Real Estate Information

Pressure is growing on U.S. banks to ease terms for distressed homeowners on home-equity loans and other second-lien mortgages. Read the article from the Wall Street Journal:

Rep. Barney Frank, chairman of the House Financial Services Committee, last week sent a letter to the four biggest U.S. banks demanding "immediate steps to write down second mortgages." The Massachusetts Democrat sent the letter to the chief executive officers of Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. Meanwhile, the Obama administration is preparing to launch long-planned initiatives aimed at addressing these obstacles.

Rep. Frank said banks' reluctance to write down second mortgages is blocking efforts to reduce the first-lien mortgage balances of many borrowers who owe far more on their loans than the current values of their homes. Because such "underwater" borrowers often feel little incentive to keep paying, "homeowners are increasingly deciding to walk away and thus foreclosures continue to mount," he said.

Many second liens have little value because of the plunge in home prices, Rep. Frank wrote, adding: "Yet because accounting rules allow holders of these seconds to carry the loans at artificially high values, many refuse to acknowledge the losses and write down the loans."

A Bank of America spokesman said that bank is "committed to working with all interested parties to develop additional solutions to help homeowners modify first and second mortgages." A J.P. Morgan spokesman declined to comment. Representatives of Citigroup and Wells provided no immediate comment.

Lack of cooperation from holders of second liens also can block short sales, in which the first-lien lender agrees to allow the home to be sold for less than the loan balance due to avoid a foreclosure. If the second-lien holder continues to press its claim against the borrower, the sale can fall through. The ensuing foreclosure is likely to be more costly for all the parties than a short sale would have been.

Under an Obama administration program due to begin in the next few weeks, borrowers who get reduced payments on their first-lien mortgage through the administration's Home Affordable Modification Program automatically would get a break on their second-lien mortgage. Bank of America Corp. already has agreed to take part in this program, and other big lenders are expected to follow suit.

In April, the administration is due to launch financial incentives to encourage alternatives to foreclosure for people who don't qualify for a loan modification. The alternatives include short sales and so-called deeds in lieu of foreclosure, in which the borrower voluntarily gives up title to the home and often gets cash to help with moving expenses.

Under this Home Affordable Foreclosure Alternatives program, holders of second-lien mortgages would be eligible to be paid 3% of the unpaid loan balance, up to a maximum of $3,000, for giving up all claims in the event of a short sale. Unclear is how many second-lien holders would participate.

Most first-lien home loans are held by the government-controlled mortgage companies Fannie Mae and Freddie Mac or by other investors in mortgage securities. By contrast, banks hold most of the seconds and other junior-lien mortgages. About $1.05 trillion of junior-lien home mortgages were outstanding as of Sept. 30, according to the Federal Reserve. Of those, $766.7 billion were held by commercial banks; most of the rest were owned by savings banks and credit unions.

If banks are forced to write down or write off large amounts of those second mortgages, many would suffer major dents in their capital. Laurie Goodman, a senior managing director at mortgage-bond trader Amherst Securities Group LP, said regulators may need to allow banks to recognize losses on second-lien loans over an extended period to avert a disastrous immediate hit to their capital.

One reason banks are reluctant to write off second mortgages is that some may still have value even after a foreclosure. Though the foreclosure wipes out the lien on the home, the consumer still has a legal obligation to repay the second mortgage debt in some cases. If the borrower has no significant assets remaining, banks generally don't bother trying to collect that debt. But they do retain that option and some say they will pursue it in cases where the borrower has significant assets or income, or may later have the ability to repay.

As a follow-up to our recent post, Los Angeles Home Buyer Credit Score Myths, here is an article from Gregory Roberts at CS Financial Inc. concerning credit scoring and credit repair:

Credit remediation is a subject consumers often face with fear and trepidation, and for good reason. With the exception of recognizing that the best score wins, the average home shopper knows very little about the whole credit scoring process. Sub-prime borrowers who are eager to move into A-Paper territory often find themselves at a loss when trying to find ways to upgrade their credit history. The good news is there are ways to improve less-than-perfect credit scores and obtain a loan for the home you really want.

The first step in the process is making sure that you have a current copy of your credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus, you'll want to request a free report from each of the three companies.

It's also important to know just what a good credit score is. Most A-Paper scores generally begin around 680, although this number may differ slightly among lenders. Don't despair if you come up shy, there is always room for improvement. Increasing your score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan's interest rate.

While credit repair is necessary for some, it's not the only way to increase your credit score. Even if you have stellar credit, you can enhance your score through these steps: 

• Evenly distribute your credit card debt to change the ratio of debt to available credit. Let's say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

• Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit. The bottom line is don't close those old accounts!

• Keep credit inquiries to a minimum. Each inquiry into your credit history can impact your score anywhere from 2-50 points. When it comes to mortgage and auto loans, even though you're only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.  

Remember, credit scores don't change overnight. Improving them requires time and diligent effort on your part, so it's a good idea to get the ball rolling at least three to six months prior to submitting your application for home financing.  

If credit repair is what you need, you can either begin the process yourself or seek out a repair service. If you decide to make your own improvements, visit as many websites as possible to get information regarding credit laws and consumer rights. Diligently search through them and educate yourself to ensure that you don't sustain any self-inflicted wounds. A good place to start would be the Federal Trade Commission's website, which contains a wealth of helpful literature. 
 
If you're facing severe or complicated credit issues, then you'll probably want to enlist the assistance of a professional credit repair company. Before you do, be sure to familiarize yourself with the FTC's regulations on credit repair. With over 1100 credit repair companies to choose from, it's important to be certain you are dealing with a reputable firm. Examine the FTC's information on fraudulent practices to avoid falling prey to credit repair scams.
 
Addressing credit issues can be uncomfortable to say the least. But by taking these steps now, you'll be that much closer to obtaining the home of your dreams.

Are you a Los Angeles home buyer with questions concerning your credit score? Ask Eileen!

No efforts have helped to turn the tide on the foreclosure crisis. Next week, Los Angeles home owners will be paid to sell their homes at a loss to help bring the foreclosure crisis to an end. Read what the NYTimes has to say about the program going into effect April 5, 2010:

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modificationshort sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed. program to shed their houses through a process known as a

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

Have questions? Ask Eileen!

Are you or someone you know behind on mortgage payments. A short sale may be the answer to saving you, your home and your family. Contact Eileen today for a private consultation.

CNNMoney.com reports glimmers of a turn around for the Los Angeles real estate market. If you have been holding off for a deal, now may be the time to buy! Read what CNNMoney.com has to say:

While home prices remain low, they're no longer free-falling in most markets. Mortgages are historically cheap. And the sweet tax credit that was offered to new buyers last year has been extended to April 30 and expanded to include current homeowners too.

But for all the motivation to act quickly, buying right now is not a no-brainer. In some areas home prices may fall further. If you own a house now, it may take longer than you expect to sell it, and you may walk away with less cash than you thought.

"It's a good time to buy, but it's still a really difficult market," says Patrick Newport of IHS Global Insight. As the clock ticks toward the tax-credit deadline, answer these questions to decide whether it's time to get off the sidelines.

Can you really nab that tax credit?

Current homeowners who sign a contract to buy a home on or before April 30 get a dollar-for-dollar reduction on their taxes of 10% of the purchase price of the home, up to a maximum of $6,500 (first-time buyers can get up to $8,000).

But according to the National Association of Realtors, buyers spend about 12 weeks home shopping before making an offer, so if you haven't already started looking, you may be pressed to meet the deadline.

Plus, to qualify for the full credit, your household income must be under $225,000 if you're married and less than $125,000 if you're single; repeat buyers must have lived in the home they are selling for five of the past eight years. The good news: Once you've signed the contract, you have until June 30 to close the deal.

How much could you lose by waiting?

Besides the loss of the tax credit, the biggest game-changer facing buyers is a potential jump in mortgage rates. If the Fed moves ahead with its plan to stop buying mortgage-backed securities at the end of March, the rate on a 30-year fixed mortgage is expected to increase nearly a percentage point from today's 5.18% to 6.1% by the end of 2010, according to the Mortgage Bankers Association. On a $300,000 fixed-rate mortgage, that's an extra $174 per month.

But if home values are falling in your area, you don't have much to lose by waiting. If the house you want costs $375,000 today and you put down 20%, you'd pay $1,644 a month for a fixed-rate mortgage at 5.18%. Buy that same home for 5% less later on with rates at 6% and you'd only pay an extra $65 a month. If prices plunge 10% or more this year (as they are expected to in 12% of markets, according to Fiserv), you'll come out even or ahead.

To get a handle on the direction of your market, check trulia.com to see whether inventory levels are increasing, and visit realtytrac.com to find out whether foreclosure filings are still rising. A glut of properties and bank-owned homes means a recovery may not be in sight.

How quickly can you sell the home you now own?

Even in markets that are recovering, sellers must price aggressively to make a fast deal.

"Everybody thinks their house is worth more than it is," says Dallas realtor Bruce Lynn. Before you sign a contract for a new place, ask a few agents to give you a realistic figure that will generate a quick sale. Can't bear to part with your home at that price? Waiting may be your only option.

Also keep in mind that, with the credit crunch not far in the past, lenders may not approve your purchase until you've sold your home. A delay in sale could also stick you with two mortgages, far outstripping any savings from the tax credit.

See if the sellers will let you put a contingency in the contract that negates the sale if you don't find a buyer -- it's a long shot but worth a try. If they won't, propose adding a kick-out clause that allows the sellers to keep their home on the market, but lets you either pull out or quickly move ahead with the deal if they get another offer.

While extra contract negotiations may be a hassle, the past few years have proved that a purchase decision shouldn't be taken lightly.

Have questions about the Los Angeles real estate market? Ask Eileen!

Los Angeles had 97,891 foreclosure homes with 14,680 new foreclosure homes in February 2010. The average price of a Los Angeles home was $436,816 and the average sales price of a foreclosed home was $293,009, according to RealtyTrac.com. A $143,716 savings.

Los Angeles Foreclosure Activity and Home Price Index

Los Angeles foreclosure activity dropped 0.09% in February while price appreciation dropped 0.09%.

Los Angeles County foreclosure activity is based on the total number of properties that receive foreclosure filings - default notice, foreclosure auction notice or repossession notice - each month. Home price appreciation is based on month-over-month percentage change of the Home Price Index. The Home Price Index is calculated from home sales records.  

Los Angeles Foreclosure Geographical Comparison

Los Angeles foreclosures were 0.20% above national statistics and 0.07% below California numbers.

Los Angeles Foreclosure Activity by Month

The number of bank-owned properties decreased from 3,021 to 2,134 in February. Pre-foreclosure acitivity declined from 5,422 properties to 6,567. The number of auctions dropped from 7,732 to 5,979.

Are you or someone you know behind on your mortgage payments and facing a foreclosure? You do have options. A short sale may be the answer to saving you, your family and your home. I am a Certified Distressed Property Expert (CDPE). Give me a call for a private consultation. 

Have questions about Los Angeles real estate? Ask Eileen!

Low listing prices, reasonable interest rates, and an abundant variety of homes to choose from are among a few of the reasons now is the perfect time for buyers to make a move in today’s real estate market. Current market trends and other factors have made conditions even more favorable for first-time homebuyers. Though becoming a homeowner comes with huge responsibilities and financial commitments, first-time home buyers should take advantage of the market over flowing with opportunities. The following tips will help ease your mind when considering the smart purchase of your first Los Angeles home.

1. Become familiar with the new first-time homebuyer federal tax credit.

People who are considering the purchase of their first Los Angeles home, or have not been home owners for at least the past three years can gain great benefits from the first-time homebuyer tax credit. According to FederalHousingTaxCredit.com, qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before May 1, 2010 will receive a tax credit of up to $8,000. Unlike past tax credits from 2008, the money received does not have to be repaid, unless the homebuyer sells the property with in three years.

2. Determine what is reasonably affordable.

Prior to beginning the hunt for the perfect home, it is important to find an affordable price range. Many factors such as money available for a down payment, eligibility for a loan, and monthly mortgage payments, all play a role in determining what the buyer can comfortably afford. Total monthly mortgage payments should be, on average, approximately 30 percent of one’s gross monthly income. Affordability or loan calculators found on the internet can give a good idea of what is affordable. Before seriously inquiring the purchase of your first Los Angeles home it is important to have a consultation with a knowledgeable financial advisor.

3. Deciding where and what

Once an affordable price range is determined, it is time to decide where you want to live and what you are looking for in a home. Whether staying with in the same general area, or looking for a new location, it is crucial to do a fair amount of research on the area and its demographics. For example crime rates, school districts, shopping, medical facilities, and travel, are all important factors have to be considered since they could affect your everyday life. It is also essential to know what you are looking for in a home. Separate lists of essential needs and wants should be carefully thought out towards the beginning of the home search. The list of basic needs should include things such as minimum square footage, number of bedrooms and bathrooms, location, and price. The want list should be compiled of things that would be nice to have, such as pools, big yards, and gated communities. 

4. Find a knowledgeable Real Estate professional

Finding and purchasing a home is a complicated, overwhelming experience, which should be nothing but exciting. Working with an experienced real estate agent can make the process run smoothly and be more successful. The chances of finding the perfect Los Angeles home are significantly increased when put in to the hands of the right real estate professional.

Learn more about how we can help you purchase a Los Angeles home by visiting EileenWalshRealtor.com or give us a call for more personal service.

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If you are moving to a Los Angeles home, you can, with prior planning and these tips, make your move a smooth, less stressful experience. After you have gathered recommendations from friends and checked out moving companies on the web, you should narrow your choices to three or four. At this point you can avoid moving mistakes by using these guidelines to make informed, intelligent choices.

1. Insist on an in-home survey and estimate. Movers should actually see what needs to be moved and be aware of items requiring special attention, such as pianos or valued art pieces. In addition, by meeting the mover’s representative in person, you can get a feel for the way customers are treated by the company. It is also important that you disclose at this time any details, such as elevator availability, street restrictions, etc., to avoid unpleasant surprises on moving day.

2. Beware of too low a price. While price is certainly a major consideration in making your selection, you need to question a low-ball estimate. Are there hidden charges? Is the firm reliable? Does it value your business? Is it a licensed, insured mover? Check the web at www.protectyourmove.com for this information and for a record of customer complaints.

3. Avoid the busy season. Good moving companies are especially busy in the summer and in the first and fourth weeks of the month. Plan ahead and reserve early to get the mover and time frame you want. Remember that the best deals can usually be found in the winter and in the second and third weeks of the month.

4. Sign a contract. Do not begin a move without first signing a binding agreement which details the services contracted for and the total amount you have agreed to pay. Do you have insurance options? What is the charge for that? If you’re not comfortable with the document, trust your instinct and don’t sign!

5. Have a budget. Be informed and realistic about your overall moving costs. Be sure to include travel distance to your new home or storage facility, any hotel and meals expenses, auto transport, and insurance.

6. Do unto others… Your movers will respond well to smiles and a positive attitude. They also appreciate offers of coffee, water, soft drinks, and tips for quality service.

Los Angeles has many reputable and reliable moving companies who want your business and will work with you to make your moving experience as stress-free as possible. By following these six steps, your relocation to your new Los Angeles home can actually be rewarding!

In today’s competitive housing market, buyers can afford to be selective. It is, therefore, up to the seller to anticipate the demands of the buyer and act accordingly. The ten strategies listed below will help you accommodate the buyer’s needs and make certain the selling process is a successful one.

1. Price sensibly. Listing too high initially is doubly dangerous. Price-savvy potential buyers will simply bypass your home in favor of more realistically priced Los Angeles real estate, thus limiting your market. In addition, you’ll have to lower your price eventually, possibly below market level, to capture their attention.

2. Utilize professional expertise. Far too many sellers come to regret their attempt to avoid a paying a sales commission when they are unable to generate widespread exposure on their own. To their dismay, they also find that potential buyers expect a far lower price on a FSBO.

3. Make needed repairs. Buyers want a home that is in good condition, up to date, and “move-in ready.” Be sure that all systems, the roof, appliances, etc., are in good working order and replace fixtures that look out-of-date.

4. Simplify the setting. Make room! Too much furniture makes rooms appear smaller, and too many accessories draw the buyer’s attention away from your home’s assets. De-clutter cupboards, counters, and other flat surfaces. Make space in your closets and storage areas, and allow for an open traffic pattern. Put away personal items. Buyers need to be able to visualize their own furniture and belongings in what could be “their” new home

5. Keep it clean! Odors and dirt are real turn-offs to potential buyers.

6. Provide curb appeal. The exterior of your home must invite buyers to come inside. Remove weeds, trim trees and bushes, present a healthy lawn, and maintain an attractive appearance at all times. Don’t forget power washing or repainting, if needed. Add a pot of colorful flowers and a new welcome mat for extra charm and a successful showing.

7. Allow for accessibility. The more showings of your Los Angeles real estate you have, the greater the chance of a successful sale. Buyers want easy access to the homes they visit. Your realtor will help you make satisfactory arrangements for optimum availability, use of a lock box, advance notification, etc.

8. Stay away during showings. Buyers viewing your home need to take their time to thoroughly it and fee free to voice their reactions to the realtor. Also, if you’re not there, you can’t say anything which might hurt the prospect of a sale.

9. Avoid misrepresentation. Your realtor will advise you of local disclosure laws, and it is important that you comply with them. Attempts to hide a defect will only result in problems later on and may well derail a potential sale.

10. Be flexible. Selling your home can feel like a personal transaction, and sometimes emotions threaten to overshadow logic. Listen and react to all contract proposals as objectively as possible. Know in advance what your needs are re: price, what items convey, settlement time frame, etc. Try to keep in mind the big picture and resist getting hung up on the small things.

The sale of your home depends on both your realtor and you. By working as a team and utilizing the ten strategies outlined above, the process has a greater chance of being a productive and successful sale.

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