Cram Down On Your Primary Mortgage

The Federal Government is modifying the bankruptcy code to allow cram downs for primary home mortgages. After meeting with lawmakers, Citigroup has agreed to back legislation that would allow bankruptcy judges to alter the amount due on primary mortgage principals, so called cram-downs. (I guess if we want banks to change we have to cram it down their throats)

Quoting Buiness Week

“As it stands, Durbin’s Bill (SB 61) would essentially give judges the authority to rewrite the terms of a home mortgage — a so-called “cramdown,” something possible already for every other kind of debt, mortgages on vacation homes and any real-estate other than a primary residence. It would also extend Truth in Lending Act protections to bankruptcy court, meaning predatory loans — made in violation of TILA — would be wiped.”

If the bill passes, a home owner who is facing foreclosure would have the option of filing for bankruptcy and have the mortgage reduced to a level where future payments would be manageable. As we said, every other kind of mortgage can be reduced except for a person’s personal residence. Doesn’t make sense, but the banks have fought this change forever

This would help save millions of homes from foreclosure, which some people may not agree with, but somehow we have to stop the foreclosure rate. Until we do that, the economy is not going to come back and more unemployment will result.

Of course, the rest of the mortgage industry opposes this, since it feels that it would hurt their bottom line.

Short Sale, How Short, Read On

As foreclosure rates hit record levels, more sellers are asking their banks or mortgage companies to do a short sale. How does that work? In a short sale, the seller arranges for a mortgage lender to accept a price that is less than the amount they owe on the property. In most cases, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn’t have to go through a foreclosure, and although the seller’s credit rating will drop, it may be a little less then a foreclosure.

Buying a home in a short sale usually means that the bank will not pay for any inspections. Therefore it is imperative that a buyer obtain a whole house inspection, termite report and carefully review a title report for easements and liens that may affect the property. If the house is in the country, then the well should be checked for production and possible harmful minerals. The septic system should also be checked out and boundary lines verified by a licensed land surveyor

Speaking of title reports, if you are a buyer; remember that there could be two loans on the property, a first senior loan and a second junior loan. If you are buying the home for $125,000 to pay off the first loan and there is a $75,000 second on the property, then you have just bought a home for $200,000.

For a very good example of what I’m saying go to

Rocklin & Roseville Today article

That is a real horror story of Bank of America refusing to work with the seller to the extent that (according to the story) it may kill the short sale.

As a buyer, you may have to wait anywhere from six weeks to six months to finally complete the sale. Banks work by committees and we all know how committees work, slowly. Of course while you are waiting, someone else might submit a larger offer and you are out of the picture with your purchase and the short sale turned out to be very long indeed!

Questions? Email John O’Dell
Real estate broker, civil engineer and general contractor

Short Sale Horror

What is a person to do? I recently talked to a client who’s daughter wants Countrywide Mortgage (now owned by Bank of America) to refinance her home to a lower interest rate. She has an excellent credit rating. But because she lost one of the three jobs she was holding, she wanted a loan modification. At this point in the market, she still has equity in the home, which is great; at least she’d not upside down on loan to value.

In keeping with current banking mentally, she was told “Why should we refinance?.. You are making your payments now. If you stop making your payments, we will sit down and talk to you.” Now this woman has a credit score in the upper 700’s. So the question is, should she stop making payments, ruin her credit score and THEN maybe Countrywide will renegotiate her loan?

My advice was to go somewhere else and get another loan. Rates have now fallen below 5% for a thirty year fixed loan and it’s a great time to refinance. With a good credit score, equity in her home, she has a good chance to get a new loan at a lower interest rate.

By the way, there were an average 3,100 foreclosures per day in the U.S. in November, according to RealtyTrac Inc., an Irvine, California real estate data company. That’s triple the 1,000 per day average in 1933, the worst year of the Great Depression, according to the Federal Reserve Bank of St. Louis. So my question is, when are the banks going to learn that they have to work with home owners to stabilize the housing market and help their bottom line?

Here’s some photos of the Great Depression from the Federal Reserve Bank of St. Louis:

The Great Depression Photography

Questions? Email John O’Dell
Real estate broker, civil engineer and general contractor

Market Statistics for Nevada County 2007 vs. 2008

Prices in Nevada County continued in a downward direction during 2008 compared to 2007. The average price for residential homes sold in 2008 was $407,973 compared to $493,261 in 2007. This is a seventeen percent drop in the average home price sold in Nevada County. The average time on the market in 2007 was 98 days compared to 133 days in 2008, taking twenty six percent longer to sell a home. There were 1,481 homes listed in 2007 and 489 of those listings sold. In 2008 there were 1,248 homes listed of which 392 homes sold.

Land sales for 2007 indicated that the average sales price was $222,827. There were 393 listings, of which 95 of the listings sold. In 2008 the average sales price was $203,894. There were 291 listings of which 65 listings sold. Sales prices dropped eight percent in 2008. Days on the market for land went from 122 days in 2007 to 209 days in 2008.

How much longer prices are going to continue to fall is anyone’s guess. You can listen to ten economists and get ten different answers. Although the interest rates are at an all time low, the banks have tightened lending requirements. Unless you have excellent credit and can show a good income stream, it is very hard to get a loan. In talking to a local bank the other day, I was informed that even for an equity loan, you have to have full documents, good credit (In the 700’s FICO score) and so on.

We seem to be doing well in Nevada County compared to other areas. For example here are some nationwide statistics:

The decline in residential property prices appears to be slowing according to preliminary data from First American CoreLogic.

A preview of its November report shows that home prices fell 9.6 percent last month, compared with 10.4 percent in October and 11.2 in September.

“The consistent deceleration over the past two months with November indicating the same trend in price declines is encouraging because it could portend the trough in price declines”, says Mark Fleming chief economist for First American CoreLogic.

Still, layoffs and the swollen supply of unsold homes remain a concern, he notes.

Source: American Banker (12/29/08)

Contact Email John O’Dell
Real estate broker, civil engineer and general contractor

Happy Holidays Nevada County

Happy Holidays to everyone. Since its the holiday season, I am writing a very short blog. As we begin 2009, we know that the news has not been the best, but we are fortunate to live in a beautiful area, with a great variety of climates, terrain, plant and animal life. We still have the small town friendliness where we know each other and cars even stop for pedestrians. So as we go forth in 2009, let’s keep our perspective, count our blessings, keep a positive attitude, and remember what a grand area we live in. Best Wishes for 2009!

Scotts Flat Lake January 1, 2009

Snow scene December 2008 from my deck looking at Scotts Flat Lake and towards the Coast Range Mountains

banner-mt

Another snow scene December 2009 Banner Quaker Hill Road.

Mortage Rates Drop to 37-Year Low

According to Realty Times ® Freddie Mac today released the results of its Primary Mortgage Market Survey in which the 30-year fixed-mortgage rate (FMR) averaged 5.19 percent this week. This is the lowest FMR that Freddie Mac has recorded since it started keeping records in 1971 or 37 years ago. A year ago, the rate for a 30-year FMR averaged 6.14 percent.

Well that’s the good news. The bad news is in order to qualify for the above rates, according to Donna Knapp of Empire Home Loans, you need to have a FICO score of 740, full documents, that is proof of your income, the assets that you have and a review of your income tax returns. However, if you have all of that,you can get up to 100 percent financing.
The couple were then qualified for a large loan to buy a home beyond their means. With a low starter teaser interest rate, they could manage to hang on the home thinking the price of the home they purchased would go up and when the interest rate increased, they could refinance or sell. However, when the interest rate rolled over to a higher rate, they could not afford the new payment. In the meantime,the value of their home had gone down and they could not refinance. All the couple could do was move out and let the home go into foreclosure.

You may ask why banks ever made stated income loans. These type of loans were designed for self employed people, who’s income is erratic, but in general have good credit and usually are a good credit risk. So,understanding how the system was abused you can also understand how we are in such a financial mess because of the loose loans that were made in the recent past. In summary, the banks did not do due diligent on their part to assure themselves as to whom they were dealing with. Now they have gone to the other extreme, making it hard for most people to get a loan to buy a home with their stifling requirements.

Nevada County Free Discount Prescription Card

Prescription Card
Prescription Card

I was wandering around on the Internet the other day and what a surprise when I stumbled unto the fact that the county of Nevada County has a free prescription card. On reading further on the Nevada County website, it states that the card may be used by all county residents, regardless of age, income or existing health coverage. The National Association of Counties has made this available to all counties that want this discount prescription card and to our good fortune, the Nevada County Public Health Department decided to make this card available to us living in Nevada County. (The formal name of the card is “The National Association of Counties NACo Drug Discount Card or simply NACo discount card”)

There is no enrollment form, no membership fee and no restrictions or limits on frequency of use. Cardholders and their family members may use the card anytime their prescriptions are not covered by insurance. According to the County, savings average 20 percent, some discounts may be more, and some less, depending on the drug and quantity purchased. Cardholders are eligible for higher discounts on a three-month supply of some medications through mail service. If you have a pet, believe it or not, you can save on pet prescriptions at participating retail pharmacies. By the way, this is not an insurance card.

The card may be used at over 57,000 pharmacies nationwide, including most chain pharmacies and many independents. Wal-Mart participates in the program. In addition the program has a safety feature that alerts pharmacists when one drug may conflict with another medication the card holder is taking, if the prescriptions were obtained with the NACo discount card. The card program remains a useful option now that Medicare Part D has been implemented. For example, the card can be used when a Medicare Part D plan doesn’t cover a drug.

For information on obtaining a NACo discount card call 530–265-140 or go to 500 Crown Point Circle, Grass Valley, CA, If you do not live in Nevada County, check with your County Health Department and see if they have enrolled in this program.

Nevada County Free Discount Prescription Card

County Discount Card

I was wandering around on the Internet the other day and what a surprise when I stumbled unto the fact that the county of Nevada County has a free prescription card. On reading further on the Nevada County website, it states that the card may be used by all county residents, regardless of age, income or existing health coverage. The National Association of Counties has made this available to all counties that want this discount prescription card and to our good fortune, the Nevada County Public Health Department decided to make this card available to us living in Nevada County. (The formal name of the card is “The National Association of Counties NACo Drug Discount Card or simply NACo discount card”)

There is no enrollment form, no membership fee and no restrictions or limits on frequency of use. Cardholders and their family members may use the card anytime their prescriptions are not covered by insurance. According to the County, savings average 20 percent, some discounts may be more, and some less, depending on the drug and quantity purchased. Cardholders are eligible for higher discounts on a three-month supply of some medications through mail service. If you have a pet, believe it or not, you can save on pet prescriptions at participating retail pharmacies. By the way, this is not an insurance card.
The card may be used at over 57,000 pharmacies nationwide, including most chain pharmacies and many independents. Wal-Mart participates in the program. In addition the program has a safety feature that alerts pharmacists when one drug may conflict with another medication the card holder is taking, if the prescriptions were obtained with the NACo discount card. The card program remains a useful option now that Medicare Part D has been implemented. For example, the card can be used when a Medicare Part D plan doesn’t cover a drug.

For information on obtaining a NACo discount card call 530-265-140 or go to 500 Crown Point Circle, Grass Valley, CA, If you do not live in Nevada County, check with your County Health Department and see if they have enrolled in this program.

Journey to Purmamarca

The next day we started on an trip to Purmamarca, pretty much due north of Salta. But we went the long way around first , to the north west of Salta. We started by following the famous narrow gauge railway called Tren a las Nubes (the train to the clouds).

Train to the Clouds

If you do want to take the train, it is a full fifteen hour trip from Salta and back again. But we were in a van and only followed the train for a few hours. Along the way, we watched the train when it came to an area that the train had to come to complete stop, back up to another track going up hill, raising as it backed up, then going forward to a higher track. This was the only way it could climb the mountain. The construction of this railroad is an engineering feat and took twenty years to build, constructed by men with only basic tools through almost impossible conditions, detonating rocks and cutting away steep mountain sides through howling winds and snow.

Train going through small tunnel built to have water diverted over tracks

This small tunnel was constructed to have the water from the mountains go over the track, otherwise washing out the rails.

We arrived at San Antonio de los Cobres where the land changes dramatically to the high desert puma (a lot like Nevada). This was a simple former mining town of low adobe buildings in very poor condition in the middle of a dry dirt valley.

Town of San Antonio de los Cobres

We left that town after a quick tour with no stops(!) and went to a settlement truly in the middle of nowhere, which was founded by a man who had a vision to be self-sustaining and to have a place for tourists to stop and have lunch. He had many children and has since, with them, built many buildings all of them of adobe. He has even constructed a church and museum. He has goats, chickens, llamas, a hot house for fruits and a garden to grow their own vegetables.. There was a solar oven, one small solar panel for electricity, a homemade cell phone antenna… and basically has done quite well if you like to be with your family 24/7 and work seven days a week from sun up to sun down.

Small Town near Salinas Grande

We had a very nice lunch there, family style, with a stew (of an unknown type of meat), vegetable soup and fruit desert. The restaurant held maybe 40 people, and was really quite nice. The tables we ate at were made of SALT (more on this later).

After lunch we proceeded down Highway 40 to Salinas Grandes (Great Salt Lake). This is an area that was once the Pacific Ocean, but due to past uplifting of the earth and volcanic eruption, it left a large area of the ocean to slowly The ocean evaporated leaving a large salt and mineral deposit. the thickness of the salt and mineral deposits range to from 1 to 3 meters. There are artisans carving figures and even huge sculptures (and large rectangles for shelves and tables) out of the salt.

Salinas Grande

Water is still found when a hole is cut on the surface to about 8-10 inches below the surface. When this is done, the hole is left open for the winds to blow minerals into the pool, which then forms new crystals, and then is mined and sold. But for every 1000 Kilograms (or 2200 pounds) of salt the natives only get 18 pesos, or about $6.00 US from the Government. By the way, the winds blow constantly. And we were there on a good day which was blowing really hard.

Salinas Grande Pits

From there we went over some mountains, and down into a valley which held one of the cutest towns we had seen so far, Purmamarca. There we spent the night in the motel La Conarca in a suite/rooms that looked like it could belong to Worldmark or RCI travel corporations, really nice, and brand new. We bought a lot of gifts in the local market around the square, the best deals we had found.

Purmamarca is surrounded by mountains of seven different colors as you can see from this photo:

Mountains of Seven Colors

John O’Dell is a licensed civil engineer, general contractor and real estate broker. Judy Pinegar is Wavier Officer for the Department of Education. Your comments are welcomed

Journey to Cachi

On Tuesday the 18th, we took a tour to Cachi, southwest of Salta. The drive is through a valley and raises to about 5,000 meters (Salta is at 1200 meters). The drive is one of the most unforgettable drives in Argentina. I know that Judy and I will not forget it, with a gravel, narrow, twisting road with many switch backs. The altitude raises quite rapidly and the vegetation changed as we got into the high desert.

Road to Cachi
Road to Cachi

As the journey continued, we went through Parque Nacional Los Cardones which has huge candelabra cacti. According to our tour guide they only grow less then one centimeter per year and since they grow to about 6 meters that would make some of them about 600 years old.

Cacuti
Cacuti

Judy standing by the side of one of the many cacti in the area

We arrived at the town of Cachi, located in a wide green valley. Cachi was founded in 1694 by the conquering Spanish. Prior to that time, it had been an Indian settlement long before the conquering Incas arrived in 1450, and the irrigation channels constructed by the Incas are still in use today. They grow a lot of red peppers and after the summer they are spread on the ground in huge patches to dry. But it was only spring time now, and the wet season has not started.

Cachi-Salta City Hall
Cachi-Salta City Hall

It is nice place to stay for a few days, as it is very quiet, not too touristy, and very inexpensive. There is no wi-fi, not sure that there is television available, but other than that, it has all modern conveniences.

Street scene
Street scene

Street scene in Cachi

Our trip back down the mountain was a little hair raising and the tour group cheered the driver when we got down to the flat lands again in one piece. Luck was with us in the form of a rainbow!

Rainbow
Rainbow

John O’Dell is a licensed civil engineer, general contractor and real estate broker. Your comments are welcomed