Be persistent during ordeal of short sale
Approximately one in five homeowners is “underwater” – meaning they owe more on their mortgage than their home is currently worth. For borrowers in default or at risk of defaulting, selling their house for less than is owed, often termed a short sale, may be the only option. However, short sale offers must be accepted by the bank that owns the mortgage, and can take as long as a few months before an offer is accepted.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Some home buyers are submitting unrealistically low offers on bank-owned properties, hoping to purchase a home at a bargain price. Low offers often use valuable time and resources that could be dedicated toward more favorable offers more likely to garner bank approval. It is vital that home buyers work closely with their REALTORS® to submit appropriate offers, especially when dealing with a short sale property.
• Theoretically, short sales should be a win-win for the bank and the homeowner. Although the bank does not receive the full payment on the mortgage, it also does not incur the costs of foreclosure and/or eviction, if necessary. Many homeowners also prefer short sales because it does less damage to their credit score than a foreclosure. However, many real estate experts say that the majority of banks are reluctant to approve short sales, and often let properties go into foreclosure, even when there are reasonable offers on the property. In addition to considering the price, most lenders also take into consideration whether the homeowner can demonstrate financial hardship. If the homeowner is capable of making payments, many lenders will try to work out a loan modification, rather than a short sale.
• Short sales often are more time intensive than traditional transactions and often require additional paperwork. Due to the large number of short sale offers, many take as long as a few months to receive approval. If information or required forms are missing or incomplete, the bank may set the offer aside, which could delay the process and cause the property to go into foreclosure. To expedite the process, it is important that sellers work closely with their REALTOR® to provide all of the necessary paperwork.
To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/30/BUIQ14C4F5.DTL
Finding an area with appreciation potential
Some real estate experts believe that home buyers who purchase a house during the current market will gain equity if they stay in the house for at least five years and purchase in a desirable neighborhood.
MAKING SENSE OF THE STORY FOR CONSUMERS
• Neighborhoods with strong employment bases, such as hospitals, universities, and government, tend to be recession-proof. People desire to live near their jobs, so housing that is in close proximity to these types of industries are generally in higher demand than those in other areas.
• High gas prices and roadway congestion have led many people to seek “walkable” communities – neighborhoods that offer both daily needs such as grocery stores and coffee shops to more specialty items like hair salons, all within walking distance. Walkable communities also provide public transportation, which is becoming more desirable to many home buyers and is increasing demand for housing in these areas. One Web site, walkscore.com, calculates the walkability of a community by locating stores, restaurants, schools, parks, and other attractions that are within walking distance. The scores are based on a 100-point scale with 100 points being a “walker’s paradise.”
• Home buyers who seek a new or nearly-new home should search in areas where the homebuilder is known for honoring warranties and building high-quality homes that are structurally sound. Homes in these areas are more likely to weather well and gain value in the future than homes in areas where the homebuilder is unknown.
• Homes in neighborhoods with sales momentum generally appreciate at a faster pace than areas where sales are flat. Some real estate industry consultants advise clients to pay close attention to the “list to sale” numbers, which reflect the difference between the asking price and the final closing price. Usually, if the gap in list-to-sale numbers is narrow, then the real estate market in that area is improving.
To read the full story, please click here:
http://www.chicagotribune.com/classified/realestate/advice/chi-select-neighborhood_chomes_1oct31,0,5272949.story
Housing Prices INCREASING despite reduced demand
By Tim & Julie Harris – REO Specialists and owners of www.agentreosecrets.com
Interest rates are INCREASING for the best borrowers….
Rates on average 30-year fixed mortgages rose to 6.37 percent this week, about the highest in six years. More than 70 percent of new home loans are bought or guaranteed by the government-chartered companies, known as “prime” mortgages.
Higher rates for the safest borrowers may exacerbate the worst housing market since the Great Depression and thwart efforts by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson to bring mortgage rates down. The slowest-growing economy since 2001 is already shutting out some buyers and increasing costs for those seeking to borrow with smaller down payments or below-average credit scores.
As rates rise, sellers are forced to lower prices for buyers seeking to make the same monthly payments. A rate of 6.37 percent equates to a monthly payment of $1,871 on a $300,000 mortgage, up from $1,739 when rates were as low as 5.69 percent in May, according to data from Bankrate.com in North Palm Beach, Florida.
What the heck is going on?
My clients, co-workers, referral partners, family and friends are all asking “what the heck is going on?” And it’s truly a question I am getting hourly. Here’s an in-depth look at some of the cause of the current situation we are in so you have an overview understanding. We ALL are learning more and more about our economy and how it “really works” daily.
Whatever the political posturing, a plan needs to be passed – and passed soon. Credit markets are frozen and banks are going bust every day. This is not totally because of so-called “toxic” mortgages as the media has portrayed. This has a lot to do with new legislation and rules passed last year by the SEC (Securities and Exchange Commission) and the FASB (Financial Accounting Standards Board) with the SEC’s elimination of the uptick rule for Wall Street and the FASB’s 157 ruling, also known as “mark to market”.
Uptick rule: The uptick rule was a securities trading rule used to regulate short selling in financial markets. The SEC eliminated the uptick on July 6, 2007 causing short-selling to be at record levels by early 2008 and wild swings of the markets. The problem with the elimination of the uptick rule is that without it, short sellers were devaluing perfectly solid stocks. On September 19, 2008 the SCE halted short-sales temporarily of 799 financial stocks.
FASB 157: http://www.fasb.org/st/summary/stsum157.shtml Each day lenders must mark their assets to the marketplace. It’s like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But “mark to market” does not allow for this, which creates a vicious cycle.
Why is this so bad? Because as lenders mark down their assets the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to “mark to market” requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio…at cheap prices. And this makes the vicious cycle continue.
And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages, are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn’t just A paper or B paper etc. it’s everything. Its got some A paper, B paper, C paper, and even what looks like toilet paper. An “A” investor buys the whole pool but because they are an “A” investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.
Now add to all this the opportunistic shorting that was done, while the uptick rule was eliminated, on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector mentioned able.
As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posture from both sides is just part of the process – and it is never, ever pretty.
This is not easy to understand for the general public. In fact most politicians don’t get this either. That’s why it is a difficult yet critical bill for them to vote on.
Once this bill is done it will take some time but the markets will stabilize. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to fix our industry. We just need to be patient.
I hope that you found this ecomonic information helpful and informative – as it’s important to me that my clients, referral partners, family and friends are kept up-to-date and in-the-know! If you have any questions whatsoever, let me know.
Make it a great day!
Jeff Cook
Senior Loan Officer
Metro Sunset Mortgage
Phone: 310.623.1307
Fax: 866.445.7068
jwcook@metrocitiesmtg.com
www.MetroSunset.com
Mortgage 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.
Ernest Tepman
President
The OCD Group Inc.
Los Angeles: 800-963-4623
San Diego: 877-863-4623
E-Mail: mmg@theocdgroup.com
Should you buy a home now?
Thursday, August 07, 2008
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
With home prices in California declining by 37.7 percent in June compared with a year ago, some consumers are wondering if now is the right time to purchase a home, or if they should wait for prices to stabilize. Some real estate experts believe that home prices will continue to decline and that buyers should wait, while others recommend that home buyers take factors other than price into consideration, such as the benefits of owning versus renting.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Consumers who are hesitant about purchasing a home today because they fear price depreciation, need to understand that real estate is cyclical and that prices will increase again. Home buyers should view a house as a long-term investment and not be fixated on short-term prices. Some economists believe that consumers should purchase a house if they plan to live in or hold the property for at least seven years. This will allow the market to stabilize and homeowners to possibly profit from their investment, if they decide to sell.
· Although a typical monthly mortgage is higher than a rent payment, home buyers who qualify for a fixed-rate mortgage, such as those backed by the Federal Housing Administration, will have consistent monthly payments, while renters are generally subjected to annual rent increases. Mortgages also can be paid off and the house can be owned free and clear, while renters will consistently have a monthly payment.
· To help home buyers lower the financial risk of homeownership, experts recommend that consumers purchase a home within their means and have enough in savings or other assets to cover the mortgage payment for at least six months if they lose their job.
California’s Discount Foreclosure Sales Point to Housing Bottom
Thursday, August 07, 2008
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
Recent economic developments indicate that California may be the first state to find the bottom, based on the increase in sales volume in the previous three months. In June, home sales rose for the third consecutive month, following a 30-month decline. Although approximately 40 percent of the transactions were foreclosure sales, the increase is allowing the market to stabilize by depleting some of the excess inventory. Some experts believe that once a neighborhood’s median home price declines to 50 percent from the peak value that the homes in that neighborhood will no longer depreciate.
MAKING SENSE OF THE STORY FOR CONSUMERS
· Although California leads the nation in foreclosures, the state’s foreclosure process is more efficient than other states, which likely will lead to a quicker rebound. Foreclosed properties are receiving multiple bids and financial institutions are selling these homes quicker than the market would typically allow.
· The Unsold Inventory Index in June decreased to 7.7 months from 10.2 months a year earlier, demonstrating that the market is improving.
FORECLOSURE RELIEF BILL BECOMES LAW
Friday, July 11, 2008
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
This week, the State Legislature enacted foreclosure reform law to address the adverse effects of high foreclosure rates in California. The new law requires lenders to contact homeowners to explore options for avoiding foreclosure at least 30 days before filing a notice of default. It also requires owners acquiring property through foreclosure to maintain the exterior of vacant residential properties. The new law also extends from 30 to 60 days the time for residential tenants to move out of properties that have been foreclosed upon, unless other laws apply. These requirements will remain in effect until January 1, 2013. The full text of Senate Bill 1137 (Perata) is available at www.leginfo.ca.gov.
Highlights of the new law are as follows:
Contact Between Lender and Borrower
Effective on or about September 8, 2008, a lender, trustee, or authorized agent may not file a notice of default until 30 days after contacting a borrower to assess the borrower’s financial situation and explore options for avoiding foreclosure. A lender must generally contact the borrower in person or by telephone, or satisfy due diligence requirements for contacting a borrower. During the initial contact, the lender must inform the borrower of the right to request a meeting with the lender within 14 days. The lender must also give the borrower the toll-free number for finding a HUD-certified housing counseling agency. A subsequent notice of default must include the lender’s declaration that it has contacted the borrower, tried with due diligence to contact the borrower, or the borrower has surrendered the property. A lender who had already filed a notice of default before the enactment of this law must include a similar declaration in the notice of sale. This requirement to contact borrowers applies to loans secured by owner-occupied residences made from 2003 to 2007. Certain exemptions apply if the borrower has filed for bankruptcy, surrendered the property, or contracted with a person or entity whose primary business is advising people, who have decided to leave their homes, on how to extend the foreclosure process and avoid their contractual obligations.
Maintenance of Vacant Properties
Effective July 8, 2008, anyone who acquires property through foreclosure must maintain the exterior of vacant residential property. Violations of this law include permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action against trespassers or squatters, failing to take action to prevent mosquitoes from breeding in standing water, or other public nuisances. This law authorizes a governmental entity to impose a civil fine up to $1,000 per day for any violation, as long as the owner has been given notice and an opportunity to remedy the violation. A violator must be given at least 14 days to begin, and 30 days to complete, such remediation before a fine can be assessed.
60-Day Notice to Terminate Tenants
Effective July 8, 2008, a tenant or subtenant in possession of a rental housing unit that has been sold through foreclosure is generally entitled to a 60-day written notice to quit, not just 30 days. However, a borrower who remains on the property after foreclosure may be served a three-day notice to terminate. This law does not affect, among other things, rent-controlled properties with just-cause evictions. Effective on or about September 8, 2008, the lender, trustee, or authorized agent posting a notice of sale must also post and mail a specified notice of a tenant’s right to a 60-day eviction notice from the new owner, unless other laws apply. This requirement to notify tenants of their rights applies to loans secured by residential real property where the borrower has a different billing address than the property address.
U.S. economy: Consumer confidence, house prices slide
Thursday, June 26, 2008
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
The Conference Board reported that its confidence index fell from 57.2 in May to 50.4 in June thanks to the housing downturn, higher unemployment and the rising cost of food and fuel. The last time the index was this low was in February 1992, when the economy was beginning to recover from the 1990-91 economic downturn.
The S&P/Case-Shiller index fell by 15.3 percent in April from the previous April, continuing March’s 14.4 percent year-over-year decline. However, eight of the 20 cities included in the index experienced month-over-month increases in prices. That shows cities “are beginning to sort themselves into the bad and not-so-bad,” said economics professor and index co-founder Karl Case. “It’s not like the whole market is collapsing.”
California cities included in the index continued to experience price declines: In Los Angeles, the index fell 2.2 percent from March to April and 32.1 percent year over year. San Diego was down 2.6 percent for the month and 22.4 percent compared with April 2007, and San Francisco declined 2.2 percent in April and was 22.1 percent below last April’s index.
To read the full story, please click here:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aX6aDvhPpltY&refer=home
U.S. home slump harder to reverse than usual – Harvard
- Homebuyers remain on the sidelines as they face the highest mortgage rates in nine months and stricter lending criteria. The Federal Reserve?s efforts to keep interest rates low with the hope of stimulating buyer activity has largely fallen on deaf ears as potential homebuyers watch prices continue to slide in many areas of the nation courtesy of a large inventory of foreclosed properties for sale.
- Director Nicolas Retsinas observed that housing markets “historically recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability. It will take longer to rebound given the unusually high levels of foreclosures and constrained credit markets. The slump in housing markets has not yet run its full course.”
- The report concludes: “…if the economy slips into a recession or job losses keep racking up, household growth and homeownership demand could fall even more.”
To read the full story, please click here:
http://www.reuters.com/article/marketsNews/idUSN2347133320080623?sp=true
California unemployment hits 6.8%
- California’s unemployment rate trails four other states: Michigan, Rhode Island, Alaska and Mississippi. Some 1.26 million Californians were unemployed in May, up 115,000 from April and 300,000 higher than in May 2007. The state posted a net loss of 10,900 jobs in May, primarily in construction. However, there were net gains in jobs in education and health services, natural resources and mining, information, leisure, and hospitality.
- The state’s employment situation could worsen later this year under the weight of state and local government budget cuts and a threatened actor’s strike.
- Economists say an employment recovery may be as long as a year off. That’s when the construction sector is expected to benefit from billions of dollars in public infrastructure projects approved by California voters.
To read the full story, please click here:
http://www.latimes.com/news/printedition/front/la-fi-caljobs21-2008jun21,0,5760427.story
Fannie, Freddie Fail to Relieve Housing by Shunning Jumbo Loans
- Jumbo loans of more than $417,000 accounted for about one-third of the mortgage market last year and represented a fifth of all mortgage applications in May, sources say. Since March, however, Fannie Mae has packaged only $24 million in jumbo loans into securities while Freddie Mac has packaged about $220 million. Meanwhile, the two companies invested more than $32.4 billion to buy their own securities, according to regulatory filings.
- The NATIONAL ASSOCIATION of REALTORS® (NAR) had projected the two companies would buy $150 billion in jumbo loans this year. UBS AG now predicts that total may be less than $74 billion. Freddie Mac has said it would buy between $10 billion and $15 billion in jumbo loans this year.
- The two companies own or guarantee almost half of the $12 trillion in U.S. residential mortgage debt. They experienced record losses totaling $11.8 billion over the last three quarters as mortgage defaults climbed to 30-year highs.
To read the full story, please click here:http://www.bloomberg.com/apps/news?pid=20601103&sid=a57eFJtEHSHI&refer=us
