FHA Announces Changes to Lending Policies: More Mortgage Insurance

Hello Neighbors,

FHA just announced some big changes.

Why is this important?

FHA drives the standards for loan qualification that many of the large lenders adhere too. FHA backed loans are also a major percentage of all loans underwritten in this current market.

FHA loans are popular when times are tough. When lending is easy? FHA fades into the background. No more. The lending practices of 2000 – 2005 have pushed FHA back into control.

What does this mean?

• Loans will be a bit more expensive for the borrower, for those who finance more than 80% of the purchase price.
• Sellers can expect a reduction in requested concessions – no longer will the Buyers ask for 6%. It’s now limited to 3%.
• A few other technical issues that will make loans a bit harder to qualify for.

Here is the detail from the FHA:


FHA ANNOUNCES POLICY CHANGES TO ADDRESS RISK AND STRENGTHEN FINANCES

New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities

WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.

The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement. U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.

“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”

Announced FHA Policy Changes:
1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
a) The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
b) If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
c) This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
d) The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

2. Update the combination of FICO scores and down payments for new borrowers.
a) New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
b) This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
c) This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

3. Reduce allowable seller concessions from 6% to 3%
a) The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
b) This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

4. Increase enforcement on FHA lenders
a) Publicly report lender performance rankings to complement currently available Neighborhood Watch data - Will be available on the HUD website on February 1.
a1) This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
b) Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
b1) Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
b2) This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
c) Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
c1) Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
d) HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
d1) Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
d2) Legislative authority permitting HUD maximum flexibility to establish separate "areas" for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.

Many thanks,

- Jim

www.NeighborlyFinancial.com

www.NeighborlyFinancialMortgage.com

www.NeighborlyRealty.com

www.NeighborlyGroup.com

MOVIE: What is My "FICO Score" (Your Credit Score)

Hello Neighbors,

Again, more educational material from the team at Neighborly Financial.

You may have heard the term “FICO score” before… You’ve certainly heard the term “credit score”. What are they? Are they different? How are they calculated, and how can I improve mine?

Watch this video and find out how your credit score matters, and how the actions you take can impact that score:

http://www.youtube.com/watch?v=TfUa_vQuTXQ

Need more information? Call John Graham at 916.799.4336 or email John at JohnG@NeighborlyFinancial.com

Many thanks,

- Jim


www.NeighborlyFinancial.com

www.NeighborlyFinancialMortgage.com

www.NeighborlyRealty.com

www.NeighborlyGroup.com

MOVIE: What is my Loan’s “APR” and Why is it Higher Than Interest?

Hello Neighbors,

Again, more educational material from the team at Neighborly Financial.

This time - what is "APR"?

Like interest, you will see this number quoted in your mortgage (purchase or re-fi) Good Faith Estimates. Unlike interest, it isn't totally clear how this number was created.

Watch this video and find out why APR is often higher than the interest rate you've been shopping for:

http://www.youtube.com/watch?v=5fiHr_Hw9h0

Many thanks,

- Jim

MOVIE TIME: Pre-Qualification vs. Pre-Approval

Hello Neighbors,

Our team at Neighborly Financial is at it again – creating more consumer education videos to help you make informed mortgage decisions.

Again, be gentle.

The content is fantastic, but we aren’t movie stars. Brad Pitt has nothing to fear.

Should you need more insight, please contact John Graham at 917.799.4336 or email JohnG@NeighborlyFinancial.com

This first movie: What is the difference between a Pre-Qualification letter and a Pre-Approval letter.

What are the process differences between the two, and which should you ask for?

Why does your Realtor need this data up front before you start looking for houses?

Please take a look and let us know what you think:

http://www.youtube.com/watch?v=4jQQBhtqjiA

Many thanks,

- Jim

www.NeighborlyFinancial.com

www.NeighborlyFinancialMortgage.com

www.NeighborlyRealty.com

www.NeighborlyGroup.com

Neighborly in Kaneva

Hello Neighbors, and "virtual neighbors",

We aren't sure how it works yet, but we took the leap into a very popular "virtual world" called Kaneva:

http://www.kaneva.com/channel/Neighborly.channel

Some of our younger clients have mentioned this a few times... so why not?

If you are in Kaneva, look us up!

Many thanks,

- Jim

www.NeighborlyGroup.com

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

Help Us With the Next Neighborly Web Design !

Hello Neighbors,

Do you have some graphic artist skills?

Do you create pages for the web?

Want to participate in a design contest?

If so, take a look at www.99Designs.com and search for Neighborly.

We are sponsoring a contest to design the next version of the "Neighborly Group" website. The contest will run for a week.

On that site, click on "Browse Projects" then enter "Neighborly" in the keyword field.

Thanks for the help!

- Jim

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

www.NeighborlyGroup.com

Land Banking: Time to re-Start ??

Happy Holidays Neighbors!

May 2010 bring you health and prosperity.

Tomorrow, Jenny and I are going to look at vacant land in a couple of the resort areas in California's Plumas County. We've been watching that area for 11 years now. Jenny's family has owned property there for at least 25 years.

That market has bottomed, and it's time to consider "land banking" an investment lot or two for the near future. Property in some of these locations are selling at less than 20% of market value from a few years ago. If you can sit and fund the HOA dues, this should create healthy returns four or five years out.

This isn't nearly as risky as the "Winchester" development outside of Auburn, California. We've done background checks on their financials and market plans.

Call if you want to discuss.

Again, happy holidays from everyone at Neighborly!

- Jim

www.NeighborlyGroup.com

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

Movies! Watch these Videos on Loans

Hello Neighbors,

The Neighborly Financial team is at it again.

Home financing is a tough process, especially in this market. The NF team recently created a few new YouTube movies to help educate and inform.

Take a look when you get a moment.

How To Get the Best Interest Rates:

http://www.youtube.com/watch?v=sLvr5O8SQNg

Pre-Qualify for a Loan:

http://www.youtube.com/watch?v=BOzIyFwmCMw

Choosing the Right Lender:

http://www.youtube.com/watch?v=45XPlKJDEs4

Our video production staff is top notch, but our budget isn't - so please be kind !!

Many thanks, and enjoy the videos. Please do share with friends and family.

Should you need more information (or want to talk to our in-house movie star), John can be reached at 916.799.4336

- Jim

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

www.NeighborlyGroup.com

New Consumer Help Web Site from the National Association of Realtors

Hello Neighbors,

This just out from NAR (the National Association of Realtors). The new web site is still in beta (test) mode, but try it if you'd like and share your feedback. We've linked it to the blog via the section to the right called "TOOLS".

Here's the site: www.Realtor.org/HouseLogic

Here's its purpose:

To bring ideas and content to homeowners - and future homeowners - for improvement projects, clean living, energy savings ideas, tax savings, refinance concerns, and a variety of different topics.

NAR is trying to make home ownership an better understood process, and provide solutions to those who need a hand in projects that involve your own real estate.

My thoughts:

I like the content around tax breaks and energy / green alternatives. The "manage a project" engine is interesting, but time will tell if you find it useful (let me know!).


Enjoy!

- Jim

www.NeighborlyGroup.com

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

Home Sales Up Again - 2010 Looks Promising

Hello Neighbors,

GOOD news from our friends at NAR (the National Association of Realtors). They posted this content recently, and we thank them for their insight.

"Pending" ("used" homes, not new construction) home sales have been up for 9 months in a row now. 2009 is almost done, and I think we will look back on it as the start of the recovery - or at least the end of the slide.

Impacts to you?

Buyers? 2010 could be competitive.

Sellers? 2010 will see stability in your home values, and increases in value for certain price ranges / market segments (especially first time buyer homes).

Here is the NAR report:

Nine Consecutive Gains for Pending Home Sales

Washington, December 01, 2009

Pending home sales have risen for nine months in a row, a first for the series of the index since its inception in 2001, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 3.7 percent to 114.1 from 110.0 in September, and is 31.8 percent above October 2008 when it was 86.6. The rise from a year ago is the biggest annual increase ever recorded for the index, which is at the highest level since March 2006 when it was 115.2.

Lawrence Yun, NAR chief economist, said home sales are experiencing a pendulum swing. "Keep in mind that housing had been underperforming over most of the past year. Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6.0 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus," he said. "This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future.

The PHSI in the Northeast surged 19.9 percent to 100.2 in October and is 44.2 percent above a year ago. In the Midwest the index rose 11.6 percent to 109.6 and is 36.6 percent higher than October 2008. Pending home sales in the South increased 5.4 percent to an index of 115.4, which is 31.6 percent above a year ago. In the West the index fell 11.2 percent to 127.7 but is 21.9 percent above October 2008.

Yun cautioned that home sales could dip in the months ahead. "The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months. Given the lag time, we could see a temporary decline in closed existing-home sales from December until early spring when we get another surge, but the weak job market remains a major concern and could slow the recovery process.

"Still, as inventories continue to decline and balance is gradually restored between buyers and sellers, we should reach self-sustaining housing conditions and firming home prices in most areas around the middle of 2010. That would mean broad wealth stabilization for the vast number of middle-class families," Yun said.

The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

# # #

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Existing-home sales for November will be reported December 22 and the next Pending Home Sales Index will be on January 5; release times are 10 a.m. EST.

Many thanks,

- Jim

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

www.NeighborlyGroup.com

Thinking of Selling in 2010? Use a Certified Negotiation Expert !!

Hello Neighbors,

2010 feels good. OK, it's not here yet, but it sure feels like it has promise.

If you need to sell next year, do your best to protect your family and your financial interests - higher a Certified Negotiation Expert (CNE).

The CNE is the designation recognized by the National Association of Realtors as the premier training mechanism for negotiation strategy.

Need a compelling reason to call? How is this statistic: To date, only 7,000 Realtors and Brokers across the United States (of the 1,300,000 Realtors nationwide) are CNE trained. That’s less than 1% of the Realtors out there.

Do you want to work with the best 1% in the business, or the other 99% who treat your sale – your most important financial step in life – as simply another transaction?

Make sure you use a CNE! To learn more about the CNE credentials, click here: http://www.negotiationexpertise.com/benefits.php

I've had over 7 years of formal business school (BS and MBA degrees). NONE of those programs covered negotiation as well as this certification program.

When the time comes to sell, or if you know someone who is thinking along these lines, make sure to consider hiring a Certified Negotiation Expert (CNE).

Let's make 2010 great,

- Jim

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

www.NeighborlyGroup.com

Planning to Purchase in 2010? Try to Act before April 30th - TAX Credits !!

Hello Neighbors,

If you are planning to buy a home (your first, or a "trade up"), you may want to start the process before April of 2010.

Tax Credit for First-Time Homebuyers

FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Tax Credit for Current Homeowners

The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in the military do have some special extensions on the timelines available.

What's So Important About a "Tax Credit"?

The benefit of a tax credit is that it's a dollar-for-dollar benefit, rather than a "tax deduction", or reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Home financing is never an easy thing to wrap your head around. It seems like there is an ocean of financing options available for buyers these days, and it's incredibly hard to figure out which option is right for you. Not every financing option works for all people, it's important to have a trusted and experienced real estate team leading you through the home buying process. There is no doubt in our mind we can guide you through your home financing and provide you with the best options.

We would love the chance to talk about what it takes to buy a home in today's marketplace and what sort of financial options are available to you. Neighborly Realty's partner "Neighborly Financial" has access to loan products from dozens of lenders. When the two companies are able to combine services for the same client, the savings to that client are in the THOUSANDS of dollars.

Please call or email with any questions or concerns or just to talk about your real estate options. We look forward to hearing from you.

Happy Holidays,

Jim

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

www.NeighborlyGroup.com

Sacramento County Sales Statistics

Hello Neighbors,

My apologies for the drop in blog activity.

We are just coming back up to speed after Strep Throat and Scarlet Fever ran through the household. Not much fun!

Blog activity will probably be slow until early December too, as we will be with family for Thanksgiving.

HAPPY THANKSGIVING to all of you!


Here's one bit of market data to keep you going...

In Sacramento County for the last month - 25.2% of home sales were funded with all cash. Roughly 27.6% of home sales were with FHA first time buyer type loan products.

39% of homes were bought with conventional loan products (likely using standards driven by FHA).

What does it mean?

A bit over half of the activity last month was a continuing battle between investors and first time Buyers.

I'm pulling for the first time Buyers!

Again, Happy Thanksgiving,

Jim

www.NeighborlyGroup.com

www.NeighborlyRealt.com

www.NeighborlyFinancial.com

$6500 Buyer Tax Credit to Existing Home Owners !!

THANK YOU Kat !!

Hello Neighbors,

This note comes to us from our good friend Kat Fiorentino at First Priority.
As you read in this blog a few days ago, the $8000 first time buyer tax credit was extended until April of next year.

.....and now? A tax credit for anyone buying a home – it doesn’t matter if you are a first time buyer or a current owner trading up!

YES - you can take advantage of these insanely low prices and interest rates, "Trade Up", and get money back from the federal government.

Details from Kat’s message are below. Thanks again Kat!

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the House voted 403-12 Thursday to extend and expand the tax credit to include many buyers who already own homes. The Senate approved the measure Wednesday, and the White House said President Barack Obama would sign it Friday.

Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.
"This is probably the last extension," said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.

The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that was included in a bill extending unemployment benefits for those without a job for more than a year. The other would let companies now losing money recoup taxes they paid on profits earned in the previous five years.

"We are still in a world of economic hurt, and Congress must continue to act boldly and creatively," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. "With the right mix of tax breaks and investments we will get through this recession and get folks working again."

The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.

"For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," Bond said. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.
Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.

The business tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years, giving them refunds of taxes paid in those years. Under current law, businesses with annual gross receipts of more than $15 million can claim losses back only two years.

The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. Congress included a scaled-back version of the tax break — for companies with revenues of $15 million or less — in the economic recovery package enacted in February. The new tax break would be available to companies of any size, providing a quick source of cash.

The U.S Chamber of Commerce has been a big backer of the tax break for money-losing companies.

"It frees up capital that they can use to maintain jobs and potentially even hire new people as the economy returns," said Caroline Harris, senior tax counsel for the U.S. Chamber of Commerce.

The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.

The bill is H.R. 3548.

Woo Whoo!

2010 is going to be on fire!

- Jim

www.NeighborlyRealty.com

www.NeighborlyGroup.com

www.NeighborlyFinancial.com

First Time Buyer Tax Credit Extended

HELLO Neighbors !!!

GREAT news today!

The first time buyer tax credit is getting extended. Buyers have to be in contract by the end or April.

For us car guys, "Cash for Clunkers" was fun... but we knew it would only spur short term demand and sales volume upticks. THIS? This is how you bring the economy back!

From the Wall Street Journal:

By COREY BOLES and JOHN D. MCKINNON

WASHINGTON -- Senate negotiators reached a tentative deal to extend a tax credit for first-time home buyers, but its passage remains uncertain.

The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting.

Many property experts have cited the credit as a reason for signs of recovery in the housing market in recent months. But that recovery was somewhat undercut by the September drop in new-home sales reported Wednesday.

The credit would be extended from its current expiration date of Dec. 1 to all contracts entered into by April 30, and closed before July 1. It is expected that income limits on people claiming the credit would be increased to $125,000 for singles and $250,000 for couples, from the current $75,000 and $150,000, aides said. The credit phases out for people making more than those amounts.

.While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. Senate Majority Leader Harry Reid (D., Nev.) hopes to add it to a bill currently on the Senate floor to extend federal unemployment insurance benefits. But agreement on that hasn't been finalized.

While Senate Republicans are likely to support the measure, House Democrats have raised concerns that it carries a high cost to the government. The Internal Revenue Service is examining the program for alleged abuse.


Thank you Wall Street Journal for the content!

This is wonderful and fantastic news.

- Jim

www.NeigborlyGroup.com

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

Home Values in California to RISE in 2010 !!

Hello Neighbors,

A great update from CAR (California Association of Realtors) economists!

This echoes what we've been saying (and hoping) for the last year - 2010 should be a year of recovery, although some significant unknowns still exist (bank owned homes, Fed bailout programs).

Thank you CAR for the data!

LOS ANGELES (Oct. 7) –“California’s housing market continued its strong sales rebound this year, resulting from the continued pace of distressed properties coming to market,” said C.A.R. President James Liptak. “This follows two years of double-digit sales declines in 2006 and 2007. Looking ahead, we expect sales to moderate to a more sustainable pace.”

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) "2010 California Housing Market Forecast" will be presented this afternoon during CALIFORNIA REALTOR® EXPO 2009 (www.realtorexpo.org), running from Oct. 6-8 at the San Jose Convention Center in San Jose, Calif. The trade show is expected to attract more than 7,000 attendees and is the largest state real estate trade show in the nation.

“After experiencing its sharpest decline in history, we expect the median price to rise modestly next year,” Liptak added. “2010 will mark the beginning of the ‘new normal’ for California’s housing market. This ‘new normal’ likely will feature a steady stream of sales driven by distressed properties in the low end of the market, coupled with moderate home-price appreciation.”

The median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 this year, according to the forecast. Sales for 2010 are projected to decrease 2.3 percent to 527,500 units, compared with 540,000 units (projected) in 2009.

“Housing in California has become a tale of two markets,” Liptak said. “The low end continues to attract first-time buyers and investors, with a resulting shortage in the number of homes for sale. Sellers at the high end, however, continue to be challenged by the ability of home buyers to secure financing as well as their concerns about where prices are headed. While demand from first-time buyers for low-end properties will continue throughout next year, sales could be impacted if discretionary sellers do not return to the market by the second half of 2010.

“2009 marked a unique opportunity for first-time home buyers,” Liptak said. “Homes were more affordable than they have been in years, interest rates hovered near historic lows, and the federal tax credit helped more than 1 million people become homeowners nationwide. Now is the time for Congress to extend the federal tax credit and to expand it to all buyers, not just first-timers.”

“With distressed properties accounting for nearly one-third of the sales in 2010, inventory will be relatively lean, under six months during the off-season months, and a roughly four-month supply during the peak season,” said C.A.R. and Vice President Leslie Appleton-Young. “We expect the median price to decrease slightly through the remainder of 2009 and into next year, then rise before leveling off next summer. For the year as a whole, home prices are forecast to reach $280,000.”

“Although it appears at this time that lenders are closely monitoring the flow of distressed properties onto the market, there could be an exertion of downward pressure on home prices should a heavier than expected wave of foreclosures come to market next year,” she said.

“The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government,” Appleton-Young said.

- Jim

www.NeighborlyGroup.com

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

Neighborly Financial - now a "Tier 1" Wells Fargo Direct Lender

Hello Neighbors,

Congratulations to Neighborly Financial, John Graham, and his team.

That group is now a direct lender with Wells Fargo. Even better, they hold a "Tier 1" status - which means real dollars to clients. That status drive a further reduction in costs of at least .25%.

Nicely done Neighborly Financial!

- Jim

www.NeighborlyGroup.com

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

C.A.R. Confirms - Longer Escrow Periods Likely

Hello Neighbors,

As mentioned in a blog article from a couple of months ago, be ready for potential extensions in escrows due to changes in financing regulation.

But... don't just take our word for it, take a look at what the California Association of Realtors (CAR) just published.

THANK YOU CAR!

NEW LOAN DISCLOSURE RULES MAY POTENTIALLY AFFECT CLOSE OF ESCROW

Starting July 30, 2009, if the APR on an initial Good Faith Estimate is no longer accurate (within a 0.125% range) at close of escrow, a lender must generally provide a residential borrower with a new disclosure and a three-day right to rescind before consummating the loan. REALTORS® are forewarned that, because of this new three-day waiting period, a lender's failure to timely provide corrected disclosures has the potential of delaying funding of the loan and close of escrow.

This new requirement is part of the Mortgage Disclosure Improvement Act (MDIA) implementing new loan procedures to protect borrowers and foster greater transparency in mortgage lending. For loan applications submitted on or after July 30, 2009, the new MDIA changes to the Truth in Lending Act are generally as follows:

Applicability: The new MDIA rules pertain to federally-related mortgage loans covered under RESPA and secured by a consumer's dwelling. The rules apply to both purchase and refinance loans.

Early Disclosures: A lender must provide a borrower with an initial Good Faith Estimate within three business days of receiving the borrower's written loan application as specified. For this provision, a "business day" is generally defined as a day on which the lender's offices are open for business.

Upfront Fees Restriction: Neither a lender nor any other person may impose an upfront fee on the borrower (except for credit report) until the borrower has received the early disclosures in person or, if mailed, three business days after the early disclosures are mailed. For this rule, a "business day" is defined as all calendar days except Sundays and legal public holidays as specified.

Seven-Day Waiting Period: A lender must wait seven business days after providing the early disclosures before consummating the loan. For purposes of this waiting period, a "business day" is defined as all calendar days except Sundays and federal legal holidays as specified. A borrower may waive the waiting period in writing in case of personal financial emergency, such as an imminent foreclosure sale.

Re-disclosure Requirement: If the final Annual Percentage Rate (APR) at loan consummation varies more than 0.125% (or 1/8 of one percent) from the initial APR on the early disclosures of a regular transaction, the lender must provide the borrower with a corrected disclosure at least three business days before the loan is consummated. For purposes of this waiting period, a "business day" is defined as all calendar days except Sundays and federal legal holidays as specified.

Three-Day Waiting Period: For corrected disclosures, a lender cannot consummate a loan until three business days after the borrower receives the corrected disclosure in person. If the corrected disclosure is mailed, the borrower is deemed to have received it three business days after it is placed in the mail. A borrower may waive this waiting period in writing in case of a bona fide personal financial emergency, such as an imminent foreclosure sale.

Source: The new MDIA rules and regulations are set forth at 74 Federal Register 23,289 (May 19, 2009) (to be codified at 12 CFR 226) available at http://www.federalreserve.gov/reportforms/formsreview/RegZ_20090519_ffr.pdf.

Again, our sincere thanks to CAR for this content.

- Jim

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

www.NeighborlyGroup.com

Neighborly Financial Joins Calaveras County Search & Rescue Efforts

Hello Neighbors,

John Graham, manager of Neighborly Financial is back.

He's been gone for the last several days, helping a search and rescue effort in a neighboring county.

From John:

I went to help search for the missing deer hunter in Calaveras County, last Wednesday. We spent all day looking for the subject. We were able to track his footsteps from the truck for about 7 miles, step by step, until darkness forced us to retreat for the night. Attached is a photo of the footprint we were following during the Calaveras County search. As of Friday, his location is still unknown. I have no details on the outcome, other than he is alive.

I am a member of the Placer County Sherriff's Search and Rescue team. We are recognized as one of the largest and better trained teams in the state, and therefore we get called out to assist with searches in many other counties. We assist with both backcountry and urban searches, for missing hikers, hunters, motorcycle riders, children and Alzheimer's patients. We also assist the Sherriff with evidence searches for criminal cases. We get called out about once or twice a month. Volunteers spend many hours training and in the field on searches. We all serve as ground searchers, willing to hike in any conditions and any terrain, but also we are divided into teams with specialties in 4WD, radio communications, motorcycles, mountain rescue, horses, and canine search, to name a few.

NICE work John. Another example of supporting our local community. We love doing it, just wish it wasn't a tough story.

Our thoughts go out to this family as they continue the search,

Jim

www.NeighborlyRealty.com

www.NeighborlyFinancial.com

www.NeighborlyGroup.com

"Shadow Inventory"

Hello Neighbors,

I attended this month’s Finance Forum (meeting) at the Sacramento Association of Realtors branch office.

Interesting stuff.

A term we’ve been hearing more and more of recently was discussed….. “Shadow Inventory”.

What is Shadow Inventory?

Homes that are in some sort of Notice of Default (NOD) or foreclosure proceedings… but haven’t yet been taken back by the banks. Meaning? Homes that are vacant – or will be soon – that aren’t yet being reported on the bank’s financial books.

How much?

I heard an estimate this morning that shocked me: 35,000 – 40,000 homes in the “Greater Sacramento area”. Now that area probably includes parts of Sacramento County, Placer County, and even El Dorado County. If those numbers are correct, it is a HUGE amount of homes that will some day come to market. If. If. If.

Impacts?

Obviously, if such numbers exist, that has huge macro-economic implications. Prices will drop. Banks will be in financial trouble. Buyers will benefit – if they can get loans. Sellers will have to hold tight for much longer, or compete with insanely low price points.

HOWEVER, there is a problem – accurate data.

No one has actually published the data we need to verify such speculation. Search MLS and you will find that there isn’t much bank owned inventory now. It’s dried up. You can search county tax records, but those tools aren’t very user friendly. It would take days and days to compile such data. One industry professional says the inventory is there… another say the Obama plans have curbed the problem.

So?

We continue to listen. Speculation runs from all ends of the spectrum. If we had the data, we could guide you in the right direction. Until then, we (all of us in this industry) continue to be reactive instead of proactive.

I’m looking forward to changing that behavior.

- Jim

www.NeighborlyGroup.com

www.NeighborlyRealty.com

www.NeighborlyFinancial.com