Category Archives: Real Estate

Real Estate

New Financial Incentives and Uniform Process for Short Sales

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short-sale-house

The following is a press release which announces that the Obama Adminstration has setforth guidelines to make short sales a little easier and should help us in Nevada County in speeding up short sales.  For anyone with economic problems regarding their home, this is welcome news. Banks tend to prolong a short sale because of their bureaucracy . This proposal will give banks financial incentives to speed up the process. 

A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.

The NATIONAL ASSOCIATION OF REALTORS® (NAR) today announced that the Obama Administration has added new incentives and uniform procedures for short sales under its new Foreclosure Alternatives Program (FAP), part of the administration’s Making Home Affordable plan.

Loan servicers may consider short sales or deeds-in-lieu of foreclosure for borrowers who do not qualify to have their loans modified on a permanent basis under the Making Home Affordable Loan Modification Program.

• Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program, but don’t qualify for a modification or do not successfully complete the three-month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate.

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

• The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.

• Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.

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

• The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.

• Servicers may not charge fees to borrowers/homeowners for participating in the FAP.

• The program is in effect through 2012.

• Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).

Printed by Permisson of:
Copyright © 2009 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

Real Estate

Real Estate Listing Prices Increasing in California

sold-signs

There are further indications that we may have hit the bottom of the housing markets. Real estate sales continue to go up in Nevada County with pending sales in the 200’s range. At the beginning of the year, the pending sales were below the 150’s. Sacramento saw a decline in inventory for April which is unusual. According the Sacramento Bee, sine 1994, only four years, 1995, 2003, 2008 and 2009 have seen for sale inventory fall from March to April. It also appears to have happened nationally this year.

According to PR Web, listing prices are increasing in California:

“Listing prices rose at the fastest rate in the California markets with San Jose up 3.7%, Los Angeles up 3.2% and San Diego up 2.8% in April. Prices in 18 markets are now showing three months of sequential listing price increases. Asking prices fell at the fastest rate during April in Las Vegas followed by Salt Lake City – down 3.8% and 2.6% respectively.

“Broadly rising asking prices in this difficult economic environment demonstrate the powerful effect of seasonality in the housing industry,” said Stephen Bedikian, partner and research director for Real IQ. “We expect to see continued strength during the next few months of the spring selling season fueled by historically low mortgage rates. We won’t be able to call a bottoming of the market until we see stability continue into the seasonally weak fall and winter months.”

Inventory levels decreased in a majority of major markets with inventory falling in 15 of 26 markets. Across the 10-City Composite Index markets, inventory fell by 1.5% in April and was effectively unchanged during the most recent three-month period. Inventory grew by the largest amount in Boston up 6.3% followed by Austin up 4.9%. Inventory fell by the largest amount in Phoenix and San Francisco where it contracted by 11.0% and 7.1% respectively.”

So no one is predicting that we are at the bottom of the market.  All I know is that sales in Nevada County are going up, and prices are starting to rise.

Real Estate

Putting Mortgages into ‘Plain Language’

house-on-hands

Bank of America has created a new website called Bank of America Home Loans for borrowers that includes a calculator that determines not just what size loan people can qualify for, but how much they can spend without being stretched too thin. “We wanted to change the conversation to ‘How much house can I comfortably afford?’ rather than ‘What’s the maximum I can buy?’ ” said Aditya Bhasin, the product, pricing and strategy executive for Bank of America Home Loans.

The site is designed to be easy to read, spelling out a variety of contingencies, including the maximum payment that an adjustable rate mortgage could potentially cost.

The new site also offers what BofA calls Flat Fee Mortgage Plus, which has no application fee and a single closing fee that includes processing costs and fees for third-party services like appraisals.

Not included are other standard costs like property taxes, homeowners’ insurance and prepaid interest.

Craig Focardi, a senior research director at the Tower Group, a financial consulting firm, said the idea for the plan is nothing new – it’s been tried by others. But the prominence of the programs could persuade competitors to adopt the features.”

If you recall, Bank of America took over Countrywide Lending and renamed it Bank of America Home Loans. I’m not sure that their new website is not a rehash of Countrywide’s old website. But with B of A’s great customer service (tongue in cheek) they need some kind of P.R. to make them look helpful. Some related information on Countrywide Financial Corporation:

According to the LA Times 04/27/2009

“Linked more recently with high-risk loans, co-founder Angelo R. Mozilo’s huge paydays and FBI investigations, the Countrywide name became “too toxic to resuscitate,” as another expert puts it — and a liability for Bank of America Corp., which snatched it up last year as it neared collapse.

And so over the weekend, nearly 10 months after the Bank of America deal closed, Countrywide Home Loans signs came down and Bank of America Home Loans signs appeared at the lender’s 215 storefront offices in California. It was the start of a rebranding of nearly 1,300 Countrywide mortgage offices nationwide.”

Yep, Countrywide and Bank of America, great combination.

Real Estate

Lenny Dykstra’s $25 Million Home Faces Foreclosure

lenny-dykstra

It seems that Lenny Dykstra, former major baseball player for the New York Mets and Philadelphia Phillies, may be facing foreclosure on his 12,723 square foot Georgian estate, originally built for hockey legend Wayne Gretzky. Dykstra’s lender, Index Investors LLC, filed a default notice on March 11 at which time he was behind in his payments in the amount of $422,436. The private investment group gave Dykstra an $850,000 bridge loan in November of last year which was secured by the home.

Dykstra bought the home from hockey Wayne Gretzky for $18.5 million in 2007 and put it on the market last year for $24.95 million. The six-bedroom home didn’t sell and in February it showed a price reduction down to $16.5 million. All of a sudden, the list price has been pushed back up to $25 million. It is still however listed at the same rental price it was in February, $55,000 a month.
lenny-dykstra-fireplace2

Now, the NY Post is reporting that “Lenny Dykstra” is flat-out broke and facing foreclosure. According to the article, “The private-equity firm Index Investors filed foreclosure papers March 11 on Dykstra’s sprawling Thousand Oaks estate…” Also, Washington Mutual filed its own notice of default on his $12 million mortgage on March 18. To top it off, his jet has been impounded.

If that isn’t bad enough, his wife, Terrie Dykstra of Thousand Oaks filed for divorce in Ventura County Court on April 16, listing irreconcilable differences. Terri is requesting joint custody of the couple’s 13-year-old son, according to court documents. Two houses in Thousand Oaks owned by the couple are listed as community property.

The couple were married more than 23 years and were separated on April 3, court documents show.

Stories about Dykstra’s personal acquisitions after baseball, his financial woes and legal battles have aired on HBO, ESPN and been published in sports magazines.

In addition, lawsuits filed in Ventura County Superior Court claim he owes: $4,850 for pilots and maintenance fees for a two-day trip he took over Christmas; $12,000 for chartered aviation services in connection with his magazine, The Players Club (the complaint states Dykstra’s Visa card was declined); and more than $290,000 to Las Vegas printing company Creel Printing and Publishing Co. for printing services for The Players Club. The magazine folded in April 2008, shortly after it was launched.

Dealbreaker also says that Dykstra’s Gulfstream II was impounded on February 12. It’s a dramatic turn from a year ago when the New Yorker did a profile of Dykstra and his magazine, The Players Club which was going to show professional athletes how to keep their wealth and not join the ranks of players who earn millions and wind up in financial trouble just a few years later. Since then, Dykstra has been the subject of multiple lawsuits and creditors in relation to the magazine. As investments, magazines are like restaurants, glamorous, but highly profitable only for the lucky few.

Dykstra’s major league career spanned from 1985 to 1996 with the New York Mets and Philadelphia Phillies.

Real Estate

Lenders Chase Short Sale Sellers

This is a reverse view, your neighbors are there to watch out for you.
This is a reverse view, your neighbors are there to watch out for you.

This is Listing… with panoramic views in Seattle, Washington. But, on with the story.

An increasing number of lenders are going after borrowers who sell their homes for less than they owe – known as a short sale – in order to recover more of the difference between the amount owed and the sale price.Lenders say the factors that they consider when they decide to seek more money are: 

  • How large was the unpaid debt?
  • Was the property an investment or a personal residence?
  • How much money does the borrower make and what other assets does he have?
  • What is the policy of the mortgage insurer or the holder of the second lien? 

A PMI Group Inc. spokesman says the mortgage insurer “primarily target[s] borrowers who are not experiencing hardship – but those who simply elected to walk away from the property due to its decline in value

Source: The Wall Street Journal, Ruth Simon (04/30/2009)

In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, usually in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. 

In some cases as mentioned above, the banks are not willing to just let go of the mortgage without further compensation.  In many cases, this has led to foreclosure in lieu of a short sale. 

Real Estate

Hard Money Lending & Tom Hastert

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Tom Hastert
Tom Hastert

The term “hard-money” lending can be traced to the Great Depression when private individuals started lending money because of the banking crisis, said Leonard Rosen, whose La Jolla-based company, Pitbull Mortgage School, teaches mortgage brokers about hard-money loans.

“No one really knows the reason they used ‘hard money’ as a term. It could be that it was hard to get, hard to find or because it was hard cash,” Rosen said. “I’m not an advocate for hard-money lending. But it’s something that has its place as long as it’s done responsibly. There are some people who should not be in the lending business at all.”

Thomas Hastert, now a former attorney and real estate broker, certainly was one of those people that should not have been in the lending business at all.  Hastert had the mortgage company Loan Sense, which was located in Grass Valley off of Brunswick Road.

As you may know by now, Hastert is in jail, having pleaded guilty to 59 felony counts of embezzlement, securities fraud and selling unregistered securities. However, Attorney General Brown had filed 73 criminal charges against Hastert, so by plea bargaining, it was dropped to 59 felony counts with a possible five year jail term instead of eleven years. Hastert is to be sentenced in June.

By the way, Hastert did not make $20 million; most of the money he received from customers he used to make loans with extreme poor judgment, ignoring the law and some obvious intent to commit fraud. Most of the investors’ monies were lost by loaning money with improper loan to value of property. This, along with improper funding of construction loans led to horrific losses to the customers who gave Hastert money to make hard money loans. 

This man brazenly deceived investors and borrowers, promising high returns and easy loans, ripping off his customers for his own personal enrichment,” Attorney General Brown said. “Ultimately, this criminal scheme collapsed when many of these loans failed, costing hundreds of people more than $20 million.”

  • Hastert brokered over 270 hard-money loans in Nevada, Sacramento, Sutter, Butte, Placer, and Yolo Counties between September 2004 and September 2007 for real estate development projects. Hard-money loans typically provide high returns for private investors and are secured through collateral such as real estate.

    In this case, Hastert secured $20 million from numerous investors, using the funds to broker hard-money loans to borrowers seeking to develop homes on real estate.

    In the criminal complaint, Hastert is alleged to have:

    “Misled investors. Hastert told investors that borrowers had excellent credit scores and were capable of repaying the loans. This proved to be untrue. Many borrowers had poor credit scores, did not make regular payments on the loans, and held properties that were in foreclosure.

    The loans that Hastert brokered were required by law to be placed into a special trust account overseen by a third-party escrow firm. The firm had to verify whether funds being withdrawn by borrowers were being used for construction projects. Despite telling investors he had established such a trust account, Hastert never did, and the money was regularly withdrawn and misused by borrowers with no oversight.

    Hastert told investors he would personally oversee the development of the land. In one instance, he was asked by investors to drive them to a particular property that was supposedly under development. Hastert could not locate the property.

    Set up fake investors, known as “straw men,” to keep concerned investors at bay. Hastert filed documents with a county recorder’s office saying that his secretary owned a majority interest in the investment, despite the fact that she had never invested a single dollar. If a legitimate investor tried to initiate foreclosure proceedings, Hastert would contend that the supposed majority owner opposed the action.

    Embezzled fees. Hastert was entitled to collect a 3% fee on loans he brokered. However, he took all his fees up-front as if the loan were fully funded. In fact, some loans never fully funded, and others took more than a year to fully fund.”

“Those who invest their money with hard-money lenders are taking on significant risk. That’s why they would expect a significant return relative to other investments,” said Stuart Gabriel, a UCLA finance professor and director of the university’s Ziman Center for Real Estate. “If they need to take the property back, there’s legal risk and marketing risk. There can be very significant losses.”

So if you are going to invest in hard money loans, with a promise of high returns, be careful. Give me a call or write if you want some guide lines prior to investing.

Real Estate

The Bargains in Real Estate are Going to be Gone

inside-of-church

This is an interior picture of a  listing for a three bedroom, two bath home which will save you travel time and gas for Sunday services.

Here in Nevada County, while there were almost the same amount of sales in April of this year compared to last year, the pending sales are way up. Potential buyers in areas that were hard hit by the housing downturn have read about bargains; only find it disappointing when they go shopping.

But in Southern California, housing is hopping:

According to an article in the Los Angeles Times:

“House hunters are trying to pounce on deals from sellers they expected to be frantic — if not curled in the fetal position. What they’re finding instead are bidding wars as low interest rates and pent-up demand in traditionally stable or chic areas have kept prices up — not as high as the market’s peak, but not nearly as low as they had hoped.

Bank-owned or not, the cheaper properties are dominating the sellers’ block in the notoriously expensive L.A. County real estate market. In March, 2,871 homes under $300,000 were sold compared with only 734 a year earlier, according to real estate information firm MDA DataQuick.

When the real estate bubble burst, it didn’t affect the mid-priced market, said real estate information firm MDA DataQuick. Instead, it created opportunities in troubled neighborhoods and slowed sales in the market of homes priced above $1 million. But in areas where most of the homes sell for $400,000 to $800,000, there are few discounts to be found.

Even the foreclosure market has slowed, says University of Southern California Professor of Real Estate Tracey Seslen. Seslen said lenders with foreclosures are supporting market stabilization and releasing only a few homes at a time to avoid flooding the markets.”

Like I said, if you wait to buy at the bottom of the real estate market, you’ll find that the bottom pasted you by a long time ago.

 

Nevada County Home & Land Statistics, Nevada County Information, Real Estate

Nevada County Residential & Land Sales, April 2009

"Alternative Housing" Location, Oregon
"Alternative Housing" Location, Oregon

 

What the figures show for April of this year is that residential sales are about the same number as it was for April of last year.  However, we’ve had a further decline in medium residential home prices of minus 23 percent. Here are the stats for sales in Nevada County.

There were 67 residential properties sold in April 2009 compared to 62 residential sales in April 2008.  Total residential sales from January to the end of April 2009 were 191 sales compared to the same period last year of 203 sales.

The medium price for April 2009 was $299,000 compared to April 2008 of $387,500 a decline in market price of 23 percent.  There were 1,165 residential properties listed for sale at the end of April, which based on the number of sales from January to April 2009 equals about 1.6 years supply of residential property for sale, assuming sales continue at the same rate.

There were 20 land sales from January to April in 2009 with a 45 month supply of land at the end of April. Last year there were 45 land sales with a 49 month supply of land.

I’ve noticed a pickup in pending sales, which I post on this website daily for those that are interested, and it seems that the pending sales are up. They have been hovering in the 200 pending sales starting within the last month. However, this is for all sales, not just residential sales.

Where are we with future sales? It’s anyone’s guess, Fannie Mae and Freddie Mac asked lenders to forestall any more foreclosures until March 6, 2009.  What they are doing now that the agreement date has expired? Some circles say we are in for a tsunami of foreclosures. The following banks had agreed to the government’s request and their expiration dates of the agreement. 

JP Morgan Chase – New Owner-Occupied residential loans that are owned and serviced by JPMorgan Chase.  As with Fannie Mae, the moratorium of foreclosures end date, March 6th.

Citigroup – All Citi-owned first mortgage loans that are principal residence and on loans for which understandings with investors have been reached.  Moratorium end date – March 12th.

Bank of America (also Countrywide now renamed Bank of America Home Loans) – Delay foreclosures sales on owner occupied properties whose mortgage loans are owned and serviced by B of A or Countrywide  – Through March 6th.

Wells Fargo (also Wachovia) – For Loans it holds.  The moratorium is expected to remain in place until the government’s foreclosure prevention plan is announced.  The majority of Wells Fargo’s mortgage loans are serviced by it and owned by other investors. 

 

Real Estate

New Appraisal Rules for Fannie Mae & Freddie Mac

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appraisal-of-house

There is a new “Home Value Code of Conduct” that went into effect on May 1, 2009.  All Fannie Mae and Freddie Mac mortgages have major changes in ordering and processing home appraisals.

Under the new rules, mortgage brokers will no longer be able to order appraisals directly for loans sold to Freddie and Fannie. This will force mortgage brokers to be “hands off” in choosing appraisers and potentially influencing the outcome of the appraisal.

Fans of the new code say appraisals will be more accurate, and there will be less fraud and lower costs. But others say the new rules will result in less reliable appraisals by some who may not be thoroughly familiar with an area, delays in getting loans processed and steeper costs.

In his latest blog post, Mortgage Broker Dennis Smith of Stratis Financial Services in Huntington Beach writes about how he sees the new code affecting home buying.

Smith writes about the process:

“First, the HVCC is a requirement for all loans that are being funded by Fannie Mae and Freddie Mac, no exceptions.  Under the rules of the HVCC any person or company that collects a commission as part of the mortgage transaction may not have any contact with the appraiser, including ordering the service. 
 
“Starting with all transactions with applications dated [on or] after May 1, 2009 the originating entity, me, must order any appraisals through the funding entity (lender) who must use an “adverse selection” process to select a national appraisal company. 

“When the appraisal is ordered the fee for the appraisal must be paid in full through credit card transaction; the borrower will need to provide this information for the transaction to move forward.  The national appraisal company upon receiving the order will then contact an appraiser in the area or region of the subject property and place an order for the appraisal.
 
“The appraiser will contact the appropriate person for access to the property and complete the appraisal.  He will then send the appraisal electronically to the national appraisal company who will review the appraisal and send it electronically to the underwriting unit of the lender.  The underwriter will review the appraisal and if acceptable will post it on the company website and notify the borrower.
 
“Attention! It gets interesting here.  Under the HVCC policy the borrower must receive a copy of the appraisal at least three days before ‘closing’.  I put closing in quotes because in some states closing and loan documents are the same time-this occurs in non-escrow states.  In states such as California where we order loan documents and then close after they are signed an reviewed most lenders are requiring that the borrower receive the appraisal at least 3 days prior to drawing loan documents.  In short, loan documents will not be drawn until 3 days after the borrower has received a copy of the appraisal.  And that copy must come directly from the lender. 
 
“This process will take several weeks to flush out but in California the most obvious problem is the appraisal contingency that is part of all CAR contracts — expect a revision in the near future as the HVCC becomes better understood by the CAR attorneys — since no one intimately involved in the transaction has any contact or control over the process from selecting the national appraisal company to selecting the appraiser, no one involved in the process can say for certain when an appraisal will be delivered so all aspects are known.” 

I left out the rest of his comments, since as a mortgage broker; he does not like the new rules. Mortgage brokers like to work with appraisers who they are familiar with and who know the area that they are working in. My own personal opinion is the more hands off the process is, the better it is for all of us.

What do you think?

 

Real Estate

Be Careful of Real Estate Scams & Fraud

house-fraud

Real estate fraud is a serious problem now and always has been something to watch out for. Here are some examples of danger signals.

Property Flipping – A type of real estate investment strategy in which an investor purchases properties with the goal of reselling them for a profit. However, not all property flips are fraud, it is just a red flag and illegal flipping is another story.

From one end to the other these are deals that routinely involve valuations from appraisers who get money under the table, falsified loan applications, mortgage fraud, bait-and-switch financing, predatory loans with unconscionable terms and repairs which are not up to code and thus result in a house which may be neither safe nor habitable.

Chunking – Another common scam, where basically, there is a get-rich quick seminar to convince attendees to become investors. This is a scheme in which a fraudster sells an investor an overpriced property and pockets the difference. This is usually done in get-rich quick seminars.

As an example, Mr. Borrower attends a “seminar” or program that shows how to get rich by investing in real estate with no money down. A third party, Mr. Fraudster, possibly a presenter at the seminar/program, encourages Mr. Borrower to invest in three RE properties and acts as Mr. Borrower’s counsel/agent.

Under Mr. Fraudster’s guidance, Mr. Borrower completes the required application documentation for the transactions. Unbeknown to Mr. Borrower, Mr. Fraudster takes the applications and submits the information to 15 different lenders for 15 different properties. This scheme requires the assistance of an appraiser, broker, and/or a representative of a title company to ensure that Mr. Borrower does not have to bring money to the multiple closings.

Mr. Fraudster acts as an agent for Mr. Borrower at the 15 different closings. The net effect is that Mr. Borrower receives loan proceeds from three of the closings and Mr. Fraudster pockets loan proceeds from 12 of the 15 closings. The lenders are stuck with loans to a borrower who does not have the ability to repay the debt and are often forced to foreclose on the properties..

Nominee Loans/Straw Buyers – This involves a person who agrees to lend their name and credit but does not intend to actually be responsible for the property.

As an example, person A wants to buy a property, but convinces person B to step in as a “straw buyer” to obtain terms that person A could not. Alternatively, person A steals person B’s identity, and forges all of their information on the purchase and loan papers. In both cases, person B is not the person really purchasing the property, but their name is on the mortgage. In the first case, person B is fully responsible for the loan and everything else that goes on, as well as having committed fraud.

Fictitious/Stolen Identity – Same problem as straw buyers, but in this instance the identity is stolen or created out of thin air.

Just be careful of the get rich quick schemes. But regardless of this, it is a great time to buy real estate; in fact, I think it’s a buying opportunity of a life time..