Apr 28, 2009

HUGE Changes in Foreclosures, Government Mandated

Wow Neighbors,

EXCITING NEWS (and huge!) for those of you trying to stay one step ahead of tough financial times.

BAD NEWS for those Buyers out there who are waiting for the "next wave" of foreclosures to bring more housing supply to the market.

This WILL slow down Short Sales as well.

Read these details carefully (from our friends at CNN - thanks CNN!).

Obama Expands Foreclosure Fix

Two steps: Second liens now covered by modification program; servicers must offer eligible borrowers principal reduction under Hope for Homeowners.

NEW YORK (CNNMoney.com) -- The Obama administration said Tuesday it is expanding its foreclosure prevention program to cover second mortgages and to direct more troubled borrowers to the Hope for Homeowners program.

Announced with great fanfare in mid-February, the president's $75 billion program has gotten off to a slow start. Loan servicers only recently started taking applications and many delinquent borrowers have complained about being left in the cold because their home values have dropped or they've lost their jobs.

The administration is seeking to address some of the concerns by tweaking the original modification plan, which calls for adjusting eligible borrowers' loans so monthly payments are no more than 31% of pre-tax income.

Servicers covering 75% of the nation's mortgages are now participating in the program, which also allows some homeowners with little or no equity to refinance their mortgages, a senior administration official said Tuesday. Together, the plans are expected to help up to 9 million avoid foreclosure.

Second Mortgage Roadblock

During the housing frenzy, many borrowers obtained second mortgages to allow them to put little or nothing down when buying a home. Up to half of at-risk borrowers have second liens, according to the administration.

These loans have complicated the modification process. For one thing, they add to troubled homeowners' debt levels. Also, mortgage investors have balked at reducing payments on first mortgages when the second loan was left intact.

Under the administration's new program, the interest rate on second mortgages will be reduced to 1% on loans where payments cover interest and principal and to 2% for interest-only loans. The government will subsidize the rate reduction, with the money going to the mortgage investor.

Servicers will be paid $500 for each modification and an additional $250 annually for three years if the borrower stays current. Borrowers can receive up to $250 per year for five years to pay down their first mortgage.

Investors can also receive a payment in exchange for extinguishing the second lien. They would receive 3 cents on the dollar for loans more than 180 days delinquent and between 4 cents and 12 cents for less delinquent loans, depending on the borrowers' debt levels.

Servicers who join the new program must modify second loans when a borrower's first mortgage is adjusted. It will likely take a month to implement, but it should not slow down the modifications of primary mortgages, the administration said.

"By bringing both the first lien and second lien program together, we can reduce monthly payments for borrowers and make it much more likely that they can stay in their homes," a senior administration official said.

Hope for Homeowners Option

Also Tuesday, the administration said it is now requiring servicers to offer troubled borrowers access to Hope for Homeowners as a modification option if they qualify.

Expanding Hope for Homeowners would address one of the major holes in the original Obama foreclosure prevention plan. It helps homeowners whose homes are now worth far less than their mortgages.

Servicers had balked at participating in the Hope program because it required they reduce the mortgage principal balance to 90% of a home's current value.

Hope for Homeowners, which began in October, is being revamped in Congress. Servicers would have to reduce the principal to 93% of the home's value. The change would also reduce the program's high fees, which turned off many troubled borrowers.

As an incentive to participate, servicers will be paid $2,500 for each refinancing, while lenders who originate the new loans will receive up to $1,000 a year for three years, as long as the loan remains current.

Separately, however, another pillar of the president's plan appears to be headed for defeat this week. The Senate is not expected to pass legislation allowing bankruptcy judges to modify mortgages. The administration had sought this change to pressure servicers to modify loans before borrowers declare bankruptcy.

How will all of this impact you? How will it impact your future housing options? CALL ME. I'd like to share some thoughts.

- Jim



Banks Out of the Real Estate Business

Hello Neighbors,

Wow is this good news for the consumer. For the last several years, the National Association of Realtors has been fighting hard to keep banks out of the real estate business.

That seems self centered, but WOW am I thankful this has come to an end.

All we do now is deal with banks - whether it is on property they now own through foreclosure, or through property they have to be involved with due to a Seller's short sale status.

NOTHING is more painful than dealing with these banks. It's terrible. Point in case - our agent Juli just closed an escrow on a bank owned property yesterday THAT LASTED 7 MONTHS! That's right. This one escrow went 7 months because the banks simply couldn't manage the transaction. They are understaffed and under skilled. It goes against all common sense – but don’t get confused with logic. Banks still don’t have it figured out.

Realtors Gain Victory on Banks in Real Estate

NAR’s 8-year battle to keep national banking conglomerates out of the real estate brokerage and management business ended with a win in March when President Barack Obama signed the 2009 Omnibus Appropriations Act. The legislation permanently prohibits banking regulators from taking any action that would make real estate brokerage and management permissible lines of business for federally regulated banks. “This is a great victory for the real estate industry and consumers,” says NAR President Charles McMillan. If banks had been allowed to engage in real estate brokerage, it would have created anti-competition and anti-consumer concentrations of power within the financial services sector, according to NAR.

I'm all for a free market economy, creating competition, and letting the consumer benefit. BUT banks in real estate? It's been nothing but headache and heartache these past couple of years. Ask my clients who have over a dozen offers out, who have waited and waited for responses from banks / lenders, AND who have lost their own loans just a couple of weeks after getting pre-qualified.

Banks don't understand the real estate transaction. They can't get it done. Keeping them at arms lenght from this business is a win for everyone, especially Buyers.

- Jim



Apr 21, 2009

1-800-960-0860 - A New Information Service !!

Hello Neighbors,

Just an FYI.

Please make a note of this toll free telephone number: 1-800-960-0860

It is our newest vehicle to get you up to date industry information. Much like this blog, we do our best to get you current news in a manner that fits your schedule. This new toll free number is available 24 hours a day, with messages we've recorded.

Stay tuned. As we create more informational messages, we will get the word out through this forum (blog), our web site, and email.

PLEASE - if you have a topic you would like to hear about, let me know! Drop me an email at Jim@NeighborlyRealty.com or call at 916.801.3940.

Many thanks, and happy calling!

- Jim



Apr 3, 2009

From CNN: "Signs of Life in California Real Estate"

Hello Neighbors,

This just in from our friends at CNN.... and we are experiencing this on a daily basis! Lots of folks asking to see property, lots of shopping, and offers going out on a daily basis - almost faster than we can manage!

Signs of life in California real estate

There's is a lot of activity out on the coast that may indicate a reawakening of the housing market there - and across the country.

By Les Christie, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- No state has been harder hit by the housing bust than California.

It has piled up more foreclosures and has endured among the worst home-price declines. The median price of a single-family home sold in February was $247,590, down 41% from 12 months earlier, according to the California Association of Realtors (CAR).

And home construction in the Golden State has nearly vanished: December housing permits shrank to about a quarter of what they were during the boom years, according to the National Association of Homebuilders.

But there are signs that California's housing market may be coming out of this tailspin: Sales volume is increasing, investors are returning and inventory is shrinking.

Bringing back buyers

Low prices have brought out droves of buyers. In February, they purchased more than 600,000 homes, some 80% more than they bought in February 2007, according to CAR. And most of this activity is where prices are off 40% to 60% from their peaks.

In the Sun City area of Riverside County, for example, prices have fallen more than 35% over the past 12 months. Two-thirds of February's sales in the area were of foreclosed properties owned by banks, according to Chuck Whitehead, broker with Coldwell Banker Associated Brokers.

"The sales rebound is largely centered around areas that have experienced the biggest impact from the subprime crisis," said CAR chief economist Leslie Appleton-Young.

How low can home prices go in your city?

In more stable communities, where fewer homes were saddled with toxic mortgages, prices have not crashed as badly and sales are rebounding more slowly. But foreclosures still account for a significant portion of sales, according to Phil Jones, a broker with Coldwell Banker Coastal Alliance in Long Beach.

Most analysts foresee continued price declines in California, according to Nicholas Retsinas, director of Harvard's Joint Center for Housing Studies. "But [there'll be] a slowing of that decline, which portends the end of price drops."

That may already be happening in Long Beach, according to Jones. The measure he uses to judge market trends there, price per square foot, turned up in February, growing 5% to $360.

"Every one of my agents is very busy," Jones said.

Investing 2.0

Another positive sign that markets don't have much further to fall is that investors are returning to some markets.

"I spoke with one investor who is putting together a group of buyers and they're ready to get back into the market," said Jones. "They're planning to buy single-family homes in bulk."

John Dugan is one such investor. The San Francisco-based medical supplies salesman is using a portion of his Entrust Group-managed IRA to buy townhouses in the Sacramento area.

So far he's purchased three 840-square-foot, two-bedroom, one-bath duplexes. He paid just $35,000 to $80,000 a piece - down from their $180,000 to $200,000 selling prices a few years ago.

He paid cash for the first property and rents it out for $750 a month, a profit of $550 after dues and common charges. That's a 19% return on investment, without figuring on appreciation.

"This kind of pricing is something you only think of as Midwestern, not Californian," he said.

Supply dropping

The booming sales have whittled away existing home inventory to just six and a half months - down from 15 months a year ago.

"Typically, I would describe a normal market as having a six to seven month supply of homes," said Appleton-Young. "We have that now."

California's inventory now compares favorably with the rest of the nation, where there's a 9.7 month supply of homes on the market, according to the National Association of Realtors.

One wildcard, however, is that banks have kept many repossessed homes off the market. "Banks are spoon feeding them out very slowly so they don't overload the market," said Whitehead. But, he added, if they release a lot of properties during the heavy spring buying season, they "will be eaten right up by buyers."

Could the end be near?

All of those factors add up to a more optimistic forecast for California, which is seen as a harbinger of things to come for the rest of the country.

Appleton-Young said that while home prices should continue to decline for the rest of 2009, she predicts that the pace of decline will slow. In total, she's predicting a total loss of 19% for the year. But, "I think we could see home price stabilization by early next year," she said.

If that happens in California, it could spread to the rest of the hard-hit Sun Belt markets - and beyond.

"California was the pace setter for lots of the mortgage products that went toxic," said Retsinas. "The sense is if the problems can be addressed there, the rest of the country will follow."

Thank you CNN !!

- Jim