2 Savvy Partners In A World Of Realtors

New Conforming Loan Limits

2011-07-14T16:02:00.000-07:00

Conforming loan limits, which had been raised for many high-cost areas throughout the country to a maximum of $729,750, are expected to expire September 30, 2011. After this deadline, high-balance loans will once again be classified as "jumbo" and carry a higher interest rate.

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The Housing and Economic Recovery Act of 2008 raised the maximum conforming loan limit in the contiguous United States, the District of Columbia and Puerto Rico to $729,750. Alaska, Guam and the U.S. Virgin Islands have a higher high-cost conforming loan limit of $938,250.

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If you are in the market for a home in a high-cost area, now is the time to take advantage of higher loan limits while they are still in effect. Instead of paying the higher interest rates typically associated with jumbo loans, you could get a better rate with a conforming loan. Act now and potentially save thousands of dollars over the life of your loan!

"Safe Haven" Impacts Home Loan Rates

2011-04-21T15:41:00.000-07:00

Robert Clark (Prospect Mortgage)

Recent news reports from Japan and the Middle East have been impacting our markets as Traders attempt to manage risk. But do you know how this impacts home loan rates?

Here’s What You Need to Know
The first thing to understand is the concept of "safe haven trading." At times of global unrest and uncertainty, like the nuclear crisis in Japan and ongoing fighting in Libya, Traders park money in "safe" investments like Bonds. And since Bonds such as Mortgage Backed Securities (MBS) are tied to home loan rates, when Bond pricing improves, our home loan rates can improve.
But it's also important to understand how incredibly volatile this situation is. A "safe haven trade" is a short-term trade. Should events around the world become more stable, this safe haven trade can unwind very quickly - with Bond prices and home loan rates worsening as a result.
In addition, we cannot overlook the impact of inflation, which is the archenemy of Bonds and can negatively impact home loan rates. One news item that pressured Bonds recently was word that inflation in the United Kingdom (UK) jumped to the highest level in two years in February. This is important because inflation around the globe can seep into the US.
In fact, we're already seeing it as the Fed's favorite gauge of inflation - the Personal Consumption Expenditures (PCE) Index, was reported up in February. Additionally, Producer Prices are running at hot levels...with prices up 3.3% in just the last three months. If pricing pressures don't recede for producers of goods and services, companies will have one of two choices:

Either: Absorb the higher cost of goods - and, thereby, hurt earnings growth.

Or: Pass those increased costs onto consumers - thereby, creating consumer inflation.
Both of those scenarios would be bad for Stocks and Bonds. And since home loan rates are tied to Mortgage Backed Securities - which are a type of Bond - those scenarios would also be bad for home loan rates.

The Bottom Line

If inflation is allowed to grow, it can be very difficult to rein in and control...and this will hinder improvement in home loan rates. And, when the situations in Japan and the Middle East eventually stabilize or improve, we could see further unwinding of the "safe-haven" buying of US Bonds, which will also hinder improvement in home loan rates.

The Good News

Fortunately, home loan rates are still at very attractive levels for now. So if you've been thinking about purchasing or refinancing a home, this is the time to see how you can benefit before rates possibly move higher.

Lower Payment vs. Lower Rate Of Interest.

With interest rates still near historically low levels, an argument can certainly be made for people considering a shorter mortgage term, such as a 15-year fixed rate mortgage. But there are some important factors to consider.
Of course, the greatest benefit of choosing a shorter term is knowing that the mortgage will have a zero balance in 15 years, saving the borrower thousands and thousands of dollars in interest payments over 30 years.
However, the lower rate and shorter term come at a monthly cost for borrowers. The difference between the monthly payment for a 30-year fixed and a 15-year fixed can add up to hundreds of dollars more per month for the 15-year fixed. And in these tough economic times, "cash is king." That is, "cash on hand" is king.
Therefore, many people may be better served by having a smaller mortgage payment under a 30-year fixed - and then saving or investing the extra money. Note, saving and investing rather than spending the extra money is the key point here.
In particular, people who find themselves without a job or who have a pressing financial need would benefit from being able to access these saved funds.

Best Path for all Prospective Borrowers

If you or someone you know is looking to refinance or buy a home, you should remember that a number of attractive mortgage options are still available. However, since an individual's or family's mortgage payment is often their largest monthly payment, it's important to get advice about your unique situation in order to make the best decision.
Call or email today to discuss which options you should consider based on your short- and long-term financial objectives. We can break down the projected costs of those options - not only for the complete term of the mortgage but also for the time you expect to have the mortgage in effect.

Q&A: Impact On Credit Scores?

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QUESTION: Can a Home Equity Line of Credit (HELOC) impact my credit score?.
ANSWER: Credit expert Linda Ferrari (author of "THE BIG SCORE: Getting It and Keeping It, Buying Power for Life") explains that HELOCs are commonly categorized as revolving accounts. As a result, they are rated using the "Balance to Limit" ratio scenario, which can drop a credit score by as much as 75 points if the HELOC is maxed out to the limit of the available credit line.
If you or someone you know has a HELOC, Ferrari recommends sending a Certified Letter (along with a copy of the HELOC agreement) to the three credit bureaus asking them to change the type of account from "Revolving" to "Line of Credit" or "Other" which can help improve your credit score.

Ten Things Everyone Should Know Before Moving

2009-11-18T10:48:00.000-08:00

(Stewart Title - Camarillo)

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1. What to tip the movers
If you are being moved state-to-state, tipping etiquette is 10 percent of your total bill. If you are being moved within the state, $10 to $20 per mover is adequate. If you are moving yourself, you can often arrange through your truck rental company to have unpackers meet you at your destination.

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2. Create a box checklist
On each box, write a number and the name of the room where the contents belong, then list them on a checklist. For example, “Bedroom: Boxes 2, 3, 4, 15.” Keep one copy and give one to the movers. While this may at first sound too Type-A for you, note that oftentimes movers load boxes from several families onto one truck. So if a box is misdelivered, you might not be the only one laughing at your high school yearbook picture.

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3. Dogs can get carsick
Letting Fido ride shotgun with the window down reduces his nausea.

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4. Fish can also get carsick
Sometimes, it seems, fatally. Keep the fishbowl as still as possible, placing it in a box on blankets.

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5. Wood flooring needs several days to acclimate
Wood flooring can’t be installed the day it arrives — or the next day, or the next day. It must acclimate, lying in open containers on the floor for several days. This is a handy thing to know when trying to assure that your floors will go in before your boxes arrive.

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6. Give a trusted neighbor a spare key to your old house
There is always a chance something will need checking or get left behind.

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7. Keep computer start-up disks with you
What if the laptop you have with you crashes while your disks are in transit?

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8. Hire a cleaner
A move is stressful enough without tackling the two-foot dust bunnies left in its wake.

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9. Tape all sundries to their associated electronic devices
Did you know that some DVD players won’t allow you to play the next episode on your DVD unless you use the arrow key on your remote? To avoid experiencing this phenomena yourself, place all equipment for each electronic device in a ziplock baggie and tape it to the device before boxing.

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10. How to pack green
Instead of paper or bubble wrap, use your own towels and scarves to wrap breakables. This is environmentally conscious and efficient, plus your new basement won’t be filled with packing supplies. Note: Cockroaches love to play in wads of paper.

Time To Take The Plunge?

2009-11-18T10:33:00.000-08:00

(Stewart Title - Camarillo)

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A few key signals can show whether it's the end for falling home prices.

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When a real estate market is experiencing falling home prices, everyone wants to know the same thing: “Have we hit bottom yet?” Homeowners want to know so they can stop reading the latest real estate news with a bottle of antacids and a full shot glass by their side. Home buyers, whether first-timers or seasoned investors, are looking for the right time to get the most for their money. Unfortunately, just as it’s impossible to know exactly when a local market has reached its peak, it’s equally improbable to know for certain when home prices have hit bottom. Like any mystery, however, even when there's not hard-core evidence showing the status of the market, there are always clues. These can help you decide to dig in your heels or proceed with conviction.

Taking stock of the market

“The most important indicator is inventory,” says Daniel Herron, a Realtor with Keller Williams Advantage Realty in Denver, Colo. “Specifically, how many homes coming on the market versus how many homes that are coming off.” Inventory is simply the number of homes for sale. The inventory is often reported for the entire country, a region, state or city. Your Realtor can document the inventory in an area of your town, or even a specific neighborhood. Think of a car lot. If a dealer has too many cars, then you know you can probably get a good deal. If you want a model that is particularly popular, such as a hybrid when gas prices are high, you are likely going to have to pay sticker price or even more. The same inventory model works for real estate. To gauge where a local real estate market is headed, you should look at the last three months of inventory and compare that to the last six months – “enough time to see a genuine trend,” Herron says. Look to see whether inventory is rising or falling. A study in the Denver area, for example, showed inventory dropped 21 percent from May 2008 to May 2009, he said. More importantly, the supply of homes dropped from six to 5.1 months. Generally, a six-month supply – this is a hypothetical situation where at the current pace of sales, there would be no homes remaining to buy after six months if no new homes were put on the market – is considered a balanced market. Anything above six months is a buyer's market. In markets hardest hit by the downturn, the housing supply in some cities was 24 months or more.

Looking for a bottom

Herron says another key indicator to where a local real estate market is heading is the number of days houses are on the market (DOM) before they sell. If the DOM is falling, it shows that buyers are motivated to make a purchase. Although it may not be ironclad, it’s fair to assume a market has at least touched bottom if you can document a declining inventory over a three- to six-month period (supply falling) and there is a steady decline in DOM (demand rising). It’s important to compile these figures for the immediate area and home type you are considering because statistics from a larger area will be misleading. The numbers in the study Herron sited were for the Denver area. But not every neighborhood was the same because the real estate market can vary considerably from neighborhood to neighborhood. He notes that in the Denver neighborhood of Green Mountain, for example, there was just a two-month supply of homes over the previous six months -- which was much lower than the inventory for Denver as a whole. Home prices in this area were at $250,000 or less. But homes in more expensive areas nearby, where properties were above $600,000, were taking 20 to 22 months to sell. In this scenario, looking at too large an area could lead a buyer looking to purchase in Denver's Green Mountain neighborhood to not act quickly enough at the low end and too quickly at the high end. Bill Garber of the Appraisal Institute, a trade organization for real estate appraisers, says another important real estate indicator is fewer seller concessions. These are “non-real estate items, carrots to buyers to make them purchase a house,” says Garber. When sellers are fighting for buyers, they sometimes offer everything from cash back to vacation trips to buyers, which would inflate the real value of the house. Buyers should talk to a couple of local appraisers and their agent to see if seller concessions are waning, which indicates a shift to a normal or even a seller's market. “A $500,000 house is not a $500,000 house if it’s sold with a new Lexus in the garage,” says Garber.

Homebuyer Tax Credit Extended 6 More Months

2009-11-02T15:39:00.000-08:00

By Scott Schang

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Well, this looks like the news we’ve been waiting on…..all indications are that there is an agreement on extending and expanding the Homebuyer Tax Credit until the end of April, 2010.
The compromise also allows for the credit to be available to any homebuyer that is in contract by the April 30, 2010 deadline as long as they close escrow by June 30th, 2010.
The expansion of the credit includes increasing the income limits to $125,000 for single tax payer and $225,000 to couples filing joint tax returns. A reduced credit of $6,500 is going to be available if they have lived in their homes for the last 5 years and are “buying up” to a larger principle residence.
Does this mean that it’s a done deal? No, not exactly, but I would call it a 99.987% sure thing at this point!

California Housing Report Shows Signs Of Improvement

2009-10-27T15:54:00.000-07:00

(Stewart Title - Camarillo)

Home sales in California remained on the incline, while median price dropped. Further details reveal the average mortgage rate, time spent on the market and more. Read on for highlights from the most recent report from the California Association of Realtors. (8/31/2009) Home sales increased 12 percent in July in California compared with the same period a year ago, while the median price of an existing home declined 19.6 percent, reported the California Association of Realtors (C.A.R.). Closed escrow sales of existing, single-family detached homes in California totaled 553,910 in July at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local Realtor associations statewide. Statewide home resale activity increased 12 percent from the revised 494,390 sales pace recorded in July 2008. Sales in July 2009 increased 8.1 percent compared with the previous month.
The statewide sales figure represents what the total number of homes sold during 2009 would be if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during July 2009 was $285,480, a 19.6 percent decrease from the revised $355,000 median for July 2008, C.A.R. reported. The July 2009 median price rose 3.9 percent compared with June’s $274,740 median price. Highlights of C.A.R.’s resale housing figures for July 2009: C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in July was 3.9 months, compared with 6.9 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate. Thirty-year fixed-mortgage interest rates averaged 5.22 percent during July, compared with 6.43 percent in July 2008, according to Freddie Mac. Adjustable-mortgage interest rates averaged 4.82 percent in July, compared with 5.24 percent in July 2008. The median number of days it took to sell a single-family home was 39.9 days in July, compared with 47.8 days for the same period a year ago.
In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 23 of the 398 cities and communities reporting showed an increase in their respective median home prices from a year ago. Statewide, the 10 cities with the highest median home prices in California during July were: Los Altos, $1.43 million; Palo Alto, $1.36 million; Saratoga, $1.35 million; Newport Beach, $1.30 million; Manhattan Beach, $1.26 million; Burlingame, $1.25 million; Palos Verdes Estates, $1.13 million; Los Gatos, $1.08 million; Cupertino, $952,000; and Rancho Palos Verdes $945,000. Statewide, the cities with the greatest median home price increases in July compared with the same period a year ago were: Laguna Hills, 40.5 percent; Newport Beach, 13.5 percent; Moorpark, 11.2 percent; Poway, 10.8 percent; San Marcos, 8.6 percent; Emeryville, 7.6 percent; Santa Barbara, 6.3 percent; Arcadia, 5.8 percent; Big Bear Lake, 5.5 percent; and West Hollywood, 5 percent. Read

Buyers Have Opportunity To Choose Escrow And Title On REO Properties

2009-10-20T17:15:00.000-07:00

Buyer’s Choice Act

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Bill mandates Escrow and Title company choice
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Gov. Schwarzenegger signed a bill into law over the weekend mandating that buyers of foreclosed homes be allowed to choose which Title and Escrow companies they hire.
Authored by Assemblywoman Cathleen Galgiani, D-Livingston, the Buyer's Choice Act will take effect next week. Legislators approved it last month. Galgiani introduced the bill in February in response to complaints that small Title and Escrow firms increasingly have been squeezed out of the market by national competitors. She worked with the Escrow Institute of California, a trade association, to draft a bill that she says will help homebuyers and local businesses. As banks have become overloaded with foreclosures, many have chosen to close deals with major Title and Escrow companies because it's easier for them to work with one large firm instead of several small ones.
That's created what the Escrow Institute has called an "anti-competitive monopoly." It's also led to higher fees for buyers, according to real estate agents. In a statement issued Monday, Galgiani said homebuyers often are better served by local firms, especially in today's market. "Local Escrow businesses can expedite the transfer of foreclosed properties to homeowners at lower cost," she said. "It also promotes competition for services and protects local jobs and our local economy." The new law will require that buyers be told that they can choose their Title and Escrow companies. It also will prohibit banks from vetoing firms chosen by buyers unless they can show good cause. Unless it's renewed, the legislation will expire in 2015.
Buyers already have a choice under federal law, but to date there's been little enforcement. The Buyer's Choice Act includes a provision that allows for fines of up to three times the cost of the
Escrow and Title service if buyers aren't told they can pick their firms.

Choosing Between Old And New Houses

2009-10-13T12:30:00.000-07:00

If you’re not sure, consider questions like location and durability

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By Jen A. Miller, Cyberhomes Contributor Published

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Homebuyers must discern whether an older home will be pricey to maintain or new construction will be durable. Some people just know. Before they call the Realtor, they’re sure they want a classic established home, or they want something brand new. Either they love the charm that comes with an older property, or they want the latest and greatest of everything. But the rest of us are caught between the two options of old and new houses. Will an older home be too pricey to maintain? Will new construction be as durable? And what about location — are newer homes found only in the suburban fringes? To help you along your house-hunting way, here are some guidelines for choosing between newly minted and gracefully aged.

New construction (less than 10 years old)

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Pros:

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1. State of the art. No dealing with a clunky stove or wheezing refrigerator here. “Everything has a life — siding has a life, roofing has a life and lighting has a life,” says Rick Tollakson, president of Hubbell Homes, a builder in Des Moines, Iowa. If you have a newer home, replacing big ticket items like appliances and HVAC systems isn’t as large a concern as it is in an old home.
2. Set for modern living. Great rooms and open floor plans are recent innovations that have made homes more pleasurable. Likewise, closets and bathrooms have grown significantly in the past decade, a welcome improvement.
3. Savings. Newer homes — especially brand-new homes — are built with energy efficiency in mind, which means better insulation and less money spent on heating and cooling. In addition, new construction may come with big tax savings. Des Moines, for example, offers 100 percent tax abatement for 10 years for just-built homes.

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Cons:

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1. Location. The best spots are taken by older homes. If you go new, you’ll most likely be on the outskirts of cities, which can be an issue for commuting, shopping and schools.
2. Ongoing building. If you buy in a still-developing subdivision, you’ll be moving into a construction site. “I can’t tell you how many flat tires I had,” Marni Jameson, author of The House Always Wins and a syndicated home design columnist, says of custom building her home. You’ll have to live with noise and debris until the development is complete.
3. Cookie cutter. Newer homes tend to look like a home you’d find anywhere else because builders “use standard millwork trim and details not associated with local environments,” says Michael Frederick of Frederick + Frederick Architects of Charleston, S.C. “All start to look like anywhere, nowhere.”

Old construction (more than 10 years old)

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Pros:

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1. Location. The early bird gets the worm — or the prime real estate. “Here in the lowcountry, highest above flood elevation home sites are occupied first,” Frederick says. Older homes also tend to be closer to town centers, and have established neighborhoods and even landscaping.
2. Character. Unless someone did a bad renovation job, the house won’t look like it came straight from a home center. “Owning a historic home is like preserving a piece of art,” says Amber Gallihar, marketing assistant for The Durable Restoration Company in Columbus, Ohio. They also tend to have trims and moldings unique to the region.
3. Environmentally friendly. Older homes were “designed to work with local environments,” says Frederick. “They have windows that allow cross ventilation, porches that block hot summer heat, materials from local sources that give older houses a character that seem to belong to the area.” Since these homes were built first, they were positioned to make the most of passive solar energy, which cuts down on heating bills.

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Cons:

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1. Outdated. No matter what renovations have been done, an old house has older parts, which could mean big bucks to fix a major system. “They have great character, which means small closets, small windows and bad plumbing,” says Jameson.
2. Maintenance. “Depending on how well the previous owner maintained the property, you might end up shelling out more money on repairs up front,” says Gallihar, though many of the materials in older homes, like copper and stone, last longer than newer options. You’re also moving into someone else’s tastes. So even if it’s functional, you may have to budget for renovations to make it into a home you love.
3. Environmentally unfriendly. While it might be situated to make the most of the environment, an older home typically needs more insulation to keep your heating dollars from flying away. Jameson suggests not getting too hung up on new vs. old when you start house hunting. Instead, find the neighborhood you want first. “The most important thing is where is it? Is it near your work? Is it near your schools? Is it near the community center or near the lack of civilization? Then if it’s new or old — it’s a secondary factor,” she says."

Mortgage Rates Up Slightly, Still Near Record Lows!

2009-10-06T11:46:00.000-07:00

By ALAN ZIBEL, AP Real Estate Writer

WASHINGTON (AP) — Rates for 30-year home loans edged up this week, but remain close to record lows reached over the spring. The average rate for a 30-year fixed mortgage was 5.14 percent, up from 5.12 percent a week earlier, mortgage company Freddie Mac said Thursday. Rates, while above the record low of 4.78 percent hit in the spring, are still at attractive levels for people looking to buy a home or refinance.
"Long-term mortgage rates were barely changed this week, remaining historically low, which is helping to sustain a high level of affordability in the home-purchase market," Frank Nothaft, Freddie Mac's chief economist, said in a statement. To revive the economy, the Federal Reserve has spent more than $600 billion out of a promised $1.25 trillion in mortgage-backed securities, which has driven down rates on home loans. It has also left a key interest rate near zero. Now that the economy is on the mend, Fed policymakers must decide how and when to withdraw that support. Some analysts think it could take four or five years for the Fed to pull back entirely and shrink a balance sheet that is now about $2 trillion, more than double what it was when the financial crisis struck.
Despite government efforts to prop up the mortgage market, qualifying for a loan is still tough. Lenders have tightened their standards dramatically over the past year, so the best rates are available to those with solid credit. Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day. The average rate on a 15-year fixed-rate mortgage rose to 4.58 percent, from 4.56 percent last week, according to Freddie Mac. Rates on five-year, adjustable-rate mortgages averaged 4.67 percent, down from 4.57 percent a week earlier. Rates on one-year, adjustable-rate mortgages were unchanged at 4.69 percent. The rates do not include add-on fees known as points. The nationwide fee for all loans in Freddie Mac's survey averaged 0.7 point for 30-year and 15-year loans, and 0.6 point for five-year and one-year loans.

What You Need To Know About Energy Tax Credits

2009-09-25T13:40:00.000-07:00

Home improvements like solar panel installations can lower your IRS burden

By Francine L. Huff, Cyberhomes Contributor
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Got a turbine to power your home? You can claim a tax credit this year.
If you missed out on getting credits for energy improvements on your income tax return last year, you’ve got another chance this tax season. You can claim tax credits on your 2008 return for projects like solar energy and small windenergy systems. What’s more, the Emergency Economic Stabilization Act of 2008 expands tax credit for energyefficient home improvements made during 2009, so track this year’s expenditures for next year’s tax return.
Energy tax credits for 2008 and 2009 For instance, you can file for a credit of up to $2,000 on your 2008 or 2009 tax return for qualified geo-thermal heat pumps. Energy tax credits for solar panel installations during 2008 are capped at $2,000, but the 2009 credit will be for 30 percent of the purchase price.
You’ll have to wait until filing your 2009 tax return to claim a credit of up to $500 for energy-efficient windows, doors, roofs, HVAC systems, stoves and water heaters. And even if you claimed part of a credit in 2007 — say, by replacing a few windows — you can still claim the remainder for eligible projects, like swapping out the rest of your windows.
Save your receipts and the manufacturer’s certification to use when filing your tax return. Not all products qualify. Keep in mind that just because a product has an Energy Star label doesn’t mean it automatically qualifies for the tax credit. “For certain products like windows or doors you can just look for the Energy Star [label],” says Karen Schneider, an IT manager for the U.S. Environmental Protection Agency. “But if you just go into Home Depot and say, ‘I need a water heater,’ you probably won’t see the ones that are the most energy efficient.”
Expect to pay more for products with the highest efficiency levels. However, one of the least expensive improvements you can undertake is to add insulation. “One of the first things people should think about is insulation, and there is a tax credit of up to $500,” says Schneider. “People are probably going to save more money by doing insulation and sealing than … by going out and buying a high-end geo-thermal heat pump.”
The EPA lists approved contractors in more than 20 states that can do an energy audit of your home, add insulation or recommend contractors for other jobs like installing HVAC systems or heat pumps. State rebates add to the tax savings. On top of the federal tax credits, you can save even more money if your state offers tax rebates. For example, New Jersey provides rebates for renewable energy projects that include solar systems.
A New Jersey homeowner with an average-size home who installs a 6,000-watt solar energy system would pay about $48,000, according to Gary Chernowetz, vice president of technical operations for NJ Solar Solutions, Inc., based in Branchburg. “But with the federal energy tax credit and a rebate from the state of New Jersey, your net price after both the rebate and the tax credit would be about $26,250.” Your final totals might differ depending upon your tax filing status.

Better to Buy or Rent?

2009-09-09T15:31:00.000-07:00

By ANNA PRIOR Wall Street Journal AUGUST 30, 2009

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With housing prices down significantly in many parts of the country and interest rates low, it may be an affordable time for twentysomethings to buy that first home.
In some instances, the price of owning can be comparable to renting in the long run. But a lot of uncertainty still remains about the housing market and the economy -- making the decision to buy more complicated.
Nicole Stivers, a 24-year-old who works in public relations in Contra Costa County, Calif., purchased her first home with her fiancé in February. They were able to capitalize on what she calls a "perfect storm" -- job stability, a desire to settle down, a surge in home foreclosures and the $8,000 tax credit for first-time buyers. Still, the move was not without its concerns. "Would we be able to afford this if we both lost our jobs? Do we have enough for a down payment? Do I have enough for moving? It's really nerve-racking when you're first doing it," says Ms. Stivers.
Here are some questions to consider when deciding if buying or renting is the right choice for you: How long do you plan to stay in your home? "There are high transaction costs associated with buying and selling" a house, says Dean Baker, co-director at the Center for Economic and Policy Research, so home buyers should plan to stay put for at least four to five years.
The reasoning? The costs for buying and then selling a home -- which can include a real-estate agent's fee, a transfer fee, closing costs, and inspector and surveyor fees -- could add up to about 10% of the sale price, or roughly 1½ years worth of rent. "If you average that over 10 years, it is not that big a deal," says Mr. Baker. "But if you average it over, say two years, you're paying an awful lot of money to own a house for a short period of time."

Can you handle the monthly expense? While a monthly mortgage payment may be comparable in some cases to a monthly rent, there are other expenses to consider.
To get a feel for the financial burden you'll be taking on -- and to see if you can handle it -- "practice" making payments. Each month, set aside projected mortgage and property-tax payments, maintenance costs, utilities and any other home-related expenses into a separate savings account, says Gary Smola, a certified financial planner with financial-educational firm Financial Finesse. What's the price-to-rent ratio? Home prices have come down significantly in some areas of the country, but "nobody knows what tomorrow's going to bring in the housing market," says Daniel Morris, a certified public accountant in San Jose, Calif.
To determine whether it makes more financial sense to buy or rent in your area, compare home sales prices with the cost of renting a similar place.
Divide the price of the home by the total cost of rent for one year. If the result is more than 20, "I'd be very concerned that the price [of the home] might fall more," says Mr. Baker, and you should consider waiting to buy. If it's 15 or below, he says, "you're probably reasonably safe" with prices holding steady or growing.
What is your job and relationship status? Twenty somethings are still getting a grasp on their futures and a constantly changing lifestyle might require the flexibility of renting.
But "if your career stability is strong, you are comfortable doing what you're doing … and you are committed in some form to your lifestyle," Mr. Morris says, buying a home becomes a more attractive option.

California Housing Report Unveils Sales Rates, Successful Cities

2009-09-03T22:16:00.000-07:00

(Stewart Title - Camarillo)

The California Association of Realtors released a report on home sales and prices over the month of June, indicating where sales paces are falling and what cities are faring better than others.
(8/3/2009)

The number of months needed to deplete the supply of homes on the market in California at the current sales rate is substantially lower today than the same time one year ago. That fact was among many highlights of a report on home sales and prices recently released by the California Association of Realtors (C.A.R.) for the month of June.
C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in June was 4.1 months, compared to 7.6 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
The median number of days it took to sell a single-family home was 44.3 days in June, compared with 49 days for the same period a year ago.
In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 20 of the 376 cities and communities reporting showed an increase in their respective median home prices from a year ago.
DataQuick statistics are based on county records data rather than MLS information. DataQuick Information Systems is a subsidiary of Vancouver, Canada-based MacDonald Dettwiler and Associates.
Statewide, the 10 cities with the highest median home prices in California during June were: Beverly Hills, $1,775,000; Manhattan Beach, $1,475,000; Burlingame, $1,475,000; Los Altos, $1,398,000; Saratoga, $1,375,000; Laguna Beach, $1,265,000; Palo Alto, $1,192,000; Santa Monica, $1,022,000; Cupertino, $1,020,000; Mill Valley, $1,009,000; and Los Gatos, $857,500.
Statewide, the cities with the greatest median home price increases in June compared with the same period a year ago were: Laguna Hills, 20.6 percent; Diamond Bar, 6.2 percent; Santa Monica, 5.9 percent; Upland, 5.7 percent; Thousand Oaks, 4.7 percent; Placentia, 2.9 percent; Big Bear Lake, 2.5 percent; Lake Forest, 2.4 percent; Walnut, 2.1 percent; and Dana Point, 1.4 percent.
Home sales in California increased 20.1 percent in June, compared with the same period a year ago, while the median price of an existing home declined 26.4 percent, according to C.A.R. The group credits state and federal tax credits, increased affordability and low interest rates for the climb. June marked the 10th consecutive month of positive sales gains and the fourth month of rising median home prices in California.

Pending Home Sales Up For Fifth Consecutive Month

2009-08-26T22:54:00.000-07:00

(Stewart Title - Camarillo)

RISMEDIA, August 5, 2009-Pending home sales are up for the fifth consecutive month, the first time in six years for such a streak, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in June, rose 3.6% to 94.6 from an upwardly revised reading of 91.3 in May, and is 6.7% above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was in July 2003.
Lawrence Yun, NAR chief economist, said a combination of positive market factors is fueling the gains.
“Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines. Activity has been consistently much stronger for lower priced homes,” he said. ”Because it may take as long as two months to close on a home after signing a contract, first-time buyers must act fairly soon to take advantage of the $8,000 tax credit because they must close on the sale by November 30.”
The Pending Home Sales Index in the Northeast rose 0.4% to 81.2 in June and is 5.8% above a year ago. In the Midwest the index increased 0.8% to 89.9 and is 11.6% above June 2008. The index in the South jumped 7.1% to 100.7 in June and is 8.9% higher than a year ago. In the West the index rose 2.9% to 100.4 but is 0.2% below June 2008.NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, is hopeful that a recently elevated level of contract cancellations will ease. “Last month, Freddie Mac and Fannie Mae clarified that appraisals should be done by professionals with clear local expertise,” he said. “This should mitigate the situation of many valuations done by out-of-area appraisers coming in below the price negotiated between buyers and sellers. Hopefully, in the months ahead, we’ll see an even closer relationship between contract activity and closed transactions.” McMillan said NAR is continuing to press the appraisal issue.
“We have asked Congress and the Federal Housing Finance Agency to immediately implement an 18-month moratorium on the new appraisal rules to further address unintended consequences of the new guidelines,” he said. NAR’s Housing Affordability Index (HAI) remains very favorable. The affordability index stood at 159.2 in July, down from record peaks in recent months but it remains 36.6 percentage points above a year ago. Under these conditions the typical family would devote 15.7% of gross income to mortgage principal and interest, well below the standard allowance of 25%. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income. “A monthly rise in home prices and somewhat higher mortgage interest rates led to a modest decline in affordability in June, but it was still the sixth highest index on record dating back to 1970,” Yun said. “Because housing is so affordable in today’s market, job security and the first-time buyer tax credit are bigger factors in influencing home sales.” A median-income family, earning $60,700, could afford a home costing $289,100 in June with a 20% downpayment, assuming 25% of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80% of what a median-income family can afford. The affordable price was much higher than the median existing single-family home price in June, which was $181,600.
Yun expects existing-home sales to gradually rise over the balance of the year, with conditions varying around the country. “It appears home sales are on a sounder footing and inventory is gradually being absorbed.

Appraisal Rules Backfire In Down Market

2009-08-12T14:14:00.000-07:00

Appraisal management companies blamed for undervaluation (Stewart Title Camarillo)

Inacting rules to curb abuses arising during a housing bubble, which don't take effect until the succeeding financial crisis, can easily do more harm than good. This is the case with new rules requiring that property appraisals be insulated from pressures exerted by any of the parties with Keeping You Informed.
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Appraisals are informed judgments regarding the value of specific properties. They are not perfect because appraisers must work with incomplete information. Further, appraisers are subject to bias, and more so if less complete information is available to them. During periods of rising house prices, such as 2000-06, many appraisers erred on the upside because they were part of a community that expected further price increases. This tendency was sometimes reinforced by pressures exerted by lenders, Realtors and mortgage brokers. None of them wanted to see deals torpedoed by appraisals below the prices buyers had agreed to pay.
In late 2007, New York Attorney General Andrew Cuomo sued the appraisal subsidiary of title insurer First American for allegedly conspiring with WaMu, a major mortgage lender at the time, to inflate appraisals. Because WaMu sold a large portion of its mortgages to Fannie Mae and Freddie Mac, Cuomo embarrassed the agencies into issuing a Home Valuation Code of Conduct (HVCC). The code declared that the agencies would then purchase only those mortgages supported by an "independent" appraisal. The objective of HVCC was to insulate the appraisal process from influence by any of the parties with an interest in the outcome. Mortgage brokers and Realtors could no longer have any contact with appraisers, and lenders had to obtain appraisals in some manner that prevented them from exercising any control. The problem with this well-intentioned rule is that it was issued in December 2008 to become effective May 1 of this year, or squarely in the middle of the worst housing market since the 1930s. With house prices declining, the upward bias in appraisals that had prevailed during the bubble had morphed into a downward bias. Many deals are not getting done because appraisals are coming in too low, and HVCC is seriously aggravating the problem.
To protect themselves from liability, most lenders are ordering appraisals from appraisal management companies (AMCs), which intermediate between the lender and the appraiser. The AMC selects and pays the appraiser, receives and evaluates the appraisal, and passes it to the lender, which has no direct contact with the appraiser. Because AMCs operate nationally but do not have appraisers everywhere, more appraisals are being done by appraisers who are not familiar with the local market. Appraisers working for AMCs are also paid less per appraisal than independents, which may induce them to invest less time. Less knowledge by appraisers means more scope for bias, and in a declining-price market, the prevailing bias is toward lower values.
Intermediation by AMCs also lengthens the period required to complete purchase transactions. People involved in the process tell me that it can add an extra week. In an increasing number of cases, the paperwork doesn't get done by the contracted due date or the expiration date of the buyer's mortgage lock, either of which can derail the transaction. The objective of HVCC was to prevent pressures being imposed on appraisers to raise values. But HVCC also prevents the loan officers, mortgage brokers and Realtors who work with borrowers from pressuring appraisers to get a deal done in time to meet a deadline. Further, they can no longer keep their clients informed about the status of an appraisal because they are no longer in the loop. In addition, the loan officers, brokers and Realtors who fashion deals for consumers used to have access to informal value opinions from the appraisers with whom they worked. Such opinions allowed them to abort house purchases and refinances that clearly would not fly because of inadequate property value. This source of information is now closed to them, with the result that deals that previously would have been screened out are now going through the system to be rejected, imposing needless costs on everyone involved.HVCC has also pretty much eliminated the ability of a borrower to use the same appraisal with multiple loan providers. Before HVCC, mortgage brokers could use one appraisal with any of the wholesale lenders with which they dealt, and lenders sometimes accepted appraisals ordered by others. Today, brokers are out of it and lenders using AMCs will not accept appraisals ordered by other lenders because they cannot be sure that the other lenders are following the HVCC rules. The upshot is that borrowers often have to pay for more than one appraisal. In sum, the HVCC "cure" for the appraisal problem of overvaluation has been implemented in a market where the problem has become undervaluation, and HVCC is making that problem much worse. It should be scrapped. When normal markets reemerge will be time enough to reconsider how appraisals can be made independent without disrupting business relationships that have served borrowers well.

U.S. Home Sales Signal Worst Could Be Over

2009-08-04T23:35:00.000-07:00

WASHINGTON (Reuters) - U.S. home sales surged in June, a sign the U.S. housing market may have hit bottom and is starting to rebound, but two big U.S. companies, diversified manufacturer Honeywell and health insurer Aetna, saw economic weakness continuing.
The mixed signals on the U.S. economy followed data showing loans to private businesses and homes in the European Union grew at their slowest annual pace on record in June, a negative sign for the world economy.
European stocks climbed to the highest level in more than eight months, while U.S. stocks rose slightly as disappointing corporate results ended a two-week rally that had lifted all major U.S. indexes about 11 percent.
Sales of new single-family homes in the United States rose 11 percent in June, the largest monthly rise since 2000, while the inventory of homes for sale fell to an 11-year low, the Commerce Department reported.The rising sales are an indication the housing sector, which led the United States into the longest recession since the Great Depression of the 1930s, may have put the worst of the crisis behind it and the U.S. economy may be pulling out of its deep slump."The data will reinforce the developing thinking that the housing market has bottomed and that the economy has stabilized and will grow in the third quarter," said Jim Awad, managing director at Zephyr Management in New York."In the cocktail of the market, it will be viewed positively and will add credence to the bulls, who think we will have a rebound in the markets going forward," he said.
FINANCIAL STOCKS UPU.S. stocks opened lower on reduced outlooks from Honeywell Inc (HON.N) and Aetna Inc (AET.N), but turned positive on the good housing news and finished with a small gain as investors bought bank shares that had lagged in the recent rally.The better-than-expected data on new home sales underpinned financial stocks, as investors snapped up the shares of several regional banks, which had been among the worst hit by credit losses tied to a weak housing market.The Dow Jones industrial average. IDJ was up just 15.27 points, or 0.17 percent, to finish unofficially at 9,108.51. The Standard & Poor's 500 Index .SPX was up 2.92 points, or 0.30 percent, closing at 982.18. The Nasdaq Composite Index .IXIC was up 1.93 points, or 0.10 percent, at 1,967.89.Honeywell, the world's largest maker of cockpit electronics, reported a 38 percent drop in earnings, cut its full-year profit forecast and said the recession was matching up to its worst expectations.Shares of No. 3 U.S. health insurer Aetna shed 2.7 percent to $25.72 after the company, one of the biggest U.S. providers of employer-based health insurance, cut its outlook, citing higher-than-projected medical costs."Honeywell said the outlook remains cloudy, setting the stage for a mixed session today," said Peter Cardillo, chief market economist at Avalon Partners in New York. "The market has come up rather sharply, so obviously it is poised for some profit-taking.”The U.S. dollar fell to its lowest level in more than seven weeks against a basket of currencies as the jump in U.S. new home sales encouraged investors to take on more risk and dimmed the greenback's safe-haven appeal.

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EU STOCKS 8-MONTH HIGH

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In Europe, stock markets gained ground on mounting optimism over a recovery in corporate profits that has fueled the sharp two-week rally on stock markets worldwide. European equities climbed to the highest level in more than eight months on Monday as a better-than-expected earnings season improved sentiment. Yet loans to euro-zone businesses and households grew at the slowest annual pace on record in June, European Central Bank data showed on Monday, with weak demand from companies and households eating into growth. Annual loan growth to the private sector slowed to 1.5 percent in June from 1.8 percent in May, the lowest level since data series began in 1992. Economists believe this is due to subdued demand rather than a credit crunch. [nLR234743]In Britain, corporate credit conditions improved in the second quarter of the year, partly as a result of asset purchases by the Bank of England, the central bank said. [nLR154913] Buoyant energy stocks and miners helped Britain's top share index rise for a record-equaling 11th straight session, though gains were limited by falls on Wall Street. LR318956The FTSE 100 .FTSE was up 9.52 points or 0.2 percent at 4,586.13, hitting its highest closing level since January 5.The index has risen 11 percent over the past two weeks on reassuring U.S. corporate earnings results, and is up 32.5 percent since hitting a six-year trough in March.

What The New Stimulus Plan Means For Homebuyers And Owners

2009-06-09T15:11:00.000-07:00

On Tuesday, February 17, 2009, President Barack Obamasigned the administration's sweeping stimulus package into law. The stimulus plan, officially known as thr American Recovery and Reinvestment Act, includes four primary provisions designed to benefit homebuyers and owners. Here is a brief overview on how those provisions may benefit you if you are thinking about buying or you are already a homeowner.

Expansion of first-time homebuyer tax credit

The tax credit for first-time buyers for homes has increased from $7,500 to $8,000. Unlike the $7,500 credit, this credit does not need to be paid back so long as the buyer lives in the home for at least three years. The income limitations remain the same for this credit ($75,000 for singles and $150,000 for married-coupled) as does its refundable status (if you owe less than $8,000 in taxes on your 2009 tax returns, the IRS will refund the difference). Additionally, the government will soon announce details on how first-time homebuyers can use the $8,000 tax credit as part of their downpayment. Purchase of a home must be completed by 12/01/09.

Higher reverse mortgage loan limits

The loan limit for reverse mortgage insured by the Federal Housing Administration (FHA) has increased nationwide from $417,000 to $625,000. And as the FHA program is virtually the only reverse mortgage program still currently operating, this is an especially important provision that presents an opportunity for senior citizens to obtain much needed funds.

FHA and conforming loan limits restored in high cost areas

Originally, the maximum limit for FHA and conforming loans in 2009 was going to be reduced. The stimulus plan restores the 2008 maximum amount limit of $729,750, thus making higher cost homes more affordable.

Expansion of home improvement tax credit

This provision increases the tax credit for making energy efficient home improvements from 10 percent to 30 percents up to a maximum of $1,500 for 2009 and 2010 installations. Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditoners and water heaters.

Before trying to take advantage of any of these provisions, consult with an accountant or financial planner. You can read the actual bill, find information on the various provisions of the American Recovery and Reinvestment Act and track the act's results at recovery.gov

FHA To Utilize $8k First-Time Buyer Tax Credit

2009-05-20T14:12:00.000-07:00

Last Tuesday, Secretary of the U.S. Housing and Urban Development (HUD), Shaun Donovan announced that home buyers will now be able to utilize the federal $8,000 first-time home buyer tax credit for their down payment on Federal Housing Administration (FHA) loans.

"We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment," HUD Secretary Donovan said at the National Association of Realtors recent Midyear Legislative Meetings & Trade Expo in Washington.

Approved lenders, nonprofit organizations and state and local government agencies will now be allowed to issue short-term bridge loans buyers can utilize for their down payments, he said.

Home buyers would be required to pay back their loans after receiving their tax refunds.

The new program details will be released soon, according to Donovan.In April, the Legislature approved a plan to provide the tax credit as a temporary loan, but has since run up against an IRS rule barring taxpayers from specifying another individual to receive their refunds.

When the boom of the subprime market hit, FHA loans had fallen off but since the housing crisis arose, the FHA loans have since come back full force.

The FHA nationwide market share soured from 1.9 percent in the fourth-quarter 2006 to 23.7 percent in the fourth-quarter 2008, according to HUD.

The new FHA tax credit is essentially a form of down payment assistance which allows government agencies and nonprofits to provide buyers down payment assistance.HUD Officials stated loans with seller assistance had a larger default rate than government and nonprofit assisted loans. This was largely due to sellers often building the concession into the price which essentially made the homeowners finance the entire purchase.

The Foreclosure Process

2009-05-12T14:36:00.000-07:00

1. A breach of the Note by the Deed of Trust MUST occur.

2. A breach of the Deed of trust could occur when there is non-payment of the encumbrance, non-payment of property taxes, non-payment of homeowner's insurance, or a sale of the property.

A Trustee's Sale can be initiated with a lost note bond and a certified copy of the deed of trust.

3. Record the Notice of Default and order a TSG (Trustee's Sale Guarantee).

The recording of the Notice of Default is the official beginning of the Trustee's Sale proceeding. The three months reinstatement period begins on the day of this recording.

4. Send out notices to the Trustor (property owner) and all parties who have recorded a Request for Notice of Default.

These notices will be sent within ten days after the recording of the Notice of Default. The Trustor must be notified of the foreclosure at his last known address if it is different than the address specified in the deed of trust. The property owner now has three months to pay all delinquent debts, plus the fees and expenses of the Trustee's Sale proceeding.

5. Check the TSG (Trustee's Sale Guarantee) and send out the 30 day notices to the junior lien holders.

6. If the trustee accepts reinstatement from the trustor, the trustee prepares and records the Rescission of the Notice of Default.

Most Trustee's Sale proceedings are resolved during the three month reinstatement period.

7. If reinstatement is not tendered by the last day of the third month, a Notice of Trustee's Sale is recorded.

The parties that received a copy of the Notice of Default will now also receive a copy of the Notice of Sale.

8. Post and publish.

The Notice of sale is also posted on the property and in at least one public place in the city where the sale will take place. The notice is sent to the proper newspaper to publish the notice once a week for three consecutive weeks. The trustor has until five days before the Trustee's Sale to pay only the delinquent amounts. After that, the beneficiary may demand payment in full.

9. Conduct the sale following the 21st day of posting and publishing.

The sale is a public auction, and is open to all bidders. Unlike some types of sales, there is not right of redemption after a Trustee's Sale. No policy of title insurance is given to the party who becomes the owner at the Trustee's Sale. They buy the property without warranties of any kind. The bidders, other than the foreclosing beneficiary must come to the sale with the full amount of the money they intend to bid. The funds must be in the form of cash, cashier's check, or certified bonds. The successful bidder will acquire title on a Trustee's Deed Upon Sale.

Pros, Cons Of A No-Cost Refi

2009-04-01T13:08:00.000-07:00

In today's market, paying points may be wiser (by Jack Guttentag)

The current refinance boom has focused attention on no-cost mortgages -- henceforth NCMs -- which have attractive features to refinancing borrowers.

NCMs help borrowers avoid being overcharged, and they eliminate most of the uncertainty involved in determining whether a refinance will pay.

On the other hand, the price of NCMs -- as measured by the interest rate increase borrowers must pay to avoid refinance costs -- is usually high in the current market. The challenge is to obtain the benefits of NCMs without paying an excessive price for them.

An NCM is a mortgage on which the lender pays the borrower's settlement costs, with certain exceptions. The lender won't pay your tax escrows, homeowner's insurance or transaction taxes if there are any. You will also be stuck with paying interest on two loans for a few overlapping days. All the costs, including the mortgage broker's fee if there is one, are paid by the lender.

Don't confuse no-cost with no-cash. No-cash means the settlement costs are added to your loan balance at closing. The borrower pays them, but over time and with interest.

NCMs help borrowers avoid being overcharged by reducing multiple price dimensions to one: the interest rate. Typically, in selecting a loan provider, borrowers shop for rates and points, ignoring other settlement costs. They usually find out about these costs after they submit an application, and then they receive "estimates" that are subject to change. This provides lenders with ample opportunities to pad their own fees and mark up those of third parties.

When responding to a borrower inquiring about an NCM, however, lenders do not have that luxury because the borrower is shopping strictly for rate. The rate lenders quote on an NCM, therefore, is likely to cover their true costs rather than a padded cost.

Borrowers shopping for an NCM can shop brokers and lenders interchangeably. Brokers must include their own fee in the quoted rate, which they know is being shopped. This imposes a competitive constraint on broker's fees.

NCMs also eliminate most of the uncertainty involved in determining whether a refinance will pay. If there are refinance costs, the borrower must decide whether the costs are offset by the lower rate.

The rate quoted by a lender on an NCM is one that, from the lender's standpoint, justifies paying the costs. The lender willing to accept a rate of X percent on a loan where the borrower pays the costs, will quote X + 1 on an NCM, where 1 is the rate increment needed to cover the cost.

Unfortunately, in the current market 1 is more than twice as large as it was only a year ago. The reason is that lenders are assuming they won't have the rate increment very long because market rates will decline further and many of the loans refinanced today will be refinanced again in the near future. This is the same reason why the best bargain in today's market is buying down the interest rate by paying points.

The upshot is that borrowers refinancing today, unless they expect to move within a few years, should pay thei own settlement costs and, if they have the cash, pay points to reduce the rate.

To do this, while retaining the strategic benefit of shopping for an NCM, follow these steps:

1. Shop for the best rate for an NCM.

2. Shop for the lowest points, but otherwise no-cost, at a specified rate.

Consider rolling your own NCM with an Upfront Mortgage Lender (UML). UMLs are internet-based lenders who display all prices and fees on their websites, which makes it simple to find the rate that will cover your costs. And if you have along time horizon and the cash to buy down the rate, you can do it without fear that the settlement costs will escalate on you.

New Stimulus and Stability Plans Equal Opportunities!

2009-03-06T21:09:00.000-08:00

Over the past few weeks, we've seen the birth of unprecedented stimulus plans and legislation that impact the housing and home loan industries. The provisions of these plans could have huge implications for those who are considering purchasing or refinancing a home. The articles below provide an overview of some benefits of the Economic Stimulus Plan and the Homeowner Affordability and Stability Plan that may impact you.
For example, the first article offers an easy-to-understand overview of two new initiatives introduced by the Obama Administration to help struggling homeowners. In addition, the $8,000 tax incentive article explains what the new tax incentive entails, as well as who qualifies for this benefit. Finally, the third article explains how you can take advantage of the higher loan limits that have now been extended!

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These plans may be helpful to many of your friends, family members and coworkers. So please forward this newsletter on to them or let me know if they'd like to enjoy their own free subscription. And if you need any personal assistance at this time, simply call or email.
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HOMEOWNER AFFORDABILITY AND STABILITY PLAN
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President Obama unveiled his plan to help stabilize the housing market and keep millions of borrowers in their homes. The Homeowner Affordability and Stability Plan includes two initiatives to help struggling homeowners. One is an incentive for homeowners who have less than 20% equity in their homes, or who owe more than their home is worth. The second part attempts to lower monthly payments for homeowners at risk of losing their home. Here is a brief overview of both initiatives.
Less than 20% equity in your home? Under current rules, those families who own less than 20% equity in their homes have a difficult time taking advantage of the historically low interest rates. This initiative is open to homeowners who have conforming loans that are guaranteed by Fannie Mae and Freddie Mac. The plan would enable them to move to a new loan for up to 105% of their homes value.
According to the plan, "credit-worthy" or "responsible" homeowners can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The new loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost option may help reduce their monthly payments by up to thousands of dollars per year. As with the rest of the plan, details about this initiative will be released at a future date-including what, if any, credit score requirements will be included.
On the verge of default? This initiative aims at providing help to individual families as well as entire neighborhoods by helping reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their monthly payments, but cannot sell their homes because prices have fallen significantly. The goal of this initiative is simple: "reduce the amount homeowners owe per month to sustainable levels." Homeowners who are current on their loans but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.
Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify.
These plans-combined with today's historically low interest rates-have created an unprecedented opportunity for homebuyers. If you have any questions or would like to discuss how this may specifically impact you, I'd be happy to sit down with you. Just call or email me to set up an appointment.
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$8,000 TAX CREDIT FOR HOMEBUYERS
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The $787 Billion stimulus bill is made up of tax cuts and spending programs aimed at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II. One of the major benefits of the plan is a tax credit for new homebuyers. According to the plan, first-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit.
It's important to remember that the $8,000 tax credit is just that... a tax credit. It's a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if you were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, you would owe nothing.
Better still, the incentive is refundable, which means you can receive a check for the credit even if you have little income tax liability. For example, if you're liable for $4,000 in income tax, you can offset that $4,000 with half of the tax incentive... and still receive a check for the remaining $4,000!
Who Qualifies?
The $8,000 incentive starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000 and is phased out completely at incomes of $170,000 for couples and $95,000 for single filers. To break down what this phase-out means, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out threshold is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer incentive to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer's income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible to reduce the tax liability by $2,800.
Remember, these are general examples. Borrows should consult a tax advisor to provide guidance relevant to their specific circumstances.
What Type of Home Qualifies?
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying "homes" include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured homes and houseboats used for principle residence also qualify. Buyers will have to repay the credit if they sell their homes within three years.
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HIGHER, NON-JUMBO LOAN AMOUNTS EXTENDED
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For those who are considering taking advantage of the $8,000 tax incentive for first-time homebuyers, there is some more good news that could make doing so easier and more accessible.
An extension is now officially in place on the higher loan limits for mortgages in the tier that lies just below what is considered a "jumbo" loan. First established last year, and now extended through the end of 2009, limits on this additional tier provide opportunities for many who are looking to either refi or, better yet, take the plunge into first time home ownership and grab a piece of the highly publicized $8,000 tax incentive.
Here are some key points about this higher loan limit extension, announced by the Fair Housing Finance Agency:
The non-jumbo, middle tier of home loans begins at loan amounts greater than $417,000 for single-unit homes.
The top end for this tier is $729,750 for single-unit homes.
The rates for these loans will again be slightly higher than conforming loan rates, but less expensive than the standard "jumbo" loan rates.
This higher limit on the non-jumbo tier is available in 250 counties across the United States.
For more information about qualifying for the opportunities that are provided by the stimulus plan, simply call or email to set up an appointment.
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The material contained in this newsletter has been prepared by an independent third-party provider. The material provided is for informational and educational purposes only and should not be construed as investment, financial, real estate and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.
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Over the past few weeks, we've seen the birth of unprecedented stimulus plans and legislation that impact the housing and home loan industries. The provisions of these plans could have huge implications for those who are considering purchasing or refinancing a home. The articles below provide an overview of some benefits of the Economic Stimulus Plan and the Homeowner Affordability and Stability Plan that may impact you.
For example, the first article offers an easy-to-understand overview of two new initiatives introduced by the Obama Administration to help struggling homeowners. In addition, the $8,000 tax incentive article explains what the new tax incentive entails, as well as who qualifies for this benefit. Finally, the third article explains how you can take advantage of the higher loan limits that have now been extended!
These plans may be helpful to many of your friends, family members and coworkers. So please forward this newsletter on to them or let me know if they'd like to enjoy their own free subscription. And if you need any personal assistance at this time, simply call or email.
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HOMEOWNER AFFORDABILITY AND STABILITY PLAN
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President Obama unveiled his plan to help stabilize the housing market and keep millions of borrowers in their homes. The Homeowner Affordability and Stability Plan includes two initiatives to help struggling homeowners. One is an incentive for homeowners who have less than 20% equity in their homes, or who owe more than their home is worth. The second part attempts to lower monthly payments for homeowners at risk of losing their home. Here is a brief overview of both initiatives.
Less than 20% equity in your home? Under current rules, those families who own less than 20% equity in their homes have a difficult time taking advantage of the historically low interest rates. This initiative is open to homeowners who have conforming loans that are guaranteed by Fannie Mae and Freddie Mac. The plan would enable them to move to a new loan for up to 105% of their homes value.
According to the plan, "credit-worthy" or "responsible" homeowners can refinance their mortgage into a 30- or 15-year, fixed-rate loan based on current market rates. The new loan, however, cannot include prepayment penalties or balloon payments. For many families, this low-cost option may help reduce their monthly payments by up to thousands of dollars per year. As with the rest of the plan, details about this initiative will be released at a future date-including what, if any, credit score requirements will be included.
On the verge of default? This initiative aims at providing help to individual families as well as entire neighborhoods by helping reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their monthly payments, but cannot sell their homes because prices have fallen significantly. The goal of this initiative is simple: "reduce the amount homeowners owe per month to sustainable levels." Homeowners who are current on their loans but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment.
Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify.
These plans-combined with today's historically low interest rates-have created an unprecedented opportunity for homebuyers. If you have any questions or would like to discuss how this may specifically impact you, I'd be happy to sit down with you. Just call or email me to set up an appointment.
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$8,000 TAX CREDIT FOR HOMEBUYERS
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The $787 Billion stimulus bill is made up of tax cuts and spending programs aimed at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II. One of the major benefits of the plan is a tax credit for new homebuyers. According to the plan, first-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit.
It's important to remember that the $8,000 tax credit is just that... a tax credit. It's a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if you were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, you would owe nothing.
Better still, the incentive is refundable, which means you can receive a check for the credit even if you have little income tax liability. For example, if you're liable for $4,000 in income tax, you can offset that $4,000 with half of the tax incentive... and still receive a check for the remaining $4,000!
Who Qualifies?
The $8,000 incentive starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000 and is phased out completely at incomes of $170,000 for couples and $95,000 for single filers. To break down what this phase-out means, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out threshold is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer incentive to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer's income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible to reduce the tax liability by $2,800.
Remember, these are general examples. Borrows should consult a tax advisor to provide guidance relevant to their specific circumstances.
What Type of Home Qualifies?
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying "homes" include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured homes and houseboats used for principle residence also qualify. Buyers will have to repay the credit if they sell their homes within three years.
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HIGHER, NON-JUMBO LOAN AMOUNTS EXTENDED
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For those who are considering taking advantage of the $8,000 tax incentive for first-time homebuyers, there is some more good news that could make doing so easier and more accessible.
An extension is now officially in place on the higher loan limits for mortgages in the tier that lies just below what is considered a "jumbo" loan. First established last year, and now extended through the end of 2009, limits on this additional tier provide opportunities for many who are looking to either refi or, better yet, take the plunge into first time home ownership and grab a piece of the highly publicized $8,000 tax incentive.
Here are some key points about this higher loan limit extension, announced by the Fair Housing Finance Agency:
The non-jumbo, middle tier of home loans begins at loan amounts greater than $417,000 for single-unit homes.
The top end for this tier is $729,750 for single-unit homes.
The rates for these loans will again be slightly higher than conforming loan rates, but less expensive than the standard "jumbo" loan rates.
This higher limit on the non-jumbo tier is available in 250 counties across the United States.
For more information about qualifying for the opportunities that are provided by the stimulus plan, simply call or email to set up an appointment.
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The material contained in this newsletter has been prepared by an independent third-party provider. The material provided is for informational and educational purposes only and should not be construed as investment, financial, real estate and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.

The Reverse 911 System Program

2009-02-18T21:11:00.000-08:00

As you know we are in the middle of our winter rain season. In past years this type of weather has caused problems in our county. In our past experiences we learned the communication between emergency responders and the citizen was less than effective or reliable.Out of those experiences came the need to improve emergency communication between local government and the citizens who were in danger.

From that came the Reverse 911 System. This program has been well advertised all over the county. The problem is that even with the advertising it is still not well understood by many members in our community. Erin, one of our fellow Watchers is also the director of the Reverse911 Program in our county. Erin has put together a facts sheet for us to explain the program and how we can use it. She has also explained how we can use the system to notify us on our cell phones. This will be great in the event we are not at home during the emergency. We may need to get home to pick up a loved one or even our favorite pets. We may also need to stay out of the area until the emergency is over.This is just another example of how we can share information that allows us to better protect our friends and family. Please take a minute to read the information sent to us by Erin.Subject: Ventura County Reverse 911®.

Have you registered yet?

REVERSE 911® is an outbound notification system used for time-sensitive, mass distribution of emergency messages. The system may be used to deliver alerts when there is a threat to the health or safety of residents in the cities of Camarillo, Fillmore, Moorpark, Ojai, Oxnard, Port Hueneme, Santa Paula, and the unincorporated areas of Ventura County.The system is particularly effective in times of crisis when rapid communication to a targeted group of citizens or emergency responders iscritical. Citizens may be given information regarding evacuationnotices, hazardous material releases, community-policing activities oralerts to boil water if necessary.

Therefore, when residents receive aREVERSE 911® message, it is important to listen carefully and follow all instructions provided in the alert.It is also important for residents not to rely on REVERSE 911® notifications as their only means of emergency information. The system may be used in conjunction with information provided to the media, directions given by emergency responders, and information posted on official city, county and government websites.

The REVERSE 911® system is able to send notifications to landline telephones, TTY phones, cellular phones, Voice Over Internet Protocol phones, and e-mail / text addresses. Currently, the Ventura County REVERSE 911® database includes both listed and unlisted landline phone numbers for AT&T and Verizon customers. Residents who want to receive notifications on their cellular, TTY or VoIP phones will need to register online or call the Ventura County Sheriff’s Office of Emergency Services at (805) 648-9283.

For more information on REVERSE 911® in Ventura County or to register phone numbers online, residents can click on the “Disaster Information” link on the County of Ventura homepage(www.countyofventura.org) and select the REVERSE 911® icon.

Tax Credit For First Time Home Buyers

2009-02-18T21:01:00.000-08:00

Information about first time home buyer tax credit as amended by the American Recovery and Reinvestment Act of 2009 (HR 1).The 3 changes to the first-time home buyers tax credit program include:
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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.
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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.

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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 is for information only and should be verified by a tax professional.

Weekly News - The Stock Market - The Stimulus

2009-02-17T09:34:00.000-08:00

Stock markets were closed on Monday in observance of President's Day. The major stock indices were roughed up last week after the Treasury's new TARP II plan left investors wondering what the details were and fears that the new stimulus package may take longer than expected to help pull the nation out of the current recession.

Last Tuesday Treasury Secretary Timothy Geithner announced his new plan to put banks to a stress test and to remove the toxic assets from their balance sheets but didn't spell out much in detail, which caused Stocks to plummet knocking 383 points from the Dow. The G-7 meeting took place in Rome over the weekend and global leaders said to Mr. Geithner that speed was of the essence to clean up the U.S. banking system. Another culprit behind last weeks malaise was the massive $787 billion stimulus package that made its way through Washington and is now set to be signed by President Obama this week.

The plan calls for tax cuts, 3.5 million new jobs and will pay for needed improvements to U.S. roads, bridges and dams. But because of the magnitude of the plan, it will take time to be implemented. A Whitehouse Senior Advisor said on Sunday that the recession in the U.S. is “gaining momentum” and it will take time for the $787 billion stimulus legislation passed by Congress last week to take effect. That's not what investors want to hear. Leaders of the largest financial institutions in the U.S. were in front of Congress last week being chastised regarding the current mess the banks have put this country in. People in glass houses shouldn't throw stones. To go along with President Obama's plan to stem home foreclosures, JPMorgan and Morgan Stanley suspended foreclosures until next month and will try to modify mortgages for troubled borrowers. President Obama will outline his foreclosure plans mid-week. The Dow closed the week down 5.2%, the S&P 500 dropped 4.8% and the Nasdaq lost 3.6%. For the Dow it was the lowest close since November 20, when it settled at 7,552.29 and is down 10% so far this year, while the S&P 500 is off 8.5% year-to-date. The 10 Yr T Note yield, which moves opposite its price, rose to 2.90% on Friday, while the yield on the 3 Month T-bill, considered one of the safest investments, was 0.28%. Oil fell below $40 last week closing at $37.51/barrel on concerns that inventories will keep growing as demand slumps.The Russell 2000 index, which tracks the performance of small company stocks, declined 22.34, or 4.7%, to 448.36. The Dow Jones Wilshire 5000 Composite Index,- a free-float weighted index that measures 5,000 U.S.-based companies - ended at 8,385.74, down 399.35, or 4.55%, for the week.

A year ago, the index was at 13,652.73.The upcoming week is filled with economic data but markets haven't been reacting in the typical fashion lately when the reports are released as we are in unprecedented times so anything can happen. The data starts with housing starts and building permits on Wednesday - construction on new homes is at the lowest level since just after WWII. Also on Wednesday Industrial production, capacity utilization and the FOMC minutes will be released. Inflation figures from the Producer Price Index and Consumer Price Index will be released Thursday and Friday respectively. With inflation taking a back seat for now the numbers shouldn't be a surprise.

Stocks are trying to find a bottom but the uncertainty surrounding the government programs are weighing on the markets and keeping a lid on any moves higher. Investors need some clear cut decisions and until that happens, we could dance around the current levels.

The New Stimulus... What's Next?

2009-02-16T14:50:00.000-08:00

"Good communication is as stimulating as black coffee... and just as hard to sleep after"

Anne Morrow Lindbergh And communication on the new $789 Billion Stimulus Plan has been flying fierce over the past week, resulting in late nights for Congress and probably more than a few cups of coffee. President Obama is certainly hoping the new plan will wake up the struggling economy, and breathe some life back into the housing market as well.
The tax credit in the Stimulus Bill has been scaled down to $8,000 from its previous level of $15,000, or 10% of the value of the home for any first time homebuyers who purchase homes from the start of the year until the end of November. It starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000, and buyers will have to repay the credit if they sell their homes within three years.
In addition, there's news that the Obama administration is trying to hammer out a new program to subsidize mortgages to fight the credit crisis. The plan would seek to help homeowners before they fall into arrears on their loans, whereas current programs only assist borrowers that are already delinquent. There are no details yet on this plan, but I will be monitoring this news closely in the weeks ahead.
There was some unexpected good news last Thursday, as Retail Sales increased in January for the first time in 7 months, as you can see in the chart below. It could take some time for the Stimulus Plan to positively impact the economy, but if it works, the improvement in Retail Sales could continue later in the year.
The Bond market closed early on Friday in advance of the President's Day holiday. Bonds and home loan rates had improved a bit early in the week, but lost their ground late in the week, and ended slightly worse than where they began.

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THE TAX MAN COMETH...YES, IT'S THAT TIME OF YEAR AGAIN. CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR SOME STIMULATING INFORMATION ON DEDUCTIONS THAT COULD INCREASE YOUR REFUND...AND MAKE TAX TIME A LITTLE EASIER!
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Forecast for the Week
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Remember that the markets will have a holiday shortened week, as they will be closed on Monday in honor of President's Day. But that doesn't mean the rest of the week will be a vacation from volatility, as there are several interesting reports in store.
We'll get news on the inflation (or deflation) front, with Thursday's Producer Price Index (PPI) Report and Friday's Consumer Price Index (CPI) Report. With the recent concerns about deflation, it will be important to see which way these reports have moved, and what the impact may be on home loan rates.
Also this week, we'll get a read on the new construction housing market with Wednesday's Housing Starts and Building Permits Reports. And on Thursday, the Philadelphia Fed Report will be released. This monthly survey of manufacturing purchasing managers conducting business around the tri-state area of Pennsylvania, New Jersey, and Delaware is one of the most-watched manufacturing reports, and given the state of the economy, this is likely to be a negative report.
Weak economic news normally helps Bonds and home loan rates improve, as money flows out of Stocks and into Bonds...however, not all investors are passing on their gains recently, as so many homeowners and homebuyers are taking advantage of current low interest rates and have flooded many investors to capacity. Call me to determine if the current market presents opportunity for you.
As you can see in the chart below, Bonds and home loan rates faced some tough technical resistance last week, which hampered the way to finding improvement. As always, I will be watching closely to see what happens this week.
Chart: Fannie Mae 4.5% Mortgage Bond (Friday Feb 13, 2009)
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The Mortgage Market View...
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Tips for a Larger Tax Refund

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No one ever wants to pay more taxes than necessary, but this year it's even more important to save every penny you can. Here are some tips that can help you get a larger refund:
Property Tax Deduction for Non-Itemizers: Before 2008, only people who itemized their deductions could deduct property taxes. For 2008, individuals who do not itemize can deduct up to $1,000 of property tax on a joint return or $500 on a single return.
Driving Deductions: The IRS increased the cents-per-mile deduction for business-related driving expenses from 50.5 cents to 58.5 cents from July 1, 2008 through December 31, 2008. They also increased the rate for deducting medical and moving driving-related expenses from 19 cents to 27 cents for that same time period.
Disaster Losses: Casualty losses (i.e. like those from storm or fire damage) are normally deductible only to the extent they exceed 10% of AGI. For 2008, casualties in federally declared disaster areas can be deducted without having to abide by the 10%-of-AGI rule, which raises the amount that is deductible.
Capital Losses: Review your portfolio and note all your realized losses for 2008. You can write these off against capital gains and you can have a net loss of up to $3,000 deductible against your salary and other ordinary income. What's more, any excess can be used to offset gains or can be deducted in 2009 or later years.
Retirement Plan Contributions: You can make tax-saving contributions to retirement plans for 2008 through April 15, 2009.
Charitable Donations: Not only can you claim deductions for money and items you donate to a charity, you can also claim deductions for expenses you incur on a charity's behalf (i.e. driving costs, printing costs, long distance phone call costs, etc.).
Make sure you take time to go through your records carefully so you receive the biggest refund possible. And if you are looking for a great tax professional to help you, please let me know and I'll be happy to recommend someone.

$7,500 Tax credit To First Time Buyer. What's The Catch?

2009-02-13T21:30:00.000-08:00

There's a catch to the first-time-home-buyer tax credit already on the books:

Those who receive the credit must pay it back over the years to come. But one provision in the stimulus bill approved by the House of Representatives this week would remove that repayment requirement.
The credit gives buyers who haven't owned a home in the past three years up to a $7,500 credit for buying a home before July. Critics of the current tax credit said the repayment feature made the incentive less appealing, and didn't serve its purpose of luring more buyers back into the market.
The House bill approved this week also would reinstate the 2008 conforming loan limits, setting those higher limits in place for the rest of 2009. The Senate is working on its own version of the stimulus and President Obama has asked for a final bill by Presidents Day.
"This is critical to stimulating home sales and shrinking the housing inventory, which will in turn help stabilize home values," said National Association of Realtors president Charles McMillan. "However, our work is far from finished and much more needs to be done in the coming days and weeks."

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NAR wants to extend the credit to all home buyers -- not only first-time buyers -- and wants the credit extended until the end of the year. The group also is still seeking a mortgage interest-rate buydown and improved foreclosure mitigation programs.
It's possible that removing the repayment requirement will cause some prospective first-time buyers to dip their toes in the water this spring. But it's too early to tell if it will be enough to make more people want to jump in and buy.
Amy Hoak, Real Estate writer

Cheerful Report... Not Soon Enough!

2009-02-12T16:48:00.000-08:00

Sent on behalf of Scott A. Anderson, Ph.D., Wells Fargo Economics.

It’s been a long time in coming, but we finally received a somewhat cheerful report regarding the U.S. consumer.

Retails sales rose 1.0 percent in January, the first increase in seven months, due to healthy sales gains in electronics (+2.6%), gasoline stations (+2.6%) and food and beverage (+2.1%). Even clothing sales rose 1.6 percent in January after plunging 4.0 percent in December. This is a far stronger number than the consensus anticipated. Consensus was looking for a -0.8 percent decline on the month. Tempering the enthusiasm, December sales were revised lower, falling 3.0 percent instead of the previously reported 2.7 percent decline.

While this report is not adjusted for inflation, it’s a good bet that consumer spending remained fairly flat in January compared to December’s depressed level, suggesting a decline in consumer spending didn’t intensify the economic downturn in January.

On balance, this report adds some further downside risk to revised Q4 GDP. A decline of 5.5 percent or greater is now expected for Q4. The bright side is the GDP decline in Q1 is likely to be somewhat less severe. Is the drop in gas prices and prospect of a large fiscal stimulus package improving confidence and animal spirits? This is consistent with the modest bounce we have seen in the ISM manufacturing and non-manufacturing surveys. Still too early to say the worst is over; declines wax and wane throughout economic recessions, but this puts at least a half smile on my face.

We also got jobless claims for the week of February 7th. Jobless claims fell by 8 K, but remained well above 600 K at 623 K. The 4-week moving average of initial claims rose by 24 K, however, to 607.5 K, revealing the underlying and persistent weakness in the labor market. Continuing claims hit a new and dubious record of 4.81 million on a seasonally-adjusted basis. It is clear that the carnage in the labor market is severe and broad-based.

There is little doubt that the U.S. economy remains firmly in recession.

This Is How Most Of Us Don't Want To Start The Day!

2009-02-02T12:03:00.000-08:00

Dow -148.15 at 8000.86, Nasdaq -31.42 at 1476.42, S&P -19.26 at 825.88

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If you thought 2008 was a bad year, think again.

The Dow Industrial Average and the S&P 500 have gotten off to their worst start for January in in the history of the closely watched indices as investors fear that the banking system is sinking deeper and that the economy may take longer than expected to recover. The so-called January Barometer developed by Yale Hirsch, chairman and founder of the Stock Traders’ Almanac, says that as January goes so does the rest of the year. Read about it in the "Extras" section. Last week there was talk that FDIC would set up a sort of bad bank that would take all of the toxic assets from troubled banks to try and unclog the system. But rumors on Friday of the plan being re-examined because of the enormous cost sent investors rushing for the exits. Preliminary GDP was reported on Friday revealing that the economy contracted by a pace of 3.8% during the last three months of 2008. This follows a decline of 0.5% in the 3rd quarter of last year. However, this was much better than the far dismal expectations of -5.4% that economists were predicting. The Fed left interest rates unchanged at the FOMC meeting that ran on Tuesday and Wednesday of last week at the 0 - .25% range. The Committee said that the economy continues to weaken with no sign of a relief until sometime at the end of this year. The members expect that inflation pressures will remain subdued in coming quarters. In addition, the Fed continues to purchase large quantities of Mortgage Backed Securities to support the housing market and will continue to do so as conditions permit. Exxon Mobil, the world's largest company by market value, reported earnings on Friday that were slightly better than estimates. For 2008 it earned $45.22B, the most for any company in US history breaking its own record of $40.61B set in 2007. Exxon probably won't be going to Washington with a tin cup in hand. The Dow closed the week lower by 0.90%, the S&Poor's 500 index sank 0.70%, while the Nasdaq fell 0.10%.Crude oil per barrel finished the week at $41.68 on the NYMEX. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was last seen at 2.85%. The yield on the three-month T-bill, considered one of the safest investments was 0.22%. Essentially you're saying I'll pay you to watch my money if you're in the three-month T-bill. This week brings us to a crossroad. Will 8,000 be the line in the sand for the Dow or will stocks crash through that level and move towards the November low of 7500? There are some important economic releases this week, which include Wednesday's release of ADP's job forecast, followed by Thursday's jobless claims figures and then the Labor Department's release of the employment picture on Friday. Estimates are calling for 500,000 jobs lost in January.The range seems now to be 7500 to 9000 for the Dow. So we are nearing the bottom range - markets may be ready for a bounce but not before some more turbulence.

Instant Analysis Of Today’s FOMC Decision

2009-01-28T21:11:00.000-08:00

Sent on behalf of Carol Nightengale, Wells Fargo Economics

The Fed sees economic fundamentals continuing to deteriorate and credit conditions for households and firms as “extremely” tight. In the December statement they only characterized credit conditions as tight. They still anticipate that economic activity will begin later this year, but see the downside risks out-weighing the upside risks at this point. The Fed kept the federal funds target rate in its present range of 0 to ¼ of a percentage point, and promised to keep the Fed funds target rate at “exceptionally low levels for some time.”The statement acknowledges that the economy has weakened further since December, citing steeply declining industrial production, housing starts, and employment, as consumers and businesses cut back on spending.The FOMC added a comment about global prospects, perhaps a nod to the IMF’s substantial downward revision in their global growth forecasts today from 2.2 percent to 0.5 percent in 2009, the worst global growth performance in the post-war period. The FOMC statement says today that “global demand appears to be slowing significantly.”Finally, the Fed doesn’t mention the word deflation in the statement, but did highlight the prospect for inflation to persist below rates that best foster economic growth and price stability in the long-term. That’s central bank code for a period of deflation!Expect further expansion and utilization of the Fed’s existing credit facilities, as well as the addition of new ones in 2009 as the Fed moves further down the path of “credit easing”. The FOMC said it was prepared to purchase longer-term Treasury securities if it could help improve credit conditions in private credit markets. This will be somewhat of a disappointment for the bond market, which was hoping for an actual announcement of the plan today. I believe there are some members of the FOMC that want to move slowly on the plan to buy long-term Treasuries, since in doing so the Fed is basically “monetizing” the debt, trading government IOUs for Federal Reserve IOUs, that could ultimately be destabilizing for the dollar and U.S. inflation down the road. Right now, 10-Yr Treasury bond yields are up about 13 basis points from yesterday’s close, though stocks are holding on to substantial gains.

Congress To Break Up REO's "Listing Agent" Monopoly

2009-01-27T16:57:00.000-08:00

From national correspondent: Ms.Catarina Huntington

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That's the headline Realtors can only hope for at this point in time. A more proportioned assignment of REO (bank foreclosures) listings would dramatically enhance the financial landscape for the struggling Realtor industry. However, as of January 2009, less than 1/3 of 1% of Realtors continue to maintain a stranglehold on REO markets, while the rest of the industry sinks in despair. For now, the "80-20 Rule" (20% of Realtors accounting for 80% of business) is a distant memory. "It seems like the new rule should be changed to the "80-1 Rule", where less than 1% of the agents are closing 80% of the deals" says Julie Tveit a real estate Broker for LaRue Realty in Minnesota. An investigation into the facts surrounding the REO listing market is interesting....

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2 million foreclosures up for grabs

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Nationwide the “private club” (as they're called) of REO Agents currently monopolizes about 1.7 million active REO listings. In 2009, 2.0 million more properties will foreclose and according to a recent report by "Credit Suisse" the US market will be averaging 2 + million foreclosures over each of the next 4 years.
Estimates are that 150,000 Realtors nationwide, provided the pertinent education, would be very qualified listing agents of REO properties. There are no specific prerequisites to become an REO Agent. Qualified Realtors simply need to possess a willingness to enter the REO arena and be thoroughly educated on the unique aspects of listing bank owned foreclosures.
Hence, there are 150,000 active full time Realtors in the United States with 2 million foreclosure listings "up for grabs". If divided equally each Realtor would close 13 REO listings per year for the next 4 years.

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REO Agents Dominate Market

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Instead roughly 5800 Realtors Nationwide sold 1.6 million REO homes in 2008. That translates into an average of 22 closed listings per REO Agent per month. That certainly doesn't sound like a “spread the wealth” philosophy does it? My research indicates that the REO industry's current model provides for a single beneficiary: REO Listing Agents, and unfortunately this model comes at the expense of the lenders themselves, frustrated buyers and the tens of thousands of agents left out to dry.
The vast majority of REO Agents are overwhelmed with inventory and under staffed. Realtors “in the field” showing REO properties tell me that they understand this all to well. "I am to the point now, in working with buyers, that I have to pre-screen listing agents that have REO listings. If I know that the listing agent is going to be difficult to work with, on any level, then I pass that information along to my buyers. There are too many properties on the market to waste time with difficult transactions" say Ms. Tviet.
The systemic problem within the REO Agent "underground" appears to have a multitude of negative consequences which result in longer market times and lower sale prices, say numerous industry sources. Ms. Tviet, "It's just common sense, if your marketing is poor, your correspondence with other Realtors is marginal and you have a reputation as difficult to work with, it inevitably effects the lenders bottom line".

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Private enterprise is fixed on changing the dynamic

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In a brief telephone interview I conducted with Ms. Simona Miu a spokeswoman for the ForeclosureU.com a private educational institute established in 2005, Miu stated:
“ForeclosureU is committed to changing all of that in 2009. Stating that ForeclosureU.com is going “at the establishment head on”. Miu says that ForeclosureU is launching a national advertising campaign in various targeted media outlets promoting the importance of their “Certified Foreclosure Specialist Designation and Training for Realtors”.….“In 2009 our sole focus will be dedicated to educating and arming 25000 Realtors to earn their fair share and rights to the REO pie……Graduates of the “CFS” Training will receive everything required to meet their career goals and seize these emerging markets”.
Miu went on to provide some of the ways ForeclosureU intends on accomplishing that challenging feat:
“CFS” graduates are provided unprecedented (a) training on listing REO property but it doesn't stop there (b) “CFS” graduates are entered into the National Database of “CFS” agents (c) which will be facilitated by an aggressive print/electronic and Internet marketing campaign (promoting its “CFS” agents) targeting the entire default (REO) industry (d) In addition a proprietary list of “REO asset managers” and their direct contact information will be made available to all “CFS” graduates.”
Miu stated that ForeclosureU is filling the gapping holes left by local, state and national educational platforms that have failed Realtors miserably in providing current educational requirements.

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Conclusion

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If ForeclosureU and companies like them truly step up and provide Realtors the tools they need there is little doubt that, at least in this columnists opinion, Realtors can surely change the course of their careers and maybe even the course of the foreclosure debacle as a whole.
On a personal note, I am pulling for ForeclosureU and any innovative new business that has the capacity to help this beleaguered economy. Small business and product/service innovation is the only viable macro solution to this countries economic downward spiral. Realtors are a part of that solution. Getting our political leaders to understand this is a whole other conundrum.

Straight Scoop On Pricing Adjustments And Paying Points

2009-01-26T10:06:00.000-08:00

Provided by MMG Member Linda Davidson.

In response to higher mortgage default rates experience by Fannie Mae and Freddie Mac, the largest buyers of 30 year fixed, conforming mortgages, the formal announcement of "Risk Based Pricing" was established during 2008. Before this was announced, a 30 year fixed rate loan was basically the same price for any borrower with a credit score of 660 or higher and a loan amount up to 95% of the home value. But now, Fannie and Freddie require pricing "add-on's" using a matrix of credit score and loan to value percentages.

This risk based pricing is MANDATED by Fannie and Freddie, and is required of ALL lenders originating a conforming 30 year fixed.Sometimes the interest rate can be increased to cover these add-on's without having to pay them out of pocket, but that is becoming increasingly difficult in today's market. Investors have changed the way they create rate sheet options, and they offer very little in the way of "premium pricing", which used to allow options for closing costs or points to be covered in return for a higher interest rate.

But in today's environment, sometimes the add-on's must be paid in the form of points - to either keep the rate and corresponding payments as low as possible, or sometimes because there simply is no other way they can be covered.

The bottom line is - smart consumers cannot just call a lender and say: "what's your rate and closing costs?" There are simply so many unknowns with the combination of credit score, loan to value percentages, property type, etc... that any reputable lender should be upfront, and be clear that any quote given is based on an assumption of certain parameters.

Inauguration Day

2009-01-19T20:11:00.000-08:00

The financial markets are closed today in observance of the Martin Luther King Holiday. They will reopen Tuesday morning for regular trading hours. I don't believe many mortgage lenders will be open tomorrow, but any that are will likely use Friday's rates or not allow a rate to be locked tomorrow.

Tuesday is Inauguration Day and while I don't believe the ceremony or President Obama's speech will directly affect the markets or mortgage rates, it does bring in the new administration, new policies and new theories. Those changes could come into play in the coming weeks and likely influence mortgage rates. Issues such economic stimulus and recovery along with tax and deficit news could create significant volatility in the markets and therefore mortgage pricing.The week's only relevant monthly economic data is December's Housing Starts report early Thursday morning, but I don't see it causing much movement in mortgage rates. This report gives us an indication of housing sector strength and future mortgage credit demand, but it is not considered to be a heavy influence on bond trading..

Also Thursdays is the Labor Department's weekly update on unemployment filings. They are expected to show that 548,000 new claims were filed last week. A smaller number is considered negative for bonds while a larger than expected rise is positive. But, this data is also not considered to be of high importance. Since it is one of the only two reports released at all, it may influence trading some but not enough to greatly affect mortgage rates.

Moving Day Countdown

2009-01-13T13:37:00.000-08:00

8 weeks before the move

- Contact a professional mover or truck rental and get estimates: make early reservations.

- Decide what furniture stays and what furniture goes.

- Use up things that cannot be moved (frozen food, cleaning supplies, flammable household products, etc.).

6 weeks before the move

- Inventory your possessions and determine what will be sold or donated.

- Get copies of records from doctors, dentists, lawyers, accountants, etc.

- Transfer children's school records.

4 weeks before the move

- Hold a garage sale, then arrange for storage if you need it.

3 weeks before the move

- Assemble package materials: dolly, scissors, packing tape, bubble wrap, rope, boxes, etc.

- Begin packing items you won't need.

- Arrange cancellation for utilities at old home and have them installed at the new home.

- Make travel and hotel (if necessary) reservations.

- Get car license, registration, and insurance in order (if moving out of State).

2 weeks before the move

- Transfer bank account and cancel direct deposit or automatic payments on account you are closing.

- Make special arrangements for moving pets. Consult your Veterinarian for tips on making the move easier.

- Get your car checked and serviced for the trip.

1 week before the move

- Transfer all medical prescriptions to the pharmacy in your new location.

- Return library books and videos; send out dry-cleaning and pick up after the move.

- Finish major packing, labeling boxes by contents and room destinations.

2 or 3 days before the move

- Defrost refrigerator.

- Have cash on hand.

- Pack a weekend bag in case of delay.

- Pack a "first day handy items" box: scissors, utility knife, coffee cups, paper plates, paper towels, instant coffee, soft drinks, water, soap, pencils, paper, local phone book, bath towels and toiletries kit.

Moving day

- Pick up rental truck early.

- Inspect basement, attic, garage, etc.

- Turn off water, lock all the doors and windows.

- List every item loaded onto the truck to use for a check list as they come off.

- Inspect your old home one more time to make sure you didn't forget anything.

Instant Analysis of Today’s FOMC Decision

2008-12-17T15:32:00.000-08:00

The Fed’s all in and throwing in the kitchen sink for good measure. “The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability”Stock and bond markets are celebrating in the wake of an FOMC statement that exceeded nearly all expectations for a substantial easing of policy today. At the time of this writing, the Dow is up about 340 points, and the 10-Yr Treasury yield has plunged to 2.36 percent from 2.50 percent yesterday. Throwing all caution to the wind, the Fed is betting that drastic rate cuts are needed immediately in order to support consumer and business borrowing in the face of a rapidly deteriorating economy and the specter of deflationary forces afoot. Such drastic measures only highlight the scale and scope of the current economic and financial crisis that still lies ahead. The Fed is now pulling nearly all its policy levers and only time will tell if it is pushing on a string, or if monetary policy still has a viable channel in which to operate. For the first time in its history the Fed has decided to establish a target range for the Fed funds rate of between zero and 0.25 percent, effectively making 0.25 percent its interest rate ceiling. This is also an admission that the Fed has been having trouble maintaining its target as massive injections of about $1.0 trillion into various credit facilities, bank re-capitalization, and the payment of interest on bank reserves make an explicit target nearly impossible to achieve. The movement to a target range also rightly puts the focus of additional policy actions on the scope and scale of outright purchases of MBS, and agency debt. The committee is also exploring the potential benefits of purchasing longer-term Treasury securities as well. Moreover, the FOMC signaled that they expect to maintain an exceptionally low fed funds rate target of some time. This signal is designed to push longer-term Treasury yields even lower, and from today’s action it seems to have worked.The FOMC statement begins by describing an economy mired in a deepening recession, with little prospect for near-term relief, stating that labor market conditions have deteriorated, and consumer spending, business investment, and industrial production have declined. The Fed’s view of credit market conditions has not improved, and their outlook for the economy has weakened further.Finally, the Fed doesn’t mention the prospect of deflation in the statement, but did highlight the prospect for inflation to moderate further in the coming quarters.Expect further expansion and utilization of the Fed’s existing credit facilities, as well as the addition of new ones in 2009 as the Fed moves further down the path of quantitative easing.

Mortgage Rates For December 2008

2008-12-14T22:46:00.000-08:00

This week is moderately busy in terms of the number of economic releases scheduled for release with four on the agenda, but the biggest news will likely be the last Federal Open Market Committee (FOMC) meeting of the year Tuesday.

Only one of the four economic reports is considered to be of high importance, so the data may not be the biggest influence eon the markets and mortgage rates this week. November's Industrial Production data is scheduled to be posted mid-morning tomorrow. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting this report to show a 0.5% decline in output. A larger than expected drop would be good news for bonds, while a stronger than expected reading may result in slightly higher mortgage pricing.The week's most important economic data comes Tuesday morning when November's Consumer Price Index (CPI) is posted. It is similar to last week's Producer Price Index, except it tracks inflationary pressures at the consumer level of the economy.

Current forecasts call for an decline of 1.3% in the overall index and a 0.1% rise in the core data reading. The core data is watched more closely because it excludes more volatile food and energy prices, giving a more stabile reading for analysts to consider. November's Housing Starts report will also be released Tuesday morning, but I don't see it causing much movement in mortgage rates. This report, which is expected to show a decline in starts of new homes, gives us an indication of housing sector strength and future mortgage credit demand. But, it can be considered the least important of this week's news.The last FOMC meeting of the year is Tuesday and will adjourn at 2:15 PM ET.

There is much debate about what the Fed will do at this meeting, but the general consensus is that another rate cut is coming. Some think that the Fed will reduce key short-term interest rates by another .750 of a discount point, but most think the Fed will make a half-point move and wait until early next year before making another change. The post meeting statement also may a significant influence on the markets and mortgage rates as investors look for any indication of what and when the Fed may do next.The last piece of economic news will be posted Thursday morning with the release of the Conference Board's Leading Economic Indicators (LEI) for the month of November. This 10:00 AM release attempts to measure economic activity over the next three to six months. It is expected to show a sizable decline in activity, meaning that it predicts slower economic activity over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates unless it exceeds current forecasts of a 0.5% decline from October's reading. If it shows a larger decline, the bond market may move slightly higher, improving mortgage rates slightly.

Overall, expect to see a pretty volatile week in the financial markets and mortgage pricing. The most important day of the week is certainly Tuesday with the CPI and the FOMC meeting both scheduled.

How To Solve The Foreclosure Crisis!

2008-12-10T15:14:00.000-08:00

Barron's - By Jonathan R. Laing

Nothing is threatening the U.S. financial markets, and indeed the U.S. economy, as much at the relentless rise in home foreclosures.
The overhang of foreclosed homes for sale is pummeling home prices and laying waste to entire neighborhoods. In the process, consumer spending has suffered mightily and deepened the recession as Americans have seen the value of their most important assets, their homes, plummet in value.
Likewise, some $1.5 trillion of securities backed by subprime and similar mortgages have continued to decline in value, destroying the capital of many major banks and other financial institutions faster than the government has been able to replenish it under the Troubled Asset Relief Program, or TARP.
Yet, Uncle Sam's attempts to stem the tide of foreclosures and arrest the baleful fall in home prices have been, in a word, pathetic. The latest effort -- the proposal floated last week by the Treasury Department to exhort banks to offer super-low 4.5% mortgages -- was a step in the right direction. But in extending support to buyers of homes, it completely ignores the agonies of the roughly 50 million families that already have mortgages. As a result, it does little to halt the surge in foreclosures. Some 2.85 million home owners are likely to default this year, rising to as many as 4 million next year, according to Moody's Economy.com.
That's why Barron's is proposing sweeping action. First and foremost, the government should make that same 4.5% mortgage rate, the lowest in decades, available to all American homeowners through refinancings. Banks and other lenders would write the loans and then sell them to Fannie Mae and Freddie Mac, the secondary-market giants that were nationalized in early September.
The new rates, and lower monthly payments, would be especially helpful for homeowners with negative equity (they owe more on their mortgages than their homes are worth). Such underwater borrowers -- prime candidates for default -- account for about $2 trillion of the $11 trillion of U.S. mortgage debt outstanding.
Meanwhile, the government must help "modify" the most troublesome group of mortgages -- the roughly $500 billion of subprime and Alt-A mortgages that are in arrears and headed toward foreclosure. The government should facilitate extending the amortization periods from 30 years to as long as 40 years, cutting rates to 4.5% or lower and, on some loans, reducing principal balances.
Ambitious as all this is, it could probably be accomplished for $100 billion. That's a relatively small sum in the context of this year's bailouts, and it would excise the very tumor that triggered the global financial meltdown last year. The key: smart use of Fannie and Freddie, which up to now have been vastly underutilized.
Is this proposal utopian? Not really. We've talked to experts, from Economy.com's Mark Zandi to former Fed Vice Chairman Alan Blinder, who in an op-ed piece in the New York Times early this year astutely warned of an impending mortgage-default tsunami. We've also borrowed from imaginative mortgage-relief ideas put forward by the likes of R. Glenn Hubbard and Chris Mayer of the Columbia Business School, long-time market strategist Edward Yardeni and the chief of the Federal Deposit Insurance Corporation, Sheila Bair.
The FDIC leader was turned down by Treasury when she sought $25 billion of the government's $700 billion TARP plan to provide a federal guarantee and loss-sharing on approximately two million modified home mortgages. But Bair's idea clearly had merit.
To make our plan work, the Federal Reserve would have to create a special funding facility for Fannie Mae and Freddie Mac so that they could effectively borrow at Treasury rates. Currently, the two organizations are borrowing at a significant spread over Treasury rates.
That higher borrowing cost was the result of Treasury's refusal during the nationalization to "explicitly" guarantee Fannie and Freddie's debt and guarantee obligations -- a move that Blinder, for one, has labeled as boneheaded. As a result, Treasury and the Fed two weeks ago unveiled a program to spend $600 billion buying back Fannie and Freddie debt and mortgage-backed securities to bring down the two titans' borrowing costs. The move has diminished but not eliminated the spread over Treasuries.
The mortgage rates offered through Fannie and Freddie tend to run about 1.5 percentage points above their funding costs. If their borrowing rates converged with Treasuries', they could offer mortgages at around 4.2% since the 10-year Treasury bond currently trades at around 2.7%. But to leave a margin for error, we'll stick to a 4.5% rate.
Such a drop in rates would set off a frenzy of refinancings similar to what occurred in the balmy days of 2005. Yet this onslaught is something that Fannie and Freddie could easily handle with their large infrastructures and close relationships with banks and other mortgage originators, from whom they purchase mortgages in the secondary market.
Fannie and Freddie would bundle the refinanced loans into basic, guaranteed securities for investors. Demand for such securities has remained brisk throughout the credit crunch, and it should get even stronger with explicit government backing.
Perhaps most important, Fannie and Freddie would have to loosen their overly stringent underwriting standard. Today, no borrower can receive the current conforming rate of 5.6% or even have a prayer of garnering a refi without a sky-high FICO credit rating of over 730 and a down payment of at least 20% to 30%. That disqualifies the vast majority of homeowners.
The great leap of faith under our program involves the refinancing of all homeowners at the same low rate, even if they have negative equity in their homes. The latter factor would seemingly give some an incentive to walk away from their obligations.
Such lenience on the surface would seem suicidal for Fannie and Freddie, who had enough trouble making sound "qualifying" loans as to end up as government wards. But remember, the overwhelming bulk of the mortgages they would end up refinancing under our plan will come from the $5.5 trillion pool of mortgages that they already own or guarantee. So such a move, in fact, would lower rather than boost their ultimate credit risk, because the newer mortgages' lower monthly payments would reduce homeowners' likelihood of defaulting.
We would even require Fannie and Freddie to address many of the subprime and Alt-A mortgages that are sitting in the toxic, $1.5 trillion of securitizations that Wall Street confected at the 2006-2007 peak of the housing market. Remarkably enough, some $1 trillion of these loans are still current, even though virtually none of these borrowers would've ever qualified for Fannie or Freddie loan purchases using the agencies' traditional metrics of loan-to-value ratios and the like. Little or no attention was paid to borrower suitability or ability to repay.
But the risks we'd ask Fannie and Freddie to shoulder with this pool are less than they might appear at first blush. Many of the speculators and fraudsters that originally populated these Wall Street securitizations have long since defaulted and been foreclosed on, so they're gone from the pools. And there's much to be said for the moral fiber of the redoubtable subprime and Alt-A borrowers who have continued to honor their obligations. Although they likely bought their homes near the peak of the market and are now drowning in negative equity, their attachment to their homes is clearly more than financial.
Finally, Fannie and Freddie are hardly disinterested parties in how theses subprime and Alt-A securitizations fare. In fact, the two giants got caught up in the same speculative fervor that other mortgage players did, and they bought for investment some $220 billion of the securities in the $1.5 trillion total. Also, the Fed and Treasury are probably on the hook for the credit performance of another $250 billion or so of these toxic securities, not the least because of the bailouts of Bear Stearns, AIG and Citigroup.
Hence, Fannie and Freddie would be doing themselves and their federal masters an immense favor by facilitating the refinancing of the $1 trillion in performing mortgages from this pool. With lower monthly payments, many more of these subprime and Alt-A borrowers will have a chance to avoid delinquency.
The remaining $500 billion of securitized subprime and Alt-loans is the most problematic, since these loans are already delinquent or further down the road to foreclosure. Some experts, in fact, argue that this cohort is beyond redemption, and under the dictates of triage should be allowed to die an undignified death.
But under our plan, a special government entity would be created that would buy these loans out of the securitization pools at full price and thus end their zombie-like existence.
There are many advantages, of course, to cashing out and collapsing these securitizations. Banks and other financial institutions that own a ton of this stuff would enjoy an immediate boost in their capital. Also, many funds and other institutions have made costly off-track bets on the performance of these securities in the form of collateralized debt obligations and credit-default swaps; we would propose to just close down the subprime casino and allow bettors to cash in their chips.
Yet the securitization trusts wouldn't get off scot-free for our full-price purchase. They would have to shoulder, say, the first 25 cents on the dollar of any losses our entity suffered from foreclosures and other credit losses. Thus the government's effective exposure would be capped at 75 cents on the dollar.
But at least our special government entity would control these toxic mortgages. Then the FDIC, say, would be able to launch its Loan Modification Program and exercise its full panoply of measures to rehabilitate these delinquent mortgages, extending amortization periods, cutting rates and more.
Up to now, trustees and servicers of these high-risk mortgage pools have been reluctant to modify any of the mortgages holdings. They fear that any such actions would invite lawsuits from the holders of certain classes of their securitizations. The government's involvement would shield the trustees and servicers from that risk.
Ultimately, the cost of the Barron's program could be far lower than you might suspect. Take the $500 billion modification plan. Even if 60% of these nonperforming mortgages go to foreclosure and the recovery there is only 50%, the resulting $150 billion loss would be only $75 billion after the securitization sellers cover their first-loss payment on the bad mortgages.
As for the $1 trillion of high-risk mortgage securities being assumed by Fannie and Freddie, their potential losses would seem to be manageable -- say, around $15 billion or so -- even assuming a severe cumulative default rate over the next five years of 20% and the same 50% recovery at foreclosure. A lot of the defaulting mortgages could be cured short of foreclosure. Also offsetting these credit losses are the likely $45 billion the portfolio would throw off in earnings.
Last week, Fed Chairman Ben Bernanke gave a speech in which he brilliantly dissected the U.S. housing crisis and its centrality to all the financial and economic problems plaguing the U.S. But when he came to offering solutions, his proposals were both timid and ineffectual. It's not enough for a learned doctor to make the correct diagnosis. He must also come up with the correct cure, even if it involves invasive surgery.

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Unless Washington begins to act boldly on the mortgage front, today's bad times will only get far worse.

Important Easement Information

2008-12-08T16:55:00.000-08:00

We should always be concerned about encroachments; whether the seller's use of those five square feet of the neighbor's property for a garden is a problem! Can we expect that the neighbor will continue to permit it? It is a problem and we cannot expect the permissive user to continue.

The seller must establish the following:

- The use was visible, open, notorious (i.e. that the neighbor knows about it)

- The use was continuous for at least five years

- There was never expressed permission.

If the seller cannot establish these elements, the use may constitute an encroachment over the boundary line and a trespass.

Never assume that a neighbor will continue to allow the encroachment. Unless a prescriptive easement is legally confirmed, and recorded, the neighbor could always file a complaint, force the buyer to remove the encroachment and bar the buyer from crossing the actual property boundary line.

Of course, subject to the buyer's consultation with an attorney, there are some options:

- Either the seller, if the issue is discovered prior the close of escrow, or the new buyer, if after close, could negotiate a settlement or title in return for compensation.

- Or, they could agree that an easement will never be granted, but that the neighbor will give revocable permissions (a "license") to use the property.

In any event, once the issue is raised, the parties must consult counsel and resolve it before the close of escrow.

Important Escrow Terms

2008-12-08T16:28:00.000-08:00

Broker: This is the person who represents the buyer/seller during a real property transaction. When buying or selling real estate in California through a broker, you are protected by dealing with a party who is operating under state license.

Escrow: This means to deposit money and documents with an escrow agent, usually in the form of a corporation, to be used as specifically described in the written instructions of the parties.

Escrow Officer: This person writes the written instructions of the parties for the escrow agent. These instructions govern the use of money and documents given by the parties involved.

Preliminary Report: This report shows preliminary ownership and encumbrance information. It is given to the escrow officer after the escrow is opened.

Taxes: The prorating of county, city, and irrigation district taxes and the calculation of bonds and special assessments requires skillful handling.

Insurance: At the time of closing, all premiums must be adjusted and all policies transferred. All changes must be made and the insurance companies must be notified.

Prorate: The division of proportionate shares of rent, insurance, taxes, etc. between the parties involved. This is usually calculated by an escrow officer.

Revenue Stamps: These are put on deeds to show that taxes have been paid at a transfer rate of .11% based on the sale price. The escrow officer uses these when appropriate.

Deed: This is a document that is used to transfer the ownership of land from one person to another. The form of the deed may vary.

Title: The right by which the owner of the land has possession of the property. Publicly recording a deed is a common way to establish title.
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Title Insurance: A policy which protects your rights as owner of a property, and will reimburse for any problems with the title to the property.

10 Deadly Mistakes

2008-12-03T13:27:00.000-08:00

10 deadly mistakes buyers make when purchasing a home:

1. Making an offer on a home without being prequalified

Prequalification will make your life easier. So take the time to speak with a lender. Their specific questions in regard to income, debt, etc., will help you determine the price range you can afford. It is an important step on the path to home ownership.

2. Not having a home inspection

Trying to save money today can end up costing you tomorrow. A qualified home inspector will detect issues that many buyers can overlook.

3. Limiting your search to open houses, ads or the internet

Many homes listed in magazines or on the internet have already been sold. Your best course of action is to contact a Realtor. They have up-to-date information that is unavailable to the general public and are the best resource to help you find the home you want.

4. Choosing a real estate agent who is not committed to forming a strong business relationship with you

Making a connection with the right Realtor is crucial. Choose a professional who is dedicated to serving your needs, before, during and after the sale.

5. Thinking there is only one perfect house out there

Buying a home is a process of elimination, not a selection. New properties arrive on the market daily, so be open to all possibilities. Ask your Realtor for a comparative market analysis. This compares similar homes that have recently sold, or are still for sale.

6. Not considering long term needs

It is important to think ahead. Will the home suit your needs 3-5 years from now?

7. Not examining insurance issues

Purchase adequate insurance. Advice from an insurance agent can provide you with answers to any concerns you may have.

8. Not buying a home protection plan

This is essentially a mini insurance policy that usually lasts one year from the close of escrow. It usually covers basic repairs you may encounter and can be purchased for a nominal fee. Talk to your agent to help you find the protection plan you need.

9. Not knowing the total costs involved

Early in the buying process, ask your Realtor or lender for an estimate of closing costs. Title company and attorney fees should be considered. Pre-pay responsibilities such as Homeowner Association fees and insurance must also be taken into account. Remember to examine your settlement statement prior to closing.

10. Not following through on due diligence

Buyers should make a list of any concerns they have relating to issues such as; crime rates, schools, power lines, neighbors, environmental conditions, etc. Ask the important questions before you make an offer on a home. Be diligent so that you can have confidence in your purchase.

Common Escrow Questions

2008-12-02T14:33:00.000-08:00

What do I need to do before my appointment to sign loan papers?
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Cashier's Check: Obtain a cashier's check made payable to the escrow company in the amount indicated to you by escrow.
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Lender's requirements: Make sure you are aware of your lender's requirements and that you have satisfied those requirements before you come to the escrow company to sign your loan documents.
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Hazard insurance: If you are purchasing a single family home, detached home, be sure to order your hazard insurance. Then call your escrow agent with the insurance agent's name and phone number. You must have secured hazard insurance before the lender will send its money to the escrow company.
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Identification: Please bring a driver's license or passport (photo ID) for each person who will be on the title with you to the escrow company. This is needed so that your identity can be verified by a notary public. It is a necessary step for your protection.
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What is the next step after I have completed my sign-off?
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After you have signed all the instructions and documents, the escrow officer will return them to the lender for review. This usually occurs within a few days and upon completion, the lender is ready to fund the loan and advise escrow.
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What is an "escrow closing?"
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It is the culmination of the transaction. It signifies legal transfer of title from the seller to you. Usually the Grant Deed and Deed of Trust are recorded within one working day of the escrow's receipt of loan funds. This signifies the close of escrow.
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When will I receive the deed?
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The original deed to your home will be mailed directly to you at your new home by the County Recorder's office. This usually takes several weeks, sometimes longer.

Dumping Your Debt

2008-11-17T12:09:00.000-08:00

Millions of Americans set a goal for and succeed in paying off their credit card debt each year. Is this one of your goals? With a little determination and a plan, you can take control of your credit, and improve your credit score in the process. here is how:
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Cut the card
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The first step toward reducing your credit card debt is to stop adding to it. While you don't have to literally shred your cards, you do need to stop using them routinely. Try one (or all) of the tips below to break this habit:
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Cary Cash - Give yourself a weekly cash allowance for expenditures. You will be more aware of how much you actually spend; plus, once you run out of money, you are more apt to stop spending.
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Use debit, not credit - For times when only plastic will do, use your debit card instead of your credit card.
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Out of sight, out of mind - Keep your credit cards at home and you will be less likely to use them.
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Think strategically - Decide on two to four credit cards with which you have a lengthy, positive history, and close any other accounts. Having a few good accounts will boost your credit score, but having too many will hurt it (and may also keep you tempted to spend money you do not have).
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Lower rates, cut a deal
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Once you got your spending under control, focus on reducing your interest rates:
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Negotiate rates - Call up your credit card company and ask for a better rate. Explain that you plan to transfer the balances to another card unless your rate is lowered. Usually, borrowers with good credit scores can cut their rates by a few points, sometimes, as much as 10%.
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Tranfer balances - Consider transferring balances from cards with high interest rates to a different card. Look for offers with low introductory rates that are good for at least a full year, with relatively low rates thereafter. Read the fine print and pass up offers from cards with hidden fees or costs.
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Shop around - Do a little investigative work to find the best card offers. Check out http://www.cardweb.com/ for current offers.
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Reduce your debt
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Now it is time to start chipping away at those balances. Develop a strategy and make it happen, using the following tips:
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Sort it out - Make a list of each credit card you have, its existing balance, minimum payment and interest rate. use any of the online calculators to help you determine which card to pay off first.
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Develop a plan - Pay as much money as you can on your card with the highest interest rate card is paid off, take the same amount you have been paying on that cardand add it to the minimum payment on the card with the next highest interest rate (this is commonly referred to as "snowballing" or a debt-reduction rollover of your payments.) Continue to pay the minimum on the remaining accounts, repeating the process until you are debt-free.
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Have a back-up - Keep one low-interest card put away for emergencies, but maintain a zero monthly balance at all times by paying it off when due.
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Think ahead
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Now that you are debt-free, start thinking even further ahead:
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Invest - Begin to invest the same amount of money you have been applying to debt every month. You have trained yourself to live on less by paying as much as possible toward your debt each month, now take that philosophy and use it to your advantage, reinforcing that thrift must continue in order to develop a mindset of abundance.
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Visualize - Spend a few moments each day imagining what it will feel like to be debt-free, paying cash for every purchase, and looking forward to a comfortable retirement!

What Is Your Home Worth?

2008-11-17T11:58:00.000-08:00

Countless Americans diligently check the stock market everyday, on TV, online, and in print, but fail to take stock of an even weightier investment: their own home. Are you among the ninety five percent of American homeowners who are unaware of the market value of your home?

A Comparative Market Analysis (CMA) provided by a real estate professional can bring you up to speed. As the name suggests, a CMA compares your house with similar ones in your neighborhood during a specified time period. This data, combined with the value of upgrades, will give you an accurate picture of your home's worth.

Remember, however, that your personalized CMA is a "snapshot" captured in time, while the real estate market constantly fluctuates; therefore, it is a good idea to obtain a new one every 6 months (in this market).

The CMA is the only market-based means of measuring value. When buying, selling or refinancing, a CMA is essential in setting price and in choosing advantageous timing. Still, there are numerous other reasons to run a CMA; to obtain a realistic picture of your net worth, to provide adequate replacement insurance, or to leverage your equity.

What Is A 1031 Exchange?

2008-11-11T12:22:00.000-08:00

What is a 1031 exchange?

Section 1.1031, of the Internal Revenue Code of 1986, as amended, offers real estate investors one of the last great investment opportunities to build wealth and save taxes. By completing an exchange, the investor (Exchanger) can dispose of their investment property, use all of the equity to acquire replacement investment property, defer the capital gain tax that would ordinarily be paid, and leverage all of their equity into the replacement property. Two requirements must be met to defer the capital gain tax: (a) the Exchanger must acquire like-kind replacement property and (b) the Exchanger cannot receive cash or other benefits (unless the Exchanger pays capital gain taxes on this money). The tax code states: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment purposes if such property is exchanged solely for property of a like-kind which is to be held for either productive use in a trade or business or for investment purposes." Investors can accomplish virtually any investment objective with exchanges including greater leverage, diversification, freedom from joint ownership, improved cash flow, geographic relocation and/or property consolidation.

What is involved in a delayed exchange?

A typical tax deferred exchange is very similar to a taxable transaction except that prior to closing on the property being sold, a qualified intermediary, is assigned into the Sale Contract. They sell the property to the buyer and transfer the proceeds safely into a separate exchange account. (the IRS stipulates the exchanger cannot be in actual or constructive receipts of fund at any time during the exchange.) The exchange period begins with the transfer of the first property providing the investor 45 days to identify, and a total of 180 days to close, on the "like-kind" replacement property. The exchange is completed when the qualified intermediary is assigned into the Purchase Contract, utilizes the proceeds received to acquire the replacement property, and instructs the closer to transfer ownership to the exchanger via direct deeding.

What are the exchange requirements?

- Purchase Equal or Greater value.

- Reinvest all Net Equity.

- Equal or greater Debt. (Exception: A reduction in debt can be offset with additional cash, however a reduction in equity cannot be offset by increasing debt).

Exchanges must be completed within strict time limits with absolutely no extensions. The Exchanger has 45 days from the date the relinquished property closes to identify potential replacement properties. This involves a written notification to the Qualified Intermediary listing the addresses or legal descriptions of the potential replacement properties. The purchase of the replacement property must be completed within 180 days after of the close of the relinquished property. After 45 days has passed, the Exchanger may not change their Property Identification list and must purchase one of the listed replacement properties or the exchange fails.

To avoid the payment of capital gain taxes, the Exchanger should follow three general rules: (a) purchase a replacement property that is the same or greater value as the relinquished property, (b) reinvest all of the exchange equity into the replacement property, and (c) obtain the same or greater debt on the replacement property as on the relinquished property. The Exchanger can offset the amount of debt obtained on the replacement property by putting the equivalent amount of additional cash into the exchange.

In the case of real property exchanges, the Exchanger must sell property that is held for income or investment purposes and acquire replacement property that will be held for income or investment purposes. This is the like-kind property test. I.R.C. Section 1031 does not apply to exchanges of stock in trade, inventory, property held for sale, stocks, bonds, notes, securities, evidences of indebtedness, certificates of trust or beneficial interests or interests in a partnership.

Property Tax

2008-11-03T13:01:00.000-08:00

The basics

Property Taxes are governed by California State law and collected by the county. The County Assessor determines the assessed value of the property. This amount is generally the cash or market value at the time of purchase. This value increases not more than 2% per year until the property is sold or new construction is completed. The Auditor Controller applies the appropriate tax rates which include the general tax levy, locally voted special taxes, and any city or district direct assessments. The Tax Collector prepares and sends property tax bills and collects payment.

New Homeowners

Although escrow prorates taxes and gives appropriate credit between buyer and seller, the actual taxes may not have been paid and you are responsible for any unpaid taxes at the close of escrow. Review your escrow instructions, closing statement and/or title report to determine if any portion of the annual taxes were paid by the previous owner before the close of escrow.

The Tax Collector will not send a bill for the remainder of the year in which you acquired the property unless requested. if any taxes remain unpaid, call the Tax Collector and request a bill. When you call, give the Assessor's Identification Number (consisting of a map book, page, and a parcel number) from the previous tax bill (if available to you).

State Law stipulates that failure to receive a bill does not permit the tax Collector to excuse penalties on late payments.

Impound Accounts

If your taxes are paid through an impound account (included in your mortgage payment), your lender will receive your annual tax bill, and you will receive an informational copy.

Partial Payments

You may pay as much as you can afford by the installment delinquency date and avoid the penalty of the amount paid. The unpaid portion will still be subject to the 10% penalty. Any unpaid taxes as of June 30 will cause the property to become tax defaulted and further penalties and costs will accrue.

General Information

General Tax Levy: The 1% General County Tax (ad valorem) was established with the passage of Proposition 13. The general levy of 1% is distributed among agencies in the County on a country-wide basis; and its distribution changes each year based on increases or decreases in assessed value.

Voted Indebtedness: Any jurisdiction may levy a tax rate in excess of the General Tax Levy (1%) in order to produce revenues in an amount needed to make annual payments for the interest and principal on any bonded indebtedness which was approved by the voters.

Direct Assessments: Benefit assessments such as weed removal, landscape, flood control, refuse, sewer, sidewalk repair, and lighting assessments are examples of direct assessments. Direct assessments are shown separately on the secured tax bill and are added to ad valorem taxes for total taxes billed. The Auditor-Controller acts as an agent for each agency by placing the direct assessment on the tax bill and distributing the tax collected to the agency. For information regarding the direct assessment calculation, contact the agency or city responsible for the assessment.

Tax Rate Areas: properties are subject to taxation by a number of taxing agencies, such as the County, cities school districts and various special districts. The Auditor-Controller groups properties into Tax Rate Areas (TRAs). The TRAs are numbered and appear on both secured and unsecured tax bills. The Board of Supervisors sets the tax rates that are calculated in accordance with Article 13(a) of the Constitution of the State of California.

Important Dates

January 1: Taxes become a lien at 12:01 a.m. not yet due and payable for the Fiscal Tax year starting July 1 and ending June 30. Title evidence will show taxes as a lien for the coming Fiscal Tax year.

April 15: Last day to file for 100% Veterans or Homeowner's Exemption (Senior Citizens and Disabled filing period May 15 - August 31). You must own and occupy the property on January 1 to be eligible for applicable exemptions.

July 1: Current Fiscal Tax Year begins.

November 1: First installment due covering the period from July 1 to December 31.

December 1: Last day to file for 80% of applicable exemptions.

December 10: First installment becomes delinquent at 5 p.m. 10% penalty added to taxes due. If December 10 falls on a weekend or holiday, taxes are not delinquent until 5 p.m. on the next business day.

February 1: Second installment due, covers the tax period from January 1 to June 30.

April 10: Second installment becomes delinquent at 5 p.m. 10% penalty plus administrative charge attaches. If April 10 falls on a weekend or Holiday, taxes are not delinquent until 5 p.m. on the next business day.

June 30: If you fail to pay either or both installments by 5 p.m. property tax becomes defaulted and additional costs and penalties accrue. If June 30 falls on a weekend or holiday, taxes must be paid by 5 p.m. of the preceding business day.

Four Things To Avoid When Purchasing A Home

2008-10-27T11:09:00.000-07:00

There are four major things to avoid doing before applying for a loan and during the loan process itself. Any one of these four things can greatly impact your ability to qualify for a mortgage loan so it is prudent to avoid doing any of the following until AFTER your loan has closed escrow.
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1. Do not change jobs
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Changing jobs before or during the loan process can create a real problem in qualifying you for a loan, particularly if that job is in a different line of work or at a lower rate pay. During the loan process, it can also create time delays as the new job will need to be verified.
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2. Do not switch banks or move your money around
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It is best to leave your money right where it is until your loan is closed. Moving your money to a new bank or even into a new account can wreak havoc with the verification process.
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3. Do not pay off bills
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Your loan officer will advice you if it is necessary to pay off bills to help you qualify for a loan. They will also show you the best way to pay off bills to make sure that escrow has evidence they need to prove that the bills have been paid.
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4. Do not make any major purchases
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Many borrowers make the mistake of buying a new car, some furniture or making another major purchase without realizing the impact it can have on their ability to buy a home. A large monthly payment can affect the amount of home you qualify for and, during the loan process itself, actually make it extremely difficult to get your loan approved.
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If you must do any of the things listed above (even if you have just been pre-qualified for a loan) contact your loan officer. They can help you by re-qualifying you if necessary and advising you of your options.

The Bailout's Biggest Winners!

2008-10-13T12:32:00.000-07:00

The government's $700 billion rescue plan won't help the U.S. avoid a recession completely, economists say. BUT it should ease some of America's biggest pain points. Here is a look at the three groups most likely to benefit (By C.Holahan, MSN Money).

The good news is that, while the Bush administration's rescue plan probably won't eliminate the pain on Main Street, it will help.

The U.S. is still in for a RECESSION, economists say. That's inevitable, owing to steady blows from the housing slump, the failure of financial institutions, commodity price spikes and declining exports.

"The economy has endured so much adversity already," says economist Robert Hansen. "The fact that we are not in a recession yet is incredibly surprising."

What the bailout will do, with a little bit of luck, is lessen the severity of the downturn by providing banks with much needed capital through government purchases of the toxic securities linked to the mortgage mess. And that should provide relief for some economic sectors with very real impact on Main Street.

In recent months, credit has become difficult to come by, as the failure of a few large banks has made other banks anxious about lending. Capital shortage is a big problem! if people can't borrow, it will impact the consumer and business spending, and that is how we slide into a recession. Put another way, federal officials need to encourage borrowing and spending, right now, because borrowing and spending will cushion the downturn. While the program starts by putting more money in the hands of banks, the hope is that some of the money will filter through to purchasing decisions affecting housing and autos, eventually lifting the broader economy.

Help for homeowners

The recent decline in home values and the tightening of credit markets have hit hard at homeowners' creditworthiness and purchasing power. Today, it's tough for homeowners to use the equity in their homes to obtain financing for big-ticket items, such as a child's college education or car purchase. Banks are just too nervous to lend, and many homeowners continue to see rates on adjustable rate mortgages ratched up, casting doubt on their ability to pay.

One of the better indicators of anxiety among banks is the interest rate international banks charge each other on short-term loans, a rate known as the London Interbank Offered Rate (LIBOR). In recent weeks, LIBOR has risen steadily, fueled by fears of bank defaults.

LIBOR may sound pretty far removed from Main Street, but for millions of mortgage holders in the U.S., it matters, because more than half of the adjustable-rate mortgages in the U.S. are tied to the LIBOR. When the LIBOR goes up for a sustained period of time, so do interest rates on those mortgages.

By helping banks, the rescue program is likely to restrain further increases in LIBOR, or drive it down. That, in turn, would drive mortgage rates down, or forestall increases. Call it trickle-down bankonomics.

Here is how that would work. Right now, fear has totally shut down the market for mortgage-related securities, through most of these securities still have very real values. Government purchases will help re-establish a functioning market for the securities, and ultimately re-establish their real value in the marketplace. Any increase in the perceived value of the securities would tend to strenghten the balance sheets of banks and reduce anxiety about bank defaults.

That, in turn, would tend to make more willing to lend, holding the LIBOR rate down. At the end of the day, a lower interest rate for banks means a lower adjustable-rate mortgage for many U.S. homeowners.

By putting more capital in the hands of banks, the rescue plan will help in another, more direct way. it will provide additional capital for banks to grant mortgages to would-be homeowners. As new homeowners buy houses, they take excess inventory off the market, creating a more wealthy balance between supply and demand, and bolstering home values across the board.

Analysts agree that an end to the slide in home prices will be the most important step toward ending the crisis.

The automotive industry gets a lift

After homeowners, the automotive industry has perhaps the most to gain from the bailout. Car makers and dealers have endured one of the worst years in more than a decade, thanks to consumer spending cutbacks and an inability to provide financing for would-be buyers and lease owners.

Dealers are in deep trouble. The number of dealership foreclosure increased 46% in 2007 compared with the prior year, according to the National Automobile Dealers Association.

By reducing pressure on banks, the rescue should relax financing standards, enabling more customers to qualify for car leases. And any improvement in the housing market will boost automotive sales by enabling more consumers to use their home equity to buy cars.

Detroit has other reasons to cheer the rescue. The bill includes $1 billion in tax breaks over the next decade for the purchase and development of electric cars. That addition does not address problems resulting from the credit crisis, but it does help automakers restructure their businesses in the face of rising fuel prices. In the long run, the tax breaks will help the industry.

Security for small businesses

The problems facing small businesses may be the biggest threat to the broader economy. Small businesses frequently need short-term credit to meet payrolls and fund new projects. Entrepreneurs look for credit to fund startups. No credit means fewer jobs. By helping banks, the rescue will likely increase their willingness to support small-business initiatives.

Moreover, the extension of federal insurance to cover deposits up to $250,000 clearly helps small-business owners. The prior insurance limit to $100,000 covered all but the wealthiest individuals. But business owners operate on a larger scale and far more likely to have that kind of cash sitting in a saving or checking account, where it can be easily withdrawn to pay employees, rather than in long-term investments. So this change means a lot to them.

The bailout is not a panacea

Despite the benefits of the bailout, it is not a cure-all. Some banks will still fail, and as they fail, would-be borrowers will see less competition for their loans and, likely, less-favorable terms. That's not to mention all the bank employees who will face layoffs.

Still, by cushioning the impact of the crisis and helping banks avoid an even worse meltdown, the bailout should ward off a deeper recession.

Points Explained Step By Step

2008-10-02T12:21:00.000-07:00

What is a point?

One point is equal to one percent of the NEW loan amount

Why do lenders charge points?

Whenever governmental regulation, state usury law and/or competitive practices prohibit the lender from charging a rate of interest which would make the real estate loan competitive with other fields of investments, the lender must seek some method of increasing the yield for the investors. By charging "points," the lender can bring the real estate loan up to those other investments.

Are points called by different names?

Yes. Loan Origination Fee, Commitment Fee, Discount Fee, Warehousing Fee, Funding Fee, etc.

Who must pay the point?

FHA: The buyer is usually charged with the Loan Origination Fee; the Discount Fee can be paid by the buyer or the seller.

VA: The buyer is usually charged with the Loan Origination Fee and the Funding Fee. Discount Fee must be paid by the seller.

Conventional: Points can be paid by the buyer, the seller, or split between the two. State on Contract of Sale.

City/County/State government sponsored loans: As published by them.

Do the number of points charged fluctuate?

Yes. If rates on mortgage loans are lower than other investments (such as stocks, bonds, etc.) then funds will be drawn away from the mortgage market. Also, there is a heavy demand upon the money market because of business needs, role requirements or other government borrowing, the result is that money for home mortgages become scarce and more expensive. When this occurs, more points can be charged. Points balance the market. Points are not set by government regulation but by each lender individually.

On VA loans, is there any way to lock in the number of points?

Not without jeopardizing the sale. Even when a lender stipulates in writing the number of points to be charged, that guarantee states "if the government." Points charged on a FHA or conventional loan are usually not changed from commitment time to settlement.

is FHA or VA financing unfair to sellers?

No. Homes can sell faster because more buyers can qualify with the lower down payment requirement, lower interest rate, long-term loans with lowest monthly payments. Sellers receive all cash for their equity to reinvest in a new home or other investment. The purpose of these loans is to provide purchasers the opportunity to buy homes with minimal cash investment, thus providing a bigger market for sellers.

Are points deductible for income tax purposes?

Points on a home mortgage (for the purpose of improvement of, and secured by, the taxpayer's principal residence) are deductible currently if points are generally charged in the geographical area where the loan is made and to the extent of the number of points generally charged in that area for a home loan. If you are in doubt about points being deductible, you should contact your tax return preparer.

California Market Analysis - June 2008

2008-06-30T15:48:00.000-07:00

It is becoming apparent that the difference between the first quarter of the 2008 real estate market and the fourth quarter will be in sharp contrast. The subprime crisis, which hit the news the first week of August 2007, had a large impact on the market. For the next three to four months, real estate pending sales were the lowest they had been in almost twenty years, which translated into dismal closings for the fourth quarter 2007 and the first quarter 2008. Buyers started to come off the sidelines in early 2008, and the number of sales started to increase. The National Association of Realtors just announced that pending sales jumped 6.3% in April. Pending sales are an indicator of the direction closed sales are headed. This early data suggests that our prior forecast will prove accurate. We predicted late last year that sales would hit their low in the fourth quarter 2007 and the first quarter 2008. Last month, we explained about real estate cycles. based on past cycles, we can confidently predict that as the number of sales continues to slowly increase, prices will begin to level off. Our national economy is currently experiencing pressure from higher unemployment figures, fear of inflation, and record-high gas prices. The national economy is not nearly as predictable as the real estate market; however, we stand by our forecast that an improving real estate market will lead us out of our economic woes.

What Are Propositions 60 And 90?

2008-06-12T15:32:00.000-07:00

What are Propositions 60 & 90?

They are constitutional initiatives passed by California voters. They provide property tax relief by preventing reassessment when a senior citizen sells his/her existing residence and purchases or constructs a replacement residence worth the same or less than the original.

Why were they enacted?

They encourage a person, age 55 or older to "move down" to a smaller residence. When a senior citizen acquires a replacement property worth less than the original property, he/she will continue to pay approximately the same amount of annual property taxes as before.

How do these propositions work?

when the senior citizen purchases or constructs a new residence, it is not reassessed, if he/she qualifies. The assessor transfers the factored base value of the original residence to the replacement residence. proposition 60 originally required that the replacement and the original be located in the same county. later, Proposition 90 enabled this to be modified by local ordinance. Los Angeles County enacted an ordinance to provide that when the replacement is located in Los Angeles County, the original property may be located in any other California County.

Who qualifies?

The seller of the original residence, or spouse who resides with the seller, must be at least 55 years of age at the time of the sale.

When are these Propositions effective?

The replacement residence must have been purchased or constructed on or after November 5, 1986 if the original was located in Los Angeles County. The replacement residence must have been purchased or constructed on or after November 9, 1988 if the original was located in any other California county. Claims must be filed within three years following the purchase of the replacement residence.

Where are claim forms available?

The seller of the original residence, or spouse who resides with the seller, must be at least 55 years of age at the time of the sale. They are distributed at Assessor's public counters, in Room 225 of the Kenneth Hahn Hall of Administration, and the regional office. If you need additional information, call or email me.

Propositions 60 & 90 legal reference.

The seller of the original residence, or spouse who resides with the seller, must be at least 55 years of age at the time of the sale. Section 69.5 of the Revenue and Taxation Code.

What Is Proposition 13

2008-06-12T14:54:00.000-07:00

Those who have owned their home for a while, easily see the value of Proposition 13. Many of us remember that before Proposition 13, the average property tax rate in California was three percent of assessed value and there was no limit on annual increases. In those days, if a house on your block sold for much more than you paid for your house, you shuddered in fear when you received your next property tax bill. Chances are, your new taxes would be based on what your new neighbor was willing to pay for his home. Things got so bad in the late 1970s that people were actually losing their homes because of uncontrolled tax increases.

the assessment rate is now only one percent for all California property and annual tax increases are limited to no more than two percent. When property is sold, it is then reassessed at market value, but the rate remains at one percent and the new owner is then protected by the two percent cap on annual increases.

What good is Proposition 13 to me?

Every owner of property in the state is covered. proposition 13 is Article XIII of the California Constitution.

How come I am paying more in property taxes than some of my neighbors who have similar houses?

Under Proposition 13, you determine how much your property taxes will be. Your taxes are not based on your neighbors', but are based on the price you voluntary agreed to pay for your new home.

We all get the same services, but I pay more. How can this be fair?

In California, just like other states, services have never been related to the amount you pay in property taxes. If services were tied to what you paid, you might see four fire trucks assigned to a costly home while only one would protect a less expensive residence. In fact, property taxes are not allocated for specific services. They go into the general fund along with other taxes and it is local public officials who determine how the money will be spent.

It still seems like I am paying too much!

We all fee that way, but in fact, thanks to Proposition 13, the tax rate for all Californians is only a third of what it was. If you think things are bad now, multiply your tax bill by three and see what you get.

That's easy for you to say, you are still paying less than I am.

That may be true, but I have been paying for years. it's the neighbors that were here ahead of you that paid for all these local improvements you now enjoy.

I still don't see what good Proposition 13 is to me.

Besides your lower tax rate, it makes your taxes predictable. In a few years when new houses sell in the neighborhood for two or three times what you paid, you will be protected. Under Proposition 13, your property taxes can't go up more than two percent a year. You are going to find that very important when you get around to planning your retirement. If you ever find yourself on a fixed income, chances are, because of Proposition 13, you will be able to keep your home.

SHORT SALE Explained

2008-05-12T15:10:00.000-07:00

What is a short sale?
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A short sale is when a lender accepts a discount on a mortgage to pay-off the loan to avoid a possible foreclosure auction or bankruptcy. While the property is still being purchased, the lender's approval of the contract and terms becomes necessary as they must approve the discounted pay-off. For example: A homeowner, who is facing foreclosure, has an existing first mortgage of $300,000. The buyer writes an offer for $220,000, which is accepted as full payment for the loan. This is a SHORT SALE.
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It is best to do a short sale when the property is in the pre-foreclosure state because the banks do not like excess inventory and ad loans on their books.
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What happens to the seller's credit rating when they allow an investor to short sale their property?
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What topically happens is that the loan will show as "paid" on their credit report; however there will be a notation that says "settled for less than original owed" or something along these lines. It is more favorable for a homeowner to short sell than to have a foreclosure on their credit report.
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Can an owner profit from a short sale?
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The seller CANNOT profit (monetarily) from a pre-foreclosure short sale.
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How do bankruptcies affect the possibility of doing a short sale?
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Most mortgages won't consider a short sale if the homeowner is in bankruptcy because negotiating a short sale pay-off is considered a collection activity. Collection activities are prohibited in bankruptcy.
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How late in the pre-foreclosure process can you start a short sale?
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Try to allow a window of at least ninety days to effectuate a mortgage approved, pre-foreclosure short sale.

Closing Costs

2008-04-03T13:11:00.000-07:00

Closing costs amount to approximately 11% of the total sales price of a home, according to the California Land Association. These charges usually include a real estate commission, loan fee, escrow charge, title insurance premium, pest and other inspections, and costs for other services provided during the closing process. Below is a list and definition of common closing costs.

Sales/Broker's Commission

The commission is typically a percentage of the selling price of the home and usually paid by the seller. often two Realtors, the buyer's agent and the seller's agent, and their respective brokerage companies split the commission.

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Loan Fees

There are fees that are lender(s) charges to process, approve and make the mortgage loan.

Loan Origination Fee

Sometimes called a "point" or "discount point", a loan discount is a one-time charge imposed by the lender or broker to lower the interest rate at which the lender or broker would otherwise offer the loan to you. Each "point" is equal to one percent of the loan amount.

Appraisal Fee

The charge, which may vary significantly for different properties, pays for a statement of property value for the lender, made by an independent appraiser or by a member of the lender's staff. The appraiser inspects the house and the neighborhood, and considers sales prices of comparable houses and other factors in determining the value. The appraiser does not, however, necessarily detect or discuss defects in the property or title to the property. Your lender may provide a copy of the appraisal to you upon request although they may not be required to do so unless specified in state law.

Credit Report Fee

The cost for a credit report, which shows your credit history. The lender uses the information in a credit report to help decide whether or not to approve your loan and how much money to lend you.

Lender's Inspection Fee

This charge covers inspections, often of newly constructed housing, made by employees of your lender or by an outside inspector.

Mortgage Insurance Application Fee

The fee covers the processing of an application for mortgage insurance which may be required on certain home loans.

Assumption Fee

A fee which is charged when a buyer "assumes" or takes over the duty to pay the seller's existing loan.

Interest

Lenders usually require that borrowers pay at the close of escrow the interest that accrues on the loan from the date of funding to the beginning of the period covered by the first monthly payment.

PMI (Mortgage Insurance)

Mortgage insurance protects lender from loss due to payment default by the borrower. The lender may require the first premium or a lump sum premium, covering the life of the loan in advance, in escrow. With this insurance protection, the lender is willing to make a larger loan, thus reducing your down payment requirements.

Hazard Insurance Premium

The premium prepayment is for insurance for you and the lender against loss due to fire, windstorm, and natural hazards. The coverage may be included in a Homeowner's Policy Which insures against additional risks such as personal liability and theft. Often the first year's premium is prepaid in escrow. The policy may not protect against loss caused by flooding. If your mortgage is federally insured and your property is within a special flood hazard area identified by FEMA, you may be required by federal law to carry flood insurance on your home.

Title Charges

These may cover a variety of services performed by title companies and others and include fees directly related to the transfer of title and fees for recording, transfer tax, notaries, etc. The borrower may pay all, a part or none of the costs for owner's and lender's title insurance depending on the terms of the sales contract or local custom. A one-time premium may be charged for the lender's title policy which protects the lender against loss due to problems or defects in connection with the title. The insurance is usually written for the amount of the mortgage loan. The borrower will be responsible for all, part or none of the cost depending on the sales contract or local custom.

Escrow Services

The fee for the services performed by the escrow officer. Typically responsibility for payment of this fee is negotiated between buyer and seller when the sales contract is signed.

Recording And Transfer fees

The sales contract or local custom determines how fees are split between buyer and seller. The buyer usually pays the fees for legally recording the new deed and mortgage loan. The county charges a transfer tax and many cities also have transfer tax fees.

Pest And Other Inspections

This fee is to cover inspections for termites or other pest infestation of the home, payment determined by sales contract or custom.

Change Of Ownership Tax Assessment Reappraisal

2008-03-10T11:42:00.000-07:00

Joint Tenancy
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Under this method of holding title, each owner holds the property jointly with the other owners. Upon the death of one owner, the property passes to the surviving joint tenant. For assessment purposes, the termination of joint tenancy (other than husband and wife or parent/child transfers) causes a reappraisal.
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Tenancy in common
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Under this method of co-ownership, each owner owns a specific percentage of the property. At death, tenants in common pass their interest in the property to their legal heir. The transfer of a tenancy in common interest will cause a reappraisal, unless it is husband/wife or parent/child transfer, but only for the interest that has been transferred.
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Legal entities (Partnership & Corporations)
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Under this method, a reassessment occurs when there is a change in the controlling interest of the corporation or partnership. A controlling interest is defined as an interest greater than fifty percent. These changes in ownership are monitored and reported by the State Board of Equalization.
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Leases
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Whenever real property is leased for 35 years or more, including options, reappraisal is required. If the tenant then transfers or subleases that property with more than 35 years remaining on the original lease, state law requires it to be reappraise again. However, if the owner transfers or sell the leased property, a reappraisal is required only if there is less than 35 years remaining on the lease.
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Trusts
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In this method of holding title, there is only a reassessment if there has been a change of beneficial interest or control. For example, revocable trusts (i.e. living trusts) are not subject to reappraisal. Irrevocable trusts are reappraisable if the recipient or beneficiary is not the current owner.
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Methods of holding title
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A change in the method of holding title in itself does not cause a reappraisal. For example, if two equal partners incorporate, and each owns 50 percent of the corporate stock, no appraisal is required. In this case, the proportional ownership has not changed, only the method of holding title.
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Summary
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Under Proposition 13, a reassessment takes place upon a change of ownership or transfer of title. it is always best to review any proposed ownership change with the assessor's office in advance to determine any possible property tax consequences.
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NOTE: For transfers that are not required to be reappraised, taxpayers should have their own escrow and title companies note their parent/child or husband/wife relationship on their deed or other documents transferring title, including the Preliminary Change of Ownership Report (which is filed with the deed.) After the deed is filed with the County Recorder, application forms are mailed to the new owners within thirty days. They should be returned immediately.

20 Reasons For Title Insurance

2008-02-18T13:01:00.000-08:00

1. Title Insurance will protect you against a loss on your home or land due to a title defect.
2. A deed or mortgage in the chain of title may be a forgery.
3. Claims consistantly arise due to marital status and validity of divorces.
4. A deed or mortgage may have been made by an incompetent or under aged person.
5. A deed or mortgage made under an expired power of attorney may be void.
6. A deed or mortgage may have been made by a person with the same name as the owner.
7. A child born after the execution of a will may have interest in the property.
8. Title transferred by an heir may be subject to a Federal estate tax lien.
9. An heir or other person presumed dead may appear and recover the property or an interest.
10. A judgment regarding the tile may be voidable because of some defect in the proceeding.
11. By insuring the title, you can eliminate delays when passing your title on to someone else.
12. Title Insurance reimburses you for the amount of your covered loss.
13. Title Insurance helps speed negotiations when you are ready to sell or obtain a loan.
14. A deed or mortgage may be voidable if signed while the grantor was in bankruptcy.
15. Claim have risen dramatically over the last 30 years.
16. There may be a defect in the recording of a document upon which your title is dependent.
17. Title Insurance covers attorney fees and court costs.
18. Many lawyers protect their clients as well as themselves by procuring title insurance.
19. A deed or mortgage may have been procured by fraud or duress.
20. A title policy is paid in full by the first premium for as long as you own the property.

What Is An Escrow?

2008-02-18T12:43:00.003-08:00

An escrow is created when money and /or documents are deposited by two or more persons with a third party which are to be delivered upon the happening of certain conditions. The third party is known as the escrow agent or escrow holder.

The authority given to an escrow holder is strictly limited by instructions provided by the parties involved. Consequently, an escrow holder acts on mutual instructions deposited into escrow and DOES NOT represent any party. The escrow officer is authorized by instructions to allocate funds for items during the escrow period, such as real estate commissions, title insurance, liens, recording fees and other costs. Instructions also specify the method of collecting funds, proration issues, time limitations and all the terms of the transaction. The escrow process protects all parites involved by retaining money and documents until the mutual instructions are met.

The statutory definition of escrow is found in Section 17003 of the California Financial Code and reads as follows:

"Escrow" means any transaction wherein one person for the purpose of effecting the sale, transfer, encumbering, or leasing of real or personal property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by such third person until the happening of a specified event or the performance or a prescribed condition, when it is then to be delivered by such third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the later.

What is Title Insurance?

2008-02-04T12:51:00.000-08:00

What is title insurance?
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A title insurance policy protects a real estate owner or lender against any loss or damage they might experience because of liens, encumbrances, or defects in the title to said property, or the incorrectness of the related search.

How does title insurance differ from casualty insurance?

Casualty insurers (car, life, health, etc.) assume risk for future events, collecting monthly or annual premiums. A title policy insures the past of the real property and the people who owned it, for a one-time premium paid at the close of escrow.

What does title insurance cover?

Title insurance protects against claims from various defects such as another person claiming an ownership interest. Improperly recorded, fraud, forgery, liens, encroachments, easements and other items that are specified in the actual policy.

Who needs it?

Purchasers and lenders need title insurance to know the property they are involved with is insured against various possible title defects. Whether it is a sale, refinance, construction loan... the seller, buyer and lender all benefit.

How is title policy created?

After the escrow officer or the lender opens the title order, the title company begins a search of the public recording included the County Recorder, Federal and State Agencies, and County and City Offices. A priliminary report is issued to the customer for review and approval. All closing documents are recorded upon escrow's instruction. When recording has been confirmed, demands are paid, funds are disbursed, and the actual title policy is typed and sent to the insured.

What type of policies are available?

A standard CLTA "Owners" policy insures the new owner, the home buyer and an ALTA or CLTA "Lenders" policy insures the priority of the lender's security interest. An extended coverage ALTA-R (residential) policy to owners of 1-4 unit property is also offered. The ALTA Homeowner's Policy is for owners of 1-4 unit properties as well and expands the number of covered title risks to 29, including certain specified risks that may arise in the future. Special Binders, Guarantees and Endorsements are also available.

The Truth About Mello-Roos

2008-02-04T11:46:00.000-08:00

The real benefits of Mello-Roos

As always, today's families recognize the importance in a community that's as desirable as their home itself. Mello-Roos enables critical community facilities to be provided whenever they are needed at a lower cost ultimately to homeowners. By doing so, Mello-Roos ensures a higher quality of life for every family in that community. perhaps most importantly of all, Mello-Roos helps preserve the value of your new home investment.

Where did Mello-Roos come from?

When Proposition 13 passed in 1978, it severely limited the ability of local governments to use property taxes to construct public facilities and services. As a result, Californians were forced to find new ways to fund public improvements in their respective locales. The Mello-Roos Community Facilities Act of 1982 was co-authored by Senator Henri Mello of the Monterey area and Los Angeles assemblyman Mike Roos. Enacted by the California Legislature, the Act enables "Community Facilities Districts" (CFD's) to be established by local government agencies as a means of obtaining the crucial community funding. Today, the colloquial name for the Facilities Act of 1982 is simply "Mello-Roos".

What public facilities are funded by Mello-Roos?

School districts are the most common beneficiaries. Since state funds are not available to provide the quality of facilities necessary in every community in California, Mello-Roos makes the acquisition of timely financing possible. In addition, Mello-Roos can provide financing for other vital community needs. These needs include the construction and maintenance of public roads, traffic light systems, storm sewers, water mains, police stations, fire stations, ambulance services, public libraries, recreational parks, museums and cultural facilities.

How is community funding provided?

Let's say, for example, that plans for a new school are approved in your Community Facilities District. To finance the school, tax exempt municipal bonds are issued. These public bonds are repaid (or secured) over an extended time through the levy of a special tax (Mello-Roos) on properties that benefit from the facility. This tax is usually added to the annual property tax bills (over 20-25 year period) of residences within the CFD. Commercial and industrial property owners are also subject to Mello-Roos. All proceeds raised from Mello-Roos assessment must be used exclusively to finance the specific public and /or services that were authorized in your CFD.

How much will I be assessed?

This will vary from one CFD to another. Typically, an adopted formula that relates to the size of the home (square footage or lot size) is used to determine the amount of an individual assessment. In general, the special taxes and assessments do not exceed 1% to 1.5% of the market value of new homes. Moreover, the total amount of all annual taxes (including property tax) usually does not exceed 2% to 2.5% of the home's market value.

Will my Mello-Roos tax increase?

It can. However, this special tax can increase only at a maximum rate of 2% per year over a 25 years period. On the other hand, it is possible that this tax will decrease, should state or other funds become available that could be used to reduce existing bond indebtedness, or be used to construct new facilities in lieu of additional bond sales.

Can I choose how to pay for Mello-Roos?

Yes. As I already mentioned, the special assessment can be added to your property tax bills until your portion of the tax is paid off. A schedule of maximum special tax payments over a period of 25 years is available to homeowners prior to the close of escrow. Those who purchase a new home also have the option to pay for their Mello-Roos tax in its entirety at the time they buy. However, because statistics indicate that the average homeowner in California moves every 7 years, it is often prudent to spread the payments over time.

Why can't builders bear the cost of these facilities?

They can. But ultimately, the builder must recover these considerable costs in the form of higher home prices. Commercial construction loans acquired by builders typically incur rates of interest than CFD financing, which accrues at significantly lower rates.

Mello-Roos makes sense

Buying a home is the most important decision most of us will ever make. Mello-Roos offers the security of knowing that your community will continue to prosper and grow in ways that are most beneficial to its residents.

Understanding Required Reporting To The I.R.S.

2008-01-28T16:38:00.000-08:00

Sellers of real property will have certain information regarding the sale reported to the Internal Revenue Service. This required reporting is a consequence of the Tax Reform Act of 1986; it is intended to encourage taxpayer compliance and aid in audit and enforcement efforts by the I.R.S. To help you better understand this subject, the California Land Title Association has answered some of the questions most commonly asked about Required reporting to the I.R.S.
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Who is required to report to the I.R.S.?
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Sellers of real property, under guidelines established by the I.R.S., are required to have their gross proceeds from the sale reported on a form 1099S. When a settlement agent is used, the I.R.S. makes this agent responsible for the delivery of the information on the form 1099S. The settlement agent generally will be the escrow agent or the title company; however, it may be an attorney, real estate broker or other person providing settlement services.
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What is an I.R.S. Form 1099S, and what will be reported?
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The form 1099S is the reporting form adopted by the I.R.S. for submitting the information required by law. The information will be transferred onto magnetic media by the settlement agent who will store the information and make the required report to the I.R.S. The settlement agent is also responsible for keeping a master copy of all transactions reported. In general, information required by the I.R.S. falls into the following categories:
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1. The name, address and taxpayer ID number (social security or tax identification #) of the seller(s).
2. A general description of the property (in most cases, an address).
3. The closing date of the transaction.
4. The gross proceeds of the transaction (even though gross proceeds do not correspond to taxable income).
5. Any property involved as part of the transaction other than cash or cash equivalent.
6. The name, address and taxpayer identification number of the settlement agent.
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On what type of transaction is a form 1099S required?
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Currently, typical homeowner transactions covered include sale and exchanges of 1-4 family residential properties such as houses and condominiums. Also reportable is stock in cooperative housing, corporations and mobile homes without wheels. Specifically excluded from reporting are foreclosures and abandonment of real property and financing or refinancing of properties.
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What happens if the seller(s) refuses to provide the taxpayer identification number for the form 1099S?
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Should the seller fail to provide the identification number and certify its correctness, the settlement agent may choose to:
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1. Delay the closing of the transaction until the information is furnished, or
2. Complete the transaction and report to the I.R.S. that an attempt was made to obtain the information.
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How is the sale reported when there is more than one seller involved or when multiple sellers do not own equal interests in the property?
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Multiple sellers may allocate the gross proceeds among themselves for purposes or reporting. If there is no allocation, an incomplete allocation or conflicting allocations, then the entire gross proceeds will be reported for each seller.

Joint Tenants vs. Community Property

2008-01-28T13:17:00.000-08:00

Holding Title as joint tenants or as community property involves a multitude of issues to be dealt with. Here are two distinguishing features between taking title as joint tenants or community property, that most people are concerned with.

When title is taken as joint tenants and one spouse dies, the surviving spouse automatically receives the property. This is called the right of survivorship. (Although the property does not go through any probate proceedings, the surviving spouse must still file an affidavit of death of joint tenant to remove the deceased's name from the deed.

When title is taken as community property however, and one spouse dies, there is no right of survivorship and the surviving spouse does not automatically receive title to the property. If the deceased spouse died without a will, the deceased spouse's interest in the community property would go to the surviving spouse. If there is a will, the deceased's spouse's interest would be handled as outlined in the will. In other words, each spouse has ownership of their half of the community property and can leave it by will to their surviving spouse or any other third party.

One way of looking at the death scenario is that joint tenancy has more certainty and community property has more flexibility.

The tax consequences has been a little more blurred as of late but basically the issue is as follow:

If property is joint as joint tenants, the tax basis of the deceased spouse's half interest would be "stepped-up" to the fair market value at the time of his/her death. The tax basis of the surviving spouse's half interest would remain at its original basis.

If title is taken as community property, however, the entire property receives a "stepped-up" basis to the fair market value at the date of the spouse's death.

Did You Say a Buyer's Market?

2008-01-15T14:42:00.000-08:00

In 2007, sellers realized that they were not going to get top dollar for their homes.

Here are a few examples of buyers taking advantage of good opportunities in Ventura County:

Tract: Ventana, 5327 Paseo Ricoso, 2+2, 1112 sf, 4000 sf lot

Original asking price: $499,000 - Sale price: $380,000

Tract: Village at The Park, 3778 Hedge, 5+4, 3180 sf, 7135 sf lot

Original asking price: $889,000 - Sale price: $750,000

Tract: Golf Villas Spanish Hills, 1002 Corte Augusta, 3+3, 1810 sf, 4000 sf lot

Original asking price: $899,000 - Sale price: $760,000

Tract: Sterling Hills, 839 Diamond, 3+3.5, 2690 sf, 8417 sf lot

Original asking price: $1,050,000 - Sale price: $760,000

Tract: Vista Las Posas, 1975 Cabrillo Mesa, 4+3.5, 3095 sf, 8712 sf lot

Original asking price: $979,5000 - Sale price: $810,000

Tract: The Pinnacle, 2408 N. Woodcreek, 5+5.5, 4648 sf, 28379 sf lot

Original asking price: $1,699,000 - Sale price: $1,315,000

Tract: The Pinnacle, 5334 Calarosa Ranch, 4+5.5, 5765 sf, 37607 sf lot

Original asking price: $2,250,000 - Sale price: $1,500,000

It may not be the best time to sell your home, but it is sure a great time to buy!

The key is knowing where the opportunities are. No one wants to overpay for a home, especially in the current real estate market we are experiencing. Aside from home values, another very important factor to consider is interest rates. Recent forecasts state that by the end of 2008, interest rates will be up to 8%. Did you know that a 2% increase in your interest rate could mean a 33% increase in your mortgage? Ouch! Just something to consider for those of you who want to wait. This is, however, a forecast and nobody knows what will happen to the interest rates, just as nobody knows when prices will hit bottom. The only sure way of knowing when prices have hit bottom, is when prices start to go up, then it's too late!

We want to help you make the right decisions, find the best opportunity and negotiate the greatest possible price.

8 Things You Need To Know Before You Hire An Agent

2007-12-11T13:20:00.000-08:00

"It's critical that you make the right decision about who will handle what is probably the single largest financial investment you will ever make"

Not all real estate agents are the same, I repeat, not all real estate agents are the same! If you decide to seek the help of an agent when selling or buying your home, you need some good information before you make any moves.

An agent can cost or save you thousands of dollars

picking an agent is one of those critical issues that can cost or save you thousands of dollars. There are very specific questions you should be asking to ensure that you get the best representation for your needs. Some agents may prefer that you don't ask these questions, since the knowledge you will gain from their "honest" answers will give you a very good idea about what income you can expect from using them as an agent. And let's face it, in real estate, as in life, not all things are created equal.

Hiring a real estate agent is like any other hiring process, with you on the boss's side of the desk. it is critical that you make the right decisions about who will handle what since this is probably the single largest financial investment you will ever make.

1. What make you different? Why should I list my home with you?

It is a much tougher real estate market than it was 5 years ago. What unique marketing plans and programs does this agent have in place to make sure that your home stands out favorably versus other competing homes? What things does this agent offer you that others don't to help you sell your home in the least amount of time with the least amount of hassle and for the most amount of money? What things does this agent offer you that others don't to help you buy a new home for the least amount of money? What negotiation skills does that agent have compare to any other agents?

2. What is your company's track record and reputation in the market place?

It may seem like everywhere you look, real estate agents are boasting about being #1 for this or that, or quoting you the number of homes they've sold. if you are like many homeowners, you've probably become immune to much of this information. After all, you ask, "Why should I care about how many homes one agent sold over another. The only thing I care about is whether they can sell my home quickly and for the most amount of money."

Well, because you want your home sold fast and for top dollar, you should be asking the agents you interview how many homes they have sold. If one agent is selling a lot of homes where another is not selling any, ask yourself why this might be? What things are these two agents doing differently?

3. What are your marketing plans for my home?

How much and what kind of marketing does this agent provide in advertising the homes she/he lists versus the other agents you are interviewing? In what media does this agent advertise? what does she/he know about the effectiveness of one medium over the other?

4. Does your broker control your advertising or do you?

If your agent is not in control of his/her own advertising, then your home will be competing for advertising space not only with this agent's other listings, but also with the listings of every other agent in the brokerage.

5. On your listings, how close is the selling price vs. the listing price?

Is this agent's performance higher or lower than the board average? Their performance on this measurement will help you predict how high a price you will get for the sale of your home.

6. On average, how long does it take for your listings to sell?

Does this agent tend to sell faster or slower than the board average? Their performance on this measurement will help you predict how long your home will be on the market before it sells.

But please, in regard to this question, the selling price compared to other homes for sale in the area can also make a difference. Selling low vs. selling high will also make a difference in the amount of time it will take to sell your property.

7. How many buyers are you currently working with?

Obviously, the more buyers your agent is working with, the better your chances are of selling your home quickly. it will also impact price because an agent with many buyers can set up an auction-like atmosphere where many buyers bid on your home at the same time. Ask them the system they have to attract buyers.

8. What happens if I'm not happy with the job you are doing to get my home sold?

Can I cancel my listing contract? Be wary of agents that lock you into a lengthy listing contract where they can get out of (by ceasing to effectively market your home) but you can't. There are usually penalties and broker protection periods which safeguard the agent's interests, but not yours. How confident is your agent in the service she/he will provide you? Will she/he allow you to cancel your contract without penalty if you are not satisfied with the service provided?

Evaluate each agent's responses to these 8 questions carefully and objectively. Who will do the best job for you? These questions will help you decide.

Now, in my opinion, all these questions are excellent questions to ask to all potential Realtors before you make your decision on who will be qualified to sell your home or negotiate the price on your new purchase, BUT:

The bottom line is to find an agent who not only knows the business of buying and selling real estate but also, to find one with whom you will feel comfortable working with and one who will fight for you and your interests.

Also, I have realised over the years that choosing the so-called "Top Producer" agent to handle your real estate needs is not always to right way to go.

Most so-called "Top producers" I have met are too busy to really care about you. many of them, you won't even see again after you sign the contract, you will only deal with their "assistant". In many cases, I have come to realise that most "Top Producers" have something very important missing inside them, something they once had, something that has disappeared slowly along the way. That thing is Passion, passion for what they do. Passion for what they once did with so much energy and so much fire within...

My suggestion to you is that when you are ready to sell or buy a home, you have to look for a Realtor who not only knows his business but also loves it, is passionate about it and is hungry to make the next sale.

Choosing A Realtor!

2007-12-05T15:32:00.000-08:00

A Realtor can help you every step of the way towards buying your own home. Realtors subscribe to a very strict code of ethics (certainly not true for all of them but at least very true for some of them!) and are expected to maintain a higher level of knowledge. The home buying process is very detailed with important financial, disclosure, and insurance elements to protect your investment. A Realtor can guide you through the entire process and make the experience easier and more enjoyable.
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Look at all you gain by working with a professional:
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- A Realtor will be acquainted with the important elements you will want to know about the neighborhood you are considering, such as school information, community demographics, and local services.
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- Your Realtor can show you homes in the price range you can afford. he/she will do a search first to locate all the listings that do fit your criteria.
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- Realtors are listing, showing, seeing and selling properties every week. They know the inventory, even if it isn't currently being advertised.
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- When you are ready to make an offer, the Realtor can help you structure the transaction to meet your needs and save you money. A great Realtor is usually a great negotiator.
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- Give yourself the best possible negotiating position by applying and qualifying for a home loan first. talk to your local bank, credit union, mortgage company, or savings and loan about how to apply for a home loan or, just talk to your Realtor and he/she will guide you and help you find a great lender.
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- The Realtors' professional services to you are usually paid for by the seller from the listing commission. All that's asked in return is for you to allow them to write your offer and help you complete the home purchase.
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Realtors have served as the liaison between buyers and sellers. Here are a few of the reasons why it works so well for all concerned:
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- Realtors use forms developed by the California Association of Realtors. These purchase agreements, transfer disclosure receipts, and other documents are accepted standards that are fair to both buyers and sellers and clearly state the terms of the agreement.
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- The Realtor will provide you with objective information on the home, comparable sale prices for similar homes in the area, neighborhood amenities, etc., so that you can make an informed decision when you are ready to buy.
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- The ability of Realtors to negotiate price, terms, repairs, personal property, and the myriad details of most housing transactions without alienating either the buyer or seller is essential to your success.
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- The Realtor can assure that the process continues to make daily progress so that you are in a position to close on time.
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Most buyers soon discover for themselves, there are tremendous benefits in selecting a Realtor and working together to make their goal of home ownership a reality. Here are a few common interests in real property:
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FEE - Outright ownership of land and improvements.
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CONDO - Undivided interest to land and improvements except for defined units coupled with ownership to a specific unit as defined on the condo plan. required interest in HOA.
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P.U.D. - Fee interest to land and improvements within the development. The development will contain common areas. Required interest in HOA.
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OWN YOUR OWN - Undivided interest in the land and improvements with right to occupy a certain apartment.
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STOCK CO-OP - Stock certificate to the corporation. Right to occupy.
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LEASEHOLD - A lease of land/or improvements for a period of time and subject to the terms and conditions of the lease.

WARNING - WARNING - WARNING

When it is time for you to choose a Realtor, whether it is to sell your home or buy a new one, please make sure to choose your Realtor wisely and make sure you ask him/her the right questions.
Most Realtors you will interview will certainly impress you with all their bells and whistles and they will promise you the moon. Unfortunately, only after you sign with them (as the seller) or decide to buy through them (as the buyer) will you realize that most of what your Realtor told you or promised you were lies. Some Realtors will even disappear once you sign the listing agreement and as far as buyers agents, many of them will start getting very frustrated if they have to show you more than 5 properties... And those are facts!
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Ask the right questions to your Realtor, and whatever he/she promises you she/he will do for you, in the sale of your home or in the purchase of your new home, ask your new potential Realtor to put it in writing and ask him/her to sign at the bottom and give you a copy.
Last but not least, your last question to your new potential Realtor should be: "If you do not do everything you promise me you would do for me and if you do not perform the way you told me you would, can I fire you?"
This last but powerful question will make a huge difference in your Realtor's performance, knowing that you have the right to fire him/her anytime you want to if he/she doesn't perform as promised.
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In my next blog, I will talk about some of the questions you should ask your Realtor before deciding if you are going to work with him/her.

What Do I Have To Disclose To The Buyer?

2007-12-05T14:59:00.000-08:00

Most states require the sellers to disclose hidden problems (those not visible with the naked eye) that could adversely affect the value of the property.

These days, sellers are typically required to deliver their disclosure in writing. This consists of a form filled with questions about the house, property and even the neighborhood in which the house is located. Sellers are required to answer these questions honestly. if you don't know the answer to a question, there is usually a "don't know" box that you can check off on the form.

While it may seem awkward to disclose the defects in your house, it doesn't usually turn off buyers. In fact, just the opposite is true. Buyers like seller disclosures because it tells them about the problems with the house upfront; they know what they are getting. many sellers appreciate being able to be honest about the condition of their home. because they have warned the buyer that the roof leaks, for example, they don't have to worry about an angry buyer after the closing.

Each state sets its own disclosure requirements. In California, for example, the seller disclosure form is six page long, and may require a hand-written answer. In Illinois, the form has just 22 questions on a single page. Some national real estate firms require sellers to fill out a company seller disclosure form if their state doesn't require written disclosure. If the buyer directly asks you any questions about the condition of the house, of course, you MUST disclose everything you know.

The consequences of lying to the buyer or on your seller disclosure form can be severe. if a buyer can prove that you knew, or should have known, about a problem, he or she may be awarded damages in court. It is far better to be honest and upfront about any problems that might have to be corrected.

More Tips For Sellers!

2007-11-28T12:03:00.000-08:00

Let's face it, this market is certainly not a good market for sellers. Sellers know it and of course, buyers know it. So, here are a few more tips for sellers to try get as much money as possible when selling their home. I know that I have already mentioned a few of those tips in previous blogs but it doesn't hurt to mention them a second time or even a third time.

Sellers need all the help they can get!

First impressions are lasting

The front door greets the prospect. Make sure it is fresh, clean and scrubbed looking. keep lawn trimmed and edged, and the yard free of refuse.

Decorate for a quick sale

Fading walls and worn woodwork reduce appeal. Why tell the prospect how your home could look, when you can show him/her by redecorating? A quicker sale at a higher price will result. An investment in new kitchen fresh paint will pay dividends.

Let the sun shine in

Open draperies and curtains and let the prospects see how cheerful your home can be. Dark homes do not appeal!

Fix that faucet

Dripping water discolors sinks and suggests faulty plumbing. Buyers are extremely afraid of faulty plumbing. Please fix the problem(s) before putting your home on the market.

Repairs can make a big difference

Loose knobs, sticking doors and windows, warped cabinet drawers, and other minor flaws detract from home value. Please have them fixed before you put your home on the market.

From top to bottom

Display the full value of your attic and other utility space by removing all unnecessary articles. Don't forget again that first impressions do last!

Safety first

Keep stairways clear. Avoid cluttered appearances and possible injuries.

Make closets look bigger

Neat and well organized closets show that you have ample space.

Bathrooms help sell homes

Check and repair caulking in bathtubs and showers. Make your bathrooms sparkle.

Arrange bedrooms neatly

Remove excess furniture. Use attractive bedspreads and freshly laundered curtains.

Can you see the lights?

Illumination is like a welcome sign. The potential buyer will feel a glowing warmth when you turn on certain lights during the day time and all your lights during an evening showing.

Use your agent

Show your home to prospective buyers only by appointment through your agent. Your cooperation will be appreciated and will help close the sale more quickly.

A word to the wise

Let your Realtor discuss price terms, possession and other factors with the potential buyer. He/she is eminently qualified to bring negotiations to a favorable conclusion.

Of course, if you don't live in your house, I will agree that it is much easier to keep it perfectly neat for any potential buyers.

Now, for those of you who still live in the home you are selling, I understand it is not easy to keep your home perfectly neat all the time, especially if you have children and pets.

So, let me tell you this; the way your home looks will have a major effect on how long your home will stay on the market and how much you will sell it for. The better your home looks, the more money you will get for it and the faster you will sell it.

By making a few changes in your home (as listed above), and by spending a few minutes everyday in making sure everything is in place and your home looks perfectly neat, you will actually contribute to a successful sale. In my opinion, spending a few minutes a day making your home ready for a perfect sale is time extremely well invested.

There Are 5 Reasons For A Property Selling Or Not Selling...

2007-11-20T14:31:00.000-08:00

PRICE - TERMS - LOCATION - CONDITION - MARKETING

The agent CONTROLS the marketing

The seller CONTROLS all the others

Ask too much, receive too little

On average, homes that are on the market for 4 weeks or less, actually sell for near or above full price. As the length of time a home is on the market increases, the difference between the asking price and the selling price also increases. A house that is on the market for 4 to 12 weeks, on average, sells for 5% less than the asking price. if a property is available for 13 to 24 weeks, the selling price on average is 6.5% less than the asking price. If a home is "For Sale" for more than 24 weeks, the owner can expect to receive only 90% or less of his asking price.

OVER PRICING = LOWER NET PROFITS

The significance?

It's simple! A homeowner who prices his property competitively, at the beginning of the marketing process, usually receives a greater net profit. A property owner who want to start high to "see what happens" or to leave room for negotiating, often receives less than the property's actual market value.

THE HAZARD OF OVERPRICING INCLUDES:

- Lower agents and buyers response

- Minimizes offers

- Create a "reputation" problem

- Increases risk of appraisal problems

- Lengthens marketing time

- Reduces net profits

- Limits financing

- Causes frustration

- Causes false hope

- Causes inconveniences

YOUR PROPERTY'S VALUE IS DETERMINED BY:

- Today's market place

- The competing properties available to buyers

- The available financing

- The buyer's perception of your home's overall condition and appeal

- The general economic condition in the area

- What buyers have been willing to pay for like properties

- Supply and demand factors

- Location

YOUR PROPERTY'S VALUE IS NOT DETERMINED BY:

- What you have invested in your home

- What you need or want out of the property

- A bank or tax appraisal

- What you HEARD a neighbor's home sold for

- Insured value

- The cost of the next home you wish to purchase

WARNING SIGNS THAT A PROPERTY IS NOT PRICED OR CONDITIONED PROPERLY

WARNING SIGN #1: If Realtors are not previewing your home, or if they preview it but don't show it, it is being eliminated because of the price or condition.

WARNING SIGN #2: If buyers are being shown your home with no results, the buyers are finding better properties to purchase. They are eliminating your home from consideration because it is not competitive in the market place.

HOW DO YOU MAKE YOUR HOME A "10" IN THE MARKETPLACE?

- Make it sparkle. make it the most appealing home on the market.

- Offer the best terms possible.

- Price it competitive with like properties.

- If you are going to make any upgrades, choose very carefully which upgrades will add value to your home and which won't.

- Take great care of the exterior of your home. Buyers often decide whether to look at your house before they even get out of the car.

- Hide that RV and don't hesitate to ask your neighbors if they would hide theirs too for the time being. in the worst case case scenario where your neighbors refuse to hide their very old RV, tell them that you would love to pay for them to move it to a RV parking for the next few months, or until your home is sold.

Improvements, To Do Or Not To Do?

2007-10-22T13:55:00.000-07:00

Home Is Where You Hang Your Hat... Not to Mention a Few Light Fixtures, a Screen Door, and Maybe a New Deck!

When the housing market is hot, it seems like just about any remodeling project is a good investment and adds value to your home. But when the market is tight, you want to be more selective about which projects you undertake... and what you expect to gain in return.

If you have been thinking about boosting your home's value or just making your living space more comfortable, the ideas below can help you prioritize your list. So before you start knocking out walls, and renovating your roofline, consider these ways to make a difference... cost-effectively!

First Things First. Buyers often decide whether to look at your house before they even get out of the car. Before you spend a lot of time and money remodeling inside, you may want to look at the outside. Washing, repainting trims, planting flowers, and fixing screen doors can make a big difference. For even more impact, you may want to consider replacing your siding or even adding a patio or deck. The added value for these bigger projects won't yield as high of a return on investment, but may help your house stand out. So weigh your options and ask your realtor for advice before starting a big project.

Come On In... Make Yourself At Home. Making a cozy first impression is critical. To make sure your entryway invites people to come in, not turn away, try adding a fresh coat of paint to your foyer or a wicker chair and table outside the door. For even more impact, replace those old light fixtures and update the floor in your entryway.

Sparkle Up That Old Bathroom. Remodeling an old bathroom can make a big impact. For very little money, you can add a new faucet to your sink, a new medicine cabinet on the wall, and even new paint or wallpaper. For a little more, you can update the bathtub, add a double sink, or re-tile the floor.

Even Better: Add A Second Bathroom. Perhaps no improvement makes a bigger impact on your family's comfort and your house's appeal than adding a second bathroom. The number of bathrooms is always a big sticking point for potential buyers, especially families with two or three children. Although adding a bathroom costs more than simply fixing up your old one, it also increases the value of your house more. Plus, having that second bathroom may help you sell your house faster than if it only has one bathroom; an important point to consider in today's market.

Make It Hot In The Kitchen. Renovating an outdated kitchen is practically a sure thing, as long as you don't splurge on extravagant items like hand-painted Italian tile or built-in espresso machines. Instead, focus on the basics: installing new flooring, adding a backsplash and a new coat of paint, re-facing existing cabinets, installing new countertops, and possibly installing new appliances. These go a long way to making a buyer feel at home.

Remember, start small, work your way up, and always plan ahead. You don't want to get halfway into a renovation only to find out that you have to update your entire electrical system or that you forgot to apply for a permit. So, check your local zoning codes before starting any remodeling project. But with a little planning and prioritizing, you can make your house more comfortable and valuable with very little time and money.

Stock Market's Pain vs. Bond Market's Gain

2007-10-22T13:38:00.000-07:00

NO PAIN... NO GAIN?

While the old maxim is often the case, for the past week, the Stock Market's pain has been the Bond Market's gain. Last week, the Dow lost around 500 points - and as money flowed out of Stocks and into Bonds, this helped home loan rates improve by .125 - .25% over the course of the week.

Now, if you want to revisit some real Stock pain, just go back twenty years from last Friday. On october 20, 1987, the Stock Market suffered its very largest one day loss ever, with the Dow falling 508 points and losing 22.6% of its value overral. That's like the Dow losing over 3100 points today! And just prior to that wild meltdown, 1986 and 1987 had been banner years for the Stock Market - fueled by hostile takeovers, leveraged buyouts and merger mania.

While it will be interesting to see how Stocks fare next week, and if they will continue to slide lower - the week ahead also brings some potentially market moving economic reports. Existing Home Sales will arrive on Thursday. If the news of the week is very negative for the economy, Bond prices could move higher still and bring more improvement to home loan rates.

Points Explained Step By Step

2007-10-16T14:20:00.000-07:00

What is a Point?

One point is equal to one percent of the NEW Loan Amount

Why do Lenders charge points?

Whenever governmental, state usury law and/or competitive practices prohibit the lender from charging a rate of interest which would make the real estate loan competitive with other fields of investments, the lender must seek some method of increasing the yield for the investors. By charging "points," the lender can bring the real estate loan up to those other investments.

Are points called by different names?

Yes. Loan Origination Fee, Commitment Fee, Discount Fee, Warehousing Fee, Funding Fee, etc.

Who must pay the point?

FHA: The buyer is usually charged with the Loan Origination Fee; the Discount Fee can be paid by the buyer or the seller.

VA: The buyer is usually charged with the Loan Origination Fee and the Funding Fee. Discount Fee must be paid by the seller.

CONVENTIONAL: Points can be paid by the buyer, the seller, or split between the two. State on Contract of Sale!

CITY/COUNTY/STATE GOVERNMENT SPONSORED LOANS: As published by them

Do the number of points charged fluctuate?

Yes. If rates on mortgage loans are lower than other investments (such as stocks, bonds, etc.) then the funds will be drawn away from the mortgage market. Also, when there is heavy demand upon the money market because of business needs, role requirements or other government borrowing, the result is that money for home mortgages becomes scarce and more expensive. When this occurs, more points can be charged. points balance the market. Points are not set by government regulation but by each lender individually.

On VA loans, is there any way to lock in the number of points?

Not without jeopardizing the sale. Even when a lender stipulates in writing the number of points to be charged, that guarantee states "if the interest rate is not changed by the government." Points charged on an FHA or conventional loan are usually not changed from commitment time to settlement.

Is FHA or VA financing unfair to sellers?

Are points deductible for income tax purposes?

Points on a home mortgage (for the purpose or improvement of, and secured by, the taxpayer's principal residence) are deductible currently if points are generally charged in the geographical area where the loan is made and to the extent of the number of points generally charged in that area for a home loan. If you are in doubt about points being deductible you should contact your tax return preparer.

Community Property With Right Of Survivorship

2007-10-09T12:45:00.000-07:00

Old News,Yet Excellent Reminder!

A Very Important Reminder About This Form Available to Husbands and Wives Owning Real Property in California

Since July 1, 2001 husbands and wives owning real property in California can opt to take title in the form of Community Property with Right of Survivorship

What does this mean?

Community Property with Right of Survivorship has the same attributes as the traditional community property form of title but, like join tenancy, has the additional attribute of the right of survivorship. When a husband and wife hold title as Community Property with Right of Survivorship, the full interest in the property will vest, by law, in the surviving spouse immediately upon the death of the first spouse. Title insurers will be able to vest title free and clear of the deceased spouse's interest merely by the recordation of an affidavit similar to the one used to clear the interest of a deceased join tenant.

The survivorship feature will, in most instances, avoid the lengthy escrow delays caused by probate proceedings and other legal actions often associated with the traditional community property form of title. Spouses, will also have the ability to unilaterally sever the right of survivorship in the same manner that the joint tenancy is severed.

Severance of the right of survivorship may result in the property being vested in the traditional community property form.

As with any form of title, there are taxes and other legal consequences that must be considered by husbands and wives choosing to take new title in the new form. The decision to take title in the form of Community Property with Right of Survivorship should not be made until parties have consulted with their attorney and tax advisor.

Making The Most Of The Maze Of Real Estate News

2007-10-04T20:49:00.000-07:00

What I am getting ready to tell you in this blog would certainly not sell a lot of newspapers and will certainly not make the news tomorrow... Why might you ask? Maybe just because I am going to give you some good news about real estate and we all know that good news doesn't sell newspapers. Then again, I am here to tell you the truth whether that makes me popular or not.

There is good news on the homefront of the real estate and mortgage industries, but you may not necessarily read or hear about it straight out.

While news show lead-ins, crawl lines onscreen and large boldface newspaper and magazine headlines report the housing market's slowdown and its effect on resident's lives, one might expect the roof is falling in and we are all just one step away from being homeless.

Don't worry, reports of the industry's impending doom are highly exaggerated.

Buyers are still buying and Sellers are still selling

Everyone is in agreement that the real estate market isn't what it was just a few years ago but there is a lot of positive news about the market and in Ventura County as well.

NO, it isn't real estate and mortgage professionals simply trying to sweep the negative news under the rug and play a Pollyanna-type Glad Game.

This is very real positive news

Mortgages continue to be at historically low rates; the economy is strong and confidence is good (even though reports make businesses' fourth quarter news sound as if most everyone in town will be unemployed by the end of the year); rents continue to increase, which is good for the housing market; and it is definitely a buyers' market.

There are many good programs. In fact, now is a fantastic time to buy a new home or to refinance.

Most of the purveyors of bad news are not real estate-oriented analysts, reporters or experts, but rather investment advisors, newswriters quoting investment gurus and the like, most of whom have no real personal or in depth knowledge on the business in which they are reporting.

And of course, the bad news these outsiders write impact more than just those working in the field. Loan originators, Realtors and affiliates in the industry have felt the sting of the headlines and near sensationalizing of news, believing that clients react to the headlines instead of checking the facts.

Buyers and sellers see the negative-focused headlines and television and radio lead-ins on the negative impact of the reports and immediately react, often pushing out of the transactions, fearing it is perhaps too great of a risk; or thinking there is a chance that they can wait it out and get a much better deal.

The truth is that most buyers want to go forward with the purchase of their new home but the headlines reinforce their fears and honestly, being afraid is normal and understandable but at some point, buyers really need to focus on what they really want and what their needs are and they must stop listening to others and what they think. Most people don't buy a home to make money; they do it to raise a family, to put down roots, to feel secure, to build long lasting memories...

And now is a great time to do it; prices are down, way down, rates are good and the inventory is huge. On top of that, there are still many special programs for first-time buyers and several safe creative financing programs. This is why no one should be waiting on the fence; fence sitters in real estate have always lost out.

Many homebuyers and sellers have memories of the real estate market's downturn of a decade ago. Industry professionals say that the current market is nowhere near the level it was then.

Into the mid-90's in California there were base closures, we were in a national recession and there was a downturn in the economy because of many corporations leaving the state. The beginning of the current downturn in real estate values was in the mid-August 2005 when the word was out that home prices were too high and affordability had dropped too low for median-income buyers. It was reported that the reason people could still buy homes was only because of dangerously creative financing options. In truth, there were only a small percentage of these loans that were written in Ventura County. Actually, 99 percent of all homeowners are paying their loans.

Foreclosures may be up but the market is not as bad as news reports make it seem and for those finding themselves in default or in foreclosure, there are solutions. Homeowners should not be afraid to talk to their lender. Most lenders will work very hard to help homeowners remain in their homes.

"Thoughts Become Things"

Bad news is so easy to find. A recent study of 100 nights of evening news documented 8,600 negative items versus only 370 positive stories. "The attitudes people bring to economic conditions impact opportunity". "The very acts of raising capital and making investments are based on the simple belief that tomorrow will be a better day. That makes economic growth and opportunity possible" (T. Paulson).

Perceptions versus Facts

Wendy Cockerell of Western Foothill Mortgage says there has been misinformation centered around six concepts over the past two years. Here are the concepts and Cockerell's responses:

Property values have plummeted and are still dropping: In Ventura County, the median home price is down 8.7 percent from the peak in December 2005. From August 2006 to August 2007, the median price is down 4.2 percent however, in most markets, prices have been more stable for the past 12 months.

Foreclosures are extensive and increasing: Yes, foreclosure sales in the county are up 784 percent from the first six months of 2006 to the first six months of 2007 (62 vs. 548), but with more than 225,000 housing units in Ventura County, it means more than 99.8 percent of homeowners are able to keep their homes. Also, of the 2,100 "default" fillings in the county, more than 74 percent are being corrected before the home is sold in foreclosure.

Large numbers of subprime loans are bringing down the entire mortgage industry, and perhaps housing industry: The National Association of Realtors estimate subprime loans account for 9 percent of all outstanding home loans in the U.S. Of these loans, only 6.5 percent are in default while the prime loan borrowers (A paper) only have a 0.5 percent default rate.

The mortgage business is "melting down": There are literally thousands of lending companies (including banks, mortgage banks, securities firms and conglomerates) that hold home loans, most of which are now a little less healthy, but certainly not on the verge of closing their doors. If the Dow Jones industrial average were to lose 8.7 percent of its value over the next 20 months, it would fall more than 1,200 points. From December 2000 to August 2002, the DJIA lost more than 19 percent of its value and it's recovered since then.

The stock market is a better long-term investment: Over the past 50 years, the S&P 500 has outperformed real estate by an average annual gain of 10 percent vs. 8 percent. What is not taken into account is a home is a utility to the owner, meaning they can live there or rent it out; you do not have to pay cash or pay the full purchase price for the home; and interest on a home loan and property taxes are tax-deductible.

Everyone should wait to purchase a home: From 1991 to 1996, the median home price in California fell 11.7 percent. if you had bought a home in 1991, before the drop, that home has increased its value more than 270 percent. With interest rates well below their long term average, special programs for first-time buyers and several safe and creative financing programs, no one should be waiting on the fence.