Archive for the 'Real Estate News' Category

Home Valuation Code of Conduct….More Government Interferance. Just What We Need!

April 24th, 2009 Categories: Real Estate News

Home Valuation Code of Conduct:

Action Needed!
 

Our friends in Congress are at it again.

Background:


1) The HVCC negatively affects consumers and the already fragile economy.

As it stands today, the HVCC will take effect on May 1, 2009, and this rule states that GSEs will no longer purchase loans from lenders “accepting appraisal reports completed by an appraiser selected, retained, or compensated in any manner by any third party.” It overwhelmingly impacts small lending institutions and independent appraisers to the  detriment of consumers.

a)  Consumers will have to pay more for their appraisals to have them completed by AMCs.
 

b)  The exclusive use of AMCs limits competition in the marketplace, leaving the consumer and independent appraisers at a disadvantage.
 

c)  The AMC model is flawed and will produce poor quality work that will create a continuation of the declining housing market.
 

2) The manner in which lenders will collect fees in compliance with the HVCC is a potential violation of RESPA.

a)  Lenders may be in direct violation of section 8(b) of RESPA due to possible up-charging and fee-splitting. Every lender will be at risk of HUD action on every brokered loan they underwrite.

b)  Lenders will not utilize brokers for fear of potential RESPA violations. In addition, those lenders who only do brokered loans will go out of business all together, and competition within the marketplace will cease to exist-again at the detriment of consumers.
 

3) There already exists pervasive federal regulation of the mortgage lending industry’s acquisition of real estate appraisals. 

a)  FIRREA – In 1989, following the savings and loan crisis, Congress passed the Financial Institutions Reform, Recovery and Enforcement Act (”FIRREA”), which established a multi-faceted real estate appraisal regulatory system involving the federal government, the states, and The Appraisal Foundation. Since 1989, the federal agencies responsible for regulating financial institutions have promulgated regulations under FIRREA that set forth “generally acceptable appraisal standards,” and have issued guidance relating to real estate appraisals, which, among other things, set forth standards for selecting qualified appraisers. These regulations and appraisal guidelines both prohibit improper influence on appraisers and work to ensure appraisal independence.
b)  FRB Final Rule – In July 2008, the Federal Reserve Board (”Board”) issued a final rule prohibiting all mortgage brokers, mortgage lenders and their affiliates “from coercing, influencing, or otherwise encouraging appraisers to misstate or misrepresent the value of a consumer’s principal dwelling.” In issuing this final rule, the Board concluded that “[no] particular procedure for ordering an appraisal necessarily promotes” fraudulent appraisals. Rather, the Board determined that the “coercion of appraisers,” whether by lenders or mortgage brokers, “is an unfair practice” and the final rule should apply to lenders and mortgage brokers alike. NAMB fully supported the Board’s final rule because it targets problematic practices, rather than business relationships that present no inherent problems.
c)  FFIEC Interagency Guidance – On November 19, 2008, the FFIEC regulatory agencies issued proposed revisions to the “Appraisal and Evaluation Guidelines,” and requests for comment. The FFIEC regulatory agencies are currently reviewing the submitted comments and plan to issue a final rule this year.
d)  H.R. 1728 – “The Mortgage and Anti-Predatory Lending Act of 2009″ was introduced on March 26, 2009. TITLE VI of the bill – APPRAISAL ACTIVITIES – deals with every facet of the appraisal process that will ensure true appraisal independence and protect consumers.
4) The HVCC fails to comply with the Administrative Procedures Act.
The HVCC is a substantive rule that created de facto regulation of the entire mortgage industry in violation of the Administrative Procedure Act (”APA”).
a)  The FHFA is an agency and the HVCC falls within the definition of a rule under the APA. As such, the FHFA was required to utilize notice and comment rulemaking proceedings under the APA, but the agency failed to do so.

b)  Because this ruleregulates the entire mortgage industry and the FHFA failed to follow proper rulemaking procedures, we believe the HVCC is void, invalid, and unenforceable.

Impact on Consumers:

A.  The HVCC negatively affects consumers by increasing the costs to consumers for an appraisal, reducing consumer choice and adversely impacting a consumer’s ability to obtain a reliable and quality appraisal.

B.  The HVCC creates a heightened risk for consumers by requiring the use of unregulated Appraisal Management Companies (AMCs) for appraisals. The original investigation that prompted the HVCC’s creation was of an AMC and WAMU alleging that they engaged in practices of pressuring appraisers on behalf of WAMU.
C.  It increases the time to fund loans for consumers which necessitates longer rate locks or extensions of existing locks thereby increasing costs to consumers. In the case that a new lender or broker is chosen, a new appraisal will be necessitated, increasing the time to fund.

D.  It restricts the portability of an appraisal since each lender, in effect, will require a new appraisal.

Impact on Small Business:

E.  The HVCC squeezes out small business professionals that are striving to survive and have been working with consumers in the very neighborhoods where they are looking to purchase homes.

F.  The HVCC affects small business appraisers, mortgage brokers, Realtors and lenders in all 50 states without having been reviewed by ANY state or federal legislature or agency.

G.  Small business professionals who have indepth knowledge of local market conditions are being sacrificed for large AMCs who operate on a national scale to distribute orders through a primary processing hub or hubs which can be located up to thousands of miles away from the property being appraised.

Fails to comply with procedural law:

H.  Although the HVCC is broad regulation having a significant impact on small businesses and consumers, it did not go through the Administrative Procedures Act, the Regulatory Flexibility Act or other procedural laws as required by any regulation issued by a federal agency.

I.  FHFA claims that as Conservator of the GSEs, its actions are not “agency actions” under the APA and that its actions are “expressly precluded from judicial review” as a result of the Housing and Economic Recovery Act.

Appraisal standards exist:

J.  The Federal Reserve issued appraisal independence standards through Regulation Z being implemented this October which applies to every industry participant.

K.  The banking regulators issued interagency guidance on appraisal standards which are expected to become final this year.

Your comments are welcomed.  Note:  Most of this information was provided for by Connie Wright of Wright Mortgage Company, Chico, CA.

Posted by John Duffner | Currently 4 Comments »

The Housing Package….A Summary

February 20th, 2009 Categories: Real Estate News

The following information was provided by Connie Wright of the Wright Mortgage Company in Chico, CA.  An excellent summary of what the “help families keep their home” legislation is all about.

Also note that John Duffner’s Mortgage Brokerage, Inc., works in association with the Wright Mortgage Company.

Lastly, I have been given permission to duplicate this article for this blog.  Enjoy the reading.

If you find the article as interesting as I, send Connie a note.  Information is at the bottom of the article.

The Article:

The Obama administration’s $275 billion plan to help up to 9 million families restructure or refinance their mortgages offers carrots for borrowers and lenders, including incentive payments and partial guarantees against losses for lenders who agree to modify loans.

But the administration is also seeking a stick: granting bankruptcy judges the power to modify the terms of mortgages when borrowers end up in their courts, regardless of whether lenders agree to go along.
 

The mortgage lending industry has long opposed these so-called “cram-downs” of mortgages in bankruptcy court, saying the practice will drive up the cost of home loans for all borrowers.
 

Although the Obama administration will be able to implement some aspects of its homeowner affordability and stability plan without congressional action, cram-downs would require an act of Congress to amend the bankruptcy code.
 

Carrots for loan mods

Carrots for the lending industry in the plan rolled out today include a $75 billion homeowner stability initiative that the Treasury Department estimates could prop up the average home price by $6,000 by facilitating 3 million to 4 million loan modifications.
 

The stability initiative would pay loan servicers a $1,000 upfront fee for each loan modification they make that meets the program’s guidelines, plus $1,000 a year for up to three years when borrowers stay current on their loans.

The guidelines would require lenders to reduce a loan’s interest rate so that a borrower’s monthly mortgage payment is no more than 38 percent of the borrower’s income. The initiative would then provide dollar-for-dollar matches for further interest-rate reductions to bring mortgage payments down to 31 percent of a borrower’s income.
 

The lower rates would have to remain in place for five years, after which they would gradually step back up to the rate in place when the loan was modified. Borrowers would also be eligible for incentive payments — up to $1,000 a year for five years as long as they are current on their loan.
 

The homeowner stability initiative would also create a new insurance fund of up to $10 billion to partially insure lenders against losses on modified loans. Payments to lenders would be tied to declines in the home-price index — helping assuage fears that engaging in loan workouts rather than foreclosing on homes now is a mistake if home prices will continue to fall.
 

The loan modification program is focused on borrowers with high mortgage debt or who are “underwater” — meaning they owe more on their home than it’s currently worth. Homeowners whose total debt is 55 percent or more of their income can still qualify, but will have to agree to enter a HUD-certified consumer debt counseling program.
 

Refinancing program

The Obama administration said it would also enlist Fannie Mae and Freddie Mac in a new program it expects to produce 4 million to 5 million loan refinancing.

That program is aimed at helping homeowners who made down payments when taking out conforming loans owned or guaranteed by Fannie or Freddie, but who have since seen the value of their homes decline to the point where they have less than 20 percent equity — making it difficult to refinance into a low-cost home.

The administration cited a family that made a 20 percent down payment on a $260,000 home that’s now worth only $221,000 as an example of a borrower who would be eligible for the refinance plan. The refinancing plan would allow the hypothetical family to refinance their 6.5 percent mortgage to around 5.16 percent — saving them $2,300 a year despite having less than 10 percent equity in their home.
 

To support low mortgage rates for borrowers who qualify for loans eligible for purchase or guarantee by Fannie and Freddie, the Obama administration said it stood ready to buy up to $200 billion in preferred stock in each company, doubling the existing commitment of $100 billion each.
 

That appropriation was previously authorized by Congress in July 2008 under the Housing and Economic Recovery Act, and does not use any money from the $787 billion financial stimulus bill signed into law Tuesday or the $700 billion Troubled Asset Relief Program (TARP).
 

The $75 billion homeowner stability initiative will reportedly rely on $50 billion from TARP, and another $25 billion from Fannie Mae and Freddie Mac.

Fannie and Freddie will also be allowed to increase their retained mortgage portfolios — loans the companies hold for investment — to $900 billion, an increase of about 6 percent from the existing limit of $850 billion.
 

Reaction

The Center for Responsible Lending welcomed the plan, saying it recognizes that “voluntary actions to avert foreclosures without real government action simply have not worked. With this plan in place, there will be more options and incentives for servicers and investors to avoid foreclosures that don’t need to happen.”

Granting bankruptcy judges cram-down powers “will provide a new avenue for reducing hundreds of thousands of foreclosures without requiring any tax dollars,” the center said — and provide stronger incentives for loan servicers to enter into voluntary loan modifications.
 

John Courson, president and CEO of the Mortgage Bankers Association, said that while the group was encouraged by the variety of alternatives the plan offered borrowers to avoid foreclosure, it seemed to offer little help to borrowers whose loan exceeds their property value by more than 5 percent.
 

The 105 percent loan-to-value ratio limit on refinancing will limit the plan’s success in some of the hardest hit areas in California, Florida, Nevada and Arizona, as well as some areas on the East Coast, Courson said.

The plan also offers no assistance to borrowers with jumbo mortgages and those whose mortgages are in private label securities, Courson said.
 

Dan Green, a Cincinnati-based loan officer for Mobium Mortgage Group Inc., said the government is taking a broad approach to the fundamental issues of supply and demand.
 

“Falling prices are symptomatic of a lack of demand or too much supply,” Green said. “The government can’t control prices, but they can influence supply and demand. This is a broad approach, and they are hitting the market in so many places, it’s OK if one of them fails.”
 

Green recently blogged about one example of this broad approach: Fannie Mae this month announced it is increasing from four to 10 the number of single-family loans it will provide financing for, for experienced investors with good credit.

“All this stuff is related,” Green said. Other incentives on the demand side include the $8,000 tax credit for first-time home-buyers in the economic stimulus bill signed into law Tuesday.
 

On the supply side, the Obama administration’s claims that it can prevent as many as 9 million foreclosures may prove to be overly optimistic, as were similar claims made by the Bush administration when it rolled out new programs.

But Green noted that transactions in many markets are up as investors snatch up distressed properties at bargain prices, and that home-builders have cut production of new homes drastically.
 

“That’s getting inventory off the market, and all that was happening before Fannie opened up to 10 units per person,” Green said. “I hear investors show up at an auction and say they want to buy more but they can’t — they are handcuffed” by financing issues.
 

Dismal numbers on housing starts released today are actually a good sign, Green said, because builders aren’t adding more supply.
 

The Commerce Department reported that housing starts dropped 16.8 percent from December to January, to a seasonally adjusted annual rate of 466,000 units. That’s a 56.2 percent drop in the rate of new home construction from a year ago.

“Everybody says it’s a terrible sign that the economy is in bad shape — it’s actually hastening the recovery,” Green said. “I think we’ll look back and see December 2008 was the start of the housing recovery.”
 

The American Bankers Association called the plan “a constructive, flexible and multifaceted initiative” that’s “likely to have a positive effect on preventing mortgage foreclosures.”
 

The plan represents a “major commitment of funding sufficient in scope to have a significant impact,” the group said, aimed at the homeowners who are most likely to avoid foreclosure.
 

Cram-downs

While many aspects of the administration’s plan to boost loan modifications and refinancing were welcomed by real estate and consumer groups, the administration’s continued support for changes to the bankruptcy code may prove worrisome to mortgage lenders.
 

So-called mortgage cram-downs have been a hot-button issue since the fall of 2007, when Sen. Dick Durbin, D-Ill., introduced legislation that would have amended the bankruptcy code to give judges the power to modify mortgage loans, including principal reductions.
 

Bankruptcy judges already have the power to restructure other consumer debt, such as car loans and credit-card loans, when they see opportunities to provide troubled borrowers relief without relieving them of all their obligations to repay creditors.

Bankruptcy judges can even modify the terms of a mortgage on an investment property or vacation home, but not a borrower’s principal residence.

Many in the mortgage lending industry want to preserve the protections against cram-downs on most home loans, saying that all borrowers can expect to pay more if they are lifted.
 

Critics of cram-downs say bankruptcy courts would be flooded with indebted homeowners, and that investors who fund mortgage lending through the purchase of mortgage-backed securities would demand greater returns if they perceived there was a risk that the loans could be modified without their consent.

Although the cram-down legislation being considered by Congress would apply only to some loans made during the housing boom — loans made in the future would remain exempt — critics say that if Congress demonstrates a willingness to change the rules of the game once, there are no assurances it won’t do so again.
 

Many who support granting bankruptcy judges more power to modify mortgages say the lending industry has overstated the potential impacts for borrowers, and that the prospect of borrowers ending up in bankruptcy court would serve as an incentive for lenders to do more voluntary loan modifications.

The Obama administration said it will seek “careful changes” to the bankruptcy code to allow modifications of mortgages written “in the past few years” when borrowers run out of other options.
 

Only existing mortgages under Fannie Mae and Freddie Mac’s conforming loan limits would be eligible for court-ordered modifications, so that “millionaire homes don’t clog the bankruptcy courts,” the administration said.
 

The bankruptcy code would be changed so that mortgage loans exceeding the current value of a property would be treated as unsecured, allowing a bankruptcy judge to develop a plan for the homeowner to make payments that are affordable.
 

To be eligible for a cram-down, homeowners would be required to first ask their lender or loan servicer for a modification, and certify that they have complied with “reasonable requests from the servicer to provide essential information.”
 

Last month, Durbin announced that Citigroup had agreed to support his cram-down bill after the bill’s sponsors agreed to limit the legislation to existing mortgages, and require homeowners to contact their lender about a modification before filing for bankruptcy.
 

Mortgage Bankers Association Chairman David Kittle said borrowers who can’t be helped by the Obama administration’s new loan modification and refinancing measures are also likely to have a hard time regaining their footing in bankruptcy court.“Our fear is that … their bankruptcy plan will fail, they will lose their home anyway, and will now be stuck with the black mark of bankruptcy on their record” making it harder to buy or rent a home in the future, Kittle said.

While welcoming many aspects of the plan, the American Bankers Association also said it was committed to “working closely with the administration as it completes the remaining details of the plan.”

Your comments are welcomed.  Again send Connie an email regarding this article.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~The Wright Mortgage Company
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Connie WrightThe Wright Mortgage Company1166 Esplanade, Suite 2Chico, CA 95926

530.343.2454

connie@twmc.net 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
My Best to You,  Connie Wright  Director of Mortgages 

Posted by John Duffner | Currently 14 Comments »

The Enemy Becomes An Ally? With Change There Is HOPE!

January 19th, 2009 Categories: Real Estate News

The credit market has been the biggest enemy to real estate over the last several years.  However the credit market appears to be on the verge of becoming stable and this bodes well for real estate.

Banks continue to drag their feet in making mortgage loans but this too is starting to unwind with continued prodding from the Treasury Department and the Federal Reserve.

Billions have been poured into the system to make this happened which presents some interesting thoughts.

The media has written a great deal of high profile private market scams created and its impact on many people.  Prosecutors do their thing in having these people jailed or under house arrest until their trial.  There is portrayed the sense of injustice (which there is).

There is however little mention of public (government) mismanagement of the same ilk created by Congress (Mr. Dodd and Mr. Frank) with their concept of a “house in every pot”. 

Scant media coverage has been directed to the government vehicle created to implement the process for this political fiasco…..Freddie Mac and Fannie Mae.

One would think that the various control mechanisms in place (prosecutors) would take steps to find out and punish those that created this mess.  But those in charge of the controls are politically connected to the policy makers…..its a political society that does what it wants at any cost to the taxpayer, at any time, without fear or any accountability.

Who is to blame?  The citizens.  We are not vocal enough to right a wrong when it is made.  We look the other way far too often.  We play a part in the charade.   We Have Lost Our Compass/

What is the cost of this Government (real estate) mismanagement to Ventura County?  Sizable.  Here is a rough idea of cost.

Over the last two years Ventura County has lost approximately $ 1.5 BILLION in home values (and this is a very conservative number).  Multiply this by the number of Counties in California and then multiply by the other States/Counties and you have the cost of the political real estate fiasco  fostered on us by Congress marshalled by Dodd and Frank just over a two year period.  And now they head the committees that will legislate policy to get us out of this quagmire. 

Things come in three’s so they say.  After the waters settle expect double digit mortgage rates.  Sooner or later this infusion of money has to be paid .

In the article hit-the-reset-button/ it was noted that it appears to be open season and money will flow.  If anything gets done will be a miracle because there are no steps for accountability.

Schadenfreude.   According to the dictionary “schadenfreude” is defined as the pleasurable emotion resulting from the misfortunes of others”.

When I first saw this term I thought it was a stretch until I started to think of the news and other media sources.  And the term applies.  Watching or listening there is the under tones of ’schadenfreude” in play.  It has been quite evident during the credit down turn.  But taking the people who created the problem to task has been mute. 

Our news media both print and visual is a theater.  There is no insightful investigation into problems or suggestions as to how to resolve these problems.  Other avenues will fill the void (Internet?) maybe.      

There is hope President Obama will resolve our problems.  Some believe that he is going to end their mortgage payments, increase their income, and make everyone equal.  That is not going to occur.  

If he is treated with the disrespect and acrimony given President Bush by both Congress and the media we will face continued pickering and more of the same.

Let’s hope President Obama is given a chance.  He is taking on a task that very few would undertake willingly.

We are faced with excessive government and its take over of major institutions.  Russia and Venezuela are examples of what can occur.  Once government senses its overall powers nothing will be left out.  Governments have ravenous appetites to the detriment of its citizens.

To be sure President Obama best measures will not control the greed which will become grander with the willy-nelle released of monies without accountability.  But he will do his best as a person as do all Presidents who have held that office.

Comments are welcomed.

Posted by John Duffner | Currently 1 Comment »

Year 2009 Fearless Forecast for Ventura County Real Estate.

December 14th, 2008 Categories: Real Estate News

The year of 2008 has been a disaster for Ventura County.  As shown in the chart below areas that basically held their own were beach properties especially Ventura Beaches.  Oxnard Beaches and the Santa Rosa Valley property decreased approximately 10%.

As stated previously owners of beach property are holding onto a gold mine.  If you can keep it, do so.  The rewards will be outstanding for you.

The inland areas of Santa Paula, Fillmore and Ojai were devastated with property decreases of approximately 50% or more.

Conejo Valley, Moorpark, Simi Valley and Ventura saw property values decreased approximately 25% overall.

Since July, 2008 the downward trend has accelerated significantly and this most often shows the signs of a bottom taking place (which I think has happened) Ventura County Real Estate Doing’s For Week Ending July 26 2008.

The year 2008 was not very kind to real estate.

 

What will real estate look like at the end of 2009.  It appears that 2009 will be a better year with a growth rate of approximately 7.6%.

Two economic situations can change this forecast:  unemployment and job creation.  If unemployment increases significantly and there is no (or a decrease) in jobs then 2009 can be another disasters year for the County.

Expect unemployment to increase at State and Local levels.  Companies will more than likely not increase hiring especially small companies.  There will be some exceptions but companies may keep a lid on hiring until the last quarter of 2009.

Self employment will increase significantly.

Of greater importance is the consumer.  For the first time in decades debt is being lowered, people are saving money, and people are not spending.  This will not bode will for the overall economy. 

See article Killer Debt Is Like Quick Sand where it is outlined how people can help themselves shred debt.  It will take time but it can be done.

With the new administration one can expect tax increases, however these will not be noticeable until the end of 2009 and 2010.  Then its’ a wait and see game. 

The States will definitely increase taxes somewhere along the line, earlier than Federal.  Hints of an increase in sales tax, auto registration and State income tax are already on the table.

Any increase in taxes will force people to lessen spending except for food and gasoline.  Oh….a State gas tax increase is also on the table.  Remember when gas was $ 4.00 per gallon.  Well expect that again except in this case most of it will be attributed to State tax increases on gasoline.

Foreigners, especially from China, are in frenzy in their purchases of United States real estate.

Your comments are welcomed.   

Posted by John Duffner | Currently 1 Comment »

It’s Not Pretty. Picture Review of The National Real Estate Market.

November 26th, 2008 Categories: Real Estate News

The real estate market has changed significantly over the last quarter and dramatically since the 4th quarter of 2007.

And with it, the National (and a number of regional) economy appears to be in the toilet.

Summarized on the United States real estate maps below is the reported 3rd quarter, 2008 reported National real estate market results issued by Federal Housing Finance Agency (FHFA).  For comparison I have included the real estate landscape of the 2nd quarter, 2008, the 1st quarter, 2008 with the last quarter, 2007 noted.

The southern States (Texas, Oklahoma, Mississippi, Louisiana and Alabama) continue to hold their own and continue to be good investment areas although they have weakened over the last quarter.

Another investment area to consider is Tennessee.

Montana, Wyoming, North and South Dakota are areas that one should view as investment areas.  Especially North and South Dakota.  But for me those States area TOO COLD.  (Remember one of my conditions for real estate investment is to invest in areas that you may have to live in.  Needless to say I prefer not having to live in the Dakota’s). 

I have been reading various articles that perhaps Florida would be a good place but most guru’s suggest that 2010 is probably the year to start investing in this State.  I have not been a fan of Florida so you are on your own regarding that State.

Washington and Utah (as expected), Colorado, Pennsylvania and New Mexico real estate have weakened somewhat decisively since the last quarterly report.  Both Washington and Utah are expensive areas that make real estate investing a challenge.  To break even or have a positive cash flow will mean a 30-50% down payment.

Arizona has reverted back to weakness.  At the 2nd quarter, 2008 it appeared that it my have started back on the upswing but that was a false break out.

California, Nevada, Arizona and Florida negativity has doubled from the 1st quarter, 2008 to the 3rd quarter, 2008.

California in the 1st quarter, 2008 showed a negative growth of -10.6%.  Now in the third quarter it is showing a -20.8 %.  Nevada was a -20.9% up from -10.3%; Arizona earlier in the year was -5.1% and the 3rd quarter is accelerated to -13.5%.  Finally Florida was -8.2% in the first quarter of 2008 and increased to -16% in the 3rd quarter of 2008.

Within California, the worse of the worse continues to be Merced; Stockton; Modesto; Salinas; Vallejo; Riverside; Bakersfield; Yuba City and Fresno.

Which prompts me to suggest that one should add California to their watch list.  But getting investments at an extremely low price (about $ 125,000) will be difficult in California (if one wants to have a positive cash flow, with minimal down).  Candidate areas for investment are the worse of the worse areas mentioned above.

It appears that high end homes (approximately $ 1 Million or more) have decreased approximately 20% during this down cycle, while homes valued at approximately $ 400,000 or less have decreased about 45%.  This is quite a variance and I suspect that homes valued at less than $ 400,000 will accelerate upward faster within the next few months.

Help is coming.  Mentioned in this blog on a number of occassions (the latest being get-in-line) is the disconnect between the Federal Reserve and banks regarding mortgage interest rates.  But this disconnect appears to be have been spliced together and it now appears that mortgage rates will start falling to (are you ready)  5-5 1/4% rates (or less) shortly.

Side bar:  The real estate market is one of the elements that will drive this economy.  Upgrading the United States infra-structures for bridges, roads, water is the second leg that will help the economy upward.  Manufacturing (autos being one) is the third element necessary to get the economy going upward.

A redirection of corn for ethenol should be reviewed.  Sugar cane appears to be a better option to use for fuel use.  Brazil is going wild developing this oil alternative.  Sugar cane is not produced significantly in this country BUT we are smart and can grow anything.  It becomes “is the price right”.

Side bar:  (Be quite).  Ventura County real estate has certainly decreased but not at the rate of most areas.  In fact it has performed remarkedly well and it is expected to do extremely well over the next 4-5 years.

The damper to Ventura County real estate will be unemployment.  Unemployment in the County is currently about 7+%.  5.5 % or less should be the target to have an extremely good real estate market.   

Back to the subject.  Pictured below is the 3rd quarter, 2008 picture of the National real estate market. 

 This is what the real estate market looked like at the end of the 2nd quarter, 2008.

 This is the 1st quarter, 2008 real estate picture. 

 This was the appearance of the National real estate market at the 4th quarter of 2007. 

 

Your comments please.

 

Posted by John Duffner | Currently No Comments »

Title Representation Changes…..

November 5th, 2008 Categories: Real Estate News

Effective January 1, 2009, SB 133 changes the way Title Marketing Representatives and Title Companies can solicit business in Californian.

Activities covered by the legislation are:

  • Reps can no longer take a person out for lunch/dinner, drinks or entertain to market title insurance.
  • Reps can no longer take people out to sporting events to market title insurance.
  • Reps cannot pay for any advertising in newspapers, newsletter, magazines or publications on behalf of Industry participants.
  • Reps cannot take photographs on behalf of Industry participants.
  • Reps cannot create or provide any marketing materials on behalf of Industry participants.
  • Reps cannot provide food or refreshments for any broker caravan, open house or any other function on behalf of an Industry participant.
  • Reps cannot quote or charge any title or escrow fees below their company’s filed rate.
  • Reps cannot distribute any items that have a specific monetary value, including gift cards, movie tickets, car washes, etc.
  • Rep can provide educational classes and material exclusively related to the business of title insurance or escrow.  Excluded  are food and drinks during the seminar.
  • Title Company employees are prohibited from using their own money to entertain customers.
  • Reps may not engage in any prohibited activity through a separate entity controlled by the Rep or Rep’s employees.
  • Reps will be required to be licensed by the Department of Insurance in California.
  • Reps found in violation of the new law can be  subject to fines, revoke of license and if license is revoked the Rep cannot apply for reinstatement of license for a period of 5 years.

For additional information on this law visit www.CLTA.org.

Posted by John Duffner | Currently No Comments »

Insurance—A Necessary Consideration for Real Estate Investments

October 25th, 2008 Categories: Real Estate Investment Notes, Real Estate News

Insurance that real estate investors should consider for rentals are listed below. By all means this should not be considered as a complete list.  It is simply a “head start” to guide you in the right direction.

 

Of course cost is the final determination that will prevail when shopping for insurance, so shop as you find necessary and select what is required.

Just like a lighthouse land mark you want to have a safety net around your investment and your immediate assets.

Insurances to consider:

  • Hazard Insurance
  • Landlord’s Liability ($ 5,000,000) with Personal Injury Protection (an endorsement type of landlord’s liability).
  • Dwelling/structure not covered by Association
  • Wind and Flood Insurance
  • Earthquake insurance
  • Mold and bio-agent insurance
  • Animal insurance protection
  • Loss of rental income insurance
  • Assessment (inadequate insurance obtained by association)
  • Damage (a result of a legal liability for an event emanating from one’s unit)
  • Discrimination Insurance
  • Excess Liability Insurance
  • Sewer line insurance (sewer line gets blocked and sewage backs up into residence or rental unit)

I also ask that if I have left something out do let me know.  There may be an insurance that may be mandatory to have in specific locations (like flood insurance along coast lines).

Your comments are welcomed. 

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Investment Loans Just Got More Expensive!

October 24th, 2008 Categories: Real Estate News

 

Investment loans are geeting more expensive.

Starting in November Fannie Mae and Freddie Mac will begin charging substantial fees on all investor loans.  These will be in addition to earlier imposed restrictions, such as limiting investor applicants to a maximum of four rental properties.  These “adverse market fees” as they are being called could increase your out-of-pocket by thousands of dollars.  So investors have to have a sharp pencil and do the math diligently to see if a specific property is going to be worth the investment.

But of most importance is the fact that individual investors will be limited to four rental properties.  I do not know the impact to corporate type real estate investments but I am sure there will some stringent conditions applied.

In general I think that real estate investment over the long term will be worth it.  Flippers and other short term investments could be hurt with the added cost.  

Here is a summary of the new fees one has to pay to get an investor loan:

        Fannie Mae will up their fees on all loans purchased after December 1st

          Loans with 10-15% down payments will require a 3.75 point “adverse market fee”

          Loans where you put 20-25% down will require an additional 3 point “adverse market fee”

          Loans with 40% down or more will require a 1.75 point “adverse market fee”

          If you can find a 10% down loan, your rate will be about 3% higher than for an owner-occupied program. 

Freddie Mac will impose similar fees, but they start on November 7th 

Some large PMI companies are going to stop underwriting investor loans completely.  How does this affect you?

  •         Low down payment programs for investors will probably disappear, not just in hard-hit markets, but all over

  •         You will not be able to buy as many properties because each one will require so much cash to close

  •         You may not be able to get a loan

The above changes will apply to almost ALL investor financed properties. 

Know upfront you will need to be pre-qualified!    Sellers and real estate agents will not take a person seriously without a pre-qualification letter.  Pre-qualified is not the same as being pre-approved.  To be pre-qualified significant documentation will be required which will include tax returns, pay stubs and other income related data.  Allow time to do it right and all will be well.  Most certainly you do not want surprises when attempting to buy an investment property.

A portion of this article came from Marshall Reddick note and comments.

Your comments are welcomed.  

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Hey…Do You Know Who You Are Dealing With?

September 2nd, 2008 Categories: Real Estate News

Recently a presentation was made by Erin Curtis entitled “Why Can’t We All Get Along?  Generational Struggles in our Colleges”.

Erin was focused on the peoples that now attend colleges and addressed their generation and what each generation brings to the campus.

I saw this presentation somewhat differently.  I looked at the presentation as a real estate broker and saw in it the various ages that a realtor works with.

I took from Erin’s presentation and added a few items that expands his college approach and transitioned it to the real estate world.

As one reads they themselves will certainly see items that have been excluded so it is not to be considered a complete picture of real estate buyers or sellers…..but simply is a start of who you are working with and what their bases of doing and acting as they do.

I found that there is some relationship between Generation Y and Traditionalist (as labeled above) even though there’s 50+ years or more between these generations.

I also noted that Boomers and Traditionalist were almost opposite.  Traditionalist are the parents of Boomers and it appears that Mother Nature ever so cleverly made sure that there would be some significant differences in attitude and human relationships.

Enjoy the reading and add to and subtract from the chart as you see fit.

Your comments are welcomed.

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Warning! Warning! This Is Not A Drill…..

August 6th, 2008 Categories: Real Estate News

Hmmm……things are starting to get a little dicey.

Warning signs are fluttering all over the place. 

Is inflation just around the corner?  And what is happening in the world of mortgages?

The following 2 abbreviated articles have been taken from  the August 1, 2008 This Week Magazine  regarding Freddie Mac and Fannie Mae. 

Article #1:  Fannie and Freddie Make Mortgages More Expensive

The financial troubles of mortgage lenders Fannie Mae and Freddie Mac aren’t just a problem for the federal government, said Ron Lieber in The New York Times. They’re a problem for any home buyer shopping for a new loan.

The two organizations, now flirting with insolvency, have come to play a “crucial” role in the mortgage industry.  They don’t just back mortgages.  They also buy home loans from banks, bundle them into bonds, and sell bonds to investors.  If banks can’t resell their mortgages to Fannie and Freddie, they’re likely to issue fewer and set more exacting financial requirements.

“The mortgage financing system hums along until Fannie and Freddie have trouble raising money to buy loans, or it costs them more to raise the money.  And that’s what’s happening now.”

Article #2.  Is the Worst Over for Banks?

To get a sense of the ragged state of the U.S. banking industry, said David Enrich of The Wall Street Journal, consider what now passes for good news.

When Citigroup, the largest U.S. bank, reported a $2.5 billion quarterly loss last week, analysts and investors actually, “were encouraged.”  And when Bank of America, the second largest bank, reported this week that its second-quarter profits fell 44 percent from the same quarter last year, Wall Street greeted the announcement as a pleasant surprise.

The reason for the surprisingly upbeat reaction to the apparently horrible news is that analysts can see that banks are facing reality and “writing down their piles of bad assets.”  

Unfortunately, it’s too soon to say the worst is over, said Eric Dash in The New York Times.  A growing number of Bank of America’s credit card customers are falling behind on their payments, and defaults on construction loans are creeping upward.  “The bank is also experiencing heavy losses from loans made to small-business customers.”

This recent measure of the price indexes for personal consumption expenditure issued by the Commerce Department shows that income and spending are decreasing significantly and prices, especially for food and fuel are accelerating.  Disposable income has significantly decreased and wages have not kept pace with prices.

So red flags are fluttering and the Federal Reserve has a huge problem on it hands to get the economic ship upright.

Consumers are going to dig in and shortly there will be lots of questions asked (maybe never answered) by politicians regarding bio-fuels and the like.

It appears that no one gave thought to the impact on people, the economy and the increased cost and loss that many will suffer.

Your comments are welcomed.

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