The program's goal was to stimulate entry-level home purchases and, by most measures, the plan has been successful.

First-time home buyers accounted for about one-third of all home resales in May.
Now, the IRS definition of "first-time home buyer" may be different from what you expect. According to the IRS, a first-time home buyer is anyone who has not owned a "main home" in the last 3 years with "main home" defined as a home in which a person has lived "for most of the time". Main homes can include traditional homes, houseboats, trailers and other residence types.

For couples -- married or otherwise -- both home buyers must be first-timers to be tax credit-eligible.

Moreover, not every first-time home buyer is eligible for the $8,000 First Time Home Buyer Tax Credit. Some notable exclusionary cases include first-time home buyers who:

-- File taxes separately and whose adjusted gross income exceeds $95,000
-- File taxes jointly and whose adjusted gross income exeeeds $170,000
-- Acquire property from a mother, father, sibling or child
-- Acquire property from an entity in which they're a majority owner
-- Acquire the home by gift or inheritance

And then, the First-Time Home Buyer Tax Credit may not deliver the full $8,000.

The tax credit is limited to 10 percent of the home's purchase price the it also diminishes as home buyer income rises. Tax credit phase-outs start at $75,000 for homebuyers filing separately and $150,000 on joint returns.

Assuming you qualify, though, the good news is that it's easy to claim your tax credit.

-- Buy and close on a new, "main" home before December 1, 2009.
-- Submit IRS Form 5405 with your 2009 tax returns in April 2010.

That's it.

Meanwhile, the program does come with some gotchas. For example, If you sell your home, or cease to use it as your "main home" within 36 months of purchase, the IRS will require a full payback. There are only a few allowable exceptions to this policy and you shouldn't count on being granted one.
Not moving in the next 3 years? Don't worry about it.

Summer’s Coming, But Confusion Reigns Over Federal Pool Safety Law

2009-07-07T12:55:00.001-07:00

Summer’s Coming, But Confusion Reigns Over Federal Pool Safety Law

Nearly four months after the federal Pool and Spa Safety Act went into effect and with summer swimming season coming soon, many public pool owners still are unsure about what they need to do to comply with the law and unscrupulous businesses are trying to cash in on the confusion.

The law requires the owners of all public pools and spas – including those in hotels, apartment complexes, home-owners associations and other common areas – to install covers on pool drains. In the past 20 years, dozens of children have become sucked into or trapped underwater in the drains and died or been severely injured.

Maybe it’s because the law was launched in the cold of winter, when most of the country is hardly thinking of taking a dip, but there seems to be a lot of uncertainty over how to comply with the newish law.

There are about 300,000 public pools in the United States, mostly in warm weather states like California, Florida, Arizona, and Texas. However, only about 30 percent of pools currently comply with the law, officials said.

Since violating the law carries some hefty fines — up to $1.8 million per infraction plus criminal penalties, including additional fines and imprisonment – it makes sense for pool owners to make sure they are in compliance.
Requirements Spelled Out, Myths Debunked

Since there has been much misinformation spread about the requirements of the pool and spa safety act, federal officials are taking some time to spell out the rules.

All public pools must include approved safety drain covers, while single drain public pools must also install approved anti-entrapment devices, such as a Safety Vacuum Release System (SVRS), an automatic pump shut-off system, a gravity drainage system, or a suction-limiting vent system, officials said.

Privately owned pools and spas in the backyards of private homes are NOT covered by the law and are not required to install any drain covers. Reports have been received about pool maintenance companies quoted thousands of dollars to install the required covers, but officials said no such costs are warranted in order to comply with the law.

Other details just re-released include:

• Single drain public pools are NOT required to install multiple drains. The federal law only requires that single drain pools install approved anti-entrapment drain covers and use one of the other secondary layers of protection listed above.

• Pools do NOT need to be drained in order for drain covers to be installed. Doing so could waste billions of dollars of water.

• The law does NOT require public pools install new sumps.

• Dual drain pools only need to install approved safety drain covers to comply with the law, but PSC and Safe Kids strongly recommend all pools and spas, even private residential pools and spas, install both approved drain covers and an additional layer of protection.

Writing this from sunny San Diego (75 degrees and sunny, again!), we nonetheless feel compelled to remind the rest of the United States that summer swimming season is approaching fast. In another couple of months, millions of U.S. school children will don swimming trunks and bathing suits and dive into one of thousands of public pools.

Without the pool drain covers and other safety measures now mandated by the Pool and Spa Safety Act, these children are increased risk of death and severe injuries. Please take time today to double check your community pool and ask the owner of the pool if they have installed the safety devices. Let’s make the summer of 2009 safe and fun when it comes to children’s pool safety.

Be The Match Marrowthon (260 x 280)

2009-06-12T20:07:00.001-07:00

New FHA program confuses Nation

2009-05-14T14:05:00.000-07:00

Most of you have already heard that Secretary of the U.S. Department of Housing and Urban Development announced yesterday that FHA is going to permit it's lenders to allow home buyers to use the $8,000 tax credit as down payment.
First of all, it was not clear that this was to be a short term or bridge loan from approved entities. And there are no entities offering this short term loan as of yet.
Second, the letter has been removed from HUD"s website and we have been told that it has been recinded. Speculation is that it goes against HUD's policy of allowable sources of funds for closing which includes:
1. Buyers own funds
2. Gift from relative or employer
3. Monies from Federal, state and Local Governmental agencies and non profit agencies of government.
4. Secured funds ie 401k loans

As of now, nothing has been changed in the guidelines to allow for this short term bridge loan against a future tax credit.

Please clarify this with your clients who may be getting mis information from the media, or other lenders that have jumped the gun and not gotten the facts.
For more information, please visit or refer your clients to my website for recent blogs about the subject.

www.colleencraig.com

In a later email from another lender, Eric Mitchell of Prospect Mortgage:
"FHA has announced they will allow buyers to finance their tax credit and use that as their down payment. However, this new policy will probably take at least 30 to 60 days to filter through the system before investors will buy the paper. The announcement was made but the system is not allowing it yet."

The Obama Administration's Housing and Urban Development Department has thrown open the doors to high expectations for many first-time buyers. How this will play out in the short, medium, and long term is just unknown at this point.
`` SCV Home Team

Update on FHA plan to allow use of tax credit for down payments

2009-05-14T10:45:00.000-07:00

FHA plans to allow use of tax credit for down payments
By AUBREY COHEN
SEATTLEPI.COM STAFF

According to a release, HUD Secretary Donovan is going to allow an advance of the $8000 tax credit for first time home buyers to be used for the down payment on FHA loans. Rather than waiting for refunds after the closing, funds will be available at the closing. A second mortgage will be filed and repayment terms will vary. It is important to keep the home as a primary residence for at least 3 years.
Updates to the HUD handbook are as follows [although lenders who implement the program will have clearer instructions]:

II. FHA Guidance

The Tax Credit: Secondary Financing:

Entities that can offer tax credit advances with second liens.
• Federal, state, and local governmental agencies and nonprofit instrumentalities of government.
• FHA-approved nonprofits.

Additional information about these entities:
• Government agencies and instrumentalities of government are described in handbook HUD-4155.1 REV-5, paragraphs 1-13 A and B.
• FHA-approved nonprofits can be found, per each Homeownership Center jurisdiction, at: http://www.hud.gov/offices/hsg/sfh/np/np_hoc.cfm

How the secondary financing works:
• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower. The second lien may not exceed the total needed for the downpayment, closing costs and prepaid expenses.
• The tax credit advance must provide that if the borrower does not repay the amount borrowed by the designated deadline, that principal and interest payments begin automatically.
• If payments on the tax credit advance are required, they must be included in qualifying the borrower and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
• If payments on the tax credit are deferred, the deferment must be for a minimum of 36 months in order for the payment to not be included in the qualifying ratios.
• The tax credit advance second mortgage must not provide for a balloon payment before ten years.

The Tax Credit: Short-Term Loan:

Entities that can offer the tax credit advance with short-term loans:
• Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans” secured only by the anticipated tax credit due the homebuyer as collateral.

How the short-term tax credit advance loan works:
• The amount that may be borrowed in this manner may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405.
• Fees and charges for the tax credit advance loan are not to exceed a nominal amount necessary for preparing and administering the loan.

The Down Payment Assistance Program has come back in another form.

[Is this a repeat of the public policy mistakes of the past, using 'no-down mortgages'? Since something should be done to stop the continuing slide in prices, encouraging those who have limited means to buy homes is one way to do it. Will this just extend the time of foreclosures further into the future? Probably. However, we as Realtors and as Homebuyers will always continue to take action in our own best interest. As they say, public policy issues are above our pay grade. We just hope that those who are in that pay grade have the experience and the wisdom to make the best decisions on behalf of the national interest. If time proves them wrong, we should vote them out, and the sooner the better.]

Surprise: FHA Will Allow 'Advances' on FTHB Tax Credit

2009-05-13T12:00:00.000-07:00

National Mortgage News and SourceMedia, Inc.
May 12, 2009

The government today gave the green light to the financing of bridge loans of up to $8,000 to first time home buyers who qualify for tax credits under the Obama Administration's economic stimulus plan. The new mortgagee letter stipulates that government agencies, non-profits and FHA-approved lenders can give advances on the tax credits. Housing secretary Shaun Donovan told a national Realtor group Tuesday that, "We want to enable FHA consumers to access the tax credit funds when they close on their home loans so that cash can be used as a downpayment." The mortgagee letter is now available online but more details are to follow.

Understanding Your Credit Part 3

2009-05-13T11:51:00.000-07:00

Understanding Your Credit
And Making The Most Of It. (Part 3)

A Quick Recap!

A credit score is a number lenders use to help them decide: If I give this person a loan or credit card, how likely is it that he or she will become 90 days or more late in a 24 month period. A credit score is a snapshot of your credit risk at a particular point in time. It may range from 350 to 850 with the average consumer score being 686. Credit scores are provided to lenders by the three major credit reporting agencies also know as repositories: Equifax, Experian and TransUnion.

Five Factors Determining A Credit Score

1. Late payments.
2. Frequency and patterns of credit use.
3. How long credit has been established.
4. The number of times credit has been requested (inquires).
5. The types of credit (i.e. revolving, installment, secured, unsecured.)

How Credit Bureaus Rank your Credit Score

1. 35% is based on payment history.
A recent 30 day late payment is worse than a 90 day late payment that occurred more than 12 months ago. This can lower your score by 60 points or more.

2. 30% is based on existing balances.
Make sure the balances do not exceed 50% of the maximum limit on each card. Over 50% of the credit card limit will have a significant negative effect on your credit score. Distribute existing credit card debt among three to five cards.

3. 15% is based on how long your credit has been established.
Do not close accounts that have a perfect payment history and have been open for at least three years. These cards have a positive effect on your credit score.

4. 10% is based on types of credit.
A combination of credit types is best. For example, a mortgage, an auto loan and three to five revolving credit cards is ideal. Home equity lines of credit are reported as a credit card debt when the amount is less then $30,000. Try to apply for lines of credit for at least $30,000.

5. 10% is based on inquiries.
Credit inquiries from various industries can lower your credit score up to 60 points. If multiple mortgage inquiries are within a 30-day window, they count as one inquiry in total. This is also true for the auto and insurance Industry inquiries. Personal credit and bank account review inquiries do not count.

Tips To Help Protect Your Credit

1) Be very careful providing personal financial information over the internet. If you are going to provide credit card numbers, social security number, etc over the internet make sure it is through a secure website. Look for https:// instead of http:// at the website address and look for the little yellow padlock on the lower right corner of the screen.

2) Use a paper shredder when discarding any personal credit information such as credit solicitations, credit card statements, pay stubs, invoices, bank statements, etc

3) Keep a list of all credit card accounts with their respective customer service phone numbers in a safe place in the event your wallet or purse is lost or stolen.

4) Never use your full name on personal checks, use your initials instead. For example: J. Doe or J.C. Doe. If your checkbook is lost or stolen, no one will know how to sign your check (except for the bank.)

5) When paying your credit card bill, do not put your full credit card number on the memo line of your personal check. Only list the last 4 digits of your account number.

6) It is not wise nor is it necessary to carry your social security card in your wallet or purse. Commit the number to memory and keep the card at home in a safe place.

7) If your wallet or purse is stolen, contact one of the three credit bureaus immediately and have them issue a fraud alert. That credit bureau will notify the other two. This will be done free of charge and you will receive a credit report showing that the fraud alert has been issued.

Here are the three credit bureaus:

Equifax 800-685-1111 www.equifax.com
Experian 888-EXPERIAN www.experian.com
Trans Union 800-916-8800 www.transunion.com

As always, if you need help or advice, just give me a call or email. More to follow!

Understanding Reverse Mortgages

2009-04-23T12:11:00.000-07:00

The Basics

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. Homeowners 62 and older who have paid off their mortgages or have only small mortgage balances remaining are eligible to participate in HUD's reverse mortgage program. The property must be your principal residence. The program allows homeowners to borrow against the equity in their homes in a variety of different ways. (What is HUD? The Department of Housing and Urban Development is the Federal agency responsible for national policy and programs that address America's housing needs, that improve and develop the Nation's communities, and enforce fair housing laws.)

Obtaining a traditional loan (a "forward" mortgage) requires that the lender check your credit/income to see how much you can afford to pay back each month. But with a reverse mortgage, you don't have to make monthly repayments. Your income generally has nothing to do with getting the loan. You could have no income and still be able to get a reverse mortgage. With most home loans, if you fail to make your monthly repayments, you could lose your home. Reverse mortgages do not have monthly repayments, so you can't lose your home by failing to make them. You can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

• All at once, in a single lump sum of cash
• As a regular monthly cash payment to you
• As a "credit line" account that lets you decide when and how much of your available cash is paid to you
• As a combination of these payment methods

Another feature is that the money paid to you is not taxable. This is because it is not income, it is a loan! The amount of cash you can get from a reverse mortgage depends on the program you select and - within each program - on your age, home, and current mortgage rates. With a reverse mortgage, you are taking the equity out in cash, so your debt increases and your home equity decreases.

Reverse mortgages allow you to use debt to turn your equity into income. You are reversing the deal you used to initially buy your home. Then, you had income and wanted equity. Now, you have equity and want income. There are also no limits on the value of homes qualifying for a HUD reverse mortgage. However, the amount that may be borrowed is capped by the maximum FHA loan limit for each city and county. It varies from $172,632 in rural areas to $312,895 in many major metropolitan areas (and even higher in Alaska, Hawaii & the U.S. Virgin Islands) depending on local housing costs. The size of reverse mortgage loans is determined by the borrower's age, the interest rate, and the home's value. The older a borrower, the larger the percentage of the home's value that can be borrowed. As always, if you need help or advice, just respond to this email.

US Treasury Dept. launches mortgage rescue plan

2009-04-21T09:59:00.000-07:00

First participants in the Treasury Department's program to help homeowners avoid foreclosure include some of the nation's largest banks.By Tami Luhby, CNNMoney.com senior writer

Last Updated: April 16, 2009: 10:15 AM ET

NEW YORK (CNNMoney.com) -- The Obama administration's loan modification program is finally underway.

The Treasury Department announced Wednesday the first six participants to sign up for President Obama's plan. They include three of the nation's largest banks: JPMorgan Chase, which will get up to $3.6 billion in subsidy and incentive payments; Wells Fargo, $2.9 billion; and Citigroup , $2 billion. The others are GMAC Mortgage, $633 million; Saxon Mortgage Services, $407 million; and Select Portfolio Servicing, $376 million.

Additional loan servicers will be added to the list over time, a Treasury spokesman said.

Several major servicers, including JPMorgan Chase and Wells Fargo, said they began modifying loans under the government initiative earlier this month. CitiMortgage signed up for the program on Monday and will start processing applications soon.

"We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership," Wells Fargo said in a statement.

Distressed homeowners and housing counselors have been eagerly awaiting the program's launch since Obama first announced it on Feb. 18. However, it took weeks for the government to clarify the terms and for the financial institutions to update their systems and start accepting applications, frustrating many of those in trouble.

Billed as helping up to 9 million borrowers stay in their homes, the two-part plan calls for servicers to reduce monthly payments to no more than 31% of eligible borrowers' pre-tax income or to refinance eligible mortgages even if the homeowner has little or no equity. The government is allocating $75 billion to subsidize part of payment reduction, as well as provide thousands of dollars in incentives for servicers and borrowers to participate.

The Treasury Department said Wednesday it is capping the payments to servicers to allow more companies to participate. It is allocating $50 billion to the program, with Fannie Mae , Freddie Mac and the Department of Housing and Urban Development providing the rest.

The modification plan calls for the servicer to reduce interest rates so that the monthly obligation is no more than 38% of a borrower's pre-tax income, and then the government would kick in money to bring payments down to 31% of income. Servicers can also reduce the loan balance to achieve these affordability levels. The government will share in the cost, up to the amount the servicer would have received if it had reduced the interest rates.

Only loans where the cost of the foreclosure would be higher than the cost of modification would qualify. Also, Treasury will not provide subsidies to reduce rates to levels below 2%.

It was not immediately clear whether the servicers must pay the incentives to homeowners and investors out of their funding share.

In addition to subsidizing the interest rates, servicers will use the Treasury funding to pay for incentives for themselves, homeowners and investors. The program gives servicers $1,000 for each modification and another $1,000 a year for three years if the borrower stays current. It will also give $500 to servicers and $1,500 to mortgage holders if they modify at-risk loans before the borrower falls behind.

Homeowners, meanwhile, will get up to $1,000 a year for five years if they keep up with payments. The funds will be used to reduce their loan principals.

The Treasury Department set the caps based on public data about the mortgages the servicers handle. Though the program mandates that servicers modify all loans that meet the requirements, the department feels the servicers will have sufficient funds to cover all troubled borrowers' applications.

"We're confident we'll have enough money," said Treasury spokesman Andrew Williams.

Separately, major servicers also recently started accepting applications under the refinance portion of the program.

California Approves a $10,000 Tax Credit for New Home Purchases

2009-04-05T12:19:00.001-07:00

By Steve Doyle, President, Brookfield Homes San Diego
Dated: Feb 25, 2009

The Legislature for the state of California passed a revised budget plan last week and Gov. Arnold Schwarzenegger signed the historic legislation Feb. 20. Included in this new budget is a $10,000 tax credit for the purchasers of a new home.

Did you hear about the California $10,000 tax credit for the purchase of a newly constructed home?

The Legislature for the state of California passed a revised budget plan last week and Gov. Arnold Schwarzenegger signed the historic legislation Feb. 20. Included in this new budget is a $10,000 tax credit for the purchasers of a newly constructed home in the state of California. There are conditions to receive this tax credit, some of which are still being worked out. Let me tell you what we do know at this time:

1. The tax credit is good for 5 percent of the value of the newly constructed home, up to $10,000. (That would mean any home priced over $200,000 would qualify for the full credit.)

2. The tax credit will be available between March 1, 2009 and March 1, 2010, or when the funding authority runs out. (The Legislature has earmarked $100 million for this credit. That mean at least 10,000 new home sales. We don’t know yet if the tax credit will be based on when the contract for sale is written or when the escrow is closed for the purchase.)

3. The tax credit will be allocated by the Franchise Tax Board and will be available to new homebuyers over a three-year period. (Roughly one third of the tax credit will be available each year, details here are still being worked out.)

4. The new home purchaser must live in the home for at least two years.

5. There are no income limitations for the purchaser.

6. There is no “first time buyer” restriction.

7. There is no repayment requirement (unless the purchaser sells or rents out the home before two years have past from the close of escrow).

This is great news for California homebuyers. And, if the homebuyer also qualifies for the $8,000 Federal Tax Credit (see blog entry from Feb. 18 at www.expectmoreinahome.com/blog), then the total tax credit for buying a newly constructed home would be $18,000. That is $10,000 from the state of California and
$8,000 from the federal government.

Steve Doyle is president of Brookfield Homes San Diego/Riverside Division. The company’s homes are found in master-planned communities in San Diego, Riverside, and Imperial Counties.

Federal Reserve Surprises Financial Markets

2009-03-19T13:18:00.000-07:00

Here we go again, with the talking heads on financial news misinterpreting the impact of the Fed's actions on home loan rates.

Here's the scoop. What the Fed just announced is huge – they have committed to buy another $750B in Mortgage Backed Securities, and $300B in Treasuries.

But what does this mean and why do you care?

Their actions provide a demand for Mortgage Backed Securities, which should help keep a ceiling on home loan rates moving much higher in the foreseeable future. That's good news, for homebuyers who are seeing the bargains out there and understanding that now is the time to act. Good news for those who are ready to refinance too.

But an important distinction – this does not mean rates may move significantly lower. Depending on exactly which coupons the Fed purchases when they go shopping for Mortgage Backed Securities, their actions may keep a lid on rates, but not push them very much lower. And based on what they've been buying since the beginning of this year when they started their purchasing program – that is exactly how it has played out.

Present home loan rates are within inches of historic lows. What is keeping you on the sidelines from acting now to refinance and get some dollars back into your own pocket, where they belong – or moving forward to buy the home of your dreams, while it is still on sale?

If you have questions – call me. You know there's no pressure, but let's discuss options and see if there is something we should be looking at to improve your situation.

Among Home Buyers, Keller Williams Ranks Highest in Customer Satisfaction

2009-03-07T15:38:00.000-08:00

Despite Popularity of Online Home Buying and Selling Tools,
Real Estate Agents are Key to Customer Satisfaction

WESTLAKE VILLAGE, Calif.: 23 July 2008 — Keller Williams ranks highest among real estate companies in satisfying home buyers according to the J.D. Power and Associates 2008 Home Buyer StudySM released today.

The inaugural study measures customer satisfaction of home buyers with the largest national real estate firms. Overall satisfaction is determined by examining three factors for the home-buying experience: agent (65%); office (21%); and services (13%).

Among home-buyers, Keller Williams achieves a score of 831 on a 1,000-point scale, and receives highest ratings from customers in all three factors. Following in the rankings are Prudential (820) and Coldwell Banker (816). Prudential performs well in the agent and office factors, while Coldwell Banker performs particularly well in the services factor.

“When buying a home, customers particularly appreciate agent professionalism, responsiveness to calls and e-mails and the agent’s skill in locating and showing properties in the appropriate price range—all areas in which Keller Williams excels,” said Jim Howland, senior director of the real estate and construction practice at J.D. Power and Associates.

The study finds that despite the popularity of home-buying and -selling resources on the Internet, real estate agents are key to customer satisfaction with real estate companies. A large proportion of both home buyers and sellers rely on the Internet to facilitate the buying or selling process, with 68 percent of buyers saying that they used Internet tools to help them in the purchase process and 61 percent of sellers reporting that they used a Web site listing to market their home. In addition, among home sellers, online methods are the most important aspect of marketing. However, the agent factor carries the greatest importance among the factors that comprise overall satisfaction among both home buyers and sellers.

“Although the Internet provides home buyers and sellers with the ability to perform some essential tasks—such as listing a home for sale or researching a neighborhood in which to purchase a home—it still does not replace the importance of a good real estate agent,” said Howland. “Particularly in an uncertain real estate market, professional advice from agents can be especially valuable to buyers and sellers. The knowledge and expertise provided by experienced agents is an important benefit of using a full-service real estate company.”

Knights to the Rescue

2009-03-06T21:07:00.000-08:00

The world is in the throes of a global recession. But as usual, the very poorest are being hurt the most. I want to close by quickly asking you to consider helping one of my favorite causes, emergency relief for the poorest of the poor. My friends at Knightsbridge (Ed Artis, et al.) currently have three hundred thousand dollars of medical equipment and supplies (relief) sitting in two separate locations here in the United States. It's worthless while stored here but "gold" in the developing world. We need $37,000 to ship these items to the Philippines, where we can stage them for delivery to clinics in Cambodia, Vietnam, Myanmar, and the Philippines. This medical relief, when delivered, will save the lives of thousands of people affected by disease and poverty.

Knightsbridge works with many people around the world who volunteer their time to help us hand-deliver this relief, as you can see in Adrian Belic's multi-award-winning documentary film Beyond The Call (http://www.beyondthecallthemovie.com/) and (http://www.pbs.org/independentlens/beyondthecall/).

For every additional $18,500 that is raised, we can obtain and ship 40 cargo containers of valuable medical supplies and equipment, worth between $150,000 and $500,000, to the staging area in the Philippines.

We have almost unlimited resources here in America for the collection and staging of medical equipment and supplies to be shipped overseas. We will run out of shipping dollars long before we ever run out of medical relief goods in need of shipping.

Each dollar that you donate will ship many times that much in lifesaving medical relief. Your donations can be sent to Knightsbridge in two ways:

* Online donations are immediate and can be sent to us via the PayPal / DONATION icon located on our website at www.kbi.org

* Checks should be made out to our NEW partner NGO, A Prescription for Peace, in the US (http://www.APrescriptionForPeace.org).

These checks will be processed, appropriate receipts issued, and the proceeds deposited to our credit.

A Prescription For Peace (a California 501[c]3)
P.O. Box 67696
Century City, CA 90067

Housing Plan Promises Mortgage Relief

2009-03-04T11:16:00.000-08:00

RELIEF FOR RESPONSIBLE HOMEOWNERS
ONE STEP CLOSER UNDER NEW TREASURY GUIDELINES

With Detailed Program Requirements, Servicers Can Now Begin
‘Making Home Affordable’ Loan Modifications

US Treasury Department Press Release dated 3/4/09

Washington, DC – The Obama Administration today announced new U.S. Department of the Treasury guidelines to enable servicers to begin modifications of eligible mortgages under the Administration's Homeowner Affordability and Stability Plan – announced by President Barack Obama just two weeks ago. The release of detailed requirements for the “Making Home Affordable” program facilitates implementation of the critical provisions that will help bring relief to responsible homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosure such as lower housing prices, increased crime and higher taxes.

“Two weeks ago, the President laid out a clear path forward to helping up to nine million families restructure or refinance their mortgages to a payment that is affordable now and into the future. Today, we are providing servicers with the details they need to begin helping eligible borrowers,” said Treasury Secretary Tim Geithner. “It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets, just as we work to stabilize our financial system, create jobs and help businesses thrive. Economic recovery requires action on all three fronts.”

"Only two weeks after the President unveiled his plan to help promote homeowner affordability, we are moving forward today with these guidelines to implement that plan," HUD Secretary Shaun Donovan said. "This step forward represents a tremendous coordinated effort between major government and regulatory agencies to help bring relief to America's housing market and homeowners. This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans."

The guidelines will implement financial incentives for mortgage lenders to modify existing first mortgages and set standard industry practice for modifications.

Treasury announced today that the Making Home Affordable program will also include additional incentives for efforts made to extinguish second liens on loans modified under this program. Extinguishing second liens will make mortgages more affordable, improve loan performance, and help prevent foreclosures.

In conjunction with the release of the new guidelines, Treasury, HUD and other members of a broad interagency task force have prepared consumer friendly Q&A and eligibility assessment tools for borrowers available at FinancialStability.gov. To ensure the program can be implemented as quickly as possible, the agencies also have conducted extensive outreach with housing counselors and mortgage servicers, including the development of call center phone scripts, a training plan and detailed guides, to prepare them for incoming inquiries from borrowers in the wake of the guidelines release.

An expanded online resource will soon be available for borrowers, and agency representatives will fan out across the country in the coming weeks to conduct outreach at homeownership events in communities hardest hit by the housing crisis.

Modification Program Guidelines
Summary of Guidelines
Fact Sheet

Thanks to Colleen Craig of Countryridge Financial (661-310-8536) for passing this on.
www.colleencraig.com

[The devil is in the details...
SCV Home Team]

Much ado about compensation

2009-02-26T18:03:00.000-08:00

Letters From the Home Front
By Kris Berg, Wednesday, February 25, 2009. Inman News

It's the debate that "just won't go away," I read.

"Hmm," I think. What could that be? Is it the debate about how we got to a place where millions of people have lost their homes and many more will likely fall victim to foreclosure in the coming year?

Maybe it is the conversation about how lenders are pricing their foreclosure inventory using the dartboard and dreidel method of valuation, dragging an entire market into the abyss in the process. (In the case of a tie, the Ouija board shall dictate.)

Maybe it's the discussion on industry standards and ethics -- the one that challenges the theory that a home purchase or sale can easily be orchestrated while working the night shift at Jim's Pizza Emporium.

No, the real debate involves my tax return. I simply make too much.

If we are to be fair, this is not a new argument. I have been bilking the consumer for years -- in my case, 12 years. And what a fun and frolicking 12 years it has been.

Through up and down markets, through thick and thin, I have enjoyed the "freedom" that is a real estate career. I have been able to take calls and make calls from my daughters' birthday parties and field trips.

I was able to take time off to see my oldest receive her high school diploma and then spend the after-party crouched behind a parked car listening to a client counsel me. "I know you are busy with your daughter's school thingy, but I have left three messages in the past two quarks, and I need to know if you received the inspection report."

During the boom years, I made too much because homes sold quickly, forgetting for a moment that representing a buyer required us to set up encampments in our idling cars so we could beat the sign installer to the door with the offer, a process we would repeat 11 times before hitting pay dirt.

During the transition years, I made too much because, even though selling a home involved more heavy lifting, sellers were starting to see their net sheets shrinking and felt we should all toss a few coins in the jar. Today, I make too much because, well, it's just fun to say so I suppose.

It's the debate that won't go away.

Maybe it's just me, but all of this outrage where my paycheck is concerned is starting to feel a little manufactured. I am here to tell you there is no need. I have enough outrage to go around.

Suddenly, we are concerned that my compensation might not benefit the consumer. Last time I checked, the consumer had an unlimited number of choices regarding agents, services and fee structures.

You want a flat fee? Those models exist. If you want to pay $500 or $5,000, there is someone who will gladly take the job. If you want to employ Aunt Margaret to represent you in exchange for a testimonial letter and a Bundt cake at closing, she just might bite.

You can pay 1 percent or 20 percent, or you can pay as you go. You can even do it yourself. The world is full of choices. What I charge is what I am worth, and what you charge is what you think you are worth. The debate is lost on me.

If, as an agent, you think you are overpaid, then you are. Change your model and charge less. And if we are running out of controversy, maybe we should move on to more pressing issues like customer service, industry standards, and ethics -- and something about the other agent who won't return my phone calls when I have a offer to present because I am not a buyer waiving a checkbook above my head.

For me, I charge what I am worth, but I make far less than I am worth. When a client was recently laid off one week before closing, I was laid off, except he had severance pay and now qualifies for unemployment benefits. I enjoy neither. I suspect many of you, like me, have spent six months with a buyer who decides not to buy.

Many of us have spent our weekends running the Chamber of Commerce shuttle tours for people expecting to relocate and then decide not to accept the job offer or don't get the job offer. We routinely find that we have spent weeks or months promoting a listing and generating an offer only to learn that the seller "needs" to get a little more, even though the number on the purchase agreement looks suspiciously like the one we suggested should be reasonably expected when we initially met to get things rolling.

Deaths, births, divorces, marriages, employment, unemployment, and change of heart: Stuff happens. And when it does, we haven't worked for free; we have worked at a loss.

Yesterday, I called in sick. Well, that's not entirely true. I delivered the message in person, on all fours and looking like I had been whopped repeatedly with an ugly stick, as I met with two clients to get contracts signed and another to attend a final walk-through.

You see, I am paid only for delivering the goods and, more importantly, my clients aren't buying or selling a pair of shoes. We are talking about a financially enormous, highly stressful, life-changing event. There are no sick days.

I take vacations. They involve enough electronics and power cords to stock a small trade show. Did you know that your cell phone works on the beaches of St. John? I do.

It was a $1,000 lesson learned while trying to negotiate a purchase agreement on the behalf of a client who was quite irritated that a trip I had booked six months prior happened to coincide with a buyer's decision to make an offer on their home. Of course we do get "paid vacations." This is what we call the vacations we take while we are paying another agent to cover our business.

I also get paid health insurance. It's paid by me, in gold bullion, and I have had three carriers in as many years because it seems that a member organization numbering in the millions cannot find an insurer willing to make a long-term commitment to my well-being.

As an independent contractor, I pay Social Security and then I get to pay it again -- the employer's share. I pay board dues and lockbox and license fees. I pay for the business trappings that result in my garage frequently being confused with a Staples distribution center, while my home office looks like the clearance aisle at Best Buy.

I pay for my own pension plan. The latter is whatever I can sock away depending on the winds. This year, it is sorely underfunded, which is probably a good thing considering what the stock market has done.

My job is flexible, though. It is so flexible that I can work all seven days. Escrow companies, photographers, print shops and the county recorder are open weekdays.

Our clients are open on weekends -- and in the evenings after 7 p.m., because that is when the baby sleeps. During my free time, I blow off steam with a legal brief, a good article on housing trends, or a class on new disclosure laws.

What I am selling is a service, but it is the product that drives my income, and I do not control its production. I live on a cash-flow rollercoaster that involves very high "highs" and excruciatingly low "lows."

For all of my exceptional efforts, selfless heroics and best intentions, one terrorist event or economic recession can change my pay scale, as can the occasional change of heart or mind, and I rarely get my 30 days' notice.

"But representing the sale of a condo is no more or less difficult than representing the sale of Belarus!" you say. Sometimes that's true and sometimes not.

Yet, percentage-based pay systems are not foreign to us. Try charging the same flat sales tax on a Hummer that you do on a pair of Rollerblade skates and see what a big round of applause you get.

And there are losses. Because we at least strive to be for-profit businesses, the losses have to be considered in the fees we charge. Not fair? When you buy that pair of shoes you are paying in part for the guy who shoplifted his, much like the price of the steak at the store reflects all of the steaks that were not purchased and had to be tossed out.

Consumers should pay up-front, then. Only they won't. It is much more appealing to play with house money, which brings us to the subject of risk. I incur it all. There is risk every time I pay thousands to market a home only to find that the seller has changed his mind and every time I write the fifth offer for a buyer client to learn they that aren't having fun anymore or that her brother just got his license. And there is risk every time I walk into the office that a frivolous lawsuit will be waiting for me.

If I sound angry about the work, I am not, because I have defined my own scope. What I am angry about is that my income is even up for debate. This business of bilking the customer, while fun and sometimes extremely rewarding, is costly. I have paid dearly with time, money and sacrifices in my personal life. So I charge what I am worth, as should you.

Oh, and I wouldn't worry too much about the consumer where our fees are concerned. He has plenty of choices, and I respect him enough to know he will weigh his options and make the decision that is in his best interests given his particular circumstances. Respecting the customer -- now that might be a topic worth debating.

Kris Berg is broker-owner of San Diego Castles Realty. She also writes a consumer-focused real estate blog, The San Diego Home Blog

Understanding Your Credit

2009-02-26T11:40:00.000-08:00

And Making The Most Of It. (Part 1)

Where do we begin? For most consumers, the world of credit is confusing and at times, seems almost without common sense. Credit plays an important role in your life. It affects the purchases you make and much more. Here are the basics, simply explained. Paying your bills on time is the single most important contributor to having good credit. No matter what the minimum payment is, it is critical that you always make all payments on time. Whether the minimum payment is $10 or $1,000, paying it late will negatively affect your credit. What does "late" really mean? Here's an example: Let's assume your latest monthly statement says a payment is due on the 1st of the month. There is almost always a grace period, which can be around 10 days. If you make the payment after the grace period, your credit provider will likely charge you a late fee. Does this hurt your overall credit or "credit score"? No. Even though they charged you a late fee, as long as you get your payment and late fee to the creditor within 30 days of the due date, which began on the 1st of the month, your credit will not get "dinged". In other words, no negatives. Creditors regularly supply your credit history to outside credit reporting agencies, also known as credit bureaus.

There are 3 main credit reporting agencies/credit bureaus, which are Experian (formerly TRW), Equifax and TransUnion. They are companies that collect (and sell) information about how people handle their credit. Their credit reports list how individuals manage their debts, make payments, how much untapped credit they have available and whether they have applied for any loans or other financing. The reports are made available to authorized individuals and creditors. Sometimes unauthorized individuals gain access to your information. We'll save that for a later date.

What is a credit score? The most well known type of credit score is the Fair Isaac or FICO score. Each of the 3 main agencies determine their own score and can provide it within their credit report. It is a number ranging from 300 to 900 which reflects the credit worthiness of the borrower. A credit score is primarily determined by the timeliness of past loan payments and balances owed in relation to the maximum credit limits available. Huh? What was that second part again? Let's say you have a credit card with a maximum credit limit of $4000. Owing less than 50% of that limit is a good thing. Owing any more will negatively affect your credit score. So, in this case, it is better to spread your debt around various other credit cards you have, rather than to have that one big balance. Keeping your credit cards with less than 50% of the limit is always a good idea, especially if you are planning to obtain more credit in the near future.

Most mortgage lenders will want to see all 3 reports and all 3 scores. If a single person is applying for a mortgage, lenders will typically use the middle number of the 3 scores. So, if your scores are 650, 698 and 735, they will grant you credit based on 698. With a married couple, they use the middle score of the greater income earner. The national credit score average is 678.

As always, if you need help or advice, just email Adam Ford of Mortgage Advisors Group at AdamFord@skylinefinancialcorp.com. More to come later!

[Adam Ford sent me this article for inclusion in The Real Blog]

NAR Proud of New Housing Bill

2009-02-21T16:31:00.000-08:00

National Association of Realtors President Charles McMillan sent this to the Realtors:

For nearly four months, NAR has been working to deliver to you and to our nation a comprehensive plan to stabilize the housing market.

This week, we saw countless hours of hard work pay off – in a MAJOR way – when the federal government implemented NAR's recommendations to stimulate housing with the signing of the American Recovery and Reinvestment Act of 2009.

This bold and unprecedented move to help housing did not happen by chance. Just a few months ago, the auto industry had Congress' ear. Yet, thanks to countless meetings, letters, phone calls, and public pressure that we – the REALTORS® of America – placed on lawmakers in Washington, D.C., housing emerged as the top priority in the new Administration and in Congress. While some of the items in the Act are controversial and are currently being debated, most of our top priorities were addressed.

Thanks to all of our hard work, America’s homebuyers and homeowners will soon have:

Lower interest rates for home mortgages;
A greater ability to get financing through FHA, Fannie Mae and Freddie Mac in high-cost areas;
A true tax credit incentive to buy a home NOW; and
Foreclosure mitigation and short-sale standards.

As a direct result of NAR's advocacy, we hope REALTORS® will see an increase in home sales this year. NAR also continues to make significant progress on our efforts to unclog the pipeline for foreclosures and to address administrative problems with short sales.

Such significant movement on these critical issues is rare. For more information and details on these new laws and programs, visit the Unlock America's Economy Page on Realtor.org:

http://www.realtor.org/government_affairs/gapublic/gses_conservatorship?LID=RONav0023

Home Foreclosure and Debt Cancellation Info from the IRS

2009-02-18T13:57:00.000-08:00

Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

The amount excluded reduces the taxpayer’s cost basis in the home. More details. Further information, including detailed examples, can also be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form

Updated with FAQs at bottom — Feb. 28, 2008
Updated with new link — Dec. 11, 2008

IR-2008-17, Feb. 12, 2008

WASHINGTON — Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.

Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on this Web site.

“The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.”

The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds.

The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b).

The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home ( Box 7).

Note: Legislation enacted in October 2008 extended this relief through 2012. Thus this relief now applies to debt forgiven in calendar years 2007 through 2012.

Related Items:

Frequently asked questions on the Mortgage Forgiveness Debt Relief Act
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness
1099-C
Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments

MORE AT http://www.irs.gov/irs/article/0,,id=179073,00.html

FNMA Announces New Policy For Renters In REO Properties

2009-02-18T12:41:00.000-08:00

On January 13 Fannie Mae released an announcement describing a new policy that will allow qualified renters to remain in Fannie Mae-owned foreclosure properties. Formally known as the National Real Estate Owned Rental Policy, it is meant to address the difficulties faced by tenants who – often through no fault of their own – face serious disruptions in their lives because the owner of the property in which they live has been foreclosed upon.

Said Michael Williams, chief operating officer of Fannie Mae, “This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause, and help bring a measure of stability to communities impacted by high foreclosure rates.”

The policy applies to renters who occupy the property at the time of foreclosure or deed-in-lieu of foreclosure. It will not apply to the borrowers who are losing the property, nor to their immediate families. The type of property occupied may be single-family homes, condos, co-ops, manufactured housing, or one-to-four unit buildings. The only requirement is that the property is a Fannie Mae REO, and that it conforms to all applicable local and state requirements for a rental property.

Key features of the new policy are as follows:

After the foreclosure is complete, renters will be offered the opportunity to either accept an incentive payment to vacate the property (“Cash for Keys”) or they may sign a new month-to-month rental agreement with Fannie Mae.

Fannie Mae will not require payment histories or credit checks.

Renters will be charged market rents. This may require a local rent survey for comparison purposes. Fannie Mae will “review each instance where the market rate may require a tenant to pay additional rent and will work to reach an equitable solution.”

No security deposit will be required. On the other hand, the announcement is silent on Fannie Mae’s possible obligations if an unreturned security deposit had been paid to the foreclosed- upon former owner.

The property will be for sale, and may undergo repair or rehab work, during the term of the tenancy. “If the property sells, the lease will transfer to the new owner.”

The property will be managed by a real estate broker and/or a property management company.

Whether the new Fannie Mae policy will be a good thing is yet to be determined. Having lost many, many millions of dollars, Fannie Mae has already demonstrated that it was not particularly good at its core business. There is little reason to think that it will be good at the landlord business either. Even with property management companies, someone has to manage the property managers.

Already, one can see that the policy may not be particularly good for many tenants. Suppose you had begun a one-year lease in September, and now, in January, the property has been foreclosed upon. Fannie Mae offers you a month-to-month tenancy while the property is for sale. You still might have to move before school is out.

Nor does it look terribly attractive on the buyer side. A prospective owner-occupant doesn’t want a tenant in possession when he closes escrow. And neither he nor an investor buyer can be very positive about taking a property where the tenant occupant has paid no security deposit.

It’s a nice idea, but the new Fannie Mae policy is probably going to require some refinement.

January 2009

Obama's Housing Plan Gets Mixed Reviews

2009-02-18T12:14:00.000-08:00

February 18, 2009, 9:42 am

Interesting plan, but as the sheriff said to the captain in Jaws: we're going to need a bigger boat.

Please read the whole article and then go to the Wall Street Journal website on the article and read the comments. You think you have some problems with this plan? Read the comments! People are angry!

Click for the article and comments.

Obama’s Plan Aimed at Helping Troubled Homeowners

Here’s the summary of the Obama administration’s plan aimed at helping Distressed Homeowners

Homeowner Affordability and Stability Plan

Executive Summary

The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country.

· Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates.

· Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure.

· Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as much as 9 percent.

1. Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affortdable

2. A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners

3. Supporting Low Mortgage Rages by Strengthening Confidence in Fannie Mae and Freddie Mac.

The Homeowner Affordability and Stability Plan is part of the President’s broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. The key components of the Homeowner Affordability and Stability Plan are:

1. Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices

· Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.

· Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:

o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.

2. Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners

· Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes – providing families with security and neighborhoods with stability.

· No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home – it will not aid speculators or house flippers.

· Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.

· Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the plan will include households at risk of imminent default despite being current on their mortgage payments.

· Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has several key components:

§ A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.

§ “Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.

§ Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.

§ Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.

§ Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration — together with the FDIC — has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.

· Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC’s pioneering work. The Guidelines will be used for the Administration’s new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for loans that they own or guarantee, and the Administration will work with regulators and other federal and state agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans’ Affairs and the Department of Agriculture.

· Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities

§ Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and HUD to Monitor Performance

§ Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options

§ Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2 Billion in Neighborhood Stabilization Funds

§ Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk Borrowers

3. Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:

· Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.

o Provide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.

o Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.

· Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.

· Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding.

· Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving homebuyers.

· No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency Economic Stabilization Act/TARP.

First Time Home Buyer Tax Credit Information

2009-02-15T14:27:00.000-08:00

Information about first time home buyer tax credits as amended by the American Recovery and Reinvestment Act of 2009 (HR 1).

Please consult your tax advisor / accountant to determine whether you are eligible for this tax credit before making any decisions or changes to your tax status. This website is for information only and should be verified by a tax professional.

The 3 changes to the first-time home buyers tax credit program include:

Tax credit has been increased to $8,000.

Homes have to be purchased between January 1, 2009 and December 31, 2009

No repayment/recapture clause for homes sold after 36 months of occupancy and ownership.

The Tax Credit is for home buyers (either spouse if filing jointly) who have NOT owned a principle residence during the three-year period prior to the purchase. Ownership of vacation property or rental property does not disqualify home buyers from this program.

The maximum credit is $8,000 or 10% of the home purchase, whichever is less.

The credit is available for homes purchased on or after January 1, 2009 and before December 31, 2009.

To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) should be under $150,000 and single filers' MAGI should be less than $75,000. Partial tax credits may be available for married couples with MAGI incomes of over $150,000 but under $170,000 and single filers with incomes over $75,000 but under $95,000. If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4,000 each (whichever is less) on their tax returns.

Home buyers who qualify for this program, but who do not intend to purchase a home till the end of 2009, may elect to alter their tax withholdings (up to the amount of the of the tax credit) in order to save up money for a down payment. However, if the purchase of the home does not occur, the taxes must be repaid to the IRS.

There is no recapture or repayment clause IF the home is owned for at least 36 months.

The effective date of purchase for new construction (even if buyer owns title to the lot) is the date the owner first occupies the house. So even if construction began in 2008, as long as the home and buyers qualify for the tax credit, they will be eligible if they take possession any time during 2009. However, new construction bought from the builder is only eligible if the settlement date (closing) takes place between January 1, 2009 and December 31, 2009.

The law allows taxpayers to elect to treat qualified 2009 purchases as a 2008 purchase so that they can receive the tax credit on their 2008 tax returns.

The full amount of the eligible tax credit is refunded to the buyer, regardless of whether the buyer has paid an equivalent amount in taxes.

The American Recovery and Reinvestment Act of 2009

Affordability More than Doubles

2009-02-12T12:14:00.000-08:00

Affordability More than Doubles
Lower resale prices and recent declines in the mortgage interest rate are prompting more people to jump into a market that is dramatically more inviting for entry-level buyers.

A study conducted recently found that the percentage of households that could afford to buy an entry level home in California stood at 53 percent in the third quarter of 2008.

That's more than double for the same period from a year ago when only 24 percent of households could qualify.

The First-Time Buyer Housing Affordability Index study conducted by the California Association of Realtors found that the minimum household income needed to purchase an entry-level home at $287,760 in California in the third quarter of 2008 was $56,100, based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment.

First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,870 for the third quarter of 2008.

At $56,100, the minimum qualifying income was 44 percent lower than a year earlier when households needed $100,500 to qualify for a loan on an entry-level home.

Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.

The Index also rose 5 percentage points in the third quarter of this year compared to the second quarter of 2008, due to an 11.9 percent decrease in the entry-level median home price.

At 73 percent, the High Desert region was the most affordable area in the state.

The San Francisco Bay Area region was the least affordable in the state at 35 percent, followed by the San Luis Obispo County region at 38 percent.

In Los Angeles County the index stood at 42 percent, up from 20 percent a year ago.

The L.A. entry-level price of $332,680 requires a minimum-qualifying income of $64,8000 and comes with a monthly loan payment of $2,160.

Good News for Investors

2009-02-10T11:33:00.000-08:00

To speed recovery of the housing market, Fannie Mae in March will begin purchasing and guaranteeing mortgages for borrowers carrying loans on as many as nine other properties, up from the current limit of three. However, the number of months of reserve payments that must be held by investors will rise to six in June from two currently. "One of the things that leads the economy out of a housing crisis is when prices get cheap enough that investors start moving in and buying things," says Joe Garrett of the Berkeley, Calif.-based consulting firm Garrett, Watts & Co.

Local property tax scam targets underwater homeowners

2009-02-05T10:46:00.001-08:00

Company charges for free tax reassessment filing

By Josh Premako
Signal Senior Writer
jpremako@the-signal.com
661-259-1234 x519
Posted: Feb. 5, 2009 12:52 a.m.

Local residents might have noticed an official-looking letter in their mail lately, touting a rate of $179 to file a homeowner's property tax reassessment form.

Of course, they could just opt to download the one-page form off the Los Angeles County Web site and file it for free.

Los Angeles-based Property Tax Reassessment mailed the two-page letters that looks very much like a bill.

The company advertises a filing fee of $179, or $209 after Feb. 26.

"Right now, the scams out there are rampant," said City Councilman Bob Kellar, who is a real estate agent. "They're taking advantage of people."

If homeowners have questions about lowering their property tax by proving their home's value has decreased, Kellar advised they speak with a real estate agent or the county assessor's office.

A Property Tax Assessment customer service representative named Thomas said Wednesday the company serves, "pretty much California."

"Some people don't have time. We're just offering a service," said the representative, who didn't give his last name.

A man who said he was a supervisor refused to answer any further questions and said all media inquiries must be submitted by mail.

The company notes in the fine print of the letter that, "Property Tax Reassessment is not a government agency."

The Los Angeles County Assessor's Office provides the reassessment form for free, requiring the homeowner to provide two recent homes sales, preferably in their neighborhood.

"There's no benefit (in paying)," said Rayleen, an intermediate assessor who asked her last name not be used. "They could do this for free."

She said what Property Tax Reassessment does is not illegal but certainly unnecessary.

On the county form, a homeowner must list two recent comparable home sales that were less than the current assessed value of their home.

Property tax bills are sent out in October.

For information about property tax reassessment, or to download the necessary form visit www.assessor.lacounty.gov.

jpremako@the-signal.com

SCV Sheriff's Launch Vacant House Check Program

2009-02-04T18:24:00.000-08:00

During these challenging economic times and the downturn in the housing and real estate markets we may see an increase in the number of vacant houses and other structures throughout the Santa Clarita Valley. If not maintained, secured, and frequently checked, some of these vacant structures can become a haven for those intent on wrong doing. These vacant properties can lead to incidents of trespassing, vandalism, unlawful parties or gatherings, arson, drug use, and other illegal or nuisance related activities that can further reduce property values and challenge the peace, serenity, and safety of our neighborhoods.

As part of our forward-thinking approach towards best protecting our community, the Santa Clarita Valley Sheriff Station's Crime Prevention Unit, in direct partnership with the City of Santa Clarita and County of Los Angeles, has developed and launched a new "Vacant House Check" program. Although we also want property owners and agents to pay extra attention to these types of properties, the new program puts in place a system where deputies, volunteers on patrol, reserve deputies, and other station staff members can work directly with them. The personnel will randomly check vacant properties including houses, condominiums, businesses, or other structures, submitted by you throughout the Santa Clarita Valley.

If you are aware of a vacant or abandoned structure in your neighborhood or business community that appears to be run-down or attracting a criminal element, simply fill out the form at the following link: www.scvsheriff.com/vacanthouse/. Provide as much information as you can about the property and they will check it out. Working together during challenging times we can make a difference.

Is now the time to buy a home?

2009-01-27T16:47:00.000-08:00

Is now the time to buy a home? It depends on...

A simple question -- Is now the time to buy a home? -- generated heated debate at a recent dinner party, an argument that made attacks by political candidates appear tame.

"You'd be a ... fool to buy now!" one woman said, noting that resale prices are soft and falling, foreclosures and short sales are still emerging, and the national economy is on less than stable ground.

"You'd be a ... fool NOT to buy now!" another speaker growled, stating that prices are already at their lowest in decades, the selection of homes for sale is stunning, it's best to act while others are still waiting, and, despite popular belief, home loans, especially for first-time buyers, are available at low interest rates, albeit for individuals with a modest down payment and a solid credit history.

Eventually, a consensus emerged: Both positions were correct, because the answer boiled down to two words: "It depends."

It depends on: Where you want to buy? How long will you stay in the house? What is your annual income? Is your job stable? Is a work-related move likely anytime soon? Do you have a decent FICO credit score and a good credit history? How big a loan can you obtain? What is the interest rate? What is the list price of the house? Is the sale the result of a foreclosure? How much of a down payment do you have? What are you currently paying per month in rent? Do you believe home prices will rise or fall over the coming years and by what percentage rate up or down? What's happening in the local market? Are there many foreclosed properties on the market, like in areas of the Inland Empire, or relatively few by comparison, such as here in the San Fernando and Santa Clarita Valleys?

And, perhaps most importantly, what are your genuine housing needs -- are you a single renter with no imperative to move, does your family of five require room to grow, or is the nest empty and you’d like to downsize to a smaller house?

The list of questions went on and on with each raising valid points on both sides of the debate. Eventually, there was agreement on several additional points:
For example, all markets recover; Southern California will continue to lure new residents; and, there are not enough existing houses to satisfy burgeoning demand. That weighed the argument more in favor of buying, but then the debate shifted to timing, and prices, and home loans, and interest rates.

Renters currently paying a low monthly rent and of the belief that home resale prices will fall farther for months to come saw little advantage in buying now. But other renters who pay a high monthly rent and were optimistic about the market, argued in favor of capturing today's low prices, decent interest rates, and wide selection of homes listed for sale.

They wanted to get into the market before the herd returned and prices started marching up again. Plus, efforts to revive the national economy and stabilize the housing market already are yielding programs and once-in-a-lifetime opportunities that may vanish once recovery is underway.

If a renter today captured a home at a favorable price of say $300,000 with appreciation of a modest 3 percent annually, within three to four years the benefits of buying would totally outweigh any perceived benefit of renting. The sooner that houses start appreciating and the higher the rate of appreciation, the sooner that buying would make sense.

Unlike other investments, any return on a home purchase requires a relatively small initial investment. Few buyers plop down cash to pay the full cost of a $200,000 house, while most make a down payment of as little as 3.5 percent on up to 20%, again depending on individual circumstances. A 3.5% down payment of $7,100 on a $200,000 condominium would require a 5% loan of $192,900 with good credit. Principal and interest payments would equal $1,031.00 taxes (and home owners dues if a condo) would average about $400.00 per month. After tax benefits ownership is less than rent and you can upgrade and improve your own home.

If the home increased in value by 5 percent during the first year -- either due to true appreciation or simply because the purchase price was significantly below market -- that means the buyer earned $10,000 on an investment of $7,100. In that instance, the annual "return on investment" would be a whopping 141 percent.

Of course, owners must make mortgage payments and must pay property taxes, along with other costs of home ownership. However, since the interest on a mortgage and property taxes are both tax deductible, the government is essentially subsidizing a portion of the home purchase.

Is it likely that renters could find a safer, better investment elsewhere? It depends, although real estate has always fared well over the years. And in the long haul real estate has out performed nearly all other investment vehicles.

If a renter today captured a home at an extremely favorable price of say $300,000 with only 3.5% or $10,500 down, and appreciation of a modest 3 percent annually, within three to four years the benefits of buying would totally outweigh any perceived benefit of renting. The sooner that houses start appreciating and the higher the rate of appreciation, the sooner that buying would make sense.

But it always came back to the particulars of each prospective buyer's situation. It always came back to "It depends" and for the real answer each individual needs to seek expert advice from me your local Realtor and your accountant.

[Thanks, David!]

Buyer's Market: Dive In!

2009-01-27T16:13:00.000-08:00

A great opportunity awaits buyers in 2009. The perfect combination of lower prices, lower interest rates, and substantial inventory has come together to create values that we may never see again. Prices are down 25 to 40% from their high in the summer of 2005. Fixed interest rates have fallen below 5% on conforming-rate loans. Additionally, the moratorium that Congress imposed on lender foreclosures over the holidays will gradually be adding to the already ample inventory in 2009. These changes can create a dramatic benefit for a buyer.

Let’s compare buying the same home in 2005 versus 2009 with a similar loan program. Assume the purchase price of a home in 2005 was $800,000, with a 20% down payment. The interest rate for a 30-year, fixed, jumbo loan would have been 6.5%. The monthly payment for principal and interest would have been $3,467 per month. The same home today, down 33% in value, would be $536,000 . The interest rate, with a 20% down payment, would be 4.75% for a conforming, 30-year, fixed-rate loan. The monthly principal and interest payment would be $1,698. The 2009 monthly payment is less than half of the 2005 payment. If you were to stay in the home for 30 years and pay off the loan, you would actually pay $636,840 less in principal and interest, compared to a 2005 purchase. Oh, by the way, the down payment in 2005 would be $160,000, while in 2009, it would only be $108,000...and yes, the property taxes would be 33% less, too.

10 Cities Boasting Mini Sales Booms

2009-01-16T11:46:00.000-08:00

10 Cities Boasting Mini Sales Booms
Some cities that were hardest hit by the real downturn are experiencing mini sales booms.

Las Vegas real estate properties are down 28 percent in price, but sales of homes are up 15 percent.

Motivated buyers accounted for 64 percent of Las Vegas sales in October, says Radar Logic, a derivatives firm. That’s the highest rate in the country.

"There's a pretty active housing market, it's simply at a lower-priced inventory," says Michael Feder, chief executive of Radar Logic. "And there are now bidding wars taking place over homes in foreclosure."
Phoenix and San Diego are reporting similar experiences.

"We're clearing out the bad news," says Kiva Patten, a director at Merrill Lynch specializing in housing derivatives.

"By the end of 2010 – that's where we're calling the bottom in the forward market. You're going to get a small price appreciation in 2011," says Patten. "It's not like the turn is 10 percent per year, it'll be something like 3 percent or 4 percent."

Here are the cities where experts say it makes the most sense to buy now.
1. Las Vegas
2. Sacramento, Calif.
3. San Diego, Calif.
4. Los Angeles
5. Detroit
6. Phoenix
7. San Francisco
8. Washington, D.C.
9. San Jose
10. Atlanta

Source: Forbes, Matt Woolsey (01/12/09)

Foreclosure Evictions in the City of LA

2009-01-13T11:02:00.000-08:00

The HCED committee of Los Angeles city council met December 10, to approve the ordinance provided by the City Attorney's office as a result of discussion in the November 2008's meeting (November 21,2008). The plight of renters of foreclosed properties being evicted has concerned the city council. The city council has extended the RSO regulating evictions to cover foreclosed residential rental property of all types.

Details of the Ordinance:
A bank will NOT be able to evict a tenant from a foreclosed rental property in the city of Los Angeles including, single family dwellings, guest rooms, suites, mobile homes, RVs, new construction, condominiums or multifamily. It does not include hospitals, convents and educational institutions.

Once the property has been sold to non-bank entity the tenant can be given a 60 day notice of eviction but will not receive relocation if the unit was not originally under rent control. Residents of rent controlled units receive existing relocation fees.

This ordinance will sunset in one year. Review in 6 months.

Tenancy must be in existence on the date that a property is foreclosed and does not cover a tenancy created after the foreclosure date. This item is at the discretion of the council.

A posting of renters' rights in foreclosure is required to be posted at rental units in the entry or a communal area, if not a fine of $250.00 will result.

A buyer closing escrow on any multifamily building in the city of Los Angeles must notify the city of the transaction, a penalty of $250.00 will result for those that do not comply.

Items added at the meeting by the LAHD 12/10/08

Position of the Association of Realtors:
In an attempt to protect innocent residents from the foreclosure crisis the city has suggested a temporary measure to alleviate the impact on renters in the city.

The Association recognizes the city's motives, but would like to bring the following implications of the ordinance to the notice of the city council:

1) The payment of utilities (multi-family) and maintenance of the units may create a problem and result in blight and/or termination of the services for the tenants.

2) Occupation of a unit, preventing the refurbishment and showing of the unit, may result in a delayed sale. A longer time period on the market and the resulting reduced sales price may exacerbate the housing problems in the area contributing to blight.

3) Lenders may create restrictions on future mortgage products in the city of Los Angeles making renting a home more difficult or expensive for a borrower thus decreasing the rental housing stock in the city or making loans less affordable and decreasing the private property rights of the owner.

How Do You Determine A Home's Value?

2009-01-13T10:55:00.000-08:00

Determining a home's value is not an exact science and it's never a fixed number. Very few people outside of the real estate business can accurately come up with a value. Why? Homeowner's think their house is always "the best". Appraisers look at a home based primarily on statistical data. Buyers and Realtors have their own views. Depending on who you are, you may give more weight to different factors. So, will you have a wide variety of opinions? You bet. These are some of the factors to consider:

1 The home's square footage
2 Quality of construction
3 Home design, general appeal, amenities
4 The home's floor plan
5 Proximity to transportation, schools and shopping
6 Lot size, topography, landscaping, view
7 In the case of a purchase transaction, what a seller and buyer negotiate also contributes to the value
8 And of course, the most recent sales of similar properties nearby

Thanks to Adam Ford of Mortgage Advisors Group for the above article.
Adam can be reached at 661-254-3744, adam@adamford.net

New Laws affecting real estate for 2009

2009-01-05T13:41:00.000-08:00

With the housing market taking center stage among the nation's concerns, both Congress and California's State Legislature have enacted significant new laws affecting REALTORS® and their clients and customers. Highlights of some of the new laws are summarized below.

To view the full text of a California legislative bill, go to www.leginfo.ca.gov

Emergency Economic Stabilization Act May Help Homeowners: Enacted on October 3, 2008, this historic federal legislation earmarks $700 billion for the Treasury Secretary to purchase troubled assets from financial institutions. The Secretary and other federal agencies are also charged with the task of mitigating foreclosures for mortgages and mortgage-back securities and encouraging loan modifications. Furthermore, this law strengthens the FHA-insured refinance loans for troubled mortgages under the HOPE for Homeowners program, including authority for the program's board of directors to increase the maximum loan amount above 90% of the appraised value. This bill also extends the tax exemption for debt forgiveness on home loans under the Mortgage Forgiveness Debt Relief Act of 2007 from December 31, 2009 to December 31, 2012. Source: H.R. 1424.

Debt Relief Income Exempt from State Income Tax: Starting September 25, 2008, the federal income tax exemption for debt forgiven on a home loan now applies to state income taxes to a limited extent. Federal law provides a tax exemption for debt forgiveness on a loan incurred for acquiring, constructing, or substantially improving a principal residence up to $2 million if the debt is discharged from 2007 through 2012. Under the new California law, the maximum qualifying debt is only $800,000, not $2 million, and the maximum exclusion is $250,000. Moreover, the California law only applies to a debt discharged in 2007 or 2008. Senate Bill 1055.

Pool Drains Must Be Properly Covered: As a red alert for apartment and condo managers, all U.S. "public pools and spas" as defined must be equipped with anti-entrapment drain covers by December 19, 2008. The suction from pool and spa drains can be so strong as to entrap children, and cause injuries or drowning deaths. Under the new federal Virginia Graeme Baker Pool and Spa Safety Act, a "public pool or spa" includes pools and spas open to the public, as well as those open exclusively to residents of multi-unit apartment buildings or multi-family residential areas (such as condominiums). The new law requires, among other things, that drain covers for pools and spas conform to the performance standard of ASME/ANSI A112.19.8-2007 and that single main drains be equipped with anti-entrapment devices as specified. For more information, visit the Web site of the U.S. Consumer Product Safety Commission (CPSC), which includes a list of manufacturers, given the uncertainty as to whether the supply of compliant drain covers is adequate. Source: S. 1771.

Tenant Victimized by Domestic Violence Can Terminate Tenancy: Beginning on September 27, 2008, a tenant can terminate a tenancy upon giving a 30-day written notice to terminate, if the notice also informs the landlord that the tenant or a household member has been a victim of domestic violence, sexual assault, or stalking as defined. The tenant must attach to the notice a copy of a temporary restraining order, emergency protective order, or police report issued within the last 60 days. The tenant is also entitled to a proration of the last month's rent if, within those last 30 days, the tenant vacates and the landlord re-rents the premises to a new tenant. This law will sunset on January 1, 2012. Assembly Bill 2052.

Landlords and REO Lenders Must Take Charge of Abandoned Animals: Effective January 1, 2009, any person or private entity with whom a live animal has been "involuntarily deposited" must take charge of it, if able to do so, and immediately notify animal control officials to retrieve the animal. An "involuntary deposit" includes the abandonment of a live animal on a property that has been vacated upon, or immediately preceding, the termination of a lease or foreclosure of the property. The animal control officers who respond can secure a lien to recover the rescue cost, but this law imposes no other liability upon a depositary who complies with these rules. Assembly Bill 2949.

Smoke Detector and Water Heater Bracing for Manufactured Homes: Starting January 1, 2009, all used mobile homes and manufactured homes that are sold must have an operable smoke alarm in each sleeping room (whereas prior law only required one smoke detector per manufactured home). If the manufactured home was manufactured on or after September 16, 2002, the smoke alarm must comply with the federal Manufactured Housing Construction and Safety Standards Act. If the manufactured home was manufactured before September 16, 2002, the smoke alarm (which can be battery-powered) must be installed in terms of its listing and installation requirements. A seller satisfies the above requirements by signing a declaration, within 45 days before transfer of title, that the smoke alarms are properly installed and operable. For a manufactured home manufactured before September 16, 2002, the seller must provide the buyer with the manufacturer's information on the operation, testing, and proper maintenance of the smoke alarms. An agent is not liable for any error, inaccuracy, or omission in any required disclosures that the agent did not know was false. The California Department of Housing and Community Development (HCD) may establish new rules as needed to clarify or implement the smoke alarm requirements. This law also requires all replacement fuel-gas-burning water heaters in existing mobile homes and manufactured homes that are offered for sale or lease to be seismically braced, anchored or strapped in accordance with rules and standards to be established by the HCD by July 1, 2009. Assembly Bill 2050.

No Text Messaging While Driving: Commencing January 1, 2009, a person driving a motor vehicle is prohibited from writing, sending, or reading a text message, instant message, or e-mail from an electronic wireless communication device. However, a person may read, select, or enter a name or phone number in a wireless device to make or receive a phone call. A violation of this law is an infraction punishable by a base fine of $20 for the first offense and $50 for each subsequent offense. Senate Bill 1613.

Other Significant Laws: Some of the other new laws of interest: an increase in the fine for acting as a licensee without a license from $10,000 to $20,000 (Senate Bill 1448).

Realegal® is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing nearly 200,000 REALTORS® statewide.

Are Lower Mortgage Rates the Answer?

2008-12-01T12:44:00.000-08:00

In the long run, it's falling home prices that will get the economy moving again.
By JUNE FLETCHER
from the Wall Street Journal

On Tuesday, the government announced an $800 billion plan to stimulate the economy by buying $600 billion worth of mortgage-backed assets and $200 billion in consumer-debt securities. The intent is to make it easier for consumers to buy cars, pay for college tuition and get credit cards. Mortgage interest rates fell about a half-percentage point on the news. (See "Fed Aid Sets Off a Rush to Refinance")

Will the effort finally get the economy moving again? Frankly, I doubt it.

Lower mortgage rates can help people buy housing, but only if they feel secure enough in their jobs, and confident enough in their financial future to take the plunge. Given that consumers are drowning in debt -- especially housing debt -- fearful of layoffs, and waiting for housing prices to hit bottom, it's unlikely that they'll react to this initiative with a spending spree.

Consumers don't react to debt like companies, though the government is behaving like they do. Giving companies better access to credit allows them to meet payrolls while they adjust their production and expenses in response to tighter economic condition. But families who can't pay their bills can't lay off a spouse and kids. For them, debt grows from burdensome to monstrous as interest charges accumulate. Eventually, the load becomes overwhelming.

Testifying before the Senate on July 28, Harvard law professor Elizabeth Warren noted that the situation for the middle class has worsened during this decade. She explained that, adjusted for inflation, median household income fell $1,175 from 2000 to 2007, while expenses increased $4,655, pushed primarily by higher costs for mortgages, gas, health insurance and food, in that order. Families with children have borne an additional $3,180 in expenses for day care, after-school care and college tuition. To help cope with these rising costs, families turned to home equity lines of credit and refinancing -- effectively sucking the equity out of their homes -- as well as credit card debt. Nearly 44% of American households now carry a balance on their credit cards, she testified; to retire it, a family earning the median income of $48,201 would have to turn over every paycheck for nearly three months.

Foreclosure or bankruptcy will take a toll on a certain portion of these families, even though, as Ms. Warren points out in her book "The Two-Income Trap" (Basic Books: 2003), that's something most people desperately try to avoid. After studying 2,200 families that had filed for bankruptcy, she found that families that fail financially are most likely to be ones with children, who are struggling to buy and maintain homes in decent school districts, not flippers or status-seekers out to make a quick buck. For every family that officially declares bankruptcy, she writes, there are seven more whose debt loads suggest that they ought to file. But they don't, given the stigma that financial failure still holds in society.

Many Americans are so indebted that a job loss, illness or divorce inevitably pushes them over the financial precipice These days, I'm inundated with pleas for help from readers who were coping with their bills until they were blindsided by bad luck, like the Utah real estate agent who was hit with both diabetes and a falling home-sale market that destroyed her business, or the California man who got behind on mortgage payments after a heart attack, or the Massachusetts woman who lost a high-paying job and took on a lower-paying one that forces her to choose between going without food and heat and paying her mortgage. These readers aren't trying to game the system; they're trying to find ways to hold on to their homes, and failing that, their dignity.

While emergency relief measures and loan modifications may help the hardest cases, there's clearly not enough money in the federal budget to help everyone. Temporary stimulus measures like mortgage rate cuts and easier access to credit are limited, too, since they only work when people feel rich enough to buy something. Ultimately, it will take more permanent solutions, like the proposal recently unveiled by President-elect Barack Obama to boost job growth, to restore confidence enough to get the economy moving again.

In the meantime, expect some relief in the form of more affordable home prices, which continue to fall even with massive government intervention: In the third quarter, they declined a record 16.6% from a year earlier, according to the latest home price index by Standard & Poor's/Case-Shiller. As painful as this deflation is to those who are forced to sell, in the long run, lower home prices will help family budgets to come into balance, and personal debt levels to become more manageable. That will help the economy far more than trying to entice tapped-out consumers to buy bigger houses and more stuff.

Write to June Fletcher at fletcher.june@gmail.com
http://online.wsj.com/article/SB122770741433659553.html?mod=djempersonal

[The local real estate community tends to reject this common sense approach, saying that lower interest rates are indeed the answer to the problem. Some of these other Realtors need to get slapped back to reality... interest rates were too low for too long, and were combined with easy money and non-existent lending standards Those circumstances are exactly how we ended up in this mess. Here at the SCV Home Team we take a realist position. It doesn't make us that popular with some of our fellow associates, or with some of the sellers of real property. As we have said before, reality bites. We recognize reality, and go forward. So for the buyers in this market... opportunity awaits!! Home prices have fallen quite a bit and there are some terrific deals to be made! Give us a call at 661-290-3750 and let's be a buyer in this market!]

Only One Person Knows a Home's Value: Its Buyer

2008-11-21T16:49:00.000-08:00

House-Price Index Readings Can Be Inflated, Built on Shaky Foundations and Far From the Right Neighborhood

The Wall Street Journal Online
By CARL BIALIK
http://online.wsj.com/article/SB122722235538745845.html?mod=djempersonal

The good news is your home may be worth more than the rock-bottom price that your neighbors' houses fetched. The bad news: No one but you might think so.

The one point of widespread agreement in the real-estate industry is that there is no single accurate index of home prices. They are all over the map, cover different sets of homes and may exclude parts of the country or be unduly influenced by the mix of homes sold in a given month.

A sold sign is displayed in the yard of a house in Clarksville, Tenn., in October.
As the home market surged earlier this decade, the two leading indicators of home prices diverged. One didn't count homes sold with exotic or subprime mortgages, which fueled much of the bubble. These same properties are often the ones going on the auction block today at severe discounts, pulling the other home-price index down -- some say to unrealistic lows.

To address these discrepancies, indexes are going increasingly local. Other, less-well-known measures of home prices -- some of them available only to paying customers -- are adjusting to exclude homes sold by banks.

Sales of foreclosures and other distressed properties accounted for 35% to 40% of transactions in the third quarter, the National Association of Realtors said this week. The discount on such properties, often sold by banks that need to clear inventory quickly, can be 30% to 40% compared with similar properties sold by the resident, according to Damien Weldon, a vice president of credit-risk products and analytics at First American CoreLogic. The company's Loan Performance division is producing a new index without these discounted sales, a distinction that was "not important a few years ago, but now it's very important," Mr. Weldon says.

Behind the Home-Price Indexes
The numbers from home-price indexes are widely watched. The Federal Reserve uses them to measure the value of housing stock. Banks use them to determine whether mortgages are underwater and to estimate the value of homes they will have to sell after foreclosure.

But the indexes may be leading everyone astray. Just as respondents to election surveys are meant to stand in for the broader electorate, the homes being sold need to represent all homes. The problem is, producers of these price measures aren't sure that sale prices reflect the values of houses not on the market.

"People put all their eggs in the sales-price basket," says Andrew Leventis, a senior economist with the Federal Housing Finance Agency, which produces a home-price index.

"Whether the transaction pool is reflective of the entire housing stock -- nobody addresses that problem," adds Karl Case, professor of economics at Wellesley College and co-creator of the Case-Shiller Index, a competitor to the federal government's measure.

The Case-Shiller index includes properties that had subprime loans attached.

"That's the stuff that went down most substantially, and that's probably the stuff that went up most substantially," Prof. Case says.

The federal index, though, doesn't include such properties, instead accounting only for properties with financing from mortgage giants Fannie Mae or Freddie Mac. For that reason, many prefer Case-Shiller.

"I believe S&P Case-Shiller for the areas it covers," says Thomas Lawler, a housing economist in Leesburg, Va.

Case-Shiller has shown a steeper decline in markets with many distressed sales. The second-quarter year-over-year declines in San Francisco, Phoenix and Las Vegas ranged from 23% to 28%, according to Case-Shiller. But the federal gauge recorded declines of only 5.8%, 11% and 18%, respectively.

Not everyone thinks the Case-Shiller index is useful. Richard A. Smith, chief executive of real-estate broker Realogy Corp., says the index omits 13 states. "Case-Shiller as a broad index is inaccurate," Mr. Smith says.

David Blitzer, chairman of the index committee at Standard & Poor's, which publishes Case-Shiller, responds that "the sampling and data collection is as good as it can be."

"One's got to be wrong," Mr. Smith said of the dueling Case-Shiller and federal indexes. "Nobody will know until the book is written."

Yet there is no surefire way to know which index got closer to the truth. Each year since 2000, the Census Bureau has asked homeowners to report the value of their home, but "it doesn't necessarily jibe with assessment records or anything like that," says Jeanne Woodward, a Census Bureau statistician.

Another potential check on values is home appraisals. But Dr. Leventis said there are two possible sources of upward bias. One is that people often choose to get their homes appraised when they figure the value has risen sharply and they can convert some of that to cash with a refinancing. Another is that appraisals tend to overstate the value of homes, perhaps because homeowners seek the most-favorable assessment.

"I really don't see a benchmark" against which to check these home-price indexes, says Lawrence Yun, chief economist of the National Association of Realtors.

His group releases its own numbers, most recently showing prices declining by 9% in the third quarter compared with a year earlier. But that measure, unlike the others, doesn't take into account a home's sales record. So instead of comparing each property's sale price to its prior sale price, the realtors group compares the price of homes sold this month with that of homes sold last month -- even if the mix of homes has changed sharply. Mr. Yun defends the measure as "very simple to understand."

Most of the numbers that get headlines are based on metropolitan areas. Yet the housing-market picture can vary dramatically within the same region. Lynn, Mass., a suburb northeast of Boston, saw prices drop 10% in the second quarter compared with a year earlier, according to Wellesley's Prof. Case. Yet in the same period prices in Cambridge, just west of the city, rose 13%.

Integrated Asset Services, or IAS, sells estimates by neighborhood. "We are a lot more granular" than Case-Shiller and the federal index, Chief Executive David McCarthy said.

Within Middlesex County, which includes Cambridge, one neighborhood was up 12% compared with a year earlier in September, while two others were down 1% and 2%, respectively.

Fiserv Inc. uses the Case-Shiller local numbers to sell estimates for a single property.

The risk when going local is that data become sparse and a few anomalous sales may throw things off -- particularly in markets where most of the sales are distressed. IAS makes estimates based on as few as 50 to 75 transactions.

None of this nuance is captured in headlines about the latest home-price-index release, Prof. Case complains. Still, he is hopeful that home-price indexes will improve. "This new criticism that these indexes are showing different things is going to lead to a lot of research," he says.

[This article points out the problem of using national or state or even county index values. In our market area, the SCV Home Team does a much more accurate analysis of home value.]

“New” 2009 conforming loan limit unchanged from $417,000; high-cost areas now max out at $625,500

2008-11-11T11:38:00.000-08:00

“New” 2009 conforming loan limit unchanged from $417,000; high-cost areas now max out at $625,500

LOS ANGELES (Nov. 7) –The Federal Housing Finance Agency (FHFA) today announced that the “new” conforming loan limit for 2009 will remain at $417,000 for most areas in the U.S., unchanged since 2006. Loan limits for high-cost areas, including California, are capped at $625,500, down from the previous $729,750 limit. Loan limits for many areas of the state do not reach this lower threshold and are dramatically reduced from 2008.

"Although price declines mean that the total number of homes eligible for conforming financing has increased, we’re disappointed that the $729,750 limit stipulated in the Economic Stimulus Act of 2008 signed in February was not made permanent,” said C.A.R. President William E. Brown. “The reduction in the loan limit to $625,500 will negatively impact both the interest rates and the availability of funds for jumbo mortgages.

“We hope Congress will make the $729,750 limit permanent before the end of the year as one of the provisions in an economic stimulus package,” he said.

The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.

In California, the new conforming loan limits for metropolitan areas range from $474,950 in the Sacramento-Arden-Arcade-Roseville metropolitan area, covering El Dorado, Placer, Sacramento and Yolo counties; to $625,500 in the Los Angeles-Long Beach-Santa Ana metropolitan area.

Another Big Bank Moves to Assist Homeowners and Itself

2008-11-11T11:08:00.000-08:00

Citigroup has joined Morgan Stanley Chase, the Federal Deposit Insurance Corporation (FDIC,) and a few other large banks in initiating an aggressive program to mitigate foreclosures of single family homes.

The bank said on Monday that it is putting a moratorium on both initiating new foreclosures and on completing the legal process against homeowners who are currently moving toward foreclosure.

The moratorium will be available to homeowners if they meet several criteria; they must want to stay in their home, be willing to work in good faith with the bank to resolve their problems, and have the income to afford payments on a restructured mortgage.

The program will be available initially to borrowers whose mortgage loans are owned by Citigroup but the bank said it is working on expanding the program to include loans that it services for other investors.

The bank will also move proactively over the next six months to contact about one-half million homeowners, about one-third of the banks own borrowers, who are current on their mortgage payments now but are at risk of falling behind in the near future.

Citigroup will attempt to restructure mortgage loans by reducing the principal of the loan, extending the amortization period, and/or adjusting interest rates. Some 600 bank employees will be involved in the restructuring effort.

The new program is not based on altruism. The bank has suffered greatly from the subprime crisis, losing a staggering amount of money in each of the last four quarters, much more than any of its principal rivals. Citi's stock is trading only slightly above its 52-week low, closing Monday at $11.05. During the spring of 2006 the stock was trading in the $55 range.

Like FDIC, Wells Fargo, Morgan Stanley Chase and even Wachovia which is soon to be absorbed by Wells Fargo have finally realized that working with borrowers to prevent foreclosures, while expensive in the short term, is ultimately less costly than taking, managing, and marketing the foreclosed homes.

The geographic focus of Citi's efforts will be, at least at first, on those areas where unemployment and foreclosure rates are high. This will include Florida, Arizona, California, Michigan, Indiana, and Ohio.

The Associated Press reported that more than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 were in some phase of foreclosure.

[posted by Mortgage News Daily on 11/11/08]

Should You Buy or Lease?

2008-11-03T11:48:00.000-08:00

By Mark K. Solheim

To hear the critics wail, you'd think leasing a car is as bad for your finances as smoking cigarettes is for your health. Does that mean you're a closet wastrel if you've ever been tempted by ads that trumpet affordable monthly payments for a new car? Or, worse, that you are hurtling down the highway to financial ruin if you've already given in?

Relax. Leasing is not a mortal sin of money management. For some drivers, in fact, it makes sound fiscal sense. Leasing's not for everyone, but there's no reason to scorn the 15% of our fellow travelers who choose leasing over buying.

A Closer Look
Leasing often gets a bum rap because the lingo can make your head spin. It's difficult to compare one lease with another, not to mention to compare leasing with buying. And it can be tough to get a handle on leasing because the decision to lease or buy often depends on your mindset. "A lot of people are freaked out by having to turn in their car at the end of the lease," says Phil Reed, author of Edmunds.com's Strategies for Smart Car Buyers. "What they fail to realize is that they got the first years of a brand-new car's life."

One of the biggest criticisms of leasing is that in a buck-for-buck comparison of leasing and buying, leasers usually shell out more money. That's because, after the loan payments are done, buyers get to keep the vehicle (pay cash and you come out further ahead). If your modus operandi is to buy a car and run it till it sputters and dies, leasing isn't right for you. But you're a good candidate, Reed says, if you've decided that you're always going to have a car payment ? as many drivers do, now that six- and even seven-year loans are gaining popularity. It's a good bet that you can drive more car for less money if you lease. You'll never actually own the car, but who really owns a car when the bank holds the title until the loan is paid off?

A few other advantages: A lease usually ends about the same time as the warranty, so you probably won't pay for any repairs. You won't have to worry about whether you'll get a fair deal on a trade-in. In most states, you pay sales tax only on the monthly payments rather than on the full value of the car. Plus, many of today's leases include gap insurance to cover the difference between the lease payoff and an insurance settlement if the car is totaled or stolen.

Yes, there are early-termination fees if you change your mind. But if you finance a car and bail out before the loan is paid off, you could easily owe more on the loan than the car is worth. And it's true that you pay extra for exceeding the 10,000- to 15,000-mile yearly limit typically written into a contract. But buyers who rack up high mileage also pay a penalty: lower trade-in value.

Design Your Own Lease
If you choose a manufacturer-subsidized lease, you'll probably be locked in to the terms. But if the car you want isn't being pushed by the carmaker, there's plenty of room for bargaining. Either way, contact several dealers to see who's willing to cut you the best deal. Reed of Edmunds.com recommends a term of three years because that's often the turning point in a car's life (when the warranty expires, for instance, or you may need new tires).

Ask the dealer to compare leasing offers on the car from the manufacturer's financing arm as well as a few banks. That may produce a lower "money factor" (basically the interest rate) or higher residual, either of which translates into lower payments.

Next, target the capitalized cost which is leasing lingo for the price of the car written into the lease. Gross cap cost includes the price of the vehicle, fees, extended service plans, gap-insurance premiums and any other add-ons. Adjusted cap cost is the gross cap cost minus reductions for trade-in, down payment, and rebates. That adjusted cost is the amount you actually finance. Don't pay sticker unless you have to. Both Kelley Blue Book (www.kbb.com) and www.Edmunds.com list actual transaction prices to give you an idea of what others are paying.

If you expect to drive more than the number of miles included in the standard contract, try to negotiate a higher limit. Or you may be able to buy extra miles up front for an extra 10 or 15 cents per mile, versus the usual 15- to 30-cent-per-mile penalty charged at the end of the lease.

You usually have the option of buying the car at the end of the lease instead of turning it in. The purchase amount, typically the residual value, is written into the lease. Buying may not be a good idea, though, if the residual was set artificially high.

Not up for haggling? Kiplinger's has teamed with CarBargains, a buying service from the nonprofit Consumers' Checkbook organization. Its LeaseWise service will negotiate with five local dealers for you. The cost is $335. Visit www.kiplinger.com/links/carbargains or call 800-475-7283.

All contents copyright 2007 The Kiplinger Washington Editors, Inc.

Realtors Present Four Point Stimulus Proposal

2008-10-22T14:04:00.000-07:00

The National Association of Realtors® (NAR) stayed right on message as it proposed a four-point plan for Congress to enact to resuscitate the housing market and including yet another plea to keep banks out of the real estate business.

The plan, revealed in a statement made late last week and in the NAR President's Podcast released on October 21, calls for a special "lame-duck" session of Congress and asks that it consider the following, what it calls "consumer-driven" provisions to boost the economy and soothe the nerves of jittery homebuyers.

1. Eliminate the provision contained in last summer's housing rescue bill that requires first-time homebuyers to repay the $7,500 tax credit they receive under the plan and expand that credit to apply to all buyers of a primary residence.

2. Urge the government to use a portion of the allotted $700 billion that was provided to purchase mortgage-backed securities from banks to provide price stabilization for housing. The Treasury department should be required to:

3. Extend credit down to Main Street, making credit more available to consumers and small businesses;

* Extend credit down to Main Street, making credit more available to consumers and small businesses;

* Expedite the process for short sales;

* Expedite the resolution of banks' real estate owned (REOs) properties.

4. Make permanent the prohibition against banks entering real estate brokerage and management, further protecting consumers and the economy.

In the podcast NAR President Richard F. Gaylord called the proposal "a boldstep on the policy front," and urged NAR members to talk with members of Congress while they are home in their districts over the election hiatus about the proposal and how important its provisions are to consumers.

In the earlier statement Gaylor said, "Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible." It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans. We are asking Congress to act right away."

Gaylord said NAR, as the leading advocate for homeownership and private property rights, believes it is important for Congress to address the concerns and fears of America's families, much in the way it has addressed Wall Street turbulence. "Housing is and has always been a good, long-term investment and a family's primary step towards accumulating wealth."

Gaylord said that NAR will strongly pursue those proposals and is calling on Congress to return to enact housing stimulus legislation in a lame-duck session after the national elections in November.

[Published 10/22/08 by Mortgage News Daily]

The Solution: Turn on the Printing Presses!

2008-10-14T14:42:00.000-07:00

The financial markets are still volatile and people are still uncertain at best, or fearful at worst, for the future. Stratfor.com has a bit of commentary about the governments of America's and Europe's various attempts at solving the financial mess.

"Yet the Europeans and the Americans both had to intervene in some way, and now they face exactly the same problem: having decided to make the pig fly, there remains the small matter of how to build a flying pig. The problem is administrative. It is all very well to say that the government will buy paper or stock in companies, or that it will guarantee loans between banks. The problem is that no institutions exist to do this. There are no offices filled with officials empowered to do any of these things, no rules on how these things are to be done, no bank accounts on which to draw — not even a decision on who has to sign the checks. The faster they try to set up these institutions, the more inefficient, error-prone and even corrupt they will turn out to be. We can assure you that some bright lads are already thinking dreamily of ways to scam the system, and the faster it is set up, the fewer controls there will be."

Now that the governments have decided to force the banks to take money in exchange for preferred stock positions, the Dow industrial average yesterday flew up over 900 points (apparently pigs can fly!).

We will be monitoring developments closely, as always.

How Busy Are We???

2008-10-10T12:01:00.000-07:00

Sorry that I haven't posted my perspective on current events and the housing market lately.
Here's a quick note that I just sent to a friend and client:

I have been busier than a one-armed paper hanger lately. Have three offers out there and waiting to hear back on them... and they are all great offers too! Currently prepping two other offers for submission today. Right now am working with buyers buyers buyers. Not so much listings. The ebb and flow of this biz...

Betwix you and me, I think prices are going to be all over the board for a while, but locally there is a negotiation parity between sellers and buyers. There is a six month inventory based on number of listings to sales rate ratio. Very balanced... and my last three offers have been with multiple offer situations.

[Regarding the news...]
The world is not ending.

It will take a while for all of the extraordinary government intervention to work through the system and for confidence to re-build, but both will happen. That's not to say that there will not be some wild shocks to the system down the road, but I think that we are either past or nearly past the critical period of danger of systematic collapse.

[Some] people will lose jobs and houses. Christmas will be leaner than any in our children's memory. But we will get past this.

Tip o' the Day: Keep your wits about you as others are losing theirs.

[By the way... we are never too busy for you and your referrals of friends, neighbors, and associates! Please call Ray and the SCV Home Team at 661-290-3750.]

SCV Home Sales Rise in August Y2Y

2008-10-08T10:07:00.000-07:00

Single-family home sales increased 7.0 percent during August throughout the Santa Clarita Valley, the Southland Regional Association of Realtors reported.

The 199 closed escrows were 13 sales higher than a year ago, but down 16.0 percent from this July when 237 homes sold.

While buyers generally are focusing more on single-family home opportunities, condominium sales increased 31.7 percent to 83 closed escrows during August.

"Lower prices were the most important factor driving increased sales activity, simply because buyers realize that they now have a chance of buying a home that was out of reach just a short time ago," said Doreen Chastain-Shine, president of the Association's Santa Clarita Valley Division. "The increase also could be related to the positive effects of being able to obtain a larger loan at a lower cost."

Chastain-Shine was referring to the fact that the July and August were the first months that saw the conforming loan limit at its new level of $729,000, which means loans up to that amount can be obtained at a lower interest rate than ever before.

The median price of homes sold during August decreased 19.6 percent to $450,000. That was $1 10,000 below the $560,000 median price of August 2007 and $9,000 higher than the $441,000 median posted this July.

The condo median during August came in at $269,500, down 25.6 percent from a year ago and off 5.4 percent from this July.

‘The real estate market will not find some level of normalcy until Washington resolves the current financial crisis, thus making more money available for home loans, and the limited supply of bank-owned properties on the local market work their way through the system," said Jim Link, the Association's chief executive officer. [The other way, of course, is to let the market find its own level through agreement of buyers and sellers on price. However, credit availability is a critical variable in the marketplace. The financial markets are so clogged by distrust and bad paper, that some measure of governmental intervention will be needed to restore a functioning market. The SCV Home Team hopes the macro-economic experts can come up with as little intervention as possible yet still correct the excesses. It's a tall order in this, a general election year.]

"Many of the foreclosure properties, which are not nearly as numerous as in other parts of the state, already are on their way to being sold," Link said. "We expect resale prices to flatten out soon and firm up between now and Spring." [We hope!]

That relatively brief window of opportunity is when buyers will have the greatest opportunity to buy a home at a favorable price.

Activity throughout the Santa Clarita Valley picked up during August, a fact supported by the Association's statistics reporting pending escrows - a measure of future resale activity.

Pending escrows increased 89.3 percent during August compared to a year ago, suggesting that a growing number of people are getting off the fence and into the market.

There were 1,684 active listings throughout the Santa Clarita Valley at the end of August. That was down 825 listings for a drop of 32.9 percent compared to a year ago. Active listings also declined 5.3 percent from the July total.

At the current pace of sales the inventory represents a 6.0-month supply - right at the top of what industry leaders call a balanced market where neither the buyer nor the seller have a clear cut advantage in negotiations.

[Become a client of Ray Kutylo and the SCV Home Team for up-to-date analysis of market conditions.]

Today's 'Daily Reckoning' Commentary

2008-10-03T15:01:00.000-07:00

[The House of Representatives has voted to pass the Bailout Bill, and the President has signed it into law. The Real Blog has had some regular commentary about the state of the economy and the housing market over the last few years as my loyal readers well know. With the passage of the much-touted but little-understood Bailout Bill today, we take a step back and let another Blog, The Daily Reckoning, take a few shots at the wisdom of a Congress and Administration turning on the printing presses with a month to go before a national election. Want to know what $700 Billion Dollars will buy? Read on...]

Here at The Daily Reckoning...we stand back...aghast...agog...paralyzed by the whole spectacle... from the lunatic assumptions of the credit bubble...to the solemn farce now taking place in the U.S. Congress.

Yes, dear reader, we are suffering from senselessness overload...the absurdities are coming too fast for us now; we can’t keep up. We fear we are going into an irony-induced coma.

Could any scriptwriter have come up with such a preposterous story? Could any director have found such a clownish cast of characters?

It was only a few months ago that all the leading men and women of this drama claimed to believe in free enterprise so fervently they were willing to spend hundreds of billions of dollars forcing it on others. It was free enterprise that separated us from the barbarians and made the country rich, they said. But now, they’re turning many of these free enterprises over to the bureaucrats to run...and desperately trying to make sure that the others don’t go broke. It’s capitalism without the creative destruction. Capitalism with seatbelts, helmets, and airbags. Capitalism without bankruptcy. It’s like taking the crucifixion out of Christianity. What’s left is as empty and foolish as a Congressman’s head.

And then, it was only a few months ago that they were telling us that there was nothing to worry about...the subprime problem was contained...property prices had hit bottom...everything was fine. Really.

Then, two weeks ago, Ben Bernanke and Hank Paulson appeared before Congress and warned that if Congress didn’t put up $700 billion of taxpayers’ money pronto, the whole world economy could meltdown. Ben Bernanke, former head of the economics department at Princeton, and now head of the world’s biggest banking cartel – the Fed – told the
politicians:

“If we don’t do this, we may not have an economy on Monday.”

Of course, this alarm turned out to be as silly as his previous assurances. Monday came. The economy still functioned. And Congress got to work – Christmas treeing the bailout bill.

A colleague sends this handy inventory of a few of the gaudy balls so far, (as they appear in the actual bill):

Sec. 101. Extension of alternative minimum tax relief for nonrefundable personal credits. Sec. 102. Extension of increased alternative minimum tax exemption amount. Sec. 201. Deduction for State and local sales taxes. Sec. 202. Deduction of qualified tuition and related expenses. Sec. 203. Deduction for certain expenses of elementary and secondary school teachers. Sec. 204. Additional standard deduction for real property taxes for nonitemizers. Sec. 205. Tax-free distributions from individual retirement plans for charitable purposes. Sec. 304. Extension of look-thru rule for related controlled foreign corporations. Sec. 305. Extension of 15-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant improvements; 15-year straight-line cost recovery for certain improvements to retail space. Sec. 307. Basis adjustment to stock of S corporations making charitable contributions of property. Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands. Sec. 309. Extension of economic development credit for American Samoa. Sec. 310. Extension of mine rescue team training credit. Sec. 311. Extension of election to expense advanced mine safety equipment. Sec. 312. Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico. Sec. 314. Indian employment credit. Sec. 315. Accelerated depreciation for business property on Indian reservations. Sec. 316. Railroad track maintenance. Sec. 317. Seven-year cost recovery period for motorsports racing track facility. Sec. 318. Expensing of environmental remediation costs. Sec. 319. Extension of work opportunity tax credit for Hurricane Katrina employees. Sec. 320. Extension of increased rehabilitation credit for structures in the Gulf Opportunity Zone. Sec. 321. Enhanced deduction for qualified computer contributions. Sec. 322. Tax incentives for investment in the District of Columbia. Sec. 323. Enhanced charitable deductions for contributions of food inventory. Sec. 324. Extension of enhanced charitable deduction for contributions of book inventory. Sec. 325. Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds.
Sec. 401. Permanent authority for undercover operations. (as related to tax provisions) Sec. 402. Permanent authority for disclosure of information relating to terrorist activities. (as related to tax provisions) Sec. 501. $8,500 income threshold used to calculate refundable portion of child tax credit. Sec. 502. Provisions related to film and television productions. Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children. Sec. 504. Income averaging for amounts received in connection with the Exxon Valdez litigation. Sec. 505. Certain farming business machinery and equipment treated as 5-year property. Sec. 506. Modification of penalty on understatement of taxpayer’s liability by tax return preparer. Subtitle B—Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 Sec. 601. Secure rural schools and community self-determination program. Sec. 602. Transfer to abandoned mine reclamation fund. Sec. 702. Temporary tax relief for areas damaged by 2008 Midwestern severe storms, tornados, and flooding. Sec. 704. Temporary tax-exempt bond financing and low-income housing tax relief for areas. Sec. 709. Waiver of certain mortgage revenue bond requirements following federally declared disasters. Sec. 710. Special depreciation allowance for qualified disaster property. Sec. 711. Increased expensing for qualified disaster assistance property.

Bernanke and company didn’t want to wait for the lighting ceremony and the back patting. Nowhere in the U.S. Constitution does it give the Fed the power to put each and every taxpayer on the line for about $2,000. But who cares about that? The Fed, on its own initiative, began passing out the cash. $49 billion on last Wednesday alone went to the banks. That same day, the Fed lent $146 billion to investment firms. By the time people went home for the weekend, $410 billion had passed from the Fed to private firms. The money was lent, says the Bloomberg report, at about 2.25% interest. By our calculation, that’s about half the rate of inflation...and precisely 1.4% less than the government’s cost of money, based on 10-year T-note yields.

Two weeks ago, Bernanke was asked by Barney Frank how much money he had available for this kind of rescue operation. He said he had $800 billion. Last week, he was lending it out at an average daily rate of $44 billion. Let’s see, at that rate, the Fed is probably about 5 days from going broke itself.

This should be interesting...when the Fed needs a bailout!

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What the Credit Crisis Means to Your Mortgage

2008-10-03T14:11:00.000-07:00

[The Real Blog is always looking for articles that can help our friends and clients understand what is happening in the larger economy and housing market, and it applies to their particular situation. The following article outlines recent events, and how you can best position yourself as a potential buyer, seller, or homeowner.]

If there was any doubt left that the troubled US financial and credit markets are in full crisis mode, the historic events of September easily erased it. You've seen the headlines. You've heard the stories, but what does it all mean to you and your mortgage? This month, YOU Magazine will take a closer look at a September to remember and what it means to you - no jargon, no politics, just the facts.

What a Difference a Month Makes
September was a historic month in the financial markets. What started a year earlier as the subprime mortgage collapse had morphed into the perfect financial storm that wiped out some of the biggest financial firms on Wall Street. There was a general and genuine concern that the financial system was coming apart and could virtually shut down.

First, the Feds took over Fannie Mae and Freddie Mac, two government-sponsored mortgage giants that own or guarantee about five trillion dollars in home loans, or nearly half of the total US mortgage market.

Then Lehman Brothers, a prominent securities firm founded in 1850, filed for bankruptcy.

Bank of America, which earlier this year acquired Countrywide, acquired Merrill Lynch, another prominent financial firm.

The Feds were then forced to bail out insurance giant American International Group (AIG), the largest insurance company in America, which needed some $70 billion just to stay afloat.

By the end of the month, JP Morgan Chase, which bought out Bears Sterns in June, would also acquire Washington Mutual and, in a similar move, Citigroup would acquire Wachovia.

In the end, amidst the worst September in the financial markets since 2001, each of these prominent companies had failed to secure investor confidence as liquidity concerns forced their stock prices to levels that ultimately led to their demise, despite a major effort by the government and other central banks around the world to offer unprecedented financial support.

Throughout the month of September, the Federal Reserve not only injected billions into the financial market, the US Treasury was forced to guarantee nearly $2 trillion in money market mutual fund assets. The European Central Bank, Swiss National Bank, and Bank of England also pitched in a combined $90 billion in cash infusions.

Banks and Wall Street firms had essentially stopped loaning money to one another in recent weeks. That choked off the money being made available on Main Street in the form of mortgage loans, business loans, and other consumer borrowing.

To avoid further downward pressure on stock prices, the Securities and Exchange Commission banned naked short-selling and temporarily banned short-selling 799 financial companies for 10 days. Fannie Mae and Freddie Mac increased their purchases of illiquid assets, including mortgage-backed securities, that have been clogging up our financial system and further tightening the availability of credit.

Finally, to avoid an all-out credit freeze, a plan to create legislation for an unprecedented bailout of our financial system was put in place by representatives from the Federal Reserve, the US Treasury, the Bush Administration, Congress, and even the Presidential candidates – a controversial $700 billion plan that, had it passed, would have cost tax-payers for years to come.

The plan, however, came up 13 votes short of the 218 votes necessary for passage. The House vote shocked financial markets, which expected the house to approve the plan – a decision that sent the Dow Jones industrial average down more than 700 points, the largest intra-day drop in history.

At the time of the writing of this article, a new plan has already been announced in the Senate.

Create Your Own Plan
As promised, we will not delve into the politics of any of these decisions by the government to bailout said corporations or the financial and credit markets – or the merits of any new plan that might be put in place. What's done is done. We won't discuss who's to blame or what should or shouldn't be done about it. Whether it's right or wrong, moral or immoral, these actions or their implications are beyond the scope of this article.

Instead, we suggest that you put together your own financial plan to address your future. Just like your fingerprint, your financial situation, needs, and goals are unique and cannot be addressed or even encompassed by a single, one-size-fits-all solution. Whether you're looking to buy, sell, or refinance your home, you need to meet with a mortgage professional you trust right away to create a plan that best fits your individual needs as it relates to the opportunities available in today's turbulent market. What follows are merely suggested discussion topics you might want to consider depending on your individual needs.

Buying or Selling a Home
If you're looking to take advantage of lower home prices and historically low interest rates, credit is still widely available for borrowers who qualify. Qualifying for mortgages today simply means being prepared to provide documentation that supports your application. If you do have credit issues, you might want to consider government loans offered by the FHA, USDA, and VA.

If you're a first-time home buyer (someone who hasn't owned a home in the last 3 years), ask your mortgage professional about the new $7,500 tax credit. This incentive could be a valuable tool in helping you reach your homeownership dreams in today's buyer's market. There is one catch, however. This incentive is temporary, and expires in 2009, so don't wait.

It's important to note that Congress recently passed other legislation banning certain down-payment assistance programs (DAPs), so ask your mortgage professional about VA and USDA loans that, insured by the government, allow for 100% financing to qualified borrowers. There's currently a bill in the House to overturn the ban on DAPs, but congress is pretty busy right now and may not get to it before the end of the year. Some argue, this bill may never pass, so again, don't count on the government's help when you're planning your future.

For sellers it's important to understand these options as well. There are a lot of potential buyers looking to buy a home who may need creative financing options to get the deal closed. Make sure you're working with an experienced real estate agent and a mortgage professional who know how to market your property and make it stand out from the pack. In many instances, you won't have to lower your home price again to create an attractive package for home buyers.

Refinancing
September was one of the most volatile months in the financial markets in years. In one session, the Dow lost 504 points, which was the worst single-day drop since 2001. The Dow then had a two-day session advance of 779 points, the biggest since March 2000. Then, when the government's initial rescue plan was voted down, the Dow lost more than 700 points, the largest single-day decrease in history!

Mortgage interest rates, which are based on the performance of mortgage-back securities (see YOU Magazine April 2008), were so volatile in September that the market experienced price movements within days that used to take weeks or months to occur. In fact, mortgage rates reached six-month lows in September, bounced back in following weeks, only to fall again immediately after the government's rescue plan was voted down.

This volatility is a great advantage for many homeowners looking to refinance, as rates are still near historic lows. If you're connected with a mortgage professional who has access to and understands how changes in MBS pricing can affect mortgage rates on a daily basis, you may be able to secure a lower long-term rate as these short-term movements occur, depending on your situation. (See YOU Magazine July 2008 for an explanation of why bad news for stocks can be good news for mortgage rates).

Loan Modifications
Last month, YOU Magazine discussed loan modifications for homeowners struggling to make payments and/or avoid foreclosure. Print out that article and take it to your mortgage professional to discuss what options are best for your individual needs. If you've fallen behind with your payments or are currently in foreclosure, you may be able to benefit from an increased willingness of banks and lenders to work with you and help you keep your home.

ARMS
If you have an Adjustable Rate Mortgage (ARM) that is due to reset in the next 3 to 12 months, you need to know how any adjustments will affect your monthly mortgage payment. (See YOU Magazine August 2007 to learn how to understand the terms of your ARM.)

Remember, the Federal Reserve has held the line on rates for the last two meetings of the Federal Open Market Committee (FOMC), after 7 straight cuts to the Fed Funds rate in previous months' meetings. And while the Fed has no direct affect on long-term mortgage rates, their actions can directly affect rates for ARMs and certain credit cards and home equity lines of credit (HELOCs) that are tied to the prime rate – especially if the Fed begins a new financial policy of rate increases to address the growing concerns of our struggling economy. (See YOU Magazine April 2008 for more info on how the Fed affects mortgage rates).

In September, the volatility in the financial markets was not limited to the US. We live in a global economic environment, and financial markets throughout the world are more connected than ever.

Last month, we saw evidence of this in the London Interbank Offered Rate (LIBOR). Set by the British banks, this rate is considered one of the most important rates globally – especially in the US, where about 6 million ARMs, including almost all subprime ARMs and 41% of prime ARMS, are linked to the LIBOR. This rate, which experienced the largest one-day increase in 7 years last month, is beyond the reach of the Federal Reserve and its financial policies. If rates stay elevated, gains may follow in the 3- to 12-month Libor indexes, which are used to calculate US mortgage resets. This volatility was seen again as the initial Rescue Bill failed in the House.

In other words, create your own plan of success. Don't wait to be bailed out or rescued by the government or anyone else. If you have an ARM, take 10 minutes to discuss your options with a mortgage professional you trust. Changes in your credit in the last few years could help you secure a fixed-rate mortgage and avoid the volatility that surely awaits us as we face what could be one of the toughest financial meltdowns that most Americans have ever seen.

[The Real Blog Thanks Eric Mitchell of Metrocities Mortgage for forwarding this article to us! Eric, on of our trusted lenders, can be reached at 888-696-1344.

Ghosts of the Great Depression

2008-10-03T13:58:00.000-07:00

[The Real Blog reads a lot from diverse sources. One source is The Daily Reckoning, a blog of contrarian economic views. While definitely not mainstream, or perhaps because it is not mainstream, Bill Bonner of TDR has had quite a few direct hits on the state and direction of the economy. While we do not think that the economy is headed to a depression, the issues are serious and one month before a very important national election may not be the ideal time to formulate far-reaching economic policy in the US Congress. ~~ Ray Kutylo of The Real Blog.]

GHOSTS OF THE GREAT DEPRESSION
by Bill Bonner

“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate ... It will purge the rottenness out of the system...values will be adjusted, and enterprising people will pick up the wrecks from less competent people...”

That is the advice from a ghost – U.S. Treasury Secretary Andrew Mellon. But this is 2008, not 1928...the climate has changed. This week began with heavy weather – and then got worse. Over on the continent, Fortis was going under. And in British waters, the government had a rescue helicopter hovering over Bradford and Bingley. The Baltic Freight Index ran aground on the coast of Brazil, after the Chinese refused to kowtow to Vale’s new price demands for its iron ore. Shipping costs went down by 25% last week – 10% on Friday alone. Apparently, the Chinese turned off their heavy factories before the Olympics; now, they can’t seem to find the switch to get them going again. Then, by Friday, the railroads were in crash mode too. Housing prices are falling faster than ever in the United States. In Britain, the average house is falling by 93 pounds per day; the average wage is only 65 pounds per day.

We do not usually give advice to governments. To be fully transparent about it, none has ever asked. It is enough to try to advise Daily Reckoning readers. If we were to save the entire world’s financial system, at least we would want something in exchange...say, a signed photo of our president with a thank you note. Still, in the spirit of public service we undertake to unclog the following drain:

Taking into account even the most “severe assumptions” on default rates, Barron’s columnist Jonathan Laing calculated that Paulson’s bailout plan would have given the feds positive carry [the difference between the cost of borrowing money and what you earn from it] of at least 7% or 8%. He figured that the government would have ended up with a $75 billion profit in two years.

But even with the hope of profit before it, the House of Representatives rejected the plan...and then, the hurricane winds blew even harder. The world’s stock markets had their worse day ever. The choice is clear, warned a flange of kibitzers, either a bailout bill or a Great Depression. Most likely, today, Congress will vote for the former and get something close to the latter.

By Wednesday, scores of commentators had been to the cemetery. Most were channeling Franklin Roosevelt. He “understood that his first job was to restore confidence,” wrote David Brooks in the New York Times. Over in the Financial Times, Martin Wolf even quotes Roosevelt’s puerile remark that “the only thing we have to fear is fear itself”. What about 25% unemployment, one is tempted to ask?

“[W]e might have done nothing. That would have been utter ruin. Instead we met the situation with proposals...of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic... Some of the reactionary economists urged that we should allow the liquidation to take its course until we have found bottom... We determined that we would not follow the advice of the bitter-end liquidationists...”

That quotation comes neither from Paulson nor Bernankes, but from another ghost. Herbert Hoover has gotten the reputation for being a “do nothing” president. Would it were so. When the Herbert Hoover passed the baton to Roosevelt, his can-do meddling had already helped turn a financial crisis into a Great Depression. You see, ghosts are often morons too.

Poor Andrew Mellon was shouldered aside in the early ’30s. Then, Hoover got to work. His first improvement is known to us by two knuckleheads who turned it into law – Misters Smoot and Hawley. The idea was to protect U.S. business by imposing higher tariffs on foreign trade. A group of 1,000 economists, bankers and other notables realized that blocking trade at the onset of an economic slump would be suicide. They urged him to veto the bill. But Hoover believed in tariffs as he believed in almost all other forms of government interference. He signed the bill with approval.

He called on the Fed to provide “an ample supply of credit at low rates of interest,” and initiated a program of public works – including the Hoover Dam, a massive lump of concrete that blocks the Colorado River. He threatened federal regulation of the New York Stock Exchange and attacked short selling.

Hoover’s chief concern seemed to be to hold up the price of labor. He cut off immigration, in an effort to keep out wage competition. Then, he got the business community to pledge that it would not reduce wages. Since the cost of labor was then too high for the closely shaved profit margins, businesses could not hire. Unemployment rose.

Roosevelt was a better politician, which is to say – he was more shameless. He attacked Hoover for spending too much money – won the presidency – and then spent more. He began so many agencies and projects – from the AAA (Agriculture Adjustment Act) to the CCC (Civilian Conservation Corps) to the SSA (Social Security Act) – he practically ran out of alphabet. He also imposed wage and price controls, as well as limits to executive salaries.

What was the result of all these good intentions? Instead of a panic and quick recovery – a la 1921 – the U.S. economy went into a long, hard on-again, off-again depression that put a quarter of the workforce out of a job. It might have lasted until the ’50s had it not been for the biggest public works program of all time came along – WWII.

And now the ghosts of the Great Depression haunt the Capitol, while today’s Smoots and Hawleys vote on a new plan. They’ve pledged a new bailout program by the end of the week. When last we looked world markets were turning up their faces, hopefully...like a girl expecting a kiss. What they’re more likely to get is a good fright.

Enjoy your weekend,

Bill Bonner
The Daily Reckoning

Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of the national best sellers Financial Reckoning Day: Surviving the Soft Depression of the 21st Century and Empire of Debt: The Rise of an Epic Financial Crisis.

Bill’s latest book, Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics, written with co-author Lila Rajiva, is available now by clicking here:

Mobs, Messiahs and Markets http://www.agorafinancialpublications.com/Mobs.html

To learn more or subscribe, see:
http://www.dailyreckoning.com

What they said about Fannie and Freddie...

2008-10-02T15:36:00.000-07:00

from The Wall Street Journal, October 2, 2008
www.wsjonline.com

House Financial Services Committee hearing, Sept. 10, 2003:

Rep. Barney Frank (D., Mass.): I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . . .

Rep. Maxine Waters (D., Calif.), speaking to Housing and Urban Development Secretary Mel Martinez:

Secretary Martinez, if it ain't broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?

* * *
House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .

* * *
House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Gregory Meeks, (D., N.Y.): . . . I am just pissed off at Ofheo [Office of Federal Housing Enterprise Oversight] because if it wasn't for you I don't think that we would be here in the first place.

And Freddie Mac, who on its own, you know, came out front and indicated it is wrong, and now the problem that we have and that we are faced with is maybe some individuals who wanted to do away with GSEs in the first place, you have given them an excuse to try to have this forum so that we can talk about it and maybe change the direction and the mission of what the GSEs had, which they have done a tremendous job. . .

Ofheo Director Armando Falcon Jr.: Congressman, Ofheo did not improperly apply accounting rules; Freddie Mac did. Ofheo did not try to manage earnings improperly; Freddie Mac did. So this isn't about the agency's engagement in improper conduct, it is about Freddie Mac. Let me just correct the record on that. . . . I have been asking for these additional authorities for four years now. I have been asking for additional resources, the independent appropriations assessment powers.

Congresspeople don't want to remember. This is not a matter of the agency engaging in any misconduct. . . .

Rep. Waters: However, I have sat through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke. Housing is the economic engine of our economy, and in no community does this engine need to work more than in mine. With last week's hurricane and the drain on the economy from the war in Iraq, we should do no harm to these GSEs. We should be enhancing regulation, not making fundamental change.

Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. . . .

Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated?

Mr. Raines?

Mr. Raines: No, sir.

Mr. Frank: Mr. Gould?

Mr. Gould: No, sir. . . .

Mr. Frank: OK. Then I am not entirely sure why we are here. . . .

Rep. Frank: I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.

* * *
Senate Banking Committee, Oct. 16, 2003:

Sen. Charles Schumer (D., N.Y.): And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.

Mr. Raines: But more importantly, banks are in a far more risky business than we are.

* * *
Senate Banking Committee, Feb. 24-25, 2004:

Sen. Thomas Carper (D., Del.): What is the wrong that we're trying to right here? What is the potential harm that we're trying to avert?

Federal Reserve Chairman Alan Greenspan: Well, I think that that is a very good question, senator.

What we're trying to avert is we have in our financial system right now two very large and growing financial institutions which are very effective and are essentially capable of gaining market shares in a very major market to a large extent as a consequence of what is perceived to be a subsidy that prevents the markets from adjusting appropriately, prevents competition and the normal adjustment processes that we see on a day-by-day basis from functioning in a way that creates stability. . . . And so what we have is a structure here in which a very rapidly growing organization, holding assets and financing them by subsidized debt, is growing in a manner which really does not in and of itself contribute to either home ownership or necessarily liquidity or other aspects of the financial markets. . . .

Sen. Richard Shelby (R., Ala.): [T]he federal government has [an] ambiguous relationship with the GSEs. And how do we actually get rid of that ambiguity is a complicated, tricky thing. I don't know how we do it.

I mean, you've alluded to it a little bit, but how do we define the relationship? It's important, is it not?

Mr. Greenspan: Yes. Of all the issues that have been discussed today, I think that is the most difficult one. Because you cannot have, in a rational government or a rational society, two fundamentally different views as to what will happen under a certain event. Because it invites crisis, and it invites instability. . .

Sen. Christopher Dodd (D., Conn.): I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time. And we don't want to lose sight of that and [what] has been pointed out by all of our witnesses here, obviously, the 70% of Americans who own their own homes today, in no small measure, due because of the work that's been done here. And that shouldn't be lost in this debate and discussion. . . .

* * *
Senate Banking Committee, April 6, 2005:

Sen. Schumer: I'll lay my marker down right now, Mr. Chairman. I think Fannie and Freddie need some changes, but I don't think they need dramatic restructuring in terms of their mission, in terms of their role in the secondary mortgage market, et cetera. Change some of the accounting and regulatory issues, yes, but don't undo Fannie and Freddie.

* * *
Senate Banking Committee, June 15, 2006:

Sen. Robert Bennett (R., Utah): I think we do need a strong regulator. I think we do need a piece of legislation. But I think we do need also to be careful that we don't overreact.

I know the press, particularly, keeps saying this is another Enron, which it clearly is not. Fannie Mae has taken its lumps. Fannie Mae is paying a very large fine. Fannie Mae is under a very, very strong microscope, which it needs to be. . . . So let's not do nothing, and at the same time, let's not overreact. . .

Sen. Jack Reed (D., R.I.): I think a lot of people are being opportunistic, . . . throwing out the baby with the bathwater, saying, "Let's dramatically restructure Fannie and Freddie," when that is not what's called for as a result of what's happened here. . . .

Sen. Chuck Hagel (R., Neb.): Mr. Chairman, what we're dealing with is an astounding failure of management and board responsibility, driven clearly by self interest and greed. And when we reference this issue in the context of -- the best we can say is, "It's no Enron." Now, that's a hell of a high standard.

http://online.wsj.com/article/SB122290574391296381.html?mod=djempersonal

Selling a Principle Residence Formerly Used for Investment Purposes?

2008-10-02T12:04:00.000-07:00

Amendment to IRC §121 May Reduce the $250,000/$500,000 Exclusion

Internal Revenue Code (“IRC”) §121 allows taxpayers selling a principal residence to exclude $250,000 of gain from taxation (or, $500,000 for married taxpayers, filing jointly) as long as they have lived in the residence for 2 out of the preceding 5 years.

Alternatively, for taxpayers selling investment/rental property, while they may not exclude gain from taxation, they can nonetheless defer payment of taxes by completing their disposition as an exchange under IRC §1031.
While the rules for excluding gain from taxation or deferring payment of taxation may seem fairly straightforward under the above code sections, they become more complicated if the property was used as both a principal residence and for investment/rental purposes.

Fortunately, in February of 2005, the IRS issued Revenue Procedure 2005-14 clarifying that taxpayers are entitled to take advantage of both the §121 capital gains exclusion and the §1031 capital gains deferral. However, Rev. Proc. 2005-14 only addresses situations wherein the property being sold is investment property formerly used as a principal residence; it does not address how to apply §121 to situations when the property being sold is a principal residence formerly used for investment purposes.

Now, pursuant to the Housing Assistance Tax Act of 2008, taxpayers selling a principal residence formerly used for investment purposes, have specific guidance on the application of §121. Specifically, IRC §121 has been amended, effective January 1, 2009. Again, the amendment only affects taxpayers who are selling a principal residence (“qualified use”), which they formerly used for investment (“non-qualified use”). The central point of the §121 amendment is that these taxpayers are not entitled to the full §121 exclusion because the prior investment use is considered “non-qualified” use and any gain allocated to the period of non-qualified use may not be excluded under §121.

How to determine the amount of gain that is not eligible for exclusion

The period of non-qualified use (period not used as a principal residence) must be divided by the total years of ownership to determine the amount of the gain that is not eligible for exclusion under §121.

Any period of non-qualified use before January 1, 2009 should not be included in the calculation. And, depreciation should also be excluded from the calculation and is simply taxed at the applicable recapture rate.

Summary of the rules under §121 amendment

Sale of residence that was formerly investment property – the taxpayer is entitled to only a prorated portion of the $250,000/$500,000 exclusion.

Non-qualified use prior to January 1, 2009 is disregarded, except for purposes of meeting the 5 year rule under HR 4520, if applicable.

Gain resulting from depreciation is taxed and is disregarded for purposes of determining the prorated amount of the exclusion

The application of the amendment is illustrated by the following examples:

Example 1: Taxpayer acquires an investment property, rents it for 3 years and then occupies it for 5 years as his principal residence (no use prior to 2009) before selling it and realizing $350,000 of gain of which $40,000 is from depreciation deductions.

$40,000 of gain is depreciation and is excluded from the calculation. The remaining $310,000 is subject to the prorata calculation as follows:
3 (years of non-qualified use) =
3 (37.5%) x $310,000=$116,250
8 (years total ownership)
8

Thus $116,250 is not eligible for exclusion and is taxed at the applicable capital gains rate. $40,000 of gain is from depreciation and is taxed at the applicable recapture rate. The remaining gain of $193,750 may be excluded from taxation under §121.

Example 2: Taxpayer acquires an investment property in 2007, rents it until 2010, and then occupies it for three years as his principal residence before selling it in 2013, realizing $400,000 of gain. The two years prior to January 1, 2009 are disregarded (but included for determining the five year period).

1 year non-qualified use (disregard 2007, 2008) =
1 (16.66%) x $400,000=$66,640
6 years of total ownership
6

Thus, $66,640 is not eligible for exclusion and is taxed at the applicable capital gains rate. $250,000 of the remaining gain may be excluded under §121, with the balance of the gain, $83,360 taxed at the applicable capital gains rate. In sum, $250,000 is not taxed and $150,000 is taxed.

Taxpayers selling a principal residence after January 1, 2009, which was formerly used as an investment/rental property should consult with their tax or legal advisors regarding the application of the amendment to §121 to their particular situation.

Note 1:
If property was originally acquired as part of a 1031 exchange, H.R. 4520 mandates that the property must be owned by the taxpayer for at least 5 years in order to get the §121 exclusion (note: this is in addition to having lived in the property for 2 of the preceding 5 years.)

This article provided by:
Old Republic
The Meza Team
450 North Brand Blvd #800
Glendale, CA 91203
W: (800) 388-4853
M: (562) 572-1479
http://www.ortc.com

Home Resales Fall 2.2% in August

2008-09-24T10:14:00.000-07:00

from The Wall Street Journal
Sept. 24, 2008
http://online.wsj.com/article/SB122226123307770911.html

Sales of previously owned homes declined in August, but in a promising sign the backlog of unsold homes shrank.

Sales of existing homes fell 2.2% in August from the previous month to an annual sales pace of 4.91 million units, the National Association of Realtors said Wednesday. The data cover sales of homes, condominiums, and townhouses.

The inventory of unsold houses fell to a 10.4-month supply at the current sales pace, compared to July's 10.9-month supply. The current inventory is still large and many analysts say prices must fall even more to attract buyers. The median home price was $203,100 in August, down 9.5% from the year before.

"We would not expect to see any real stability in the housing market until we work off more of this inventory," said Wachovia Corp. economist Adam York in a note to clients.

Sales increased in parts of California, Florida and Nevada where subprime loans and foreclosures are heavily concentrated, the NAR said. Chief economist Lawrence Yun noted that sales of deeply discounted properties "are accounting for a disproportionately high level of sales in the current market" and helping to drive down the median sales price.

Efforts to work through bloated inventories may be hampered by the financial crisis on Wall Street.

"Home sales will be constrained without a freer flow of credit into the mortgage market," Mr. Yun said. "The faster that happens, the sooner we'll see a broad stabilization in home prices that in turn will help the economy recover."

But lenders continued in the second quarter of 2008 to toughened standards on home loans, the Federal Reserve's latest quarterly survey of senior loan officers at U.S. banks showed. About 75% said they tightened standards on prime mortgages, and that tightening is expected to continue this year.

Besides tighter loan standards and falling prices, the housing market also has been hurt by a weakening job market. Nonfarm payrolls have declined for eight consecutive months.

Regionally, sales of existing homes declined 6.6% in the Northeast and 5.3% in the West. Sales rose 0.9% in the Midwest and 0.5% in the South.

Write to Jeff Bater at jeff.bater@dowjones.com

Our Current Situation from Mortgage Market Weekly

2008-09-21T10:00:00.000-07:00

"THE PATH TO SUCCESS IS TO TAKE MASSIVE, DETERMINED ACTION." Anthony Robbins. And success in stabilizing the markets and the economy is exactly what the government is hoping will happen as a result of the massive, determined actions they took late last week in response to unprecedented happenings in the financial markets.

Treasury Secretary Hank Paulson announced that the US government will guarantee money market funds, after panic led to a "run on the bank" type of environment. A whopping $180 Billion was withdrawn from market funds on Thursday alone. And the fear was so great that a premium to put money into Treasury securities was paid, which actually exceeded the rate of return. So effectively, the return was negative! People were actually paying for a place to put their money that would be safe because they had fears of losing principal. The government guarantee helped to ease these fears and stabilize the markets.

The Fed announced plans to create a market place for illiquid mortgage debt. This should do a lot of long-term good to help the housing and lending environment. As if that weren't enough, the Securities and Exchange Commission also placed a temporary ban on the short selling of 799 different financially related stocks.

What prompted these dramatic actions? Very dramatic happenings earlier in the week.

After 158 years in existence, Lehman Brothers filed for bankruptcy last Monday due to overexposure of high-risk loans in the mortgage arena. Then, the Fed gave insurance giant AIG an $85 Billion lifeline to keep it from going into bankruptcy, after initially stating it would not intervene. Then it was announced that Merrill Lynch is being acquired by Bank of America, which will save them from the same fate as Lehman Brothers, and now troubled bank Washington Mutual is looking for a buyer as well.

Also playing a role was the fact that the Fed left its benchmark Fed Funds Rate (the rate banks charge each other for overnight lending) unchanged on Tuesday, not wanting to counter the recent improvements the US economy has made in the way of inflation. While this benefited Bonds and home loan rates earlier in the week, Stocks felt heavy selling pressure on the news...which added to the reasons for the actions taken late last week.

The government's announcements on Friday are great news for the overall health of our financial system, though they did cause Bonds and home loan rates to move away from their best levels of the week. All in all, Bonds and home loan ended the week slightly worse than where they began. Additionally, stocks had their most volatile week in history - but ended the week almost exactly where they started.

Forecast for the Week

The ride isn't over...the coming week may see more wild movement in the markets, as the financial sector responds to all the recent action, along with several reports due in the latter part of the week. We'll get a read on the housing market with Wednesday's Existing Home Sales Report and Thursday's New Home Sales Report. And we will get a read on the economy with Friday's Gross Domestic Product Report (GDP is the broadest measure of economic activity) and Thursday's Durable Goods Report.

What are "durable goods"? Simply put, they are items that are durable (i.e. cars, furniture, appliances, games, cameras, business equipment, etc), and are made to last longer than three years. This report shows a good measure of consumer and business consumption and buying behavior, and depending on the health of the report, could add to the volatility we have seen.

Remember when Bond prices move higher, home loan rates move lower...and vice versa. Bonds and home loan rates are still much improved from several weeks ago, despite giving up some recent gains. This could be a great time to take a close look at your home loan financing needs, as rates remain at historic lows. As always, I will be watching closely to see how Bonds and home loan rates continue to respond in these volatile times.

Sent to the SCV Home Team by:
Eric T. Mitchell,
CMP, CMC, CRMS
Vice President
| Business Development and Private Mortgage Banking |
Mitchell & Associates
a division of Metrocities Mortgage
Sherman Oaks CA 91403

Wild Markets, The Fed, and Opportunities

2008-09-17T18:19:00.000-07:00

Uncertainty in Financial Markets Could Cause Dramatic Rise in Existing ARMs at Next Adjustment

If you or anyone you know has an Adjustable Rate Mortgage, this is an important point to consider. Many ARM loans are tied to the London Interbank Offered Rate (LIBOR). In fact, there are six million loans in the United States that use LIBOR to determine the interest rate and as the name suggests, many banks use this rate to lend money to each other.

But, today, banks lack confidence that the money they lend will be paid back. In light of what has happened with Lehman Brothers, IndyMac Bank and others, as well as AIG, banks are requiring much higher rates on LIBOR to offset the added risk.

The Federal Reserve Left Rates Unchanged but...

The Federal Reserve met yesterday leaving the target rate unchanged at 2.00% but just like LIBOR the actual rate being charged by banks to each other is closer to 6.00%. This again suggests that those with ARM loans should consider a refinance into historically low fixed rates.

What Happened?

Financial companies have been under attack. IndyMac was the largest bank to falter in twenty years. What brought IndyMac down was their exposure to defaulting loans. This sapped investor confidence and drove down the stock price until they filed for bankruptcy.

Following IndyMac, we saw Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch succumb and were either forced into conservatorship, to close their doors, or to sell themselves. AIG, the world's largest insurance company was also impacted, forced to make a deal with the U.S. government to stay in business.

What You Can Do Now?

We have Team members who would be happy to go over your loan situation and help you understand how the recent events may affect you, and how you can best be protected. Additionally, chaotic times like these often present opportunities. I look forward to hearing from you.

Update on Fannie and Freddie

2008-09-09T14:19:00.000-07:00

Update on Fannie and Freddie
By: Tom Vanderwell, Straight Talk About Mortgages
Posted: Monday, September 8th, 2008, 8:40 am MST

Well, it happened. In case you haven't heard the news, Fannie and Freddie were bailed out by the Federal Government over the weekend. I'm not going to go over all of the details but just try to hit some "high points."

So, here goes:
1. The Federal government now owns 80% of Fannie and Freddie. That means that the shareholders in those two companies lost 80% of their equity in the company compared to what they had last Friday.

2. Why did the Government do this? It's pretty simple. The markets had lost confidence in the long term viability of the two institutions and therefore the debt that they have issued was being questioned and their ability to finance additional housing was being called in question. This was done to stabilize and calm the financial sector of the markets which were very volatile to say the least.

3. What has changed since Friday? A couple of things: 1) The "unofficial" backing of Fannie and Freddie's debt by the US Government is now official. 2) The question of what will happen to shareholders in the company has pretty much been answered.

4. What hasn't changed since Friday? The problems in the loan portfolios at Fannie and Freddie haven't gone away. The problems in the housing market haven't gone away. However, today the markets so far have been breathing a huge sigh of relief that says, "Yeah, Uncle Sam is here to protect us!"

So what does this mean going forward?

1. I've already heard that a lot of economists are saying that there could be a significant drop in mortgage rates. I'm not so convinced [and neither is the SCV Home Team] that we're going to see THAT BIG of a drop for a couple of reasons: a) The US Government just became on the hook for an additional $5 Trillion in debt and that will have an impact on the cost of treasury debt and so forth. b) The additional borrowings by the government are going to have an impact on the value of the dollar and that will make US debt more expensive. c) The only thing that has really changed is that the "right to foreclose" on Fannie and Freddie has actually happened. It hasn't changed that much. But we'll see. I hope I'm wrong. Our rates dropped by .25% today. [Due to overhanging federal debt and obligations, the SCV Home Team expects that interest rates will be rising at the end of this year, and dramatically so. Expect pre-election relative stability, then watch out!]

2. Volatility in the financial markets will be the "norm" this week. Expect big fluctuations as the markets attempt to sort out what this all means and what happens from here.

3. The government did this to prevent the mortgage markets from seizing up. That was a necessary step because having a mortgage market that keeps lending money is crucial to eventually working through the housing debacle that we are in. However, there are substantial issues in the mortgage world that aren't being solved by the takeover.

4. No substantial changes in programs or underwriting guidelines. The goal of the bailout was to keep Fannie and Freddie functioning and that will happen, but it's not going to make credit a lot easier or downpayment guidelines lower. Let's face it, Fannie and Freddie weren't making any money doing things the way they used to, so I don't think we'll see a return to that.

5. As the markets realize that the fundamental issues in today's housing/economic/credit market crunch haven't gone away, we'll see the euphoria of the first day or two slip and the value of the bailout will diminish. However, it will continue to keep the housing market moving so we can attempt to work through the inventory issues and eventually find a bottom and start building from there.

Is this the silver bullet that is going to answer all of the housing market and economy's problems? Sorry, I wish it was, but I don't see it that way. It was basically the implementation of what the markets felt was coming any way.

[ Tom Vanderwell
http://straighttalkaboutmortgages.com
or email Tom at:
straighttalkaboutmortgages@gmail.com ]

[The SCV Home Team concurs with this analysis.]

California Median Home Price Slips 37.7 Percent

2008-09-09T11:34:00.000-07:00

Home sales increased 17.5 percent in June in California compared with the same period a year ago, while the median price of an existing home fell 37.7 percent, the California Association of Realtors® reported recently.

"Statewide home sales remained above the 400,000 level for the said C.A.R. President William E. Brown. "Following a 30-month string of year-to-year percentage decreases that began in October 2005, sales during June also posted their third consecutive year-to-year gain.

"Sales were driven in part by large shares of deeply discounted distressed sales in many parts of the state," he said. "With lower prices and favorable interest rates, affordability also has improved significantly in recent months, paving the way for many buyers to purchase their first home."

The median price of an existing, single-family detached home in California during June 2008 was $368,250, a 37.7 percent decrease from the revised $591,280 median for June 2007, C.A.R. reported. The June 2008 median price fell 4.3 percent compared with May's $385,840 median price.

The inventory dropped from a 10.2-month supply to 7.7 months, assuming sales continue at the rate posted during June.

Thirty-year fixed-rate mortgages averaged 6.32 percent during June, compared with 6.66 percent a year ago. Adjustable-rate loans averaged 5.15 percent compared to 5.68 percent in June 2007.

It took a median of 49.1 days in June 2008 to sell a single-family home, compared with 51.5 days for the same period a year ago.

[Long time readers of this Blog will understand the problems with 'median home prices' as a measure of home prices, but this report does show that home prices have fallen considerably from just a year ago. Home price changes vary considerably from town-to-town, and from neighborhood to neighborhood. If you would like an idea of the prevailing price changes for your home and neighborhood within our north Los Angeles market area, please give the SCV Home Team a call at 661-290-3750.]

It's more than Fannie and Freddie (as if that wasn't enough)

2008-08-25T11:51:00.000-07:00

by John Mauldin
August 22, 2008

Yet another crisis confronts us, as we will have to deal with the aftermath of a rather large number of bank failures over the next year, which is likely to overwhelm the ability of the FDIC to insure your bank deposits. Today we look at the banking system, the FDIC, and Freddie and Fannie. It's not pretty, but as realists we must know what we are facing.

The US Banking System Is in Trouble

A few weeks ago when I was in Maine, I met Chris Whalen. Chris is the managing director of a service called Institutional Risk Analytics, whose primary business is analyzing the health of banks and financial institutions. If you are one of their clients, you can go to their web site and drill quite deep into all aspects of every bank in America. And what they have done is come up with various metrics which compare how well-capitalized a bank is, how much risk it is taking, and what kind of losses (or profits) it can expect. It is a one of a kind firm, and the data gives Chris a very special perspective on the US banking system.

And what he sees is not pretty. There is a crisis brewing. He expects 100 banks to fail between now and July of 2009. Most of them will be small, but there will be a few large banks. The total assets of those banks he estimates to be $850 billion (not a typo!). Those are the assets the FDIC is going to have to cover when they take over the banks.

Take Washington Mutual as an example. There are problems there. Their debt now trades at 20%, which is worse than junk. There is no way they could issue preferred stock to recapitalize their business. And they are going to need more capital, as they have writedowns in their future due to the slowing of the economy. Any common issue would have to seriously dilute existing shareholders almost to the point of nothing. There are circumstances in which they can survive, but it would take a remarkable recovery for the US economy, which is not likely. Maybe management can pull a rabbit out of the hat, but it will need some strong magic to get the capital they need at a cost they can live with.

The FDIC has about $50 billion. These reserves have been built up over the years from deposit insurance paid by banks that are part of the program. They are going to need an estimated $20 billion just to cover the failure of Indy Mac. The FDIC will have to cover only a small percentage of the $850 billion, as some of those assets will surely be good. But if they have to cover 10%, then the FDIC would need another $50 billion. Does that sound like a lot? Chris thinks a more conservative number for planning purposes would be 20-25% potential losses, and you hope it does not get there.

Sometime in the next few quarters, Congress and the President, either the current group or early in the term of the next President, are going to have to address that potential shortfall, before we see bank runs as people fear that FDIC insurance reserves may not be enough. The very sad fact is that taxpayers are going to be on the hook for some time. What is likely to happen is that a loan facility will be made to the FDIC so they can borrow as much as they need, and pay it back from future bank insurance payments.

You can't make up the shortfall just by raising fees. Chris points out that raising fees right now is not really a winning option, as that just makes the financial books of marginal banks even worse. You can raise rates as the banking system returns to health.

If Congress and the President wait too long, there could be a very serious problem, as depositors could start moving their funds under $100,000 (the insured amount) to what they perceive may be a safer bank than their current bank. Rumors could run rampant. This is something that needs to be addressed now. Frankly, this should be addressed right after the elections AT THE LATEST, in consultation with Congress and the new President.

If you are worried about your bank, you can go to Chris's web site and pay $50 for a brief analysis of your bank and an update for the next four quarters. If you have less than $100,000 in your accounts, you should not worry. But for businesses with large deposits and cash flows, it might be worth checking on the health of your bank. The link is http://us1.institutionalriskanalytics.com/Cart/Request.asp?affiliate=bmg123.

You can click on the link that says "Click here for the free samples" in the lower right corner of the page to see if the format of what they offer is something you would find useful.

There's more to the article! Go to the website and subscribe for free!!

John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore

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[While the rest of the local real estate community hates the bad news, now is not the time to be sticking your head in the sand. The SCV Home team likes to get ALL of the information, and go on from there. While we feel that it is always a great real estate market, it is not great for everyone at the same time. If you are thinking of BUYING REAL ESTATE in our local North Los Angeles market area, please give us a call today at 661-290-3750.]

Recover and Rebuild from a Foreclosure or Short Sale

2008-08-14T17:41:00.000-07:00

When homeowners find themselves upside down in their mortgage payments, they have no idea of which direction to turn, and it seems that it is almost impossible to get straight answers to their questions about what options they have, and how each option will affect their credit. The following is information to help answer those questions. Remember, there are NO quick fixes when it comes to credit, so it is imperative that you don't wait until the last minute to understand what the implications for your financial future are.

FORECLOSURE
Foreclosure is the legal process in which a bank or other secured creditor either sells or repossesses a parcel of real property, home or land, after the owner has failed to comply with the mortgage or deed of trust agreement with the lender. Most frequently, the violation of the mortgage agreement is the default of payment. The completion of the foreclosure process allows the lender to sell the property, and keep the proceeds to pay off the mortgage as well as any legal costs. The length of the foreclosure process varies from state to state.

If the foreclosed property is sold for less than the remaining primary mortgage balance, and there is no insurance to cover the loss, the court overseeing the foreclosure process may enter a deficiency judgment against the borrower. Deficiency judgments can be used to place a lien on the borrower's other personal property, obligating the borrower to repay the difference or suffer the loss of their property. It gives the lender a legal right to collect the remainder of debt out of borrower's other existing assets.

However, there are exceptions to this rule. If the mortgage is classified as "non-recourse debt," then the borrower has no personal liability in the event of foreclosure. This is often the case with residential mortgages. If so, the lender may not go after borrower's personal assets to recoup additional loss.

The lender's ability to pursue a deficiency judgment can be restricted by state laws. In California and some other states, original mortgages (the ones taken out at the time of purchase) are typically non-recourse loans, however, refinanced loans and home equity lines of credit aren't.

If the lender chooses not to pursue deficiency judgment---or can't because the mortgage is non-recourse-and writes off the loss, the borrower may have to pay income taxes on the un-repaid amount if it can be considered "forgiven debt."
Any other loans taken out against the property being foreclosed (second mortgages, HELOCs) are "wiped out" by foreclosure (in the sense that they are no longer attached to the property), but the borrower is still obligated to pay them off if they are not paid out of the foreclosure auction's proceeds.

How Does a Foreclosure Affect Credit?
A foreclosure can be reported as a Foreclosure or Repossession and carries a derogatory payment status of 8 or 9 (M1, R1 and I1 being the best and R9, I9, etc. being the most negative) which is just under a Public Record. There is a misconception that foreclosures are considered Public Records to the scoring system, however, they are not. Although there is a Public Notice Record on file once a foreclosure is filed, but this record is completely different than a credit report public record.

A Foreclosure will remain on a credit report for 7 years from completion date. And the score will drop from 50-250 points. The difference in point loss depends on how many points your client has to lose in the payment history factor of their credit. So if someone has a 750 credit score, and they opt to foreclose, their score could drop up to 250 points. However, if someone has a 500 credit score, they may lose 50 points for the same derogatory.

If a Deficiency Judgment or Tax Lien is filed in connection with a Foreclosure, the credit score can drop an additional 100 points.

Fannie Mae Waiting Period
The current selling guideline from Fannie Mae has upped the previous 4 year period of how much time must elapse after a foreclosure to 5 years from the date the foreclosure proceeding is completed, not started.

The exception for extenuating circumstances has been increased from a 2 year to a 3 year waiting period.

WORD OF CAUTION: If you have a borrower going through a foreclosure due to circumstances of losing a job, a medical crisis, sub-prime mortgage crisis fall-out, I suggest that you advise them to fully document their experience now. Not to wait until later, because the details and emotional energy of what they are going through will be more difficult to document and prove down the road if they decide to apply for a loan in 2 years based on an extenuating circumstance claim.

In General: When it comes to foreclosure and how it affects the ability to obtain credit in the future, there are multiple points of extremely negative impact. Deficiency judgments for the amount not collected by the lender in the foreclosure sale can end up on the borrower's credit report as a derogatory mark. Additionally, there is a high risk that the borrower will be hit with a substantial tax penalty which can result in a tax lien, which also appears on the credit report. As a general rule, other than a bankruptcy, foreclosure is the least desirable of all of the options available when a borrower is upside down in a home mortgage.

Deed in Lieu Of Foreclosure
An alternative to foreclosure is a "deed in lieu of foreclosure." In this scenario, the borrower turns the house over to the lender and walks away without owing anything. A deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The main advantage to the borrower is that it immediately releases him or her from most or all of the personal debt associated with the defaulted loan. The borrower also avoids a foreclosure proceeding and may receive more generous terms than he or she would in a formal foreclosure. Advantages to a lender include a reduction in the time and cost of repossessing the property.

However, the lender usually will not proceed with a deed in lieu of foreclosure if the outstanding debt on the property exceeds the current fair market value of the property. So in this market, this option probably won't be available to most homeowners who are upside down.

How Does a Deed in Lieu Of Foreclosure Affect the Borrower's Credit?
Most lenders report a deed in lieu of foreclosure as a foreclosure, so the credit scores will carry the same serious affect as if it were an actual foreclosure. However, what most borrowers don't know is that they can negotiate with the lender to report it differently in return for turning over the deed and avoiding foreclosure costs.

Many lenders will say that they cannot change the reporting status, but they can.

Here are their options in preferred order:

• Paid As Agreed - Credit scores will have already dropped over 100 points due to default in payments, however, if reported as Paid As Agreed, the borrower will be able to purchase another home in a shorter time period.
• Paid Settlement - Credit scores could drop up to 150 points.
The item will remain on the credit report for 7 years from the completion date or the settlement date.

Fannie Mae Waiting Period
The selling guideline from Fannie Mae has not changed. It is a 4 year period of how much time must elapse after a deed in lieu of foreclosure proceeding is completed.
The exception for extenuating circumstances also remains the same at 2 years.

Short Sale (aka Pre-Foreclosure Sale)
In my opinion, the best option is a short sale, which occurs when a bank or mortgage lender agrees to discount a loan balance, due to an economic hardship on the part of the home owner. The home owner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove a proposed sale.

A short sale is typically executed to prevent a home foreclosure. Lenders often choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owners, the advantages include avoidance of having foreclosures on their credit histories. Additionally, a short sale is typically faster and less expensive than a foreclosure.

Junior lien holders, such as holders of second mortgages, HELOC lenders, and homeowner associations (special assessment liens), may also need to approve the short sale. Frequent objectors to short sales include those who hold tax liens (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the short sale.

While it is frequently common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating the zero balance and settlement option on the mortgagor's credit report, or even flat-out refuse to do so "due to their financial loss."

The Mortgage Forgiveness Debt Relief Act Of 2007
When the lender decides to forgive all or a portion of the debt and accept less, the forgiven amount is considered as income for the borrower, like with a foreclosure, leaving it open to be taxed. However, The Mortgage Forgiveness Debt Relief Act of 2007 contains amendments to remove such tax liability, allowing the borrower and lender to work together to find a solution beneficial to both parties.

How Does a Short Sale Affect the Borrower's Credit?
The few reported short sales that I have seen have appeared as "Paid Settlements" on a mortgage account. In the wake of the current mortgage crisis, short sales are becoming extremely common, but legislation has not caught up with the tidal wave and there is no law on the books relating to them to date. As a result, there is an opportunity for the borrower to negotiate credit reporting with the lender. I've seen several successful negotiations, so be sure to let your borrower know that it is possible.

My view - a short sale proves that the borrower is exhausting every effort to pay the loan. The borrower has willingly committed to taking on months of emotional and physical stress in a good-faith effort to sell the property to maintain a good relationship with that lender. Most likely, the reason they can't afford their current mortgage is because they were in an adjustable product and their mortgage payment has doubled. That doesn't mean that they can't afford a different loan program with a lower payment. Which leads me to wonder what the incentive is for lenders not to negotiate with the borrower on how the item is reported to the bureaus. All they would be doing is cutting off a pretty substantial future income stream if they put these types of borrowers out of the market for two years. In that light, negotiation for a non-report on short sales is well worth it.

Here are their options in preferred order:
• Paid As Agreed - Won't hurt the score at all as long as the borrower has kept payments current.
Unrated - May drop a few points.
• Paid Settlement - Credit score will drop 50-150 points.
If reported, the item will remain on the credit report for 7 years from the completion date or the settlement date.

Fannie Mae Waiting Period
A few weeks ago, Fannie Mae was going to consider a short sale the same as a foreclosure, however, the current selling guideline from Fannie Mae has reduced the amount of time that must elapse after a short sale to 2 years from the date the short sale is completed, not started.

There is no exception for extenuating circumstances.

Bankruptcy Mortgage Relief
Currently, bankruptcy offers very limited protection to a homeowner who is upside down with their payments. The borrower can file a Chapter 7 which, depending on the state bankruptcy law, will most likely require him or her to surrender the property to the bankruptcy court, or file a Chapter 13 debt repayment plan to spread out prior delinquent payments over a number of months or years in the future. However, no bankruptcy proceeding can modify the terms of an existing home loan on a principal residence. Legislation is being proposed to Congress that would allow bankruptcy judges to modify the terms of an existing mortgage loan. I would not hold my breath. It could take years to make further substantial changes to the bankruptcy laws.

How Does a Bankruptcy Affect the Borrower's Credit?
My advice on this is to avoid Bankruptcy at all costs unless, your borrower is upside down on everything. Not only have the new bankruptcy filing requirements become more difficult and more costly, a public record will wreak havoc on credit scores and could stop someone from being hired or renting a place to live.

A Chapter 7 Bankruptcy will remain on the report for 10 years, and a Chapter 13 will remain for 7. The point loss could be from 100-350 points, depending on how many points the borrower has to lose in this factor.

Fannie Mae Waiting Period
The selling guideline from Fannie Mae has not changed. It is a 4 year period of how much time must elapse after a Chapter 7 Bankruptcy. The 4 year period can start on either the discharge or dismissal date.

The exception for extenuating circumstances is 2 years.

Again, the selling guideline from Fannie Mae has not changed. It is a 2 year period of how much time must elapse after a Chapter 13 Bankruptcy. The 2 year period can start on either the discharge or dismissal date.

In the case of multiple bankruptcies, the current selling guidelines that have just been added require a 5 year waiting period from the most recent discharge or dismissal date.

The exception for extenuating circumstances in the case of multiple bankruptcies is a 3 year waiting period from the most recent discharge or dismissal date.

What's the Good News?•
Aging Out: In all instances above where I reference how many points will be lost in each scenario, it is important to make sure your clients understand that over time, all derogatory accounts age out. This means, the older the account becomes, the less it will hurt their credit scores.

• 7 Year Reporting Period: The law states that derogatory items "can be" reported for 7-10 years as outlined above. It doesn't state that they "MUST BE.' My experience proves over and over again that there is no need to wait out the 7 years. You don't have to. You can start seeking early removal of the item by disputing to the credit bureaus that are reporting it. In many instances, after 3-4 years, the item will be deleted.
• You can Start Recovering and Rebuilding immediately. This is key information because many consumers feel doomed for the next 10 years. They have no idea that they can start rebuilding their credit immediately.

Information provided by Linda Ferrari, President, Credit Resource Corp. & Country Ridge Financial

as sent by Colleen Craig, Countryridge Financial in Valencia 661-290-3700

SCV Home Sales Increase for Fifth Consecutive Month

2008-08-13T13:49:00.000-07:00

Special to Real Estate
By Mary Funk, President, and David Walker,
Southland Regional Association of Realtors
August 2008 Daily News

The residential real estate market in the Santa Clarita Valley continued to stabilize and show improvement during June with sales of singlefamily homes and condos posting the fifth consecutive month of increased activity, the Southland Regional Association of Realtors reported recently.

Sales of existing single-family homes increased 11.2 percent compared to 12 months ago with Realtors closing escrow on 299 transactions. The total also was 4.1 percent higher than this May. Likewise, condo sales of 75 units were 5.6 percent ahead of a year ago and equal to the May tally.

“Open houses are packed with a lot of people expressing interest in buying a home, but closing a sale remains difficult,” said Doreen Chastain-Shine, president of the Association’s Santa Clarita Valley Division. “Qualifying for a home loan is the primary problem, plus there is a mismatch between buyer expectations regarding prices and the reality on the ground.”

While the single-family median price fell 25.6 percent from a year ago to $450,000 – a drop of $155,000 – and has been drifting downward since April 2006 when the record high of $643,000 was set, the pressure on home sellers to reduce prices is not nearly as strong as buyers presume.

Condo prices also have been falling with the median off 23.0 percent from a year ago to $285,000. The condo record-high median price of $397,000 was set in January 2006. Buyers who read media reports of rising foreclosures assume that every market is flooded with bank-owned properties or homes that are being sold for less than the outstanding balance on an existing loan, known as a short sale.

“Real estate is extremely local with the Santa Clarita Valley far better off than other, harder hit areas of the state, especially those that had large numbers of new home tracts aimed primarily at first-time home buyers,” said Jim Link, the Association’s chief executive officer. “We’re optimistic that the worst has passed and that the Santa Clarita Valley resale market will show further improvement over the coming months as distressed properties are worked out and sold.”

Part of the reason real estate leaders believe further steep price discounts are unlikely is because the number of homes on the market tips the negotiating advantage only slightly in favor of home buyers.

“No doubt that foreclosures and short sales are up and there are still current home owners at risk of losing the property,” Chastain-Shine said. “But the pressure on prices is not nearly as great as buyers assume simply because there are not nearly enough active listings to force sellers or banks to accept steep discounts.”

There were 1,940 active listings at the end of June, down 16.4 percent from a year ago and less than 1 percent below the May tally. At the current pace of sales, the inventory represents a 6.4-month supply, only slightly on the high side of the 5- to 6-month supply that is deemed to represent a balanced market.

Neither Link nor Chastain-Shine expected prices to continued dropping as steeply as in recent months, although prices will stabilize only when some measure of normalcy returns to the financial markets. There were a total of 370 open escrows at the end of June, an increase of 26.7 percent from a year ago and 9.1 percent higher than this May – suggesting that buyers are growing more confident and that resale activity will continue to rise throughout the Santa Clarita Valley during the coming months.

What the new housing law means for you

2008-07-30T12:01:00.000-07:00

By Holden Lewis • Bankrate.com

The housing rescue bill, signed into law July 30, 2008, is full of goodies and not-so-goodies for homeowners and those who aspire to be homeowners. Here are some highlights.

First-time homeowner tax credit

The law will extend a tax credit of up to $7,500 to first-time homebuyers. A first-time homebuyer is defined as someone who hasn't owned a home in three years.

The tax credit is for 10 percent of the purchase price, up to $7,500, but phases out for higher-income homeowners. Homeowners are eligible for the tax credit if they bought after April 8 of this year and before July 1, 2009.

This is a tax credit, not a deduction. It reduces the homeowners' tax bill by up to $7,500 for the tax year in which the purchase was made. If you buy a house this year, you get the tax credit for the 2008 tax year -- the one with a filing deadline of April 15, 2009. If you buy a house next year by the end of June, you get the tax credit for the 2009 tax year. It's a one-time credit; you don't get to keep taking it year after year.

There is a catch, and that is that the money has to be repaid over 15 years, starting two years after you buy the house. That makes the tax credit an interest-free loan. If you take the full $7,500 tax credit, your income tax bill will increase by $500 a year for 15 years. If you sell the house before then, you'll have to pay Uncle Sam the remaining balance.

Complex issues, such as divorce, death, sale of the house at a loss and conversion of the house into a vacation home are accounted for in the law.

Forgiveness to allow refinancing into FHA

A lot of people have fallen behind on their mortgage payments after the rates went up on their adjustable-rate mortgages, or ARMs. And they can't refinance into fixed-rate loans because their homes have lost value, and they owe more than their houses are worth.

The housing rescue law seeks to help these people get out of trouble. It encourages lenders to forgive some of their debt so they can refinance at lower amounts into mortgages insured by the Federal Housing Administration, or FHA.

It works like this: The lender has to forgive all the debt above 90 percent of the home's current appraised value. If that leaves you scratching your head, here is a hypothetical example, using round numbers:

Sometime before Jan. 1 this year, you bought a house for $125,000 and got an ARM for $110,000 after making a $15,000 down payment. But the house lost value. Now it's worth $100,000, based on an appraisal. Meanwhile, the ARM's rate went up and you can't afford the full payment every month.

Under this law, the lender would forgive everything you owe above $90,000. Let's say that you owe $105,000 of that original $110,000 loan. The lender would forgive $15,000, and let you pay off the loan for $90,000. The lender would not be allowed to seek any of that $15,000 later.

That allows you to find another lender who would underwrite a $90,000 mortgage to be insured by the FHA. That loan amount would include the upfront FHA insurance premium of roughly $2,700.

Again, there is a catch. If you take refuge in this program, you'll have to share your home-price appreciation with the FHA. If you sell the house (or refinance the loan) less than a year after refinancing into the FHA loan, the FHA gets all of the house price appreciation. The FHA's cut decreases over the next five years -- but never goes below 50 percent.

What does this mean to the borrower? Take the example above. You refinanced when the house was appraised at $100,000. A little over two years later, you sell the house for $120,000. You split that $20,000 difference with the FHA. In this case, because it's between two and three years later, the FHA gets 80 percent. The FHA would get $16,000 and you would get $4,000.

The equity-sharing arrangement goes like this: If you refinance or sell less than a year after getting the FHA loan, the government gets 100 percent of the home price appreciation. If it's more than a year but less than two years, the FHA gets 90 percent. The FHA's cut then decreases by 10 percent until the five-year mark. Anytime after that, the FHA gets half of the appreciation, no matter how long you have the loan or own the house.

This arrangement will encourage homeowners to keep their FHA-insured mortgages for at least five years, but to refinance before home prices zoom upward again.

Working with home equity debt

The government has been trying all year to encourage lenders to forgive debt so homeowners can refinance their loans for lesser amounts and remain in their houses. Lenders have been reluctant to forgive the debt. The FHA-refinance plan is another way of encouraging debt forgiveness.

Among the sticking points: Many homeowners have home equity lines of credit or home equity loans. In most cases, these lenders will lose that entire loan balance under the FHA-refinance plan. The new law is low on specifics, but it gives the FHA permission to give second lienholders a cut of the home price appreciation proceeds that the FHA collects.

Down payment assistance soon to be a thing of the past

The new housing rescue law bans down payment assistance programs such as the ones offered by Nehemiah and AmeriDream. The ban goes into effect Oct. 1.

Down payment assistance programs took advantage of a loophole in the way the FHA treats down payments. To get an FHA-insured mortgage, the homeowner has to make a down payment of at least 3 percent. Homeowners don't have to save even that much; the 3 percent can come as a gift from family members or nonprofit organizations.

Regulations don't allow the home seller to provide the down payment money. That's where down payment assistance programs come in. They are nonprofits. That allows the seller to give the 3 percent down payment money to Nehemiah or AmeriDream, and then Nehemiah or AmeriDream can turn around and "give" the down payment to the homebuyer as a "donation."

Fannie Mae and Freddie Mac don't allow sellers to indirectly give down payments to buyers. But the FHA has allowed this type of transaction for years. The FHA has long complained that down payment assistance programs artificially inflate house prices, and that loans using down payment assistance are more likely to default. But prominent congressional democrats have protected the down payment assistance programs on the grounds that they allow many minority families to become first-time homebuyers.

House Democrats wanted to keep the loophole open, and Senate leaders wanted to close it. With this law, the Senate won.

Property tax deductions for all homeowners

Under current law, you can deduct your property taxes from federal income tax -- but only if you itemize deductions on Schedule A. That leaves out people who don't have enough deductions to warrant filling out Schedule A. They have to take the standard deduction -- and that means they can't deduct their property taxes.

The housing law changes that. For homeowners who pay property taxes, it increases the standard deduction by $500 for single filers and $1,000 for couples filing jointly. This will be a boon to people, such as retirees, who own their houses outright, and therefore don't pay any mortgage interest, so they can't itemize.

You can't increase the standard deduction by more than the property-tax bill. So if you're married filing jointly and you pay $800 in property taxes, you get an $800 deduction, not a $1,000 deduction.

Loan limits extended permanently
There are maximum amounts for loans that the FHA will insure, and that Fannie Mae and Freddie Mac will guarantee. Those limits were raised temporarily this year. The new law raises limits permanently.

For FHA-insured mortgages, the new limit will be 115 percent of the median home price in that area, up to $625,500. That provision will affect loan limits in higher-cost areas. In lower-cost areas, the current FHA limits won't decrease.

For conforming mortgages -- those eligible to be bought by Fannie Mae and Freddie Mac -- the conforming limit will remain at least $417,000 for a single-family home. It can be higher than that. Starting next year, the new limit is either $417,000 or 115 percent of the area's median home price, whichever is higher -- up to $625,500. After that, the limits go up or down according to a price index.

More regulations on reverse mortgages

A reverse mortgage is an advance against home equity. It's for homeowners age 62 or older, and the reverse mortgage doesn't have to be repaid until the borrowers die or move out.

Because reverse mortgages are for elderly borrowers, there is concern that dishonest lenders and brokers take advantage of borrowers. Borrowers are required to get counseling first, to learn the pros and cons of reverse mortgages. The law will result in strengthened qualifications for counselors.

The law bars insurance salesmen from originating reverse mortgages and prohibits originators from requiring homeowners to buy annuities or insurance products. (There's one big exception: The FHA insures reverse mortgages, and borrowers will buy that coverage.)

Finally, the law limits origination fees on reverse mortgages. They can't exceed 2 percent of a reverse mortgage of up to $200,000. For a reverse mortgage amount above that, the limit is $4,000, plus 1 percent of the loan amount above $200,000. Origination fees can't exceed $6,000 in any case. In future years, this upper limit is indexed to inflation.

Manufactured housing

FHA-insured loans for manufactured houses are limited to a maximum of $48,000 -- a limit that has been in effect since 1992. That limit finally will be increased to about $70,000 and will be indexed to inflation. These are the limits for loans in which the borrower is buying only the manufactured home and not the land under it.

According to the Manufactured Housing Institute, the raised limit will make a big difference to thousands of families. Under the $48,000 limit, a lot of families can afford only single-section homes. The increased limit will allow more people to buy double-section homes -- what are colloquially known as double-wides.

The law directs Fannie Mae and Freddie Mac to come up with new products and flexible underwriting standards for manufactured houses.

Veterans

Service members returning from active duty abroad will be given breaks, effective immediately now that the bill has been signed into law.

Some protections apply to service members whose military obligations affect their ability to repay debts -- primarily, reservists and members of the National Guard who are called to active duty. They have to leave their jobs and, in many cases, take pay cuts.

For these service members, there are protections having to do with foreclosures and interest rates. If a service member had a mortgage before entering active duty, a lender can't start foreclosure proceedings until nine months after the service member returns from active duty. Formerly, the protection period was 90 days.

Also, when someone with a mortgage is called up to active duty, the interest rates on all previously existing debt are capped at 6 percent. That goes for mortgages -- and for home loans, that 6 percent cap extends until one year after the service member returns from active duty.

The Defense Department will be required to provide foreclosure-prevention counseling upon request to service members who are returning from active duty abroad.

Miscellaneous
Other provisions of the law:

~~~ It will establish an Office of Housing Counseling, which coordinate all federal housing counseling functions, as well as produce booklets that will be given to people applying for mortgages.

~~~ It will require licensing and registration of all mortgage brokers. Several states have begun to license mortgage brokers and share the information through the Conference of State Bank Supervisors; this law extends that initiative nationally.

~~~ It won't ask questions about tornadoes. An earlier version of the bill would have commissioned a study into how to "mitigate the risks to manufactured housing residents and communities resulting from tornados." The inquiry into this head-scratcher will have to wait for another bill; it was deleted in the final version that passed into law.

'Stealth' Housing Bailout: It's Bigger Than You Think

2008-07-26T15:18:00.000-07:00

'Stealth' Housing Bailout: It's Bigger Than You Think
By Steve Liesman, CNBC Senior Economics Reporter | 25 Jul 2008 | 02:55 PM ET

With Congress on the eve of passing a historic bill [passed on 26 July] that would give the Treasury a blank check to lend money to Fannie Mae and Freddie Mac, it’s worth looking at how much money the government has already pumped into the system during the housing crisis.

The numbers are staggering and likely to get much larger. What we have here is, through a variety of programs, a stealth bailout where more than a trillion dollars of taxpayer guarantees have been extended to the housing market, both to keep it going and to clean up the mess from the past.

I looked at the changes over the past year to the balance sheets of four governmental and quasi-governmental agencies—the Federal Reserve, the Federal Home Loan Banks, the Federal Housing Administration and Fannie Mae and Freddie Mac. The objective was to see how much additional financing they have provided to the housing market. The total: $1.43 trillion.

I’ll walk you through the numbers in a minute, but it’s worth pointing out this is not an actual expenditure of taxpayer money—not yet anyway. It’s a tally of how much financing those organizations have put out into the marketplace that's largely related to the housing crisis. The costs to the taxpayer will be directly related to how bad the housing crisis gets from here, how much of a buffer in the way of capital these organizations have to absorb losses, and how good their underwriting is for the new loans or collateral. Which is to say: We can count the exposure, but we can’t yet tally the losses.

The Fed: $446 billion

A simple way to look at how much financing the Fed has pumped into the housing market is to look at the change in the weekly balance sheet. What you’ll see immediately is that the total amount of Treasurys on its books has fallen by $311 billion compared with a year ago. This has been replaced by $150 billion in collateral from the Fed’s Term Auction Facilities, in which it is taking in a variety of collateral, much of which is presumed to be housing-related. Another $29 billion is on its books in the form of collateral from Bear Stearns, which greased the wheels of that firm's buyout by JPMorgan Chase. Add to that $14 billion in discount window lending to banks and $88 billion in repurchase agreements, which the Fed has always done, but not in such great amounts or for such periods. These repos are now from 15 to 90 days. There’s another $65 billion in swap lines to the European and Swiss central banks that designed to allow European banks to borrow dollars and finance their illiquid assets.

We should also count the $100 billion of Treasurys the Fed loans out through another new facility designed to pump liquidity into the market. Through that system, the Fed loans Treasurys and takes in collateral—again, some of it housing-related. The Fed doesn’t debit its Treasury line item for this because it says it’s only loaning out the securities, but those loans are backed up, in part, by a variety of assets, including some from housing.

So the total for how much new financing the Fed has made available to markets: $446 billion.

Fed officials have said they've never lost a penny on such lending in the past and they deal only with sound financial institutions. (If you’re not sound, you can’t borrow from the Fed, and staying current with the Fed is a good way to stay sound.) They add that they have protection through haircuts or discounts, so that $100 of bonds could get only $95 of financing. In addition, to some extent, as the Fed has made more financing available to real estate-related securities, it’s made less financing available elsewhere. But overall, it’s opened up the spigots to finance real estate in a big way.

Note that the Fed won’t provide values of the types of collateral it holds against its loans.

Federal Home Loan Banks: $274 billion

This is an easier calculation than for the Fed. The 12 Home Loan Banks provide financing to its 8,000-plus banks that, in turn, is used to fund mortgages. The amount of what FHLB calls “advances” to member banks has risen by $274 billion, to stand at $914 billion for the second quarter of 2008.

The FHLBs say existing capital and member banks will absorb losses if they occur. But there is an implicit government guarantee, on that Treasury Secretary Henry Paulson reiterated recently. The legislation in front of Congress allows Treasury to increase lending to FHLB.

Fannie Mae and Freddie Mac: $621 billion

Another easy calculation. Just go look at the balance sheets of Fannie and look at the increase in outstanding mortgage-backed securities. That number tells you how much more mortgage guarantees the two giants have out there. Combined, the figure is up by $582 billion. Add in a $39 billion increase in Fannie Mae’s portfolio to get to $621 billion. But note that this is comparing 2007 with 2006. The numbers are almost certainly larger now.

Federal Housing Administration: $90 billion

Officials there tell me they have added $90 billion or so of insured loans since October. Moreover, they have added loans from people they formerly did not lend to: Now they're doing refinancings and funding delinquent borrowers, folks they previously wouldn't deal with.

They say the phone is ringing off the hook as subprime borrowers look to FHA to help them get out of onerous loans. This is a place where there could be real losses, and where losses are expected to grow. The legislation in front of Congress authorizes up to $300 billion of FHA lending.

© 2008 CNBC.com

How to Buy a Foreclosed Home

2008-07-24T17:35:00.000-07:00

By June Fletcher
July 21, 2008 3:21 p.m.
www.wsjonline.com

For anyone wanting to take advantage of today's buyer's market, distressed properties offer the best chance to make a killing. But you need good credit or ready access to cash, and a taste for the hunt.

As I've mentioned in previous columns, searching for a foreclosure can be maddeningly frustrating. Newspaper notices of foreclosure sales are disorganized; foreclosure-listing Web sites charge hefty monthly fees; lenders post only minimal information on the properties they've taken back. And many real estate agents have little experience with these sorts of transactions, and don't want to be bothered with them.

That means foreclosure buyers must be willing to do more sleuthing on their own to find the best deals. Here are some tips to get started:

• Focus on one neighborhood: Although distressed properties are found everywhere these days, not every one is a good deal, especially if the seller bought at the top of the market or if the entire neighborhood is undergoing a decline. It's best to concentrate on places where there are relatively few distressed properties and good job growth. These areas will revive quickly once housing returns to normal. Once you've targeted and studied property values in a particular neighborhood, drive around and look for properties that aren't as well-kept as the ones around it -- then start ringing doorbells. You may be able to buy directly from an owner who's in financial trouble even before the loan defaults.

• Research the property: Although major real-estate Web sites and portals for both agent-listed and for-sale-by-owner properties list foreclosures these days, most provide minimal information and refer you to a subscription-based foreclosure listing site. Some lenders also list the properties they've taken back, though information on these properties is also sparse.

• Once you've targeted a property, check out the local assessor's office: Web sites for these offices often list the owner of the property, tax information, assessed value, square footage and aerial pictures. Most importantly, they reveal what the seller paid for the home, which could be more or less than the property is worth now. The best deals generally come from sellers who have owned their homes for a long time and have built up some equity.

• Learn what the seller wants: Knowing what motivates the seller gets you the best deal. If monthly carrying costs are high, you'll score if you can settle quickly. Or if a lender is trying to minimize losses on a foreclosed property which no longer is worth the unpaid loan amount, you might be able to negotiate a very good deal on financing by agreeing to pay a close-to-market price.

• Find an experienced broker: While it makes sense to gather as much information yourself as you can, and to deal directly with sellers whenever you can, some lenders refuse to deal directly with buyers. If that's the case with the property you've targeted, find an agent with ample recent experience with distressed and foreclosed properties. Ask the agent to explain the details of the deals: How much was offered compared to the asking price, how long it took for the seller or lender to accept the offer, and any concessions the agent was able to negotiate. Pay attention not just to the answers, but to the emotions the agent expresses. Foreclosure deals are often complex and time-consuming; you don't want an agent who lacks diplomacy, patience and perseverance.

[Call Ray Kutylo and the SCV Home Team at Keller Williams Realty at 661-290-3750]

Kudlow: The Media Are Missing the Housing Bottom

2008-07-24T17:12:00.000-07:00

Posted By: Larry Kudlow, www.cnbc.com

Media reports painted a pessimistic picture of today’s release on existing home sales, which fell 15 percent from a year ago and recorded higher inventories. But inside the report was an awful lot of very good new news, which appear to be pointing to a bottom in the housing problem; in fact, maybe the tiniest beginnings of a recovery.

For example, the median existing home price has increased four consecutive months and is up 10 percent since February. Yes, it’s down 6 percent over the past year. But the monthly numbers show a gradual rebound. Actually, this median home price is $215,000 in June, compared to $196,000 last winter.

And there’s more. One of the hardest hit regions is the West, including California, Arizona, and Nevada. The other two bad states are Florida and Michigan. However, existing home sales in the western region are up four straight months, and are 17 percent above the low in October. At the same time, prices in the West have increased three straight months.

Meanwhile, overall national existing home sales are basically stabilizing at just under five million. And in the first and second quarters of 2008, these sales dropped slightly by 3 percent in each case, which is a whole lot better than the roughly 30 percent sales drops of the prior three quarters.

It’s a pity the mainstream media keeps searching for more and more pessimism. The reality is a possible upturn in the housing trend, and at the very least we are getting a bottom. Stocks sold off 165 points largely on media reports of terrible home sales and prices. But I am hoping the market comes to its senses and realizes the data are a whole lot better.

And on top of all that, just as housing may be on the mend, Congress is about to ratify a huge FHA-based bailout that could total $42 billion. Congressional solons are putting up $300 billion to refinance and insure distressed loans through the Federal Housing Administration. But this dubious government agency, with a whole history of bad portfolio management, may wind up taking in the very worst loans on the books.

Of course, taxpayers are on the hook. More government semi-socialism.

Legislation Won't Cure Housing Woes, Band-Aid Helps Stop Bleeding

2008-07-24T10:43:00.000-07:00

Cash-strapped homebuyers and borrowers facing foreclosure will get some relief from a housing bill passed by the House on Wednesday but the bill won't solve the deep-rooted ills of the U.S. housing market.

The bill was widely praised by real estate industry groups but doubts remain about how much real-world impact it will have for consumers.

"This isn't going to be the catalyst for a better housing market," said Mark Zandi, chief economist at Moody's Economy.com.

"It may staunch some of the downturn, but it's going to have a very modest positive impact."

The vote on the bill came after months of negotiations between House and Senate lawmakers and the Treasury Department.

President Bush initially opposed it but now could sign as early as this week.

The highlights include: $300 billion to provide more affordable mortgages to troubled homeowners, nearly $4 billion in grants to help communities fix up foreclosed properties and a $7,500 tax credit for first-time homebuyers.

Andrew Lenz, a 27-year-old first-time buyer in Minneapolis, said the tax credit won't affect his decision to make an offer soon on a foreclosed townhome, but added, "Every little bit helps."

And plenty of first-time buyers won't get help.

The tax break only applies for homeowners who purchase between April 9, 2008 and July 1, 2009.

The full amount of the credit also is only available for individuals with incomes under $75,000 or couples earning less than $150,000.

Moreover, it will have to be paid back, interest-free, over 15 years.

In Baltimore County, Md., where foreclosure filings between January and March were running at nearly four times last year's levels, Liz Glenn was grateful to see the provision in the bill for $3.9 billion in grants to help local governments buy and fix up empty homes.

The money "would enable us to acquire and rehab more homes and offer them at an affordable price," said Glenn, a community planning official.

The county, which surrounds Baltimore's city limits, currently works with nonprofit developers to fix and sell up about 20 homes a year -- nowhere near enough.

Maryland estimates it could receive about $30 million in funding as part of the bill, said Carol Gilbert, a state housing official.

Homeowners, who are spending more than 31 percent of their income on their house payment, may qualify for a new, more-affordable loan backed by the Federal Housing Administration under the bill.

Lenders, however, would have to agree to take a loss on the existing loans, and would walk away with at least some payoff and avoid the costly foreclosure process.

Lender participation is also voluntary.

"The industry really has to step up and use it," said Bruce Dorpalen, director of housing counseling for Acorn Housing.

In addition, homebuyers who purchase a property with an FHA loan will no longer be able to receive financial assistance from the sellers.

The bill closes a loophole that let sellers channel money to buyers through charities.

While critics say defaults from these no-money down loans are rising to such an extent that they threaten to put taxpayers on the hook, supporters say many borrowers with good credit but without enough money saved up for a down payment will be locked out of the market.

"That's going to cause a lot of people not to be able to buy a house," said Mike Davis, a Realtor in West Des Moines, Iowa.

"That's really going to hurt."

In a move to shore up mortgage finance companies Fannie Mae, the bill allows the government to buy stock in them and extends a line of credit to the companies.

Over the past week, investor fears about the health of Fannie and Freddie, which buy or guarantee about half of the nation's mortgage loans, have rippled through the market, causing a sharp rise in mortgage rates since late last week.

Rising rates mean more trouble for the housing market as fewer borrowers are able to afford the higher monthly payments.

Average rates on 30-year fixed rate loans under $417,000 have soared to more than 6.8 percent -- the highest rates in a year, according to data publisher HSH Associates.

Besides worries about Fannie and Freddie's future, rising rates reflect an effort by banks recapture money lost on mortgages made in 2005 and 2006.

Keith Gumbinger, a senior vice president with HSH Associates, said, "You have to offset those losses some way or another."

[This article from AP on the www.cnbc.com website]

Housing Bill: The New And The Old Of It All

2008-07-23T11:57:00.000-07:00

[from Diana Olick's blog, Realty Check, at www.cnbc.com]

In a vote of no confidence in the housing market, President Bush this morning revoked his threat to veto the housing rescue bill, which is making its way to a vote on the House floor today.

He is still opposed to the $4 billion in community block grants to buy foreclosed properties that’s included in the bill, but, as White House Press Secretary Dana Perino said in an unscheduled call to reporters, “This is not the time for a prolonged veto fight.”

Tell me about it. Apparently Treasury Secretary Henry Paulson had to convince Mr. Bush to drop the fight. “This is a very important message that we are sending to investors around the world,” he told reporters today. Yep, no worries there.

The housing rescue bill is enormous, especially since it just got a whole new provision to backstop Fannie mashed into it last week. It would allow the Treasury to open up a new line of credit to the two as well as buy equity in them. Yesterday the Congressional Budget Office estimated that if F and F had to use all that Treasury cash, it could cost you and me about $25 billion.

The bill still has the same old other stuff in it that lawmakers have been arguing over for eons:

- Allows the FHA to guarantee and additional $300 billion in new loans for at-risk subprimers
- Overhauls Fannie and Freddie oversight
- Overhauls the FHA
- Sets the conforming loan limit at $625,000 (up from $417,000)
- Creates an affordable housing fund from Fannie and Freddie dollars
- 10% tax credit for first-time home buyers
- and a whole bunch more tax provisions

We’re told that the House chiefs have been negotiating all this with the Senate chiefs as well as the Treasury Secretary, so clean passage at this point is more likely than it has been in the past. Notice how I couched that, given that any lawmaker can throw any wrench into it at any time. Who was that old Russian comedian who always said, “I love this country!”

[The Real Blog's take on the market gyrations, interest rate hikes, and this huge housing relief bill...

Housing is in a world of hurt, and you would have to be living in the Santa Clara riverbed with no access to the media not to know that. Oh, that's right, there are some living there as a direct result of a very personal housing crisis, so they know it too!

In every market, there is opportunity. Home prices have come down a lot, and there is still attractive home interest rates that make a purchase rational. So far, there are FHA programs that make it REALLY attractive for some first time home buyers to buy right now. Investors are looking for long term wealth creation and looking to scoop up some residential deals to be rentals. There are the usual seller motivations that come up (relocation, divorce, death, economic change either for the good or the bad).

There are challenges, of course. People in the housing market have gotten really used to artificially low interest rates. Those same really low interest rates have been one of two primary reasons for the housing bubble in the first place. The second reason being lax loan oversight and underwriting, which allowed people to buy homes based on no verification of income, debt, or ability to repay the loan.

It's going to take some time for the housing system to work through the excesses. Since this is an election year, you can depend on bad policy being voted on and passed at the governmental level. Stay tuned.

~~ Ray

Home Foreclosures and Abandoned Swimming Pools A Major Public Health Concern in 2008

2008-07-23T10:44:00.000-07:00

Mosquito season is back and this year brings new public health concerns for Los Angeles County residents as West Nile virus positions itself to resurge due to ideal ecological conditions. But, there is also another force impacting resurgence. The explosion of home foreclosures has not only pushed the State’s economy to the brink, it has vector control agencies working over-time to control the proliferating populations of potential disease-carrying mosquitoes breeding in abandoned swimming pools.

This year, the number of homes headed towards or in foreclosure has risen dramatically. The statistics are a shocking wake-up call to the housing sector, but offers residents little information about the looming public health crisis.

Empty houses can hide un-maintained swimming pools, spas, fountains, and bird baths, which can provide the stagnant water needed for mosquitoes to complete their life cycle.

Within the 1,330 square miles serviced by the Greater Los Angeles County Vector Control District, there are thousands of out-of-service swimming pools that require routine mosquito treatment. The number is climbing every day, as abandoned swimming pools from vacant homes are reported.

This increase in backyard breeding sources may lead to a rise in West Nile virus transmission. West Nile virus is spread through the bite of infected mosquitoes and may lead to debilitating health conditions such as encephalitis, paralysis, coma and even death.

In 2007, 380 human cases of West Nile virus were reported in California resulting in 21 deaths. There were a total of 43 human infections and 3 fatalities in Los Angeles County alone. The deaths were the first in the County since the major West Nile virus outbreak in 2004.

So far this year, West Nile virus activity has already been detected in 19 counties in California including Los Angeles, Orange County, and Riverside. The California Department of Public Health predicts the virus will again pose a serious public health threat in 2008.

The best defense against disease transmission is being proactive and taking precautions to protect from mosquito bites. Follow these simple steps to protect yourself and your family:

• Avoid outdoor activities between dusk and dawn when mosquitoes are most active.

• Wear long-sleeve shirts and pants when engaging in outdoor activities during these hours.

• Apply approved insect repellents containing active ingredients such as DEET, Picaridin, or oil of lemon eucalyptus.

• Keep tight-fitting screens on doors and windows to prevent mosquitoes from entering your home.

• Eliminate all sources of standing water around your home and property and properly maintain ornamental ponds, pools, and spas.

• Contact the Greater Los Angeles County Vector Control District at (562)944-9656 (Santa Fe Springs Headquarters) or (818)364-9589 (Sylmar Branch) to report any significant mosquito problems in your neighborhood or visit online at www.glacvcd.org.

Real estate professionals who encounter vacant homes with potential mosquito breeding sources should submit a service request to the Greater Los Angeles County Vector Control District. Vector Control Specialists can treat the pool for mosquito breeding and reduce the risk of West Nile virus transmission.

Frequently Asked Questions About Green Swimming Pools

How do I keep mosquitoes from breeding in my pool?

You can prevent mosquito breeding by properly maintaining your pool using chlorine and a filter system. Prevent the growth of algae by using appropriate chemicals. Consult a pool professional for further instructions.

Will I get cited if my pool is green?

The California State Health and Safety Code authorizes public health agencies to levy fines up to $1,000 a day if the pool is declared a public health risk.

I drained my pool a few years ago. What can I do with rain water that puddles at the bottom of the pool?

Treat the accumulated water with chlorine and other approved chemicals to prevent mosquito breeding. Upon request, the District will also deliver free mosquitofish to residents for placement in backyard swimming pools, ponds, and fountains.

My city has instituted mandatory water conservation measures which prohibit me from adding any water to my pool. What can I do to prevent mosquito breeding?

Follow the steps above to prevent mosquito breeding and be sure to notify the Greater Los Angeles County Vector Control District if mosquito control services are required.

Where can I go for more information?

You can contact the Greater Los Angeles County Vector Control District by calling (562)944-9656 (Santa Fe Springs) or (818)364-9589 (Sylmar Branch). You can also visit our website at www.glacvcd.org. The California Department of Public Health is also a great source for up-to-date information on West Nile virus. Visit www.westnile.ca.gov or call the department’s toll-free hotline to report a dead bird or squirrel at 877-WNV-BIRD

[from the Southland Regional Association of Realtors website, www.srar.com]

7% of Renters Ready to Buy

2008-07-23T10:40:00.000-07:00

High home prices, the lack of a down payment, and concerns over the economy were the major obstacle blocking some people from buying a home.

However, as many as 7 percent of renters plan to jump into the market within the next 12 months to take advantage of current market conditions.

As many as three out of four American believe the housing market has yet to finish its current readjustment, but nearly half think conditions will improve once a new president is elected. Those were findings of a recent poll conducted by Harris Interactive and reported on Inman News.

When it comes to choosing a place to live, the poll found the most important factors to be local crime rates (56 percent), proximity to daily conveniences such as stores and services (47 percent), and concerns over high property taxes (46 percent).

Many people are waiting for economic conditions to improve before entering the home buying market, Realtors reported.

"People are waiting for the market to hit bottom and, then, lo and behold, all of a sudden it's in the rearview mirror," said Pat "Ziggy" Zicarelli, a director of the Southland Regional Association of Realtors and a Realtor in Tarzana. "You can never buy at the lowest and sell at the highest, unless you just happen to be lucky."

True, the market is relatively quiet, he said in a recent Realtor magazine article, but lower home prices, short sales, and bank-owned properties offer fabulous opportunities for buyers.

[from the Southland Association of Realtors website, www.srar.com]

The World Will Not End

2008-07-20T09:54:00.000-07:00

"Housing starts rose 9% and the market cheerleaders proclaimed that we have seen a bottom. But not if you look at the actual numbers. New unemployment claims were OK, but not if you look at the actual numbers. And inflation was simply ugly, no matter what numbers you look at. However, oil is down and there is reason to think it may have further to go on the downside. We cover all this and more, as we first look at why the world is not going to end."

So begins John Mauldin's current investor essay, one of many that we follow regularly [if you haven't subscribed to his FREE newsletter yet, please click here:
http://www.frontlinethoughts.com/subscribe.asp ]. Folks, the world will not end even though the media is full of tough news. In the housing market, it's always a great market... for somebody. It just isn't a great market for everyone at the same time.

Right now, investors are swarming over the foreclosure market, seeing an opportunity to build long-term wealth. First-time buyers are looking at condos, townhomes, and low-priced fixers and using attractive FHA financing with down payment and costs paid by the seller. The usual motivations for sellers can still be in play, whether down or up-sizing, relocation, divorce, or homes put in probate.

There are sales of homes, and purchases of homes, being made every day in our local area. Whether you as an individual buy or sell is a choice for you to make. However, people are making moves and if it might be something you are considering, you should call us at 661-290-3750 and let's get started.

Gas Prices Hitting Home? I Don't Think So (Do The Math)

2008-07-12T10:34:00.000-07:00

Wednesday, 25 Jun 2008

By: Diana Olick, Realty Check at CNBC.com

New home sales in May fell 2.5 percent, and everyone is now wondering if rising gas prices are adding fuel, so to speak, to the meltdown in housing. A big article in the New York Times today features a few families who claim it just isn't worth living in the suburbs anymore.

The drive now costs far more as do the utility bills to heat and cool the larger home. Cities are taking advantage by investing more money in metro and downtown amenities and everyone is flocking back to city-center. Home builder/developers who bet on the "ex-urbs" might as well have bet on Mars.

Hogwash. Sit down with a pencil and paper and calculate exactly how much more you are spending a week on gasoline as compared to what you spent five years ago. Say you drive 50 miles a day to and from your office even, which is 250 miles a week. Say you get 15 miles to the gallon on average. You're using about 17 gallons a week for your work commute. If you were paying two dollars a gallon five years ago that's $34/week. Now you're paying twice that, so it's $68/wk. If your suburban house is big, you probably have higher utility costs now too, but your home is likely pretty new, and more energy efficient.

Now let's talk about the city. Your property taxes will be higher. Your supermarket and restaurant costs will be higher. You will likely live in an older house that will leak hot/cold air like a sieve and require more repairs. Basic services like the dry cleaner, the tailor, the liquor store, the bagel bakery, will cost slightly more because they're all paying higher rent. Urban school systems, like here in DC, can't hold a candle to those nice sprawling green suburban schools, and you might feel forced to send your kids to private school (try $15-20,000/yr per kid).

If you work, which you probably do, since you're commuting so much, then you'll need after school activities for your kids, which will of course cost far more in an urban setting than out in the 'burbs. And since you're living in the city, you probably don't want your kids just "hanging out" because you don't have a big house or a big yard, and so they'll want to hang out somewhere you probably don't want them to be.

I could go on and on. The reason today's new home sales numbers are down has nothing to do with real gas prices. If anyone is opting for an urban home over a new development, it's either because they know they'll see better appreciation or because they have some psychological fear of energy prices that is not based on real numbers.

New Law Affects All California Residential Mortgage Foreclosures

2008-07-11T14:29:00.000-07:00

From the Insolvency Law Committee - Business Law Section of the State Bar of California

July 9, 2008

Dear Insolvency Law Committee Constituency List Members:

Governor Schwarzenegger signed legislation on July 8, 2008, effective immediately, regarding all California residential mortgage foreclosures.

Civil Code sections 2923.5, 2923.6, 2924.8 and 2929.3 and Code of Civil Procedure section 1161b are added to the California Codes to address the influx of mortgage foreclosures in California.

Requirements to Contact Borrower re Workout Options Prior to Foreclosure and to Provide Declaration re Same with Notice of Default and/or Notice of Sale

Civil Code section 2923.5 applies to loans initiated from January 1, 2003 to December 31, 2007 secured by residential real property for owner-occupied residences. Owner-occupied means it is the borrower’s principal residence.

The section provides that a mortgagee, beneficiary or authorized agent, which can be the prospective foreclosure trustee (collectively hereafter “beneficiary”), may not file a Notice of Default under section 2924 until 30 days after contacting the borrower as prescribed below or a diligent effort as described below is made to contact the borrower.

The beneficiary shall contact the borrower in person or by telephone to assess “the borrower’s financial situation and explore options for the borrower to avoid foreclosure.” During the initial contact, the beneficiary must:

1. Advise the borrower that he or she has the right to request a subsequent meeting to be scheduled by the beneficiary within 14 days; and

2. Provide the borrower with the toll free number made available by the US Dept of Housing and Urban Development to find a HUD certified housing counseling agency [(800) 569-4287].

The Notice of Default must now include a declaration from the beneficiary that it has contacted the borrower or conducted due diligence to do so unless the borrower has surrendered the property to the beneficiary. If the Notice of Default was recorded before July 8, 2008, a declaration must accompany the Notice of Sale when it is recorded, stating that the borrower was contacted to assess the financial situation and explore options to avoid the foreclosure or list the efforts made to contact the borrower if no contact was made.

Diligent efforts to contact the borrower shall “require and mean:”

1. Sending a first class letter that includes the toll free HUD number; and

2. Attempting to contact the borrower, after the letter has been sent, at least three times by telephone call to the primary number on file at different times on different days—an automated system is ok so long as a live representative connects if the borrower answers, and the telephone requirements are met if after trying the contact, the number is disconnected; and

3. Two weeks after the telephone contact attempts are satisfied, if the borrower does not respond, the beneficiary must send a certified letter that includes a toll free number to contact a live representative; and

4. The beneficiary has posted a “prominent” link on the homepage of its internet website, if any, with the following information:
a. Options may be available to borrowers who cannot afford their mortgage and the instructions on how to explore the options;
b. A list of financial documents borrowers should collect to discuss options with the beneficiary;
c. A toll free number to discuss the options; and
d. The HUD toll free counseling number;

Contacting the borrower or diligent efforts to do so are not required if:

1. The borrower surrenders the property by turning over the keys or by sending a letter to the beneficiary; or

2. The borrower has contracted with a person or organization whose primary business is advising how to extend the foreclosure process and how to avoid contractual obligations; or

3. The borrower has filed bankruptcy.

Duty of Servicing Agents to Enter into Workouts or Modifications
Section 2923.6 provides that servicing agents for loan pools owe a duty to all parties in the pool so that a workout or modification is in the best interests of the parties if the loan is in default or default is reasonably foreseeable, and the recovery on the workout exceeds the anticipated recovery through a foreclosure based on the current value of the property.

Notice to Tenants Living in Foreclosed Property of Extended Eviction Period
Section 2924.8 applies to residential real property when the billing address is different than the property address, i.e. there are potentially tenants living in the property. It provides for an additional notice to be mailed and posted with the Notice of Sale, addressed to “Resident of property subject to foreclosure sale.” The notice shall say in English and other languages as required by Civil Code section 1632, if the agreement was negotiated in another language:

Foreclosure process has begun on this property, which may affect your right to continue to live in this property. Twenty days or more after the date of this notice, this property may be sold at foreclosure. If you are renting this property, the new property owner may either give you a new lease or rental agreement or provide you with a 60-day eviction notice. However, other laws may prohibit an eviction in this circumstance or provide you with a longer notice before eviction. You may wish to contact a lawyer or your local legal aid or housing counseling agency to discuss any rights you may have.

Maintenance of Foreclosed Properties and Fines for Failure to Do So
Section 2929.3 applies to vacant residential real property purchased at a foreclosure sale and requires the purchaser to maintain the property. Failure to maintain means failure to care for the exterior of the property and includes, but is not limited to:

1. Letting the foliage grow so that it diminishes the property values;

2. Failing to take action to keep squatters and trespassers off the property; and

3. Failing to abate mosquito larvae growth or other public nuisances.

The local governmental entity must provide a 14-day notice to the property owner with 30 days to complete the remediation. Thereafter, the governmental entity may impose $1,000 per day fines until the situation is rectified. The section provides for a hearing to contest the fines and requires the governmental entity to take into account good faith efforts to remedy the problem. If the condition threatens public health of safety, the compliance period may be shortened.

60-Day Eviction Notice for Tenants in Foreclosed Properties
Finally, Code of Civil Procedure section 1161b provides that tenants in foreclosed properties must be given a 60-day eviction notice. The section does not apply if any party to the foreclosed note remains a tenant, subtenant or occupant in the property.

These materials were written by Donna T. Parkinson, Chair of the Insolvency Law Committee.

Best regards,
Ellen Friedman

Friedman Dumas & Springwater LLP
efriedman@friedumspring.com
Insolvency Law Committee, Co Vice Chair

The Insolvency Law Committee of the Business Law Section of the California State Bar provides a forum for interested bankruptcy practitioners to act for the benefit of all lawyers in the areas of legislation, education and promoting efficiency of practice. For more information about the Insolvency Law Committee, please see the committee's Web site: www.calbar.org/buslaw/insolvency.

A reminder to all...

2008-07-11T12:31:00.000-07:00

Back in September of 2005, on the first day of school, Martha Cothren, a social studies school teacher at Robinson High School in Little Rock , did something not to be forgotten.

On the first day of school, with the permission of the school superintendent, the principal and the building supervisor, she removed all of the desks out of her classroom. When the first period kids entered the room they discovered that there were no desks.

Looking around, confused, they asked, 'Ms. Cothren, where're our desks?'

She replied, 'You can't have a desk until you tell me what you have done to earn the right to sit at a desk.'

They thought, 'Well, maybe it's our grades.'

'No,' she said.

Maybe it's our behavior.' She told them,

'No, it's not even your behavior." And so, they came and went, the first period, second period, third period. Still no desks in the classroom.

By early afternoon television news crews had started gathering in Ms.Cothren's classroom to report about this crazy teacher who had taken all the desks out of her room.

The final period of the day came and as the puzzled students found seats on the floor of the deskless classroom. Martha Cothren said, 'Throughout the day no one has been able to tell me just what he/she has done to earn the right to sit at the desks that are ordinarily found in this classroom. Now I am going to tell you.'

At this point, Martha Cothren went over to the door of her classroom and opened it.

Twenty-seven U.S. Veterans, all in uniforms, walked into that classroom, each one carrying a school desk. The Vets began placing the school desks in rows, and then they would walk over and stand alongside the wall.

By the time the last soldier had set the final desk in place those kids started to understand, perhaps for the first time in their lives, just how the right to sit at those desks had been earned.

Martha said, 'You didn't earn the right to sit at these desks. These heroes did it for you. They placed the desks here for you. Now, it's up to you to sit in them. It is your responsibility to learn, to be good students, to be good citizens. They paid the price so that you could have the freedom to get an education. Don't ever forget it.'

By the way, this is a true story. You can verify this by clicking on http://www.snopes.com/glurge/nodesks.asp

God Bless America - and Our Veterans

What Is A Veteran?

A 'Veteran' -- whether active duty, discharged, retired, or reserve -- is someone who, at one point in his or her life, wrote a blank check made payable to 'The United States of America,' for an amount of 'up to, and including his life.' That is honor, and there are way too many people in this country today, who no longer understand that fact.

[Thanks to our Team Leader Frank Crandall for forwarding this message to me. This is a reminder of a fact that should always be remembered whether we are sitting at a classroom desk, or at an office desk while posting a message to The Real Blog.]

Summertime... and We are Busy!

2008-07-10T12:33:00.000-07:00

Hello everyone,
I haven't written much in terms of analysis of the local housing market lately. We have been pretty busy with some listings, and even more buyers than usual. As we have always maintained, it's always a great housing market, just not for everyone at the same time.

Right now investor buyers are coming out and picking off the weak ones. The bank-owned properties (REOs, foreclosures) are leading the market, with the banks taking the financial hits Big Time. Between the Wall Street Journal and CNBC there is plenty of cautionary words out there for housing, and the periphery of our immediate market area is in a world of hurt. If you are in Palmdale/Lancaster or the Inland Empire, you know what I'm talking about. Locally it is a rare neighborhood that has not been touched by at least one foreclosure sale, and signs of property deterioration like unwatered lawns, or lots of RVs parked on the street, can be a sign of problems to come.

For the regular seller, this housing environment can be challenging. Between the fallen home prices now on the market, and the closed sales of home foreclosures used by appraisers as comparable sales data, this can be pretty tough row to hoe for your average seller who is moving up, moving down, or moving out. Shrinking equity positions sometimes introduce a sense of panic in sellers, who for some months try to hold the line on their list prices, only to have to bend to larger market forces later on with home price reductions much more severe than many had thought possible.

Unfortunately, this is an old lesson that is being re-learned. Home prices go up. Home prices go down. The only constant is change itself.

For home sellers, 'following the market down' has never been a winning selling strategy in a weak market. If you have to sell, take the hit and then try to make it up on your subsequent purchase. If you have to sell and then won't be buying for a while, again, take the hit and price at the very lowest end of the market, and go on with life afterwards. We all know (even us Realtors) that you don't want to 'give your home away'. But the market reality is that in this housing market, you probably won't be happy with the price you do eventually get. However, if you want to sell you have to just bite the bullet and move on.

Buyers.

You are my friends in this market environment.

Buyers have lots of choices, and if serious about buying, can come out with some terrific deals. However, buyers must understand that no one is going to give them a house. Getting a loan is harder than it has been in six or seven years, and the underwriting guidelines for approving a loan are tough. Liars loans are gone, as are the no doc loans that brought out the liar in far too many people. The lenders just don't want to give you a pile of money anymore on your say-so that you can pay it back. Yes, it's a different environment. The slick schemes just aren't available.

But as long as the buyer has some down payment and good credit, there are deals to be made!

Have to run out for an appointment, so that's it for now. This Fannie and Freddie situation will have to be watched. If the government further federalizes the housing industry with a bailout of these quasi-governmental guarantors, we could be in for lots of negative ramifications including an immediate addition of more than $5 Trillion Dollars in federal debt in one fell swoop. Both political parties will be responsible for this, as there is plenty of blame for them both on this matter. We will be watching closely.

Give me a call if you want to buy, sell, or lease residential property, and let's get started.

Are Freddie and Fannie Insolvent?

2008-07-10T12:07:00.000-07:00

Financial news outlet CNBC was reporting early Thursday that Freddie Mac and Fannie Mae, the two corporations around which much of housing recovery has been structured, may be technically insolvent.

The claim came from William Poole, former president of the St. Louis Federal Reserve, follows a stock market trading day in which Freddie and Fannie stock resumed the free-fall it had started earlier in the week when Lehman Brothers speculated that changes in accounting rules would require that the two government sponsored enterprises (GSEs) raise even more significant amounts of new capital than had been previously thought. In a market which was plummeting in all sectors, finishing the day down over 230 points, Freddie's shares were off 24 percent on the New York Stock Exchange, closing at $10.26 while Fannies' dropped 13 percent to $15.31.

Poole told Bloomberg News that Congress should recognize that the two are technically insolvent and the odds are that the U.S. may have to bail them out. Others disagreed, saying that there would have to be sudden losses of $40 billion between the two to trigger insolvency.

Meanwhile, the Wall Street Journal is reporting that the Bush administration has been holding talks for months about what to do should either of the two GSEs fail.

The paper says that the government doesn't expect the corporations to fail and no rescue plans are imminent. The talks are part of "normal contingency planning" that the Treasury Department and federal regulators regularly undertake, but that these talks have become more serious recently.

The viability of the two corporations is critical to policymakers because of their key role in the housing market. They own or guarantee about $5 trillion of mortgages which equates to about one-half of outstanding U.S. mortgage debt. The two are currently $1.5 trillion in debt.

While many analysts are saying that the two cannot be allowed to fail, any attempt on the part of the government to help at this point would set off some wild partisan fights on Capitol Hill. Republicans have long sought to put constraints on the GSEs saying that their presumed safety net - the federal government - gives them an unfair advantage in the mortgage market and Treasury Secretary Henry Paulson has, in the past, denied any government intention to guarantee Freddie or Fannie's debt.

However, the assumption that Uncle Sam will be ready to step in should things get bad enough has allowed the GSEs an advantage which allows them to borrow money at better rates. Even in the midst of the current mess the companies have been able to get credit at relatively low cost. On Wednesday Fannie Mae issued a series of two-year bonds that were priced only 0.74 percentage points higher than the yields on comparable Treasury bonds about double the usual disparity.

While it appears most likely that Freddie and Fannie will continue to raise capital from private investors, other options open to help them include a credit line from the Federal Reserve, a federal guarantee such as the administration insists won't happen, or an actual equity investment in the companies by the government.

According to the Journal, "Fannie and Freddie are trapped in a vicious cycle. The companies will have to raise capital through stock sales, and the multibillion-dollar amounts they have to raise could result in a massive dilution of shareholders' equity. In anticipation, investors have been dumping the shares, driving their prices sharply lower. And the devalued currency of Fannie and Freddie shares means they will have to sell even more shares."

Freddie's viability is of more concern than Fannie's. When the Office of Federal Housing Enterprise Oversight (OFHEO) which currently functions as regulator of the two companies stipulated that one criterion for reducing surplus capital requirements for the GSEs earlier this year was that the companies raise additional capital, Fannie raised $7.5 billion right away, while Freddie is still waiting to get registered with the U.S. Securities & Exchange Commission, and wants to resolve past accounting issues before it does. In May, Freddie said it planned to raise $5.5 billion through issuing a combination of common and preferred stock.

At the open on Thursday Fannie Mae's stock was down $2.88 to $12.33 and Freddie's fell another $1.60 to 8.67.

Realtors Report Jump in Sales in Santa Clarita

2008-06-27T12:33:00.000-07:00

By the Santa Clarita Signal Staff
Posted: June 27, 2008 1:54 a.m.

Sales of existing single-family homes in the Santa Clarita Valley continued their rebound in May with more than 200 homes closing escrow, according to a Thursday report from the Southland Regional Association of Realtors.

Despite the improvement for single-family home sales, condominium sales remain slow while the inventory of homes for sale is dropping and inching closer towards a balanced market between buyers and sellers.

During the month of May, Realtors closed escrow on 220 homes, a 22.9 percent increase from a year ago and a 23.6 percent jump from April, according to the association. May represents the fifth consecutive month of gains in home sales for the Santa Clarita Valley.

May also marks the first time since June 2007 that more than 200 homes sold in a single month.

"Sales activity is picking up," Doreen Chastain-Shine, president of the association's Santa Clarita Valley division said in a statement. "Agents are reporting that a lot of people are coming through open houses, a lot of people are looking for a home."

The median price of the single-family homes sold during May fell by 14.1 percent from a year ago to $450,000. April's median price was $480,000.

The condominium median price of $305,000 was down 14.1 percent from a year ago, but up 9.3 percent from April's median price of $279,000, according to the association. The group called condominium sales for May "sluggish" because they believe that buyers are focusing on purchasing single-family homes that are being offered at favorable prices.

The association explains that while home loans are available, most loans require a down payment and borrowers must show proof of income and the ability to repay the loan. This means that the pool of qualified buyers is limited.

"Buyers should not turn their backs on traditional buyers thinking that a foreclosure or short pay always offers the best opportunity," Link said. "Traditional sales can be completed faster, buyers have more ability to request repairs, and sellers typically are more willing to negotiate."

Pending sales, which the association uses as a future resale activity, increased 19 percent from a year ago to a total of 339 open escrows. Despite the increase from 2007, pending sales fell 11 percent from April.

A total of 1,946 properties were listed for sale throughout the Santa Clarita Valley at the end of May, which is down 13.1 percent from a year ago and 3.4 percent lower than April.

The inventory represents a 6.6-month supply. The association believes a balanced market is when the inventory is between a 5 to 6 month supply.

"Despite media reports suggesting otherwise, we're not seeing a flood of inventory locally," Chastain-Shine said. "I really do believe the worst is past."

Are your property taxes current?

2008-06-27T12:29:00.000-07:00

The Los Angeles County Tax Collector operates on a fiscal year that begins on July 1st.

Delinquent property taxes that are not paid by June 30th, will incur significant penalties and fees.

6 Clues a Lender is a Predator

2008-06-27T10:04:00.000-07:00

Help protect yourself by being aware of activities that might indicate a predatory lending practice.

Here are some tips from the NAR brochure "Are You Having Trouble Paying Your Mortgage?"

~~Excessive service fees. Lender fees of 1 percent are common on many mortgages — significantly higher percentages may be a red flag.

~~Teaser rates and balloon payments. Borrowers must understand what their payments will be when the rate is raised.

~~Delayed closing. Unscrupulous lenders may delay a closing so that a more favorable loan rates expires.

~~Overinflated appraisals. Higher values allow for higher fees to the lender and added cost to the borrower.

~~Prepayment penalties and other barriers to refinancing. Penalties for prepayment try to make it too costly for borrowers to get another loan at a more favorable rate.

~~Unexpected settlement costs that make the fees charged at closing significantly higher than those disclosed earlier.

Renegotiating a Troubled Mortgage

2008-06-27T10:00:00.000-07:00

If you are facing a potential foreclosure, help yourself by assembling the following, as suggested by the Federal Housing Administration.

1. Loan number and recent payment history.

2. A brief explanation of their circumstances. Are their financial problems temporary (for example, a cut in job hours or the illness of a family member) or permanent?

3. Recent income documentation, including pay stubs or tax returns.

4. A list of household expenses — utility bills, food, insurance.

5. A list of other debt obligations — credit cards, car loans.

Call your lender and ask for the 'Work Out' department. They will connect you to the department in charge of adjusting your loan terms, or approving a short sale.

FBI Arrests Hundreds In Mortgage Fraud Case

2008-06-19T13:31:00.000-07:00

Losses Total About $1 Billion

POSTED: 7:10 am PDT June 19, 2008

The FBI said Thursday that it has arrested more than 400 real estate brokers since March -- including dozens over the last two days -- in its crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.

One law enforcement official put the losses to homeowners and other borrowers who were victims in the schemes at more than $1 billion. The Justice Department and FBI announced the recent arrests at a news conference Thursday afternoon in Washington. Apprehensions were made in Chicago, Atlanta, Miami and suburban Maryland.

"Operation Malicious Mortgage" resulted in 144 mortgage fraud cases in which 406 defendants were charged. On Wednesday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneysâ€™ offices based upon the law enforcement and investigative efforts of participating law enforcement agencies.

"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind of millions of American homeowners," said Deputy Attorney General Mark R. Filip. "'Operation Malicious Mortgage' and our other mortgage-related enforcement actions demonstrate the Justice Departmentâ€™s commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets."

FBI Director Robert Mueller said that the FBI will continue to direct resources to prosecuting mortgage fraud.

"This operation is an example of our unified commitment to address this significant crime problem," Mueller said. "The FBI will continue to direct investigative and analytic resources towards mortgage fraud and corporate securities fraud that threaten our nation's economy."

Also a part of the operation was the indictment of two former Bear Stearns managers in New York, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market.

Ralph Cioffi and Matthew Tannin, who have been the target of a probe by Brooklyn federal prosecutors, are suspected of misleading investors about the risky market.

Houston Arrests

A group of Houstonians are accused of defrauding banks and stealing $24 million in a fraudulent mortgage scam, KPRC-TV in Houston reported. Six defendants are suspected of recruiting people with good credit to act as buyers in fraudulent mortgage deals, prosecutors said.

Federal agents began making arrests early Wednesday morning, delivering defendants to the federal courthouse who are alleged to have operated the massive mortgage fraud ring. Officials said they were identified as mortgage loan officers or straw buyers who defrauded lenders of $24 million. The defendants were charged with conspiracy, fraud and money laundering. Named in the indictment were Latasha Bellow, Frankthea Williams, Ishmael Laryea, Charles Joseph Deshawn Wilson, Kristen Way and Robert Stanley.

The indictment alleges phony buyers were recruited to apply for loans to buy pricey condominiums in Houston and surrounding suburbs. The loan applications allegedly used fraudulent information to obtain millions of dollars that the defendants then pocketed, the indictment said.

Attorney Ed O'Suji represents Williams. "She's not guilty. She's been in real estate for the last five to six years. This is something she makes a living off of like any other real estate agent or broker," O'Suji said. Williams and two other defendants made federal court appearances Wednesday. Their bond was set at $50,000.

The remaining three were scheduled to appear in court on Thursday.

[All we can say is: It is about time! This mortgage fraud business was widespread and has significantly contributed to the housing crisis in general, and problems in our own little corner of the Universe in Santa Clarita. If some really high profile action were taken locally against some of these crooks, the real estate and mortgage business would improve their practices immediately!]

We were sent this article from NBC News by our favorite inspector team, John and Linda St George. Thanks!

Mortgage Rates Are Rising: Real Buyers Take Action

2008-06-18T18:55:00.000-07:00

Recent indication is that first time home buyers are getting tired of sitting on the sidelines. According to a recent online poll taken by the National Apartment Association, 17 percent of renters plan to make the jump to home ownership in the next year; 41 percent of the 2,041 respondents planned to be home owners within two years. Only 31 percent planned to still be paying rent five years from now.

Another factor that could very soon contribute to an increase in home buying could be rising mortgage costs. Fixed-rate mortgage rates rose to 6.32 percent, the highest it has been since October. After months of aggressively dropping interest rates, many lenders are worried that the Fed will be forced to raise rates back up. As interest rates rise, so do mortgage rates. According to a press release on freddiemac.com, Frank Nothaft, Freddie Mac vice president and chief economist said that, "Mortgage rates jumped this week after a number of Federal Reserve officials, most notably Chairman [Ben] Bernanke and Vice Chair [Donald] Kohn, expressed concern over a threat of inflation." We may very well be seeing the beginning of the end of the super-low mortgage and potential buyers may realize that with rising rates, now may be the time to jump in. Nothaft added, "Moreover, pending home sales for April unexpectedly rose by 6.3% and mortgage applications for home purchases ... were also up last week."

FHA waiting period change intended to help lenders get REOs off the books

2008-06-16T09:30:00.000-07:00

In an attempt to help lenders speed the process of getting real estate-owned
properties off their books, the Federal Housing Administration will temporarily
lift a 90-day waiting period for property resales financed by FHA-guaranteed
loans.

The 90-day waiting period -- instituted in 2003 to counter predatory lending
and house flipping -- never applied to properties sold by Fannie Mae, Freddie
Mac, or state- and federally chartered financial institutions.

But it can be hard to determine which lenders are exempt from the rule, and
many who are exempt prefer to transfer title to REO properties over to property
disposition firms that are not exempt, FHA officials say. Because a glut
of foreclosed and abandoned homes harms neighborhoods and delays a community's
recovery, FHA will lift the waiting period for one year.

"The action we take today will allow home buyers to purchase these homes
in much greater numbers and ease the excess supply of unsold homes in neighborhoods
across the country," said Federal Housing Commissioner Brian Montgomery in
a statement announcing the change.

But because FHA also requires that homes purchased with loans it guarantees
to be in "safe, secure and sound" condition, lenders still won't be able
to resell many of the homes they've foreclosed on to FHA-eligible buyers
until they make the repairs needed to bring them up to FHA standards.

"It's not going to have as much an impact as one would assume, because most
of the properties aren't going to meet FHA standards," said Glen Daniels,
director of real estate-owned properties for the distressed and foreclosed
property listings site, Foreclosure.com.

Daniels -- who once managed $243 million in REO properties for Ocwen Financial
Corp. -- said that if the previous owner of the house was unable to make
the mortgage payments, the chances are good that he or she was not keeping
up with maintenance.

Lifting the 90-day waiting period does give lenders more incentive to repair
REO properties, Daniels said. Under the old standard, lenders that chose
to renovate a property would still have to wait 90 days to sell to a buyer
using FHA loan guarantee programs.

With FHA loan programs accounting for a growing share of mortgage lending,
"I assume a lot more lenders will take that option, to rehabilitate a property,
bring it into FHA compliance, and sell to a home buyer" who is eligible for
an FHA-backed loan, Daniels said.

According to the Census bureau, there were 129 million housing units in the
United States, and 18.6 million were vacant during the first quarter. Those
vacancies include 4.1 million rentals, 2.3 million for-sale homes, and 7.5
million "vacant for a variety of other reasons" that include foreclosure.

While Daniels doesn't see FHA's new policy having a big impact in the short
run, it might help stabilize property values in the long run. That's because
if lenders choose to rehab properties before selling them, they won't discount
their asking price as much.

In justifying its waiver of the 90-day waiting period, FHA said it would
reduce the impact foreclosures can have on the value of adjoining and nearby
properties.

When FHA announced the 90-day waiting period in May 2003, it said the most
egregious examples of predatory lending were often seen on "quick flips,"
in which homes sometimes resold within a few days.

The rule, "FR-4615 Prohibition of Property Flipping in HUD's Single Family
Mortgage Insurance Programs," also requires lenders to obtain a second appraisal
on properties resold within 91 and 180 days if the resale price exceeds the
previous sale price by 100 percent or more (see letter to lenders).

FHA officials say the threshold was set relatively high to allow legitimate
rehabilitation efforts while deterring unscrupulous sellers, lenders and
appraisers from defrauding home buyers

But one veteran property rehabber told Inman News that convincing the FHA
that a property wasn't an illegal flip after the 90-day waiting period expired
could be "a nightmare."

"We would take a shell and turn it into a castle," said Duane LeGate, president
of HBN Interactive. "Half of the potential buyers couldn't qualify for my
properties because of the rule. Even when the 90 days expired, you had to
show FHA before-and-after pictures, full documentation of all work done to
'prove' that the property wasn't an illegal flip."

Foreclosures Cost Lenders, Homeowners, the Community, and You Big Bucks

2008-06-02T13:55:00.000-07:00

Earlier this month a reader, Pamela Norvell, wrote a suggestion for lessening the foreclosure crisis. She suggested a freeze and/or a rollback of interest rates to their original levels. In making her suggesting Ms. Norvell wondered what it was causing lenders to foreclose on properties rather than do a workout or a restructure. Made us curious too.

The cost of a foreclosure, it turns out, is pretty staggering and we wonder why lenders and the investors they represent aren't jumping at a solution, any solution, that would allow them to avoid going to foreclosure whenever possible.

According the Joint Economic Committee of Congress, the average foreclosure costs $77,935 while preventing a foreclosure runs $3,300.

The cost of preventing a foreclosure is not easily categorized. We assume that it includes the staff costs of talking to the borrower, collecting financial documents (a task we have noted seems unreasonably difficult for the borrower) reviewing the documents, ordering and reviewing the appraisal, the cost of that appraisal (more likely to be a less expensive brokers price opinion or BPO) and the preparation of a justification to decision makers for any workout plan.

We have seen figures from non-profits that the cost of averting a foreclosure through the use of credit counseling from a non-profit agency approved by the Department of Housing and Urban Development can range from a bit under $1,000 to $14,000 and we don't quite know what to do with that large and disparate range. We do know that counseling programs vary greatly and we assume that those on the high side include programs that provide emergency funds to homeowners to bring loans current while those on the low side are primarily advising and educating their clients.

But the $77,934 cost to foreclosure figure seems fairly easy to document and, compared to others that are widely bandied about - from $58,000 to 30 percent of the pre-foreclosure value of the house - seems reasonable.

First of all, the cost does not accrue totally to the lender. The homeowner has a typical loss of $7,200 which includes loss of equity in the property, moving expenses, and perhaps some legal fees.

Those neighbors living in close proximity to the foreclosed house suffer $1,508 in losses from the decrease in the value of their own home as the neighborhood begins to deteriorate.

The local government loses $19,227 through diminished taxes and fees and a shrinking tax base as home prices decrease. This is a hard number to justify. First of all, only a portion of the declining tax base is due to foreclosures. A big chunk of it is based on falling prices community wide. And we'll bet that even as we talk about it local governments are busy adjusting assessments and mill-levies to keep total revenues close to pre-housing crisis levels. This means that the neighbor's share of the costs should be higher as they absorb increased tax levels.

Also, while the cities and towns are permanently losing some income from fees such as trash pick-up and water and sewer charges, if and when the house is sold they will collect back property taxes or, if they remain unpaid, they will become the owners of the property through tax title. (That opens a whole new area of concern, but one for discussion on a different day.)

That leaves us with total costs of $50,000 for the lender under the numbers produced by the Joint Economic Committee of Congress. The Committee does not break out these figures but a new study from Standard & Poor's (S&P) does. While there is not a total match between the two sets of data, they are close enough.

The Committee includes the following in its list of pre-and post-foreclosure expenses:

Loss on property/loan
Property maintenance
Appraisal
Legal fees
Lost revenue
Insurance
Marketing
Clean-up

And S&P breaks them down as follows:

The largest component of the $50,000 is cash loss on the property. S&P pegs this number at $40,000 for a typical loan of $210,000. Investors who buy short sales tell us that the big lenders are unwilling to sell property or take payoffs for more than a 15 to 20 percent discount so these numbers are closely in sync. S&P however includes only the actual decline in property values in that 19 percent loss figure.

S&P assigns a staggering 26 percent of the loan amount for the costs of foreclosure. This category wraps up the remainder of the list above and include paying property taxes (3 percent, although many ignore this obligation, hoping to pass accrued taxes on to the eventual buyer), maintaining hazard insurance, legal fees (1 percent), an appraisal (although most lenders are choosing the far less expensive alternative of a brokers price opinion or windshield appraisal,) lost revenue (an estimated 13.6 percent of the loan amount) 6 percent marketing fees (broker's commission) and 3 percent spent on home maintenance.

There is a figure that is usually not taken into account - cash reserves. Bank regulations require that lenders put aside a percentage of their capital to cover potential losses. That amount, whether $100,000 or $500,000 is that much less that the bank has to loan to others and means more lost revenue.

It is obvious that no one is a winner in the foreclosure game. But we wonder if lenders and their real estate agents are not exacerbating the situation for all involved through their property management and marketing policies. A look at that later in the week.

from mortgagenewsdaily.com

'Top Ten Tips' Buyers Need to Know

2008-05-28T10:55:00.000-07:00

To help the first-time home buyer, the California Housing Finance Agency — known as CalHFA — has developed a list of "Top Ten Tips" prospective home buyers need to know before buying a home

1. Before starting to look for a home, get pre-qualified for a loan. Lenders will take an application, process the loan documents, and see the loan through to the funding stage.

2. Marginal or Bad credit — consult your lender. Buyers may still be able to qualify for a loan depending on how long ago and why the buyer’s credit was affected.

3. Buyers may need a down payment. CalHFA loans are all 100% financed Requirements do vary depending on the type of loan; however CalHFA offers many down-payment assistance programs which could include loans or grants depending on the down payment required. Talk with a lender about programs available.

4. Funds for closing costs. Closing costs are fees charged for services related to the closing of a real estate transaction. These fees could include, but are not limited to: escrow fees, title policy insurance fees charged by the title insurance company, mortgage insurance, fire, flood and homeowners insurance, county recorder fees, loan origination fees. Speak with a lender for an estimate of these costs.

5. Some loans have points and some do not. Points are fees charged by a lender equivalent to 1 percent of the loan amount. Some lenders may charge points in exchange for a lower interest rate. A CalHFA loan does not have points and limits the fees a lender can charge you.

6. Mortgage rates can be fixed or adjustable. This choice can be made based on whether mortgage rates are high or low, and how long the buyer plans on living in the home.

7. There are two main types of loan categories: Conventional mortgage loans are available with fixed or adjustable rate loans; Government loans include Federal Housing Administration, fixed- and adjustable-rate mortgage loans and Veterans Administration fixed-rate mortgage loans.

8. Low and moderate income home buyer. There are special programs designed to help. These loans are available through private lenders, as well as local and state housing agencies.

9. Mortgage insurance. Mortgage insurance protects the lender from loss if the buyer should default on the payment. Conventional loans usually require larger down payments and do not require this insurance. Mortgage insurance is required on FHA mortgage loans.

10. First-time home buyer counseling. There are multiple organizations that provide classes for the first-time home buyer. These classes will cover home selection, Realtor services, lenders, loan programs, home ownership responsibility, saving for a down payment and other important information.

Countrywide CEO Mozilo's "Disgusting" Email Reply: OOPS!

2008-05-22T13:50:00.000-07:00

Wednesday, 21 May 2008
Countrywide CEO Mozilo's "Disgusting" Email Reply: OOPS!
Posted By:Diana Olick
cnbc.com

The very idea of blogging this story makes my stomach churn, but there are some things I am simply morally required to do. So here goes.

You’ve done it, and I’ve done it, and now Countrywide Countrywide Financial CEO Angelo Mozilo has done it. He hit “reply” instead of “forward” on the computer. For most of us, the mistake usually results in a “DOH!” and perhaps and explanation and/or apology, but Mozilo’s is now resulting in an online slam-fest.

Why? Because Mozilo proved what so many were thinking, that he doesn’t have a whole lot of compassion for a whole lot of his customers, especially the ones in trouble.

According to the L.A. Times, one of those customers, Daniel Bailey Jr., wrote an email to Countrywide asking that the terms of his loan be modified. Like so many others, his adjustable rate loan reset, and now he can’t make the payments.

Countrywide has been publicly begging for troubled borrowers to contact them. In fact, I’ve sat through several press conferences at the Treasury Department (touting the Hope Now alliance), where some Countrywide rep says the biggest problem they have is that they can’t reach all the troubled borrowers in order to help them.

Okay, so Mr. Bailey sends the email, but he uses a form letter that you can get from a website called LoanSafe.org. He says he needed help with the wording. Anyway, the email goes out to about 20 Countrywide addresses, including Mozilo’s.

Mozilo, who has gotten tons and tons of these, writes, “This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the Internet. Disgusting.”

He meant to send it to someone else, but oops, that darned “reply” button. Mr. Bailey, of course outraged at the reply, then posts it on LoanSafe.org.

Scandal! Now the web is awash with all kinds of criticisms being hurled here and there (and not all of it against Mozilo). Countrywide ends up issuing a statement: “Countrywide and Mr. Mozilo regret any misunderstanding caused by his inadvertent response to an e-mail by Mr. Bailey. Countrywide is actively working to help borrowers, like Mr. Bailey, keep their homes.”

Now I get all kinds of news releases from Countrywide spammed at me ad nauseum. I didn’t get that one.

Is the Housing Crisis Over?

2008-05-06T10:31:00.001-07:00

[The following article is making waves on CNBC this morning. It follows my own announcement at the Friday MLS meeting in early April that 'the housing market has reached a bottom'. I got a lot of comments after that, but I can take it. That is not to say that prices will now rise (I don't think they will0, or that individual homes, neighborhoods, and cities may continue to have price declines that will show up. But I do think that we have reached an inflection point in market activity that is a real change from the 'free fall' in prices that we have been experiencing. What do you think?]

The Housing Crisis Is Over
By CYRIL MOULLE-BERTEAUX
Wall Street Journal Opinion Article
May 6, 2008; Page A23

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.

Not Many Positives Coming Out of Jumbo Mortgage Changes

2008-05-06T10:31:00.000-07:00

With the House and Senate working to hammer out differences in their respective approaches to solving the housing/credit crisis, problems are already emerging with other solutions proposed or enacted tackle pieces of the problem.

The New York Times reported on Wednesday that there are real problems with the jumbo mortgage aspect of housing rescue.

Several months ago Congress, in an attempt to loosen up credit in costly markets, raised the loan limit on loans which could be backed by government-sponsored housing finance agencies such as the Federal Housing Administration from $417,000 to amounts up to $730,000, depending on location. The change was intended to reduce rates for more borrowers (jumbo loans have always carried a higher rate than conventional loans, i.e., those below the loan ceiling) and to stimulate lending. The goal was not aimed at helping subprime borrowers but was aimed at credit-worthy borrowers with acceptable down payments who wanted to refinance or purchase a home in expensive housing markets like San Francisco or New York. It was thought that helping thousands of borrowers access billions in new loans would stimulate the housing market, spur consumer spending and possibly avoid or at least reduce the effects of a recession.

Instead, Matt Richtel, reporting in the Times says the effort to make it easier to get jumbo mortgages has yielded frustration and disillusionment. Since the rules took effect April 1, many borrowers and their mortgage brokers say the new loans are either not available or the rates are far higher than they expected.

Richtel quotes the president of one mortgage corporation as saying that the program "is so much of a failure that it's really unbelievable. Like coming up with a vaccine to a terrible disease, and then not giving it to people, or making it too expensive."

But, Richtel said, rates have not dropped, at least not to the degree that many borrowers and mortgage brokers had expected. In some cases, "conforming" loans, so designated because they conform to the old government-sponsored rules, are a full percentage point below the newly conforming jumbo loans intended to be covered by the new law.

One reason that the loans are not competitive has to do with that now familiar word, securitization. Lenders can package and sell conforming loans as mortgage-backed securities either on the open market or to Fannie Mae or Freddie Mac. The private sector is open to these securities because they know that they can resell them later to housing finance agencies. Thus the conforming loans can offer a lower interest rate to borrowers.

Freddie Mac recently announced it would buy up to $15 billion of the newly defined loans. That could lead to more loans and lowered interest rates, but there is not a lot of time. At the end of the year the system is supposed to revert to the old loan limits and lenders as well as secondary investors are hesitant about changing rules and operations for a short time.

Two other major initiatives, a program run by the Federal Housing Administration and proposed Federal Reserve rules on lending which are about to emerge from the comment period, are also under attack. We will take a look at these as well as attempt to catch up on the status of the very different housing bills passed by the House and Senate which are being worked out in compromise committee.

[I can attest to the continued sluggish activity with those properties priced for sale and needing financing above the conventional $417,900 loan limit. We expected a boost and more normalization in sales in our local area as a result of the increase in the 'super conforming' limit, but it just has not happened so far. ~~ Ray]

Foreclosures Must Be Averted for Sake of the Economy

2008-05-06T10:24:00.000-07:00

Fed Chairman Ben Bernanke said accelerating rates of foreclosures and delinquencies can have a significant impact on the economy and called for more to be done in order to prevent them.

Speaking Monday night at the Columbia Business School's 32nd annual dinner, Bernanke said the rate of foreclosures will likely increase in 2008 and that traditional anti-foreclosure steps may not be working to prevent them. He also said sharp declines in home prices can have a negative impact on the overall economy.

"High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets, and the broader economy," he said. "Therefore, doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest."

He said government-sponsored enterprises Fannie Mae and Freddie Mac should raise more capital and "could do more" to help ease the crisis. He also called for clear disclosures of home-loan modifications.

"Additional government policies can help address problems in the mortgage markets," he said. "The Congress can take an important step by moving quickly to reconcile and enact legislation permitting the Federal Housing Administration (FHA) to increase its scale and improve its management of risks."

Bernanke also said the best solution is sometimes a mortgage writedown.

Bernanke did not comment on the outlook for interest rates.

By Stephen Huebl and edited by Nancy Girgis

[No kidding, Ben.]

If You Are in a Hole, Stop Digging

2008-04-26T06:57:00.000-07:00

I often listen to CNBC when I am working on the computer (if I am not on the phone). I am amazed how often I hear (or read) about the bottom of the housing market. Often we hear that the stock market is predicting the bottom. I wonder if any of these cheerleaders actually looks at the relevant statistics. Again, let's do some basic arithmetic so that even a Realtor can understand.

Yesterday we found out that new home sales are running at an annual rate of 526,000, the lowest number in almost two decades. The supply of new homes, in terms of the amount of time it would take to work through the inventory available for sale was 8.4 months last October. It is now an even 11 months. (source for data: www.weldononline.com)

How many homes did the home building industry start building last month? Housing starts were running at an annual rate of 947,000. Permits for new homes was 927,000. That means the industry is building over 400,000 more homes than they are selling. Add in a million or so foreclosures. Kill the subprime market. Really make it hard to get a loan securitized for anything but government backed mortgages.

Home construction is going to drop precipitously before the inventory of new homes is worked through. Those who are predicting a rebound this quarter are simply not paying attention to the basic math. New home prices are down 13.3% year over year. They are going much lower. Margins are going to get squeezed. Now maybe the market is pricing all this in. But I think there are better places to gamble than the home builders.

Are you paying attention, Lennar?