As a foreclosure alternative, short sales are catching on as lenders and servicers deal with a huge inventory of defaulted mortgages that will continue to grow over the short term a industry news reported according to a report from CAR Newsline.

Citigroup mortgage analyst Robert Young believes there are three million mortgages in “suspended animation” with troubled borrowers living in homes and who haven’t made a payment for six months or more.In addition, there is a large pipeline of loan modifications and foreclosures in progress. Mr. Young was expecting the sale of this huge inventory would overwhelm demand and drive down home prices, but it hasn’t happened yet. And he now thinks it may not happen at all.“It seems like all the actions the banks and government have taken is to avoid this fire sale,” he said in an interview with National Mortgage News. Despite the carrying costs, “the government and the banks are managing liquidations to avoid a fire sale.”As a result, home prices may remain relatively stable for several years. But there is a “trade-off,” Mr. Young said. “We aren’t going to see a rebound (in prices) either.”Economists at Moody’s Economy.com don’t expect a surge in foreclosure sales this year either. They are forecasting that 1.9 million borrowers will lose their homes through foreclosure sales in 2010, compared to 1.8 million last year.However, they expect a sizeable increase in short sales and deed-in-lieu transactions.

Economy.com estimates that 490,000 homeowners will use short sales and deed-in-lieu transactions as an exit strategy, compared to 300,000 in 2009.In a short sale, the distressed borrower sells the property (for less than the outstanding mortgage) with the approval of the lender/investor and walks away debt free. In a deed-in-lieu transaction, the homeowner hands the keys over to the servicer and vacates the property.

Travis Olsen, chief operating officer of Loan Resolution Corp., says he has seen a tremendous increase in short sales in the past six months. “The industry is recognizing that many people don’t want or don’t qualify for home retention options. They want to get out.”He said his volume of short sales has doubled in the past six months and he expects to see it double again this year. Mr. Olsen estimates the industry could see 1 million short sales and deed-in-lieu transactions this year.Loan Resolution Corp., Scottsdale, Ariz., is working with several Home Affordable Modification Program servicers to implement Treasury’s new expedited short sale and deed-in-lieu program that provides cash incentives for homeowners, servicers and investors.Treasury issued the guidelines in early December and servicers are expected to implement the Home Affordable Foreclosure Alternative program by April 5 or sooner. The guidance establishes procedures for HAMP servicers to provide borrowers with a pre-approved price and sale terms prior to listing the property.Once the borrower submits a signed sales contract and all required attachments, the servicer has 10 days to accept the offer. As a vendor and outsourcer, Loan Resolution developed a similar process to handle short sales for mortgage investors and servicers. After agreeing a listing price, RLC would have the delegated authority to accept, reject or counter a buyer’s offer.Mr. Olsen said the HAFA program will help standardize the process and expedite short sales. “You will see far more short sales get approved,” he said in an interview.Under the HAFA program, servicers will receive a $1,000 incentive payment for each completed short sale or deed-in-lieu transaction. The former homeowner will receive $1,500 for relocation costs. Investors can receive up to $1,000 if they pay $3,000 to subordinated-lien holders that relinquish their claims. The investor’s reimbursement is based on a one-for-three match.

Subordinate-lien holders are a major hurdle to completing short sales and incentive payments are helpful, Mr. Olsen said, but $3,000 is not enough in many cases. He would like to see the maximum incentive increased to 6% of unpaid principal balance of the second lien.

Carlos Cabrera, making clients for life.

Kenneth R. Harney reporting from Washington today that if you’ve been holding back on the new $6,500 federal tax credit for repeat home purchases, you now have all the official IRS guidance you’ll need to buy a house, qualify for the credit and pocket the $6,500.

That’s because the Internal Revenue Service finally published the rules for the repeat purchase credit along with key details for taxpayers that had been missing since President Obama signed the legislation creating the program Nov. 6.

The IRS posted its revised Form 5405 on its website ( www.irs.gov) on Jan. 15, six weeks after the agency warned taxpayers not to file claims for the $6,500 credit without using the revised form and new instructions.

The repeat buyer credit inelegantly dubbed the “long-time resident of the same main home” credit by the IRS supplements the popular $8,000 credit for first-time buyers. Homeowners who have occupied the same property as a principal residence for any five consecutive years during the previous eight years may now be able to claim a tax credit on a purchase of another home they intend to use as a principal residence.

The credit is for as much as 10% of the price of the replacement home, capped at $6,500. The purchase contract must be dated from Nov. 7, 2009, to April 30, 2010, and the closing must occur no later than June 30. Members of the armed forces and federal diplomatic and intelligence personnel stationed overseas get an extra year to claim the credit.

The maximum purchase price on homes eligible for the credit is $800,000. Buyers are not required to sell their previous home, but they must be able to demonstrate that the replacement home they buy is or will be their principal residence.

The new IRS guidance answers key questions that had been uncertain from the legislative language alone. For example, they describe what documentation home buyers must submit along with their $6,500 credit claim. On 2009 and 2010 tax returns, buyers should attach:

* A copy of the signed HUD-1 settlement sheet, including contract sale price and date of closing. This is to document that the timing of the transaction meets the program’s requirements.

* Evidence of long-term ownership and occupancy of the previous home to meet the five consecutive years’ test. This can be property tax records, homeowners’ insurance records or IRS Form 1098 interest statements for the five-year period.

* For buyers claiming a credit on a newly constructed home, where a HUD-1 settlement sheet is not available, the IRS will accept a copy of the certificate of occupancy showing the buyers’ names, the property address and date.

* For buyers of mobile homes who are not able to get a settlement statement, the IRS will accept a copy of the executed retail sales contract showing the property’s address, purchase price and date of purchase.

All this extra documentation was required by Congress after reports that audits had uncovered widespread abuses by those seeking the $8,000 credit for first-time buyers. Among these were fictitious home purchases in which taxpayers or tax preparers sought or obtained credits on properties that never were sold or bought. This time around, the IRS says, it is going to rigorously investigate all claims filed, starting with a review of the documentation submitted.

The new IRS guidance also spells out the revised income limits for home buyers claiming credits: Your modified adjusted gross income must be $125,000 or less if you are single, or $225,000 or less if you are married filing jointly. Above these limits, the allowable credit amount begins to phase down in increments, and it is eliminated once incomes reach $145,000 for singles and $245,000 for married joint filers.

There are pitfalls as well: An advisory posted by the IRS this month spelled out situations in which recipients of tax credits may have to repay them to the government. These include taxpayers who sell their homes within a 36-month period after purchase. Recipients must also repay the credit if they convert their principal residence to a rental or business property, or if their lender forecloses on the home.

With all the rules now available, here’s the action message to potential tax-credit seekers: Speed up your search for the home you want to buy. There are only 14 weeks to sign a contract and five months to close.

Carlos Cabrera, making clients for life.

Brittany Dunn from DSNews reported that starting this summer, Realtors will have access to an online real estate library/archive with data on every property in the United States.

Dubbed the Realtors Property Resource (RPR), this powerful new tool is a project by the National Association of Realtors (NAR). RPR was created to help Realtors better serve their clients, providing unmatched access to tax and assessment data; property data; neighborhood, school, and demographic information; and maps, trends, and reports, NAR said. In addition, RPR will include public record information, details of prior transactions, multiple listing service (MLS) data, and zoning information.

“RPR is welcoming news for our Realtor members who are always tech savvy and on the cutting edge of business innovation,” said Karl Lee, president of the Santa Clara County Association of Realtors.

Lee said this visionary project will provide NAR members with in-depth, trusted information on local properties and make it easier for them to help clients analyze their buying and selling decisions, including specialized property types, such as vacation homes. The advanced user profile and social networking component of RPR will help create online referral communities and inspire members to experiment with new business models, he explained.

According to NAR, RPR will be exclusive to Realtors and member of participating MLSs, and beta testing will begin in March of this year. On July 1, 2010, Realtor logins will begin to be activated across the country, and a phased roll-out will occur in the months following.

Carlos Cabrera, making clients for life.

This month’s Market Snapshot, provided by the CAR, titled “California’s Median Price: First Year-to-Year Gain in Two Years,” features:

• Median price has seen an improving situation: Following a 59 percent peak-to-trough decline, California’s median price surpassed the $300,000 threshold in November, an increase of 2.4 percent in month-to-month comparisons, and the first year-to-year increase since August 2007.
• Sales also in healthy territory: Home sales in California returned to pre-peak levels in late 2008, and sustained them throughout 2009.  

To read the complete version of Market Snapshot, please click here.

Carlos Cabrera, Making clients for life!!

Closing Costs 101: Part 2
Here are some more facts concerning closing costs:

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.
As always, I am your trusted source for assisting in the entire title insurance and escrow process.  Please let me know if I can be of service.

 Carlos Cabrera, Making Clients for Life!!

Jim Wasserman from the Sacramento Bee News reported on January 7, 2009 that More than 20,000 California homebuyers could get state tax credits of up to $10,000 this year under a new stimulus proposed Wednesday by Gov. Arnold Schwarzenegger.

The governor’s plan to allocate $200 million in credits to buyers of new or existing homes is part of a job creation strategy. It goes now to state lawmakers for consideration.

It’s unclear how fast legislators might act. But last year, they handily approved $100 million in tax credits for buyers of new, unoccupied homes. The credits, claimed by 10,600 buyers from March through June, proved popular and ran out faster than expected.

The announcement in the governor’s annual State of the State address won praise from the state’s struggling real estate sector.

This report further stated that building industry representatives said they wouldn’t oppose extending tax credits to existing homes. But Allison Barnett, a lobbyist for the California Building Industry Association, said using credits for new home construction creates more jobs.

The tax credits – which would provide up to $3,333 off state taxes for each of the next three years – could be combined with an $8,000 federal tax credit. That credit for first-time buyers ends April 30.

The article said that Schwarzenegger’s administration officials said conditions of their proposal would be similar to last year’s credit. That had no income limits, made all buyers eligible and required that buyers live in their homes. No dates have been set yet for eligibility. Buyers qualified last year by closing escrow after the credits became available on March 1.

The proposal has its critics. Some renters object to subsidizing homebuyers, and some economists think $200 million in a deficit-plagued state is better spent elsewhere.

 Chris Thornberg, head of Los Angeles-based Beacon Economics said “there is enough incentive with the federal tax credit and low interest rates” for instance. But building industry officials think otherwise.

Home builders counted 3,398 closed escrows in the eight-county Sacramento region during the first 11 months of 2009. That was just 9 percent of all area sales, according to San Diego County researcher MDA DataQuick. In 2005, new homes were 25 percent of sales.

Carlos Cabrera, Making clients for life!!

A recent real estate report from MSNBC which was posted and distributed by the California Association of Realtors (CAR) indicates that consumers may be taking their time house hunting this winter, which some economists believe could lead to a “double dip” in home prices.  A recent report from the NATIONAL ASSOCIATION OF REALTORS® (NAR) showed that its pending home sales index declined 16 percent in November to a reading of 96, the first decline after nine consecutive months of gains.MAKING SENSE OF THE STORY FOR CONSUMERS

• NAR’s Pending Home Sales Index (PHSI) is a barometer of future sales.  Typically, there is a one- to two-month lag between the signing of a sales contract and the close of escrow.  Although government incentives, low interest rates and affordable home prices have lured many buyers, especially first-timers, to the market, historically sales decline during the winter months and begin to rise in the spring. 
• Because of the government’s efforts to stimulate the housing market, some economists believe that housing prices will decline once the incentives come to an end.  However, the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) closely watched “2010 California Housing Market Forecast,” projected that the median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 in 2009. 
• According to C.A.R.’s Vice President and Chief Economist Leslie Appleton-Young, unlike the rest of the nation, home sales in California already bottomed out more than two years ago, and the median home price reached its trough in February 2009. 
• Although home buyers should not focus solely on future home price appreciation, according to data collected by C.A.R. over the last 40 years, homeowners who purchase and live in their home for at least five years, have averaged an annual rate of return of nearly 12 percent.

“Making Clients for Life!!”, Carlos Cabrera.

The Wall Street Journal posted the new rules for loan shopping for consumers. It it is everyone’s best interest to protect our consumers when they decide to get a loan for the biggest financial commitment of their lives. 

The new Federal rules that take effect Friday, Jan. 1, mandate a standard, three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. The rules are an update of the Real Estate Settlement Procedures Act, a 1974 law known as RESPA,the Journal reported.
 

HOW DOES THIS MAKE SENSE FOR CONSUMERS?
The Journal stated that, although Good Faith Estimates have been in use for many years, there never has been a standard form required of all lenders. Under the new rules, lenders and mortgage brokers are required to give consumers the standard estimate forms within three days of receiving a loan application.

It was further stated that the Good Faith Estimate form requires lenders to combine all of the bank’s fees into one “origination charge,” enabling consumers to compare one lender’s fees with another’s.  Lenders are prohibited from increasing the origination fee from the estimate.  Some additional charges, including title services and recording charges, can increase by as much as a combined 10 percent.  Estimates for other charges, such as homeowner’s insurance and other services provided by third parties selected by the borrower, aren’t subject to such limits.

A finance professor emeritus at the University of Pennsylvania’s Wharton School recommends that borrowers focus on two items as they shop: the interest rate and the “adjusted origination charge,” which includes any points paid to lower the rate the story said.

Finally, the Wall Street Jounal said that another change includes the HUD-1 form used by settlement firms in closings.  The new HUD-1 includes a comparison of the estimated and final costs, as well as a summary of the loan terms.

The consumer is advised to shop around for the best offerings from any and all lenders before committing to purchase a home, therefore, it’s always best to make the right choice in lending and be fully approved prior to looking at properties and submitting purchase offers to avoid any set backs when already in escrow and potentially jeopardising the transaction and ultimately the consumers Good Faith Deposit.

“Making Clients for Life!!”. Carlos Cabrera.

Gretchen Morgenson from the New York Times stated in an article that, after months of playing pretend, the Treasury Department conceded last week that the Home Affordable Modification Program, its plan to aid troubled homeowners by changing the terms of their mortgages, was a dud. The 10-month-old program is going nowhere, the Treasury said, because big institutions charged with implementing it are dragging their feet.

In an article published last Sunday in The New York Times, Michael S. Barr, assistant Treasury secretary for financial institutions said ‘’The banks are not doing a good enough job,'’.

After the government spent hundreds of billions of dollars bailing out banks, the Obama administration rolled out the $75 billion loan modification plan to show its support for beleaguered homeowners. But if the proof of the pudding is in the eating, homeowners are going hungry. A stalled loan modification plan might not be worrisome if the foreclosure crisis were abating. Yet at the end of September, a record 14.4 percent of borrowers were either in foreclosure or delinquent on their mortgages, the Mortgage Bankers Association reported. It’s time for the government to acknowledge the flaws in its program and create one that might actually succeed. Only then will the supply of homes for sale, and the pressure on prices associated with that overhang, be reduced. The Treasury program has decided to tackle the delinquent mortgage problem by reducing the interest rate on eligible borrowers’ loans to a level that makes monthly payments affordable. But how it calculates affordability is one of the program’s major flaws — at least that’s the view of Laurie Goodman, senior managing director at Amherst Securities Group and head of mortgage strategy at the firm. Her research shows, for instance, that 70 percent of modifications involving only interest rate cuts, rather than reductions in the principal borrowers owe, have failed after 12 months. The Treasury program is likely to have similar outcomes.According to government investigators, the average monthly mortgage payment for a borrower under early plan modifications fell by 34 percent. Assessing for possible success under these terms, Ms. Goodman analyzed past re-default rates on modifications that cut payments by 34 percent. She found that 65 percent of borrowers fell back into delinquency.

The Los Angeles Times reported that Senators in Washington agreed to extend $8,000 housing tax credit for first-time buyers

The lawmakers also OK offering a tax credit of up to $6,500 to repeat buyers who have owned their current homes at least five years.

Washington - Senators agreed Wednesday to extend a popular tax credit for first-time home buyers and to offer a smaller credit to some repeat buyers. The benfit is that the tax credit provides up to $8,000 to first-time home buyers but is set to expire at the end of November.Senators agreed, however, to extend the existing tax credit for first-time home buyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years.The tax credits would be available to buyers who sign purchase agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers, the times reported.

Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.

Senators in both major parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as today, but lawmakers were still haggling over several unrelated amendments Wednesday evening.

The Senate’s majority Democrats have blocked the proposed amendments. If the Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have said they support extending the tax credit for home buyers.

Lawmakers didn’t release a cost estimate for extending the tax credit, though similar proposals were projected to cost about $10 billion.

About 1.4 million home buyers have qualified for the existing credit through August. The National Assn. of Realtors estimates that 350,000 of them would not otherwise have bought their homes.

The government said Wednesday that new-home sales fell 3.6% last month. Some builders blamed the drop, the first since March, on uncertainty about the tax credit.

It takes 45 days to 60 days to close the deal on a house, making it unlikely that a sale made today would be consummated by the end of November.

This information has been obtained from the Los Angeles Times website and is Copyrighted © 2009, The Los Angeles Times. With this article, is my intention to provide the the accurate update that most of my clients, buyer and seller, were waiting for. Thanks.

If you are buying or selling, you as a consumer have choice of services. The California department of Real Estate just released a new and updated FAQ regarding these choices. They are as follows:

Frequently Asked Questions

Q. What is the Buyer’s Choice Act?
A. The Buyers’ Choice Act is a new law that prohibits a seller who acquired property as a foreclosure sale from requiring a buyer to purchase title and escrow services from a company chosen by the seller as a condition to receiving offers or selling the property. It was enacted by Assembly Bill 957 (Galgiani).

Q. Who is a seller under the Buyer’s Choice Act?
A. A seller is defined as a mortgagee or beneficiary under a deed of trust who acquired title to the property at a foreclosure sale, including a trustee, agent, officer or other employee of any mortgagee or beneficiary.

Q. When does the Buyer’s Choice Act become law?
A. On October 12, 2009. The law is an urgency measure and became effective when it was signed by the Governor on October 12, 2009.

Q. Can a buyer agree to accept the recommendations of the seller as to which title or escrow provider to use?
A. Yes, provided that a written notice of the right to make an independent selection of those services is first given by the seller to the buyer.

Q. Does the new law apply to all real estate transactions?
A. No. The law only applies to residential property improved by four or fewer dwelling units.

Q. What settlement services are covered by the law?
A. The law covers title insurance and escrow services.

Q. Are there penalties for violating the Act?
A. Yes. A seller who violates the new law is liable to the buyer for three times all charges made for the title insurance or escrow service. In addition, a seller who violates the law is also considered to have violated their licensing law.

Q. If a person violates the law can the sale be set aside?
A. No. A transaction cannot be invalidated solely because of the failure to comply with the law.

Q. What is the reason the Legislature passed the Buyer’s Choice Act?
A. The Legislative findings and declarations state that the recent troubled real estate market has resulted in a concentration of the majority of homes available for resale within the hand of foreclosing lenders and has dramatically changed the market dynamics affecting ordinary home buyers. The act declares that the potential for unfairness occasioned by the resale of large numbers of foreclosed home requires that protections against abused be made effective immediately.

Q. Does the Act continue indefinitely?
A. The Act is only effective until January 1, 2015 unless it is extended by the Legislature

Lastly, in my opinion and common practice, our offers are submitted as seller choice of services, which increases the possibility of getting our offers accepted in any market. Specially in today’s market where first time home buyers are purchasing under FHA financing and competing against conventional and/or all cash buyers where it becomes increasingly difficult to compete with. So long as the title and escrow companies used are reputable ones, in the case of escrow companies, they are regulated by the DOC, Department of Corporations, usually services become the least of our worries. Our focus is to get our client’s offers accepted at the best price, terms and/or conditions, once offer has been accepted, we then emphasize in our due diligence and ultimately protect our client’s best interest and EMD, Earnest Money Deposit for a successful purchase of a life time.

It Seems Possible, the Wall Street Journal and their staff reported this week.

With the commercial real-estate industry bracing itself for the onslaught of hundreds of billions of dollars in maturing loans, the Treasury is considering issuing rules that will make it easier for property developers and investors and their loan servicers to restructure debt, according to people familiar with the matter.

The report further stated that Tax rules make it difficult for borrowers who are current on their payments to hold restructuring talks with the servicers of commercial mortgages that were packaged and sold as bonds. This lack of flexibility was one of the reasons cited by the management of mall giant General Growth Properties Inc. for its Chapter 11 bankruptcy filing in April.

At present, it continued, developers and investors complain that only those who are delinquent can talk to servicers of these bonds, named commercial-mortgage-backed securities, or CMBS. But now the Treasury is considering issuing guidance that would allow servicers to start talking about ways to avoid defaults and foreclosures sooner, possibly at least two years ahead of the maturity date of a loan, these people said. The Treasury guidance, which could be released within weeks, would essentially enable loan-modification talks to take place without triggering tax consequences, these people say.

“This issue is critical. We are hopeful that Treasury acts soon, as each day the commercial-real-estate markets deteriorate further,” said Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a lobbying body for the commercial-real-estate industry.

The possible move by the Treasury reflects the deep concern in government and industry circles of the problems looming in the $6.5 trillion market for commercial real estate. Just as the U.S. economy is struggling to regain its footing, defaults are mounting because of credit-market turmoil, along with declining property cash flows and plunging property values.

At a hearing Tuesday on the Obama administration’s bank-rescue program, some lawmakers warned that commercial real estate could deal a punishing blow to lenders and the economy. “I am very concerned about the ticking time bomb we face,” said congressional Joint Economic Committee Chairwoman Carolyn Maloney (D., N.Y.).

Of particular concern is $154.5 billion of CMBS loans coming due between now and 2012. About two-thirds of that likely won’t qualify for refinancing, according to a recent report by Deutsche Bank. The bank projected that the default rates on the $700 billion of outstanding CMBS eventually could hit at least 30%, and loss rates, which take into account the amounts recovered by lenders, could reach as much as 13%, more than the peak seen during the commercial-real-estate collapse of the early 1990s.

Stats tells us that CMBS delinquency rates have more than tripled in just six months, to 2.7% in May, their highest point in a decade. The likely spike in commercial-mortgage defaults and foreclosures could cost the nation’s already fragile financial system hundreds of billions of dollars in losses.

But property owners and investors hoping to restructure troubled mortgages are hearing a tough message from CMBS servicers: We can’t talk to you unless you first fall behind on payments. This is because when CMBS offerings are created, the underlying mortgages are legally held by tax-free trusts. The trusts can be forced to pay taxes if the underlying loans are modified before they become delinquent, according to current CMBS rules.

Sunstone executives say the complicated structure of CMBS deals makes it difficult for borrowers to get a servicer to discuss a loan modification in the first place. In many cases, the only way to force the servicer to come to the table is to allow the loan to go into default whic by personal experience, seems to happen also on the residential side.

“What makes the system great is also what makes it weak,” said Sunstone President and Chief Executive Arthur Buser. “It’s systemized, heavily documented, heavily structured with a lot of rules that allow loans to be cut up and sold. That means there cannot be a high degree of variability and audible calls on what can be done.”

It’s clear that we experienced a very similar situation with residential real estate not too long ago, the question is, will there be a moratorium imposed on the commercial side as well? Or will banks be more receptive and cooperative on doing commercial short sales to minimize their loss and the consumer’s possible tax consequence?

PJ Cochran, a 30 year plus veteran in commercial sales and leases, now training director for Old Republic Title out of Glendale CA, answered this questions firmly, “in my opinion, banks will most likely work and expedite short sales at a high record numbers”.

California imposed a new 90-day moratorium on housing foreclosures under a new law that took effect Monday June 15, 2009 the California Department of Real Estate reported. The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing. 

The report further stated that supporters acknowledge the California Foreclosure Prevention Act won’t stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled. 

What is this really mean to the consumer like you and me? Basic supply and demand tells us that with less inventory in the market place and more buyers looking to capitalize on today’s interest rates and low pricing, values are increasing as bidding wars take place through out most market places. Secondly, as the government pressures banks to exhaust any and all options to prevent foreclosures, once a loan modification is discarded, some banks are more receptive and well prepared to expedite short sales, where the lien holder accepts to sale the property in today’s current market value, which is less than what is owed. Lastly, as traditional equity sellers were holding back on selling their homes, it now represents about 30% market share on our area of Los Angeles County. This figure included probate sales and is an estimate based on our irmls matrix system where weekly statistics are pulled.

The Los Angeles Times reported the other day that properties in several areas are selling for less than they did 20 years ago, and that’s not including inflation. Some first-time buyers are nabbing houses for less than what their parents paid.

The report further stated that in parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term.Properties in several areas are selling for less than they did 20 years ago, and that’s not even counting the effects of inflation.The reversal is a bonanza for some first-time buyers. They’re nabbing houses for less than what their parents paid in the late 1980s, jumping into a real estate market that has become a kind of economic time machine.

Earlier last week our current administration announced the new details under its Foreclosure Alternatives Program (FAP) enabling servicers and borrowers to pursue short sales and deeds-in-lieu of foreclosure in cases where the borrower is generally eligible for a Making Home Affordable modification but does not qualify or is unable to successfully complete the three month trial period. The program, effective through 2012, requires that prior to proceeding with a foreclosure, servicers must determine if a short sale is appropriate. 

We’re gratified that the administration has recognized the need to streamline the short sale and deeds-in-lieu processes, and has provided viable options to homeowners who have fallen behind on their mortgages but owe more than their homes would sell for in today’s challenging market.

Incentives in the FAP program include $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; $1,500 for homeowners to help with relocation expenses; and up to $1,000 toward the cost of paying junior lien holders to release their liens ($1 from the government for every $2 paid by the investors to the second lien holders). 

The FAP includes streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter to minimize complexity and increase use of the short sale option. Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements, based on an appraisal or one or more broker price opinions, issued no more than 120 days before the date of the short sale agreement.

In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. The property also must be listed with a licensed real estate professional with experience in the neighborhood, and no foreclosure may take place during the marketing period, of at least 90 days, as specified in the Short Sale Agreement.

The Short Sale Agreement also must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.  Servicers may not charge fees to borrowers/homeowners for participating in the program. Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement, plus any extensions.

 Additional details will be forthcoming. Please check C.A.R.’s Market Response Center for updated information as it becomes available.

In effort to provide any and all of my clients with up to date information in today’s Real Estate market condition, this information is being posted as a personal opinion and/or quoted directly and/or partially after I may have read it and/or heard it on different media sources. This information, if quoted, it is been quoted with the moral respect and/or copy right protection owed to the author(s) and/or publisher(s).  Thanks.

NATION’S HOUSING

Eligible purchasers who apply for mortgages insured by the agency may soon be able to get bridge loans or cash advances — up to $8,000 — that they can use for the down payment or closing costs. This was reported by Kenneth R. Harney from Washington.

The $8,000 federal tax credit for first-time home buyers is about to morph into a ready-cash down payment source, thanks to a new federal policy change.

Buyers eligible for the credit who apply for mortgages insured by the Federal Housing Administration may soon be able to get bridge loans or cash advances — up to $8,000 — that they can use for the down payment, closing costs or other loan expenses pending receipt of their tax credit check from the Internal Revenue Service.
 
Housing and Urban Development Secretary Shaun Donovan announced the FHA change May 12 in a speech to the National Assn. of Realtors. The idea, he said, is to “monetize” — turn into immediately spendable cash — a tax credit that often is not received until months after the settlement date.

As many as half of all would-be first-time buyers do not have enough cash on hand for a down payment and closing costs, according to building and real estate industry estimates. By advancing these consumers as much as $8,000 at closing, many more would be able to afford the purchase.

Officials at the National Assn. of Home Builders say the bridge loan feature could double the total number of home purchases stimulated by the 2009 tax credit program to more than 300,000, depending on how many private lenders and state housing agencies participate.

Under guidance drafted by the FHA, all lenders approved to do business with the agency will be authorized to provide bridge loans at closing — secured solely by the tax credit that the borrower anticipates receiving from the IRS. State and local government agencies and nonprofit organizations approved by the FHA will be allowed to offer either bridge loans or second mortgages secured by the house.

Although the $8,000 tax credit carries the name “first-time home buyer,” eligibility extends to anyone who hasn’t owned a principal residence during the last three years. The credit amount from the IRS is the lesser of 10% of the purchase price of the dwelling or $8,000.

Donovan’s announcement came as a small but growing number of states have begun bridge loan programs on their own to help stimulate home purchases. California has even created its own state-funded tax credit program — a 10% credit payable to the buyer over three years — but has limited it to newly built houses.

Bob Rivinius, president and chief executive of the California Building Industry Assn., said the new FHA credit monetization program “should provide a great combination” with the California credit. Some first-time buyers using FHA loans could even qualify for what he called “a trifecta”: They could claim the 10% state credit, file for the $8,000 federal tax credit, then turn the federal credit into instant cash for use on a down payment or for closing costs.

Rivinius said funding for the state tax credit was being depleted fast, but legislation pending in Sacramento would add $200 million — and that “should allow buyers to receive credits” through the end of the year.

The federal $8,000 credit only covers purchases closed by Nov. 30. Unless Congress extends the credit, it will disappear Dec. 1.

The new bridge loans and cash advance features of the federal credit may not be available immediately through private lenders, mortgage industry leaders say. Among the key questions yet to be answered: Where will non-depository mortgage companies get the $8,000 in advance money to provide upfront to buyers? Although most major banks offer second mortgage programs, the FHA guidelines stipulate that the tax credit advances cannot be secured by a lien on the property but only by the tax credit to be received by the buyer.

Many mortgage companies, which do not have banking deposits to tap, will need a few weeks to prepare documentation for what will essentially be secured personal loans. Plus they’ll need to locate a source of funds for their advances.

In the meantime, however, would-be buyers who believe they are eligible for the federal credit shouldn’t sit around. They should shift into high gear shopping for a house — the Cinderella date of Nov. 30 is looming — even if they’ll need a bridge loan or cash advance to complete the deal.

The odds are good that by the time they’re ready to get a mortgage and go to closing, at least some local FHA-approved lenders will be actively in the market with bridge loans.

In effort to provide any and all of my clients with up to date information in today’s Real Estate market condition, this information is being posted as a personal opinion and/or quoted directly and/or partially after I may have read it and/or heard it on different media sources. This information, if quoted, it is been quoted with the moral respect and/or copy right protection owed to the author(s) and/or publisher(s). Thanks.

Distributed by the Washington Post Writers Group.

This week, President Barack Obama signed into law the Helping Families Save Their Homes Act of 2009 to help homeowners and lenders avoid foreclosure.  Previously included in this bill was a measure to allow bankruptcy judges to modify mortgage loans for principal residences, but the U.S. Senate did not pass this “cram-down” legislation.
The Helping Families Save Their Homes Act of 2009 contains various new laws to address the national foreclosure crisis.  Major provisions that may affect California REALTORS® and your clients include the following:

HOPE FOR HOMEOWNERS (H4H) REVAMPED: The new law loosens the H4H program requirements to help homeowners refinance out of their troubled mortgages and into more affordable, fixed-rate FHA-insured loans.  Originally launched in October 2008, the H4H program intended to help 400,000 distressed homeowners, but in the program’s first seven months, it only helped one family stay in its home.  The maximum loan-to-value ratio for an FHA refinance is 96.5% of the appraised value.  If refinance proceeds are insufficient to pay off existing liens, the existing lienholders must voluntarily agree to a short payoff, but a new inducement is an opportunity for them to share in the homeowner’s equity.  Other changes to the H4H program include monetary incentives for both the participating servicers of the existing loans and originators of the FHA refinance.  Millionaire borrowers (with net worth over $1 million) are now excluded from the program.  HUD will establish the requirements and standards to implement the H4H program as revised.

LONGER STAY FOR TENANTS OF FORECLOSED HOMES: Effective immediately, an REO lender or buyer who acquires title through a foreclosure sale must give at least a 90-day notice to terminate a bona fide tenant as defined.  A 90-day notice to terminate is sufficient for a month-to-month tenant or if a new owner will occupy the property as a primary residence at the end of the 90 days.  Otherwise, a tenant with a one year or other fixed-term lease with a remaining lease term exceeding 90 days can stay in the premises until the remaining lease term ends.  This new 90-day notice requirement applies to foreclosures of a federally-related mortgage loan or residential real property, except for properties under rent control, rent-subsidized programs (such as Section - 8), or other state laws that provide additional protections for tenants.  This law expires on December 31, 2012.

NOTIFICATION OF TRANSFER OF MORTGAGE LOANS: The Truth in Lending Act now requires a lender to whom a mortgage loan is sold or otherwise transferred to notify the borrower in writing of such transfer within 30 days.  The notice must include the new lender’s identity, address, telephone number, authorized representative’s contact information, and other relevant information.  This measure should help alleviate the problem borrowers often face in determining who owns their mortgage loans.
Other provisions of the Helping Families Save Their Homes Act include a 4-year extension of the $250,000 FDIC deposit insurance to December 31, 2013, protection for loan servicers who establish qualified loss mitigation plans from liability for an alleged breach of duty to maximize mortgage values for their investors, $130 million for foreclosure prevention counseling and education, and $2.2 billion to strengthen homeless programs.
President Obama has also signed into law the Fraud Enforcement and Recovery Act (FERA) which authorizes the Department of Justice to prosecute mortgage fraud crimes against private mortgage brokers and companies that previously were not regulated by the federal government.  FERA also earmarks almost $500 million for federal enforcement agencies to investigate and prosecute mortgage fraud and other fraud crimes.

In effort to provide any and all of my clients with up to date information in today’s Real Estate market condition, this information is being posted as a personal opinion and/or quoted directly and/or partially after I may have read it and/or heard it on different media sources. This information, if quoted, it is been quoted with the moral respect and/or copy right protection owed to the author(s) and/or publisher(s). Thanks.

This information was obtained directly from the California Department of Real Estate.

The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and before July 1, 2009. The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the $7,500 tax credit?
2. What is the definition of a first-time home buyer?
3. How do I claim the tax credit? Do I need to complete a form or application?
4. What types of homes will qualify for the tax credit?
5. Instead of buying a new home from a home builder, I have hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
6. What is “modified adjusted gross income”?
7. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
8. Can you give me an example of how the partial tax credit is determined?
9. Does the credit amount differ based on tax filing status?
10. Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?
11. I heard that the tax credit is refundable. What does that mean?
12. What is the difference between a tax credit and a tax deduction?
13. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
14. I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?
15. I am not a U.S. citizen. Can I claim the tax credit?
16. Does the credit have to be paid back to the government? If so, what are the payback provisions?
17. Why must the money be repaid?
18. Because the money must be repaid, isn’t the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
19. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
20. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
21. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2008 tax return?

1. Who is eligible to claim the $7,500 tax credit?
   First time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.
2. What is the definition of a first-time home buyer?
   The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
3. How do I claim the tax credit? Do I need to complete a form or application?
   Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first-time home buyer tests.
4. What types of homes will qualify for the tax credit?
   Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.
5. Instead of buying a new home from a home builder, I have hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
   Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after April 9, 2008 and before July 1, 2009.In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
6. What is “modified adjusted gross income”?
   Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
7. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
   Possibly. It depends on your income. Partial credits of less than $7,500 are available for some taxpayers whose MAGI exceeds the phaseout limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.
8. Can you give me an example of how the partial tax credit is determined?
   Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit 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 home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.Here’s another example: assume that an individual home buyer 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 $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625.Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
9. Does the credit amount differ based on tax filing status?
   No. The credit is in general equal to $7,500 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files their taxes as “married filing separately” (in effect, filing two returns), then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns.
10. Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?
    In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $7,500. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price.
11. I heard that the tax credit is refundable. What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed).
12. What is the difference between a tax credit and a tax deduction?
    A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS.A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer’s tax liability would be reduced by $1,125 (15 percent of $7,500), or lowered from $7,500 to $6,375.
13. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    No. The tax credit cannot be combined with the MRB home buyer program.
14. I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?
    No. You can claim only one.
15. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
16. Does the credit have to be paid back to the government? If so, what are the payback provisions?
    Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.
17. Why must the money be repaid?
    Congress’s intent was to provide as large a financial resource as possible for home buyers in the year that they purchase a home. In addition to helping first-time home buyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales. The repayment requirement reduces the effect on the Federal Treasury and assumes that home buyers will benefit from stabilized and, eventually, increasing future housing prices.
18. Because the money must be repaid, isn’t the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
    Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers over $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.
19. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
20. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
21. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2008 tax return?
    Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the future home buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

Source: http://www.federalhousingtaxcredit.com/faq.php

Take a look in just about any neighborhood and you may find the sign of distressed times. Foreclosures are on the rise and that can cause a lot of panic for sellers who aren’t in the same financial crisis. We’re in a very price-sensitive market and obviously in any buyers’ market that’s the case.

The increase of awareness about foreclosures is stimulating buyers to keep fishing and pushing for even lower prices for homes.

So the sellers who are not in foreclosure or who are not in distress have to compete with those properties with the same pool of buyers. So there are two things that they can do; the two things are: pricing the property so it is competitively priced … and they have to make sure that the property shows in absolute perfect condition. Furthermore, the more choices the buyer has, the more critical the showing condition.

Get clear about your market-length time. Having an accurate picture of how long you can have your home on the market will help you to price it correctly. Remember, that buyers aren’t going to pay a premium price out of sympathy simply because the seller owes more on the mortgage. Price your home based on its worth, not on what you owe.

Work with an agent. Now more than ever, an experienced agent can help provide the advice and knowledge sellers need to get their home sold. Agents can also help to aggressively market your home so that it doesn’t get lost in a sea of foreclosure homes.

Price your home correctly from the start.

All too often sellers end up taking a humble ride down and diminishing their possible gain. They end up chasing the market down — whether they realize it or not. Price is critical. When determining price, don’t just look at computer screen shots of homes that are selling in your neighborhood, get in the car and take a ride around to view the exterior and interior of properties that your home will be competing against — that’s exactly what buyers will do. Overpricing your home will cause it to sit on the market for an extended period. Eventually your listing will become stale and you may receive many lowball offers from buyers who are simply fishing to see how low you’ll go. If a home is slightly underpriced you can generate more attention and improve your chances of getting a qualified offer.

Choose the best methods to promote your home. Nowadays, advertising isn’t really important because every buyer has access to almost complete information via the Internet — everyone can find the properties. Advertising used to be important when buyers didn’t have access to the property or a way of finding the property, but now buyers can do their own shopping, searching, and finding. They’re going to do that based on their perception of value and how it’s priced based on the other properties that they are looking at. However, that doesn’t mean you shouldn’t have virtual tours and lots of pictures loaded on websites that feature your home — buyers like to preview before they actually see the home in person.

Make your home the best value, buyers are going to look at all their options. We have to make it painfully obvious that we’re the best value. It doesn’t always mean the lowest price. It may mean a nicer house for the same price. It may mean having more goodies for the same price. It may mean having a lower price, but the buyers have the information and prices of what’s available and they will choose the one that is the best value — and we’re either going to help sell the other homes or the other homes are going to help sell ours.

You are invited to call Carlos directly at (323)517-9269 or by email at Carlos@CarlosCabrera.com.

What rescue means for mortgage rates

Bailout of mortgage giants should result in lower mortgage costs and make credit more available. But lending standards will stay tight and risky borrowers will still pay extra fees

NEW YORK (CNNMoney.com) — Mortgage applicants rejoice!
Sunday’s federal takeover of Fannie Mae and Freddie Mac will likely translate into lower mortgage rates and greater availability of credit, experts said. Rates could drop by 1 percentage point from the stubbornly-high 6.39% for a 30-year fixed rate mortgage. This could be good for would-be homeowners,” said Tom LaMalfa, managing director, Wholesale Access, a research and consulting firm. “It would reduce the cost of financing at the new and improved Fannie and Freddie.”

The government bailout is aimed at making mortgages easier to obtain and afford. By shoring up the mortgage financing giants, they can continue buying mortgages from lenders and injecting much-needed cash into the system.
“Fannie Mae and Freddie Mac are crucial to turning the corner on housing,” said Treasury Henry Paulson. “Therefore, the primary mission of these enterprises now will be to proactively work to increase the availability of mortgage finance. Our economy and our markets will not recover until the bulk of this housing correction is behind us.” But the news isn’t all good. With Friday’s report that foreclosures and delinquencies are at all-time highs, Fannie and Freddie are expected to maintain - if not ratchet up - tighter lending standards. And the fees they have introduced for borrowers with weaker credit histories won’t go away anytime soon.

High borrowing costs

Mortgage rates borrowers pay are dependent on the yields that investors demand when buying mortgage-backed securities from Fannie and Freddie.
Investors’ doubts about the companies’ viability have sent interest rates on those securities soaring. Despite regulators’ July promise that they would step in to save the mortgage companies, investors are still demanding rates of 2.25% to 2.45% above Treasuries, LaMalfa said. Historically, the spread has been 1.25%.
With the government now taking over the companies and minimizing the risk associated with their debt, investors may be willing to ease off their need for higher rates.
High borrowing costs have led, in part, to a decline in mortgage borrowing. Applications are down 27% from a year ago, according to the Mortgage Bankers Association. Also Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) will likely reverse their recent pullback from the mortgage markets. In early August, when they reported just over $3 billion in combined second-quarter losses, both said they would scale back their purchases of mortgage securities to preserve their capital.

Tight standards and fees will remain

Borrowers, however, shouldn’t expect the ever-tightening lending standards to ease. With defaults and delinquencies multiplying and home prices falling, Fannie and Freddie will likely keep a close eye on underwriting practices. Lenders are demanding credit scores above 700 these days, up from 620 in the past, and downpayments of 20%, up from zero in some cases, experts said.

The mortgage titans have also increased their fees in hopes of shoring up their finances. Just last month, Fannie Mae announced higher surcharges for loans to weaker borrowers. For instance, applicants with credit scores between 640 and 659 who are putting down 15% to 20% will pay an additional 2.25% charge.
The same borrower would pay 1.7 percentage points more because of higher fees and rates for the same loan today as he or she would have paid 18 months ago, LaMalfa said.

If the market continues to worsen, standards could further tighten and fees could rise more, he said. “We may have more stringent standards over the next few weeks because of the continued deterioration,” he said. “We don’t know where the bottom is yet. It’s a falling knife.” Also, while investors have initially cheered regulators’ moves in the past, their confidence has been short-lived. It remains to be seen whether and for how long Sunday’s action will placate them, said Kurt Eggert, law professor at the Chapman University School of Law. And if investors’ spook again, rates will rise. “If I were an investor, I’m not sure this would be enough to make me want to jump in with a lot of money,” Eggert said.

First Published: September 7, 2008: 2:53 PM EDT

http://money.cnn.com/2008/09/07/news/economy/fannie_homeowners/index.htm?cnn=yes