Housing BUZZ

Top Foreclosure Rescue Scams – Coming to a Neighborhood Near You!

With the current climate in the housing industry, and overall economy for that matter, it’s no surprise that some people may look for any angle in order to get ahead, and sometimes this may include taking advantage of those in financial desperation. Unfortunately, distressed homeowners trying to avoid the loss of their home through foreclosure are finding out the hard way these days that they may have fallen prey to an unscrupulous scam artist (or as they refer to themselves as “real estate investors”).

 

The scariest part is that if you’re currently delinquent on your mortgage then chances are that you may have already met a few face-to-face, as these so-called “investors” frequently stalk the occupants of distressed properties for any possibility of “assisting them to avoid a foreclosure.” But beware of their empty promises, there are no quick corners to cut in order to “avoid foreclosure,” and there are also many legalities surrounding the foreclosure process in which homeowners should be aware of before they allow anyone to provide any such “foreclosure prevention services” or pay any upfront fees of any kind.

 

Potential victims are easy to find: mortgage lenders publish notices before foreclosing on homes. Private firms frequently compile and sell lists of these foreclosed properties and distressed borrowers. After reading these notices, con artists approach their targets in person, by mail, over the telephone, or by e-mail. They often advertise their services on television, radio, or the Web, and in newspapers, describing themselves as “foreclosure consultants” or “mortgage consultants,” offering “foreclosure prevention” or “foreclosure rescue” services.

 

Here are the top Foreclosure and Loan Modification scams to be aware of:

 

1. Foreclosure “Rescue” and Refinance Fraud. The scam artist offers to act as an intermediary between you and your lender to negotiate a repayment plan or loan modification and may even “guarantee” to save your home from foreclosure. You may be told to make mortgage payments to the scammer directly — along with significant, up-front fees — and be told that the scammer will forward the payments to your lender. In reality, the scammer may pocket your money and leave you in worse shape on your loan. The scam artist also may tell you to stop making payments or stop communicating with your lender. Don’t follow that advice, remember that your mortgage lender should be the starting point for finding options to avoid foreclosure and you also should consider contacting qualified and approved credit counselors.

 

2. Fake “Government” Modification Programs. Unscrupulous people may claim to be affiliated with, or approved by, the government or may ask you to pay high up-front fees to qualify for government mortgage modification programs. While government-supported mortgage modification and refinancing initiatives are legitimate, the scam artists’ claims are not. Keep in mind that you do not have to pay to benefit from these government programs. All you need to do is contact your lender or loan servicer. Additionally, the scam artist’s name or Web site may be very similar to those of government agencies. These tactics are designed to fool you into thinking the scam artist is somehow approved by, or affiliated with, the government. The government is taking actions to stop this fraud, but you also need to protect yourself. Your lender will be able to tell you whether you qualify for any government initiatives to prevent foreclosure.

 

3. Leaseback/Rent-to-buy Schemes. In this type of scam, you are asked to transfer the title to your home to the scammer, who will, supposedly, obtain new and better financing and/or allow you to remain in the home as a renter and eventually buy it back. The agreement may be very hard to comply with, because it may require, for instance, high up-front costs and monthly payments that you may not be able to afford. In fact, the scammers may have no intention of ever selling the home back to you. And remember, transferring your title does not change your payment obligations — you will still owe your mortgage debt. The difference will be that you will no longer own your home.

 

4. Bankruptcy Scams. You may have heard that filing bankruptcy will stop a foreclosure. This is true — but only temporarily. Filing bankruptcy brings an “automatic stay” into effect that stops any collection and foreclosure while the bankruptcy court administers the case. Eventually, you must start paying your mortgage lender, or the lender will be able to foreclose. Bankruptcy is rarely, if ever, a permanent solution to prevent foreclosure. In addition, bankruptcy will negatively impact your credit score and will remain on your credit report for 10 years.

 

5. Debt-elimination Schemes. Scammers may claim to be able to “eliminate” your debt by making illegitimate legal arguments that you are not obligated to pay back your mortgage. These scammers will provide you with inaccurate claims about applicable laws and finance, such as that “secret laws” can be used to eliminate debt or that banks do not have the authority to lend money. Do not stop making payments on your mortgage based on their claims.

 

Always proceed with caution when dealing with anyone offering to help you modify your mortgage or avoid foreclosure. Remember that you do not need a third party to work with your lender — any such party should make the process easier, not harder and more expensive.

 

The main ways to protect yourself from falling victim to a foreclosure scam are to:

• Always keep in contact with your lender no matter what anyone else says;
• Always make payments on your mortgage to your lender and no one else;
• Avoid paying upfront fees of any kind;
• Always understand what you are signing before you sign it;
• Never, under any circumstances, sign the title of your property away to anyone without proper legal counsel;
• Be sure to get all promises in writing.

 

It’s important that homeowners understand that there are FREE foreclosure counseling services and loan modification services available. One of the most important services is offered by your lender, and if your lender becomes unresponsive then the government has sponsored a number of other resources such as the “Hope Now Alliance” and “Making Home Affordable” programs.

 

But it’s up to you to keep yourself from falling prey to a foreclosure scam. Work with real estate professionals with a proven track record of assisting homeowners in your similar situation. And for more information on these scams and ways in which you can protect yourself, please visit http://www.occ.treas.gov/ftp/ADVISORY/2008-1.html

Top 5 Reasons Why Now is a Great Time to Buy!

Although the best time for individuals to purchase a home will mainly depend on their own personal living and financial situations, the present housing market is offering some great opportunities for homebuyers that have not existed for years. 

 

But how do you really know that now is a great time to buy a home? Here are just some of the many factors that are currently influencing the current Buyer’s market:

 

1.) Home prices are very competitive

• Existing home sales in 2009 have turned the corner and have proven that our market is stabilizing, and with Bay Area median home prices down around their 2001 levels housing inventory has decreased 100% from this time last year and has returned to healthy long-term ranges  
• Home prices in many communities are still down 25-40% over their 2005 peaks
• In some areas you might find a home selling for less than it sold 10-15 years ago!
• And with the abundance of foreclosures and short sales lined up for 2010, banks are willing to negotiate in order to get these properties off their books - good deals are everywhere!

2.) Homeownership offers tax incentives

• Owning real estate and paying mortgage interest is still the best income tax deduction you can have
• The Federal Government has extended and improved the First Time Homebuyer Tax Credit, for a limited time qualifying buyers can receive a tax credit up to 10.0% of the sales price (maximum credit of $8,000) while previous homeowners (move-up buyers) can qualify for a tax credit up to $6,500.
• The tax credit will expire, you must have your sales contract signed by April 30^th and you must close on the purchase no later than June 30th!

3.) The current interest rates associated with home loans have fallen below 40-year lows with 30 year fixed rate mortgages offering 4.5% to 5.0%

• Surprisingly the rates offered right now on conforming 30 year fixed rate loans are posting some of the lowest rates ever recorded since Freddie Mac started their mortgage interest rate surveys back in the 1970's.
• Over the past 36 years, there have only been three other years when interest rates were even as close as low as it is today – back in 2003, 2004 and 2005, which was during the last housing boom.
• There are still many loan programs for deserving buyers - Fannie Mae, Freddie Mac, FHA, CalHFA all offer loans up to $729,750 at phenomenal rates with little to nothing down (0% to 10%)

4.) Will rates go even lower?  Don’t count on it!  

• At the end of 2008 the Federal Government implemented a program that focused on keeping interest rates low on conforming 30 year fixed loan programs, more specifically the US Treasury has been actively purchasing Fannie Mae and Freddie Mac mortgage-backed securities (MBS) in order to artificially keep rates low, but their trillion-dollar plan is drawing to end and it is expected they will stop these purchases sometime by the end of first quarter 2010. So without the Treasury actively purchasing MBS there will be no where for rates to go but up.

5.) Real estate is still a worthy long-term investment

• The 38-year annual appreciation rate for California real estate is 7.75 percent.
• New housing starts in California are down 70% from their 2006 levels – less supply on the market will lead to faster home appreciation
• Compared to other parts of California, the Bay Area housing market is – and always has been – even more stable and dependable. Our local market has long been characterized by an increasing supply-demand imbalance: Silicon Valley continues to enjoy a booming economy while limited land and environmental concerns restricts the development of new housing tracts.
• San Jose ranks third, and San Francisco ranks fourth among the top 10 best performing real estate markets in the nation, according to Forbes.

Foreclosures coming in 2010

Heading into 2010 the national unemployment rate is at 10.2% (California’s rate even higher) and still climbing, foreclosure activity is finally decreasing, a large volume of ARM resets are looming, and banks have yet to release an unknown volume of foreclosed homes onto the market.  But are things really this bleak…I suggest not.

There are positives looking forward, the first time homebuyer tax credit was just extended and improved to include previous homeowners, the temporary loan limits from 2009 have been extended into 2010, and the government is still sticking with their mortgage backed security purchase program that is keeping interest rates at incredible levels. But there are definitely some unknown factors that will affect our housing market in 2010.

The number one anticipated factor to affect our market this coming year is another anticipated round of foreclosures sure to flood our local markets and kill any price stability we may have gained through the end of this year.  But, although it has been speculated that banks have an insurmountable stockpile of foreclosures on their books, I don’t believe that we’ll see the same affects on the housing market that foreclosures had in 2008.

Market conditions for one should keep banks from flooding the markets with their inventory of REO properties. While local market conditions may seem plausible for banks to begin releasing their stockpiled foreclosure inventory, they may not be willing to release them until broader housing markets show better signs of recovery.

Other reasons may be more logistical in nature… I think it’s more than obvious that banks (that are left) have a lot on their plates at the moment. You may recall that some nationally (some internationally) held banks have recently consolidated with failing banks over the past year (Bank of America acquiring Countrywide, Chase acquiring Washington Mutual, Wells Fargo acquiring Wachovia) and may not be able to liquidate much of their foreclosure holdings until they have implemented systems to handle the workload.

Also considering added strict government oversight due to previous bank failures, banks must now show signs of recovery or face lack of government support. When a bank brings a foreclosed home to market they must simultaneously write down the loss from the asset (the home) which will then show up on their balance sheet and thus affect their gross worth as a company. 

And many banks have finally realized the benefits of short sales and have been implementing new policies in order to expedite these sales. Think about it, if the bank never has to foreclose and market the property as an REO then they don’t have write down the asset on their books until the short sale has been finalized. This will help them avoid being cut off from possible federal lifelines.

Recalling the first wave of foreclosures that rocked our housing market over 2008, the majority of those loans were mostly subprime mortgages from banks that no longer exist (Lehman Brothers, First Franklin, Indy Mac Bank, etc.). Current foreclosure activity is being linked to more stable loan programs from lenders who can offer alternatives for the homeowners to avoid foreclosure, such as loan modifications, short sales, or even lease back programs aimed at keeping families in their homes. All of this will lead to better housing stability.

Taking into further consideration with the recent recovery in the stock market (if you can call it recovery), we are now seeing levels near 10,000 points in the DOW, which means people are beginning to regain losses on their investments. So, unlike homeowners who suffered mortgage delinquency earlier this year when the stock market tanked out at 6,500 points back in March, today’s homeowners have the ability to dip into their stock investments and help pay for homeownership expenses.

Foreclosure activity has also been steadily decreasing for a few months now (according to RealtyTrac.com) from March of 2009 which was the peak of foreclosure activity for CA. This means there will be less defaults moving forward and hopefully the real estate market will gain some real ground moving into 2010.

Homebuyer Tax Credit Extended!!

More good news for consumers, our members, and the housing market recovery. Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. It is expected that President Obama will sign the legislation in short order.

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

According to the National Asociation of Realtors, more than 1.4 million first-time home buyers nationwide were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers. That number is expected to increase dramatically in the months ahead with this new legislation in place.

 

I'm underwater on my mortgage, can I refinance under the Obama program?

Q: I was reading an article and it stated…

"the Obama Administration's Home Affordable Refinance Program, launched early this year, allowed refinances for those whose first mortgage was as high as 105 percent of a comparable market analysis (CMV). A July expansion now allows participation by borrowers current on payments, but up to 125 percent underwater."

I own a home in San Jose and I've been told that I will not qualify for a refinance because I do not have the equity that is required by lenders in today's market. Will I be able to take advantage of President Obama's program above?

 

A: Yes, it’s true, the Obama mortgage plan does allow homeowners the ability to refinance their current mortgages up to 125% of the current market value…but, you have to read between the lines because your current mortgage MUST be owned by either Fannie Mae or Freddie Mac in order to qualify for the program.

Unfortunately in the Bay Area the majority of homeowners that have mortgages that could benefit from the Obama program are not owned by Fannie or Freddie. Instead these loans tend to be “jumbo loan programs” that were originated during the housing boom and thus owned by institutional investors that purchased them from Wall Street. So the majority of Bay Area homeowners looking to refinance but are unable to due to declining property values will not be able to utilize this program.

Currently there isn’t anything available to help such homeowners unless their current mortgage is owned by Fannie or Freddie. To find out if your mortgage is owned by Fannie or Freddie you can use the loan look-up tools on their websites:

You can fill out an inquiry on the website by Fannie Mae (FNMA) by visiting them at http://loanlookup.fanniemae.com/loanlookup/. Or if you choose you may contact them at 1-800-7FANNIE (1-800-732-6643). If they own the note, they may provide the identity of the investor.

You can fill out an inquiry on the website by Freddie Mac (FHMLC) by visiting them at https://ww3.freddiemac.com/corporate/. If they own the note, they may provide the identity of the investor.

Legislative Update – What can we expect for the housing market come 2010?

As 2009 winds down lawmakers are discussing which key ingredients of last year’s economic stimulus plan to reinstate for next year. Looking back over 2009, the real estate markets have reacted better than expected to the legislatives’ efforts to stimulate the housing market:

• the continuance of the temporary high balance loan limits for both the GSE’s (Fannie Mae and Freddie Mac)and for FHA,
• the implementation of the $8,000 first time homebuyer tax credit,
• as well as the Treasury’s budgeted purchase of mortgage backed securities to artificially keep interest rates at historic low rates

 

But as we head towards 2010 much of the aforementioned has been headed towards an end with no clear hope of extension.

 

Temporary Loan Limits

 

You may recall that these temporary loan limits, set at 125% of local area median home price and capped at $729,750, were first introduced in 2008 and then re-extended in early 2009,  as a way to make up for a fall-out in the jumbo loan market. Up until 2008, the conforming loan limits that allowed Fannie Mae and Freddie Mac to purchase loans were capped at $417,000. Any loans that were more than $417,000 were considered a “jumbo” mortgage and were funded by money invested in Wall Street.

 

When Wall Street failed due to the subprime mortgage meltdown and resulting real estate bubble, jumbo loans all but disappeared creating a huge lack of credit for those homeowners looking to purchase or refinance loans that were higher than $417,000. So, as part of the first stimulus plan back in 2008, the legislature gave Fannie Mae and Freddie Mac the ability to “temporarily” purchase loans up to 125% of local area median home price and capped at $729,750. But this legislature was scheduled to expire at the end of 2008.

 

By the end of the year the legislature had agreed to set the permanent conforming loan limit to 125% of local area median home price but capped at $625,000.  Then, as part of President Obama’s stimulus package at the beginning of 2009, the conforming loan limit was once again “temporarily” reinstated to as much as $729,750 dependant of local area median home price.

 

And now as we head into 2010vwe are faced once again with loosing these higher limits. Currently the temporary loan limits will expire on December 31, 2009 in which case loan limits will be reduced in many markets, the loan limit for Santa Clara County will be reduced to $625,000.

 

That was of course until last week when the House and Senate passed legislation to extend the current loan limits for FHA and Freddie Mac and Fannie Mae (the government sponsored enterprises, or GSEs) through December 31, 2010. The extension is included in the Continuing Resolution (CR) to fund the government for the remainder of 2009. The CR is part of the Department of Interior FY2010 Appropriations bill. As of the deadline for filing this report, the President was expected to sign the bill into law over the weekend.

 

Extending the Tax Credit

 

Currently first time homebuyers are eligible to receive a tax credit equal to 10% of the purchase price (maximum credit of $8,000) of their home when they purchase through December 1, 2009. The tax credit is in addition to any income tax refunds that they may already qualify to receive. But, even though there has been an over whelming response to the credit (as more buyers have taken advantage of the credit than previously anticipated) there has been no clear message that the tax credit will remain an option come 2010 until just recently.

The extension and expansion of the homebuyer tax credit is currently the pending business in the Senate. And after a long week of negotiation on the credit, an agreement on the scope of both expansion and extension has been reached.

 

The extension is part of a larger bill that has not yet gone to a vote, however. A Senate vote on the underlying bill will occur in the Senate during the week of November 1. The package will then go back to the House. The House is expected to accept the Senate amendments, vote on the package and send it to the President for signature.

 

The underlying bill is an extension of unemployment benefits. Other provisions in the bill include expansion of the net operating loss carry-back rules, new requirements for some tax return preparers and noncontroversial provisions that "pay for" these changes.

The agreement on the extension and expansion of the credit is as follows:

• Credit available for purchases before May 1, 2010. Prospective purchasers with binding contracts in place as of April 30, 2010 will be allowed an additional 60 days to complete the transaction.
• Credit remains at $8000 for first-time purchasers. No change to definition of first-time purchaser.
• New $6500 tax credit for repeat buyers who purchase between December 1, 2009 and May 1, 2010. Repeat buyers must have lived in their homes consecutively for 5 of the previous 8 years.
• Income limits are expanded to $125,000 on a single return and $225,000 on a joint return. Current law $20,000 phase-out retained.
• New anti-fraud limitations are imposed.

The White House has indicated that President intends to sign the legislation.

We just launched our Facebook Fan Page - Why Facebook? Why not?

Eagle Financial & Properties Group is keeping up with the latest trends in technology and has now found a new way to keep you up to date on all the latest local real estate market trends, events and news stories that affect our local communities.

In order to receive our updates on Facebook you must first have a Facebook account, so if you haven't had time to set one up (even my wife's grandmother has an account) now is your opportunity. Go to: www.facebook.com and follow the set-up instructions.

Once you have your account set up, or if you are already on Facebook, visit our Fan Page and click the icon that says "become a fan" at the top of the page.

What is Facebook?

Facebook is a great social networking tool that allows users to stay in constant contact with all their family and friends, and yes you can block people from contacting you if you're worried that your boss (or even your mother) keeping tabs on you.

It's basically a website that provides the latest news feeds from the people in your life that you would like to stay in contact with offering users the ability to quickly share their personal information, pictures, videos, thoughts and more. Users can contact each other by instant message, email and post links to their favorite news stories, websites and videos.

By creating your Facebook page you are creating a way to stay connected with as many friends or family members as you choose.

Why I use Facebook

I enjoy using Facebook as it allows me to make contact with friends I have not seen since high school or college. And its a great way to share pictures and recent events with friends and family members that you might not be able to keep up with otherwise.

Imagine being able to share your child's latest birthday pictures, or video, quickly with family or friends who are live out of state or out of the country. And Facebook allows you to easily share it all in one easy place automatically updating your friends and family when you post or upload something new to your Facebook account.

Eagle Financial & Properties Group on Facebook

New normal for home sales: Buyers have the power

Following the downturn in the housing market, lenders started requiring Buyers to come up with more money up front, have higher credit scores, prove their income, and provide all their pertinent paperwork in order to get financing—quite different than earlier this decade when subprime mortgages were rampant and buyers were able to purchase homes deemed unaffordable by today’s standards with little more than a good credit score.

For sellers these days, the standards are different too: today's sellers must be patient and maybe lower their asking price, because the balance of power has swung strongly to buyers. Many REALTORS®, mortgage brokers, economists, and home buyers across the country say they’ve noticed a shift in attitudes that they expect will last for years to come.

How are we seeing this trend affect the local housing markets?

 

Traditional sellers today are finding that the number of offers received is not nearly as high as those received on REO properties (foreclosed homes that have been repossessed by the bank), which often receive multiple bids. Buyers today have a tendancy to belive that they will be getting a better deal on a foreclosure than on a traditional sale (a sale where the homeowner is selling their home and is not facing any financial distress).

 

The negotiation process also differs between traditional sellers today and traditional sellers during the height of the market. According to one REALTOR®, if a house is not being shown, then it is overpriced. The record number of foreclosed homes on the market gives buyers even more leverage.

 

Resulting from the credit crisis, lenders now often require much more paperwork and thoroughly review borrowers’ credit histories, bank statements, tax returns, and job histories. The average mortgage applications today starts three times thicker than what it was at the start of the housing boom, and often gets thicker as the process moves along. Out of the subprime mortgage debacle lender's underwriting policies have shifted to the ultra conservative and we are now seeing very clean transactions fall apart at the last minute due to uncertainty of the borrower's ability to repay a mortgage.

It is not uncommon nowadays for closings to take 60 days. One reason is because of the adoption of the Home Valuation Code of Conduct (HVCC), which often results in appraisers evaluating homes in areas they are not familiar with and often using comparables that are inaccurate. This has caused delays in closing sales, and in some cases, undermining sales because appraisals are coming in too low.

Just about everyone in the real estate industry agrees that another dramatic boom-bust cycle isn’t going to happen again anytime soon. Most practitioners expect that the new lending regulations and a different consumer mind-set will help real estate return to a more traditional cycle where we won't witness double digit annual appreciation. This doesn't mean that real estate is no longer a viable investment, remember, a home's appreciation still accounts for the majority of a family's accumulated wealth.

Mortgage Pitfalls and Lifelines

I have recently been hearing from a lot of real estate agents about their buyer’s frustrations with the mortgage industry. It seems that most lenders today are taking forever to respond to new loan applicants, not too mention provide them with any speck of customer service, making it nearly impossible for buyers to make the competitive purchase offers required in our current real estate market. And when it comes time for the lender to come through on their loan pre-approvals, many are falling way short on their empty promises.

I hope to shed some light on some common mortgage pitfalls as well as provide some much needed guidance for anyone interested in starting the loan application process, especially if they are interested in applying for a mortgage in order to purchase a home.

The mortgage markets today are far more confusing then they ever have been for consumers, just four years ago banks were handing out loans to anyone with a heartbeat, but this is just not the case today. The same perfectly qualified buyer may receive loan approval from one particular bank but be turned down by another just because banks have their own overlying lending restrictions specific to their own interests.

These additional overlying credit restrictions can turn what seems to be a simple real estate purchase transaction into a nightmare for the buyers. Before they know it their bank of choice may not only be asking for all of their personal financial history over the past three years bust also for all property inspections on the home they are purchasing, and some even ask for all the recommended work brought up on the reports to be completed before they will fund the buyer’s new loan.

This may sound perfectly reasonable at first, but if the buyer is in the last legs of purchasing a short sale (which has probably taken three months to move forward) or worse yet a foreclosure (bank owned home/REO) then chances are that the sellers will not pay for the repairs, meaning the buyers would have to pay (could be thousands to tens of thousands) upfront for repairs to a home they do not own or face losing their chance to purchase the property, or worse yet, losing their earnest money deposit.

Many banks are also too busy to handle the business that they are receiving. On any given day the local branch of a larger retail bank may receive anywhere from 150 to 200 new loan applications. This creates a major problem when the branch employs less than 30 loan officers, not too mention the lack of loan processors and underwriters. Banks are still reeling from the mortgage collapse and just do not want to spend too much on building up their business around loans since they took such a hard fall over the past few years.

Then we have the Federal Government trying to do all they can to re-ignite the struggling economy by offering huge incentives for people to purchase and even refinance their mortgages. The Fed’s have now been artificially lowering interest rates on 30 year fixed mortgages, to the lowest in 40 years, for the past six months creating a huge demand for both refinances and purchase loans. But the banks know that the demand will be short lived, since the Fed’s can only afford to spend money for a short time-frame, and are reluctant to spend overhead increasing their loan operations thus leaving many loan applicants waiting as long as 100 days for their refinance and purchase loan applications to get approved.

So what can the savvy lon applicant do these days in order to protect themselves from a lender’s lack of service, but still hope to get an incredible interest rate?

It seems that the “time problem” many are experiencing is most likely due to working with the wrong banks. Although a particular bank has promised to help clients upfront, many end up wasting weeks of time and then end up telling the loan applicants that they cannot qualify due to recent changes in underwriting guidelines or something along those lines.

In my professional opinion, and the most important thing a loan applicant can do to protect themselves, is to first of all find a true mortgage professional to work with, not just a bank’s loan representative which is all you’ll find in retail. Rather I would recommend seeking the assistance of a mortgage broker as they tend to posses superior knowledge and a wider selection of mortgage programs.

For instance, I happen to work with over 25 different lenders (including Bank of America, Wells Fargo, Citibank, and much more) and have the ability not only to tell on any day which bank is offering the best rates but, most importantly these days, which bank is providing the most reliable service.

Just as some mortgage brokers have the ability to offer different mortgage programs from a wide range of major banks, loan applicants should also apply at more than one mortgage lender. If the applicants choose to work with larger banks this is especially important to remember.

And if any fears are brought up about credit being negatively impacted when applying through many different banks, this is not true. The credit bureaus allow mortgage applicants to shop at as many lenders as needed in a 90 to 120 day time period with all credit checks counting as a single inquiry against their credit.

Yes, I am a little biased because I am also a mortgage broker, but I also continue hearing about buyer’s horror stories while working with larger retail banks. And we have horror stories to tell from some of our own buyers who have chosen to work with some larger retail banks (I won’t name names but they are the largest bank in America) instead of working with a local mortgage broker. This doesn’t mean that all brokers are superior to retail banking operations (or vice versa) but some in particular are definitely better than others presently.

There are enough challenges in today’s real estate market that buyers must face; additional challenges in the mortgage market just complicate things even further.

Silicon Valley Housing Market Update for July 2009

Summer Selling Season in High Swing

Overview:

The numbers are out and things are continuing to improve in our local real estate markets. All across Santa Clara County, the median home price is rising (up 11% last month to $540,000 in July), supply is falling and demand is still growing. We’re by no means showing full recovery as the median home price is still down 17% year over year, far under the 2008 mark, but values have definitely stopped declining. And for the second month in a row the median sales price has risen over the half-a-million dollar mark suggesting that our high-end housing market is beginning to show a pulse.

 

 

The median sold price marks the halfway point, meaning half the homes sold for more and half for less. This information is gathered from all publicly recorded sales of single family homes in Santa Clara County closed during the month of July.

A total of 1,531 previously owned single family homes sold in the county last month, 35% more than in July 2008, and the highest total for any July since 2005 when the housing boom was still in full swing.

 

Digging deeper:

Existing home sales are continuing to increase each month as we progress through summer. The latest theme has been a tale of two markets – the lower-end of the market (currently referred to as the “distressed sales” market; representing sales prices up to $650k) and the upper-end of the market (also known as the “step-up” market; representing sales prices over $650k).

The lower-end of the market has been moving strongly for the past few months and lately can even be described as hampered due to a lack of inventory. Sales in this market are dominated by distressed sales of foreclosed properties, also known as bank owned homes or REO, and short sales, the sale of a home where the sales price is less than the outstanding liens.

As we make our way through summer demand is continuing to increase while inventory levels have continued to decline (see graph below). We are down to 1.3 months of supply and an average of 67 days on the market for properties selling for under $650k.

 

 

During the month of July there were 2453 (down 49% from July 2008) properties for sale of which 844 were newly listed properties (down 22% from last year), 934 were put under contract (up 86% over last year), and 740 (up 73% from last year) actually sold and closed escrow by month’s end. 

Demand in this entry-level market is being controlled by first-time homebuyers and investors. First-time homebuyers are seeing great opportunities in the current housing market with the highest affordability witnessed in recent years as supported by historically low interest rates and a multitude of home financing programs and government tax incentives. But first-time homebuyers are not the only one’s gobbling up these fantastic prices, real estate investors are also being attracted to these undervalued homes finding that the real estate market may offer better returns presently than the volatile financial markets.

Due to this growing demand for housing and shrinking inventory we are beginning to see multiple offers and even bidding wars breaking out on many properties in the entry-level market. It is not uncommon for sales prices to be much higher than the original listing prices and for first-time homebuyers to compete against all cash offers from real estate investors on the same property. It seems that one of the most important things that first-time homebuyers can do at the moment to prepare themselves for making an upcoming purchase offer is to get fully approved for purchase financing before they begin their home search.

The opposite is true for the upper-end of the housing market which has been suffering from a lack of jumbo financing programs severely limiting the number of qualified buyers for these properties. But even with the current jumbo financing available (which can require large down payments that can make up to 30% of a home’s sales price) we have finally started to notice an increase in sales activity. It seems that sellers who have been waiting for the market to change dramatically are getting realistic with today’s market conditions and are beginning to price their homes more competitively. 

 

In July we are down to an average of 49 days on the market and 3.9 months of inventory for this price range. Also, during the month of July there were 2432 (down 29% from July 2008) properties for sale of which 711 were newly listed properties (down 25% from last year), 420 were put under contract (up 7% over last year), and 512 (up 4% from last year) actually sold and closed escrow by month’s end. 

Other major challenges affecting our markets, in addition to the lack of inventory in the “distressed markets” as well as lack of jumbo financing in the step-up market, would be the newly passed Home Valuation Code of Conduct (HVCC) and most recently the Home Economic Recovery Act (HERA).  The HVCC, effective as of May of this year, is wreaking the most havoc on the housing market.

The Home Valuation Code of Conduct is a law governing appraisal guidelines and has created a situation where appraisals are less accurate, not provided in a timely manner and are more expensive for the consumer. New appraisal protocol requires lenders to order appraisals through large third party appraisal management companies, some based on the east coast, who then in turn assign the task to a local appraiser near the subject property. Realtors in our area have witnessed appraisers from outside our market area, as far away as

Southern California

, performing appraisals for their sales.

Also affecting the financing side of the market through the passage of HERA there have been changes made to the Truth in Lending Act, which took effect last month, requiring lenders to provide certain disclosures about mortgages fees in an attempt to help borrowers make better-informed loan choices.  However, some in the industry believe the new regulations could create further delays in the lending process by requiring re-disclosure when fees and annual percentage rates change from initial disclosures sent out at the time of loan application.

The chances of re-disclosure as required under the new law are very probable given the recent volatility in the interest rate market and likelihood of borrowers changing their initial fee schedules. Following the required re-disclosure of initial loan terms, borrowers would not be able to fund on their loans until 7 business days have passed, not too mention the 4 day requirement before appraisals can even be ordered.  

Previously, lenders could begin underwriting the loan the same day they received an application and have the ability to charge fees to borrowers such as paying for property appraisers.  The new regulations now mandate a three-day review period for the loan documents before the loan process can begin which correlates to a 4 day delay in the appraisal ordering process.

Although these new laws only add to the confusion seen in the current real estate market they are unlikely to hinder the current moment that we have seen over the past few months. Thirty-year fixed-mortgage interest rates averaged 5.22 percent during July 2009, compared with 6.43 percent in July 2008, according to Freddie Mac. Adjustable-mortgage interest rates averaged 4.82 percent in July 2009, compared with 5.24 percent in July 2008.