Dawn Rivera’s Fremont & East Bay Real Estate Blog

when the economy gets bad and people get desperate, some people have no scruples and will try to scam any way they can.

If you are trying to get a mortgage, beware of online scams who are trying to just get your information so they can steal your identity and ruin your credit and your life. Also beware of brokers or lenders who tell you one rate and then give you another (higher rate). Be sure you do business with a “Realtor” or someone else you know and trust. Realtor’s have specific ethics they have to abide by.

Some people are already finding ways to scam the tax credit, and it makes it tougher for those of us who are trying to complete honest business transactions. keep heart there are good, honest, people who will help you get the mortgage you need.

When I first heard about the new housing bill, that would force banks to modify loans to keep people in their homes, or face stiff fines. I was excited. A housing bill that would help keep people in their homes, and slow or stop the dreaded foreclosures. Woo Hoo! How wonderful for the many people faced with losing their homes.

Then I viewed my Active Rain site and read a blog by JP Lowry of Preferred Financial Funding, titled What are We Doing America? in which he VERY ADAMANTLY stated why the bill was Disgusting, Ridiculous & Entitled. I have to say after reading it there were some very good points. Now I am not sure where I stand and was wondering what other opinions were.

I am very happy for the families that will be able to keep their homes, but at what cost? I agree that some people bought homes that they knew they could not afford, but… the lenders let them. Also as tax payers have already bailed out the banks shouldn’t the money be used for what it was intended?

Due to the turmoil in the real estate market, a Florida couple is raffling off their luxury home in Fort Lauderdale for only $10 a ticket. After the drawing is held, the deed and title to the home will be transferred to the lucky winner (with no mortgage), and a portion of the proceeds raised will go to benefit a local charity.

Moving from their dream home is something the Brannans never thought would happen, but the economic crisis has caused them to make many tough decisions. They came to the conclusion that raffling off their 6,000 sq. ft.
home was the only reasonable solution.

In addition to offering people an opportunity to win this home for just $10, the couple states that a portion of the proceeds from the drawing will benefit The Mission of St. Francis, a charitable organization in Ft. Lauderdale. According to Miles Brannan, “The Mission of St. Francis is a wonderful organization that helps individuals suffering from addictions by providing them housing and helping them find jobs to get back on their feet.

We’ve all been hit hard by the poor economy lately, and I feel The Mission is really making a difference in people’s lives. So a portion of the proceeds will go to the Mission to aid in their efforts.”

The Florida home’s spacious open floor plan includes 6 bedrooms and 6.5 baths. The master suite is 1,000 square feet and has a second story balcony overlooking the waterway. The estate also has a theater room with a 120?
screen, 4 car garage, and beautiful winding staircase. I

Only 300,000 tickets will be sold for this raffle, and the drawing will take place once all tickets have been sold. Once the drawing has taken place the winner will be notified within 24 hours by phone, e-mail or certified mail.
Winners do not need to be present to win. All monies collected will be held by Chicago Title Insurance Agency, Inc.

For more information, visit www.floridaluxuryauctions.com.

After a recent spike seen in mortgage rates, some consumers are wondering whether they’ve missed their chance to refinance into an ultra-low rate. Fear not: While the conforming 30-year fixed-rate mortgage hit a daily average of 5.81% last Thursday 06/18/09, it averaged 5.53% on Tuesday06/23/09, and it’s possible that rates could continue to fall. Predicting interest rates is like predicting who is going to win the World Series in January,I feel the recent spike is somewhat of an aberration, I expect rates will continue to drift down.

Why the recent run-up in rates? Over the past month or two, the economic skies have brightened somewhat, and the threat of trillion-dollar budget deficits for the foreseeable future, the potential for significant inflation, and few clues as to how the government might extricate itself from intrusions into markets created a landscape that was not appealing to investors.

Now, rates are retreating partly because inflation doesn’t seem as immediate as investors feared. In my opinion, nothing fundamentally has changed in the economy over recent weeks to warrant the rate rise, yet he expects volatility through the remainder of the year as investors debate the economy’s health. Realistically, I think that the rates will drift under 5% again. It may take a month, may take two months.

It’s also important, however, to realize that extremely low rates likely won’t be around forever. Luckily, we have seen rates drop some this week, which should help many consumers breathe a little easier. But the fact remains, the government’s plan of purchasing mortgage-backed securities cannot go on indefinitely, and when it ends, we will most certainly see a spike in rates. The hope is that the Fed can keep rates low long enough to kick-start a housing recovery. Whether that will work remains to be seen.

The latest survey by the Pew Research Center finds that 20% of all homeowners-or 30% of mortgage holders-say that if they had to sell their home right now, it would sell for less than they owe. And homeowners who feel underwater on their mortgages report considerably more financial strain that those who do not.

Roughly 6 in 10 (61%) of those who say they are underwater on their mortgage are white, 12% are black and 18% are Hispanic. By comparison, 84% of mortgage holders who say their home would sell for at least the value of their mortgage are white, 6% are black and 6% are Hispanic.

Nearly a quarter (23%) of those who owe more than the current value of their home are under 30 years old, compared with just 10% of those who think they would at least break even if they had to sell today. Those who feel that they are underwater on their mortgage are also much more likely to have children under 18 living in the home than are mortgage holders who don’t feel that way (64% compared with 47%). Those who say their home is paid for tend to be older: 43% are 65 or older and 33% are ages 50 to 64. Consequently, relatively few (19%) say they have children younger than 18.

Overall, homeowners offer mixed ratings of their own personal finances. Nearly half (46%) say they are in excellent or good shape financially, and about the same number (52%) say they are in only fair or poor shape.

Among those who feel that their home would now sell for less than they owe on their mortgage, however, ratings of personal finances are considerably less positive. More than six-in-ten (63%) offer a negative assessment of their personal financial situation, while only 36% say they are in excellent or good shape. In contrast, a majority (54%) of mortgage holders who feel they would at least break even if they had to sell today say they are in excellent or good financial shape.

Mortgage holders who are underwater also are more likely to be suffering financially in other ways. They are more likely to have had trouble getting or paying for healthcare for themselves or their family (32% vs. 16% of those who are not underwater) and to report having been laid off (21% vs. 13%).

Nearly all (98%) of those who say their home would sell for less than they owe on their mortgage report having made reductions in spending or changes in their saving or investment patterns lately, as do most (86%) of those who say their homes would sell for more than the value of their mortgage. However, on any given cutback item- outside of adjusting retirement plans- those who are upside-down on their mortgages are at least 15 points more likely than those who are not to report cutting back. For example, 63% of mortgage holders who say they owe more than the value of their home report having delayed or canceled plans to make a major purchase for their household, compared with just 38% of those who do not owe more than the value of their home.

Although a substantial minority (19%) of those who feel underwater on their mortgages cite declining real estate values as their top personal financial worry, this concern runs a distant second to worries about the job situation. Nearly half — 47% — of those who feel upside-down cite jobs as their top concern.

While a plurality of mortgage holders who do not feel upside-down also mention jobs (38%), the second most cited concern among this group is problems in the financial markets (30%); only 11% of mortgage holders who are not underwater say their biggest concern is declining real estate values.

Today, President Barack Obama is expected to unveil a new "carrot-and-stick" approach to get banks and other lenders to better address soaring nationwide home foreclosures.

The plan He’s expected to announce will be to use $50 billion or more in Wall Street rescue money authorized last year, to provide subsidies for when banks reduce interest rates to lower the monthly payments for many Americans (who got into bad loans they did not understand or have lost their jobs due to the current bad economy ) who are now struggling to pay.

The plan, (to subsidize banks) which has yet to be formally announced, would serve as the carrot for banks to help homeowners stay in their homes and halt foreclosures, so there would not only be help to stop the losses for individuals and the banks, but also stop the foreclosures from dragging down the values of nearby homes.

The prevoius vountary efforts during the bush administration_Hope for homeowners and the federal Housing Administration’s FHA Secure that the banks joined have resulted in relatively few mortgage modifications.

Now the stick part, of the Carrot and stick approach is they will have a stick waved at them if they don’t comply with the subsidy plan. It will come in the form of Obama’s support for legislation pending in Congress that would allow bankruptcy court judges to modify the terms of a mortgage.

Right now that is forbidden, and banks and other lending institutions fiercely oppose what they call "cram down" legislation, saying that it willl bring uncertainty for lenders, who will respond by restricting mortgage lending.

If passed, it will mean that banks will have to soon choose between the lesser of two evils. They could either modify loans (with a subsidy) to provide lower lending rates, and lose what they might have made from the higher lending rate over the life of the loan. Or they can do nothing and a homeowner could file for bankruptcy and then have a judge order new loan terms that allow the borrower to stay in the home, and pay the lender less money.

The Obama administration isn’t providing details, but it promises a serious new approach.

"Ten thousand people face foreclosure every day in this country. And it’s a problem that not only affects the individual homeowner and their family, but oftentimes has a direct impact to home values in the neighborhood that that house or homes are on," White House spokesman Robert Gibbs said on Tuesday. "This is a tremendously important part of what the president believes has to be done next in order to move our economy forward."

More than 2.3 million mortgages entered foreclosure proceedings last year, and by year’s end almost one in 10 mortgages in the U.S. were either delinquent or in foreclosure. Some prominent economists such as Harvard University’s Martin Feldstein think that one in five homes nationwide is worth less than the mortgage that was arranged to purchase

Dec. 12, 2008-Like many retirees, Marlene Laffoon, 73, watches in dismay as both her home’s value and her investments slide southward. And yet everyday costs for this former bookkeeper aren’t falling correspondingly.

So Laffoon’s spirits rose last month on an unexpected windfall of good news: Loan amounts on reverse mortgages have been increased and the fees decreased.

A reverse mortgage allows homeowners 62 or older to borrow up to $417,000 of their home’s equity to use any way they wish; the old limit was $352,790. They don’t have to repay it as long as they stay in the home.

Laffoon promptly asked her reverse-mortgage officer, Jerry Dawson at Frontier Bank in Everett, Wash., how much cash she could get if she took out a new reverse mortgage to replace the one she got several years ago.

"I really don’t want to touch anything in my investments now, and yet I can’t wait 10 years to have something to draw on," says Laffoon, who used funds from her original reverse mortgage to remodel the bathrooms and re-roof her Snohomish County, Wash., home of 43 years.

Reverse mortgages have been growing in popularity for some years now, with more than 100,000 homeowners nationally taking them out so far this year. They’ve been offered by private lenders, by quasi-governmental mortgage backer Fannie Mae and by the Federal Housing Administration.

Following the turmoil in the mortgage industry, both private-lender and Fannie Mae reverse mortgages have either ceased or cut back substantially, says Darryl Hicks, associate director of the National Reverse Mortgage Lenders Association in Washington.

That leaves the FHA as the biggest player on the block. It recently announced the new across-the-board national $417,000 limit for its reverse, called Home Equity Conversion Mortgage, or HECM for short.

"It’s going to allow those people who own higher-priced homes to access a lot more of the equity of their homes for whatever need they may have," notes Hicks.

A borrower’s age and home equity determine the amount of money available. There are no income or credit score requirements, and a homeowner who’s already had a reverse mortgage can get another.

The older the borrower, and the more equity they have, the more money they can pocket. They can take it in monthly payments, in a lump sum or as a line of credit to be drawn on as needed. The amount of a reverse mortgage has to be paid back once the homeowners move out of the house-even if the house isn’t sold.

The typical borrower is in his or her 70s. Getting a reverse mortgage doesn’t affect the borrower’s ability to get Social Security or Medicare.

A home needn’t be paid off for its owner to get a HECM reverse. However, the owner must pay off the outstanding mortgage balance as part of the process.

.The FHA requires counseling for those considering a reverse so they clearly understand the pros and cons.

The Urban League of Metropolitan Seattle is one of the approved counseling agencies. A. Linda Taylor, its housing director, says there are a lot of misconceptions about reverse mortgages, which counseling clears up.

A common fallacy: Homeowners who get a reverse mortgage are signing their house over to the government or a loan company. That’s incorrect; they still own it.

Another one: Owners will have monthly mortgage payments. That’s not true, nor can the seller (or the seller’s estate) ever owe more than the total loan amount (including interest, which can be either variable or fixed).

However, Taylor suggests that homeowners and their families consider the reverse issue carefully because getting one isn’t always the best answer.

The loan, which requires all the normal closing costs plus mortgage insurance, can be expensive relative to the amount borrowers get, particularly if they’re near the minimum limit of age 62 or they have little equity in their home.

And finally, a reverse may not be the best solution for a cash-strapped homeowner.

Taylor recalls an elderly man who came with his large family for counseling.

"He was worried to death" about his finances, she said, but also concerned that getting a reverse would use up home equity he’d hoped to leave to his children.

A frank family conversation revealed the man was struggling to secretly pay a family member’s bills. When they others learned of this, they prevailed upon that family member to stop relying on the elderly man for support.

They also did the repairs the man’s home needed, repairs that would have consumed his reverse mortgage money.

So in the end, he found he didn’t need a reverse mortgage at all.

A reverse mortgage, which allows homeowners to cash out some of their home’s equity, is available to those 62 and older who own and occupy a single-family house, a condominium, town house, co-op, manufactured home or two- to four-unit building. (Some limitations may apply.)

Consumer Reports magazine suggests homeowners educate themselves by visiting these websites:

AARP, at www.aarp.org has thorough information about reverse mortgages, plus a calculator that allows homeowners to estimate how much money might be available to them.

The National Reverse Mortgage Lenders Association, at www.nrmla.org, has mortgage information, plus a list of approved lenders who subscribe to its code of ethics.

Housing and Urban Development, at www.hud.gov, has information plus a list of HUD approved housing counseling agencies.

Federal Trade Commission has information on its site, www.ftc.gov, as do some banks’ sites.

January 12, 2009-Less than 24 hours after members of the 111th Congress were sworn into office, the National Association of Home Builders (NAHB) launched an all-out effort to make housing a centerpiece of the massive economic stimulus package that lawmakers are expected to complete by mid-February.

More than 80 builders from across the country converged on Capitol Hill yesterday to meet with the congressional leadership and key members of the banking and tax writing committees to convey the message that a housing stimulus is urgently needed and that restoring demand for housing is the fastest and most effective way of reviving the economy.

The key ingredients to the recovery plan call for Congress to support enhancements to the home buyer tax credit, to provide below-market interest rates on 30-year fixed-rate mortgages and to continue foreclosure prevention measures such as those advocated by Federal Deposit Insurance Corporation Chairman Sheila Bair.

Underscoring the urgency of the situation, in a briefing to builders before their meetings with lawmakers, NAHB Chairman Sandy Dunn said: "Our industry stands at a crossroads and our efforts here today are vital to the housing industry’s ability to weather this storm and come out the other side healthy and in a position to grow."

"Congress must understand that housing is central to the economic crisis, that housing has led our nation out of past recessions and that it can do so again," she added.

"Over the next year, the stimulus plan will increase economic activity in every state as vacant homes are absorbed, households are able to relocate to new jobs, home values are stabilized and local property tax revenues return to their pre-recessionary levels," said NAHB Chief Economist David Crowe.

This year alone, Crowe said the plan would result in 200,000 additional new home sales, 1 million more existing home sales and a boost in expected housing starts from 649,000 to 908,000, on par with last year’s level.

In addition, the plan this year would create more than 539,000 jobs, generating $26 billion in wages and salaries, $21 billion in business income and $28 billion in federal, state and local tax revenues.

Under Bair’s plan, the federal government would provide $24 billion in loan guarantees that could help as many as 1.5 million home owners modify their existing mortgages and avoid foreclosure.

Putting the situation in starker terms, Crowe said that barring any significant federal action, 4 million strapped borrowers could lose their homes this year. "There are at least 1.5 million excess empty homes on the market today. That does not include homes people live in and want to sell," he said.

In order to stabilize the marketplace and put a floor under declining home values, NAHB and the Fix Housing First coalition are calling on Congress to pass short-term, targeted incentives that spur demand and encourage Americans to buy homes.

Specifically, a temporary, expanded home buyer tax credit is needed to reduce excess inventory and encourage fence sitters to enter the market. The Fix Housing First legislative proposal calls on Congress to enact a stimulus plan that would reduces mortgage interest rates to as low as 2.99% on 30-year fixed-rate conventional loans purchased between Jan. 1, 2009 and June 30, 2009. The interest rate would be 3.99% for contracts that close between July 1, 2009 and Dec. 31, 2009.

At the same time, lawmakers need to make the current $7,500 home buyer tax credit much bigger and better, eliminating its current recapture provision and making it available to all purchasers. The coalition is calling for a credit amounting to 10% of the home’s price, capped at 3.5% of local FHA loan limits. This would range between $10,000 and $22,000.

The key is basing the credit amount on prices in each locality.

"Obviously, you don’t need a $22,000 credit in Bozeman, Mont. but a $22,000 credit will just get you into the marketplace in California," said Howard.

The tax credit and interest rate buy-down are not new ideas, Howard added. "Congress enacted a similar housing solution in the mid-1970s when the nation was in recession. The plan led us out of recession then, and it can do it again."

Bolstering the visits to Capitol Hill, more than 17,000 telephone calls and e-mails in support of the Fix Housing First proposal were received by the Congress from members of NAHB and the coalition.

To learn more about the coalition, go to www.fixhousingfirst.com.

Adding to a mounting chorus in the nation’s capital that the Bush administration must do more to reverse the nationwide housing slump, Federal Reserve Chairman Ben Bernanke spelled out some aggressive steps that the government should take to help fix the main cause of the recession.

"Despite the efforts of both the private and public sectors, the foreclosure rate remains very high, with adverse consequences for both those directly involved and for the economy in general, addressing a Fed conference on the housing and mortgage markets, Bernanke said, "More needs to be done."

His comments came the after reports surfaced that the Treasury Department is weighing new steps that could reduce some mortgage rates below 5%. Mortgage Bankers Association reported record mortgage delinquencies and foreclosures from July to September.

2009 National Association of Realtors® President Charles McMillan said, "We are happy that the leadership of the Treasury Department is seriously considering the actions we discussed to lower interest rates. The result of such action will help the nation’s economic recovery and bring stability to the housing market." NAR estimates that lowering the mortgage interest rate by 1 to 2 percentage points can result in up to an additional 800,000 home sales. Housing has always led our economy out of downturns and lower interest rates are key to bringing home buyers back to the market."

According to the MBA, (Mortgage Bankers Association) National Delinquency Survey, the delinquency rate for mortgage loans on one-to-four-unit residential properties stood at 6.99% of all loans outstanding at the end of the third quarter of 2008, up 58 basis points from the second quarter of 2008, and up 140 basis points from one year ago on a seasonally adjusted basis.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.07%, down one basis point from last quarter and up 29 basis points from one year ago on a non-seasonally adjusted basis.
 

The seasonally adjusted total delinquency rate continues to be the highest recorded in the MBA survey. The increase in the overall delinquency rate was driven by increases in the number of loans 90 or more days past due, primarily in California and Florida. The 30 day delinquency percentage remains below levels seen as recently as 2002.

What’s more, "While much of the mortgage problem in some states continues to be overbuilding, poor underwriting and incorrect credit pricing, fundamental economic factors are becoming more important," said Jay Brinkmann, MBA’s Chief Economist and Senior Vice President for Research and Economics. "The 30-day delinquency rate is still lower than it was in the 2001 recession, but job losses are mounting. We have not gone into past recessions with the housing market as weak as it is now so it is likely that a much higher percentage of delinquencies caused by job losses will go to foreclosure than we have seen in the past."

Usually, the job of the Fed chairman is to fight inflation and ensure that the economy is growing. However, problems in housing have contaminated financial markets and the broader economy, and they help explain why Bernanke took the unusual step of calling for aggressive steps to end the housing slump.

"Significant efforts have been taken in this direction, but more can be done," he said.

A. The Fed chairman said that as many as 20% of homeowners now might be "underwater" or have negative equity; that is, they owe more than their homes are worth. In addition, he said, lenders are expected to have started 2.25 million foreclosures this year, a staggering number when compared with the pre-crisis average of fewer than 1 million foreclosures a year.

A. The Fed said last month that it would begin buying up to $100 billion in debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and would buy up to $500 billion in mortgage-backed securities issued by Fannie and Freddie, the mortgage finance giants that the government seized in September. These mortgage-backed securities are the pooled and packaged mortgages that are sold to investors in a secondary market. Since investors want no part of them, the government is stepping in as the buyer of last resort in hopes of thawing this frozen market.

A. The Federal Housing Administration is offering FHA Secure, which enables some homeowners with adjustable-rate mortgages that are about to jump to higher rates to get long-term, fixed-rate loans. Congress recently passed the Hope for Homeowners Act, which allows some troubled mortgages to be refinanced into FHA loans if the lenders are willing to take losses and write down the mortgage balances. The FHA Secure program is limited in reach, and Hope for Homeowners hasn’t proved to be very attractive to lenders, who’re unwilling to take losses.

A. Industry sources suggest that the Treasury is weighing an idea that would have Fannie and Freddie purchase new government-guaranteed mortgages that carry interest rates as low as 4.5%, a full percentage point below the current rate for 30-year fixed-rate mortgages. This could help borrowers take out larger loans at lower rates, potentially arresting the fall in home prices in areas such as California and the Northeast, where home prices are higher. The plan could prove to be controversial because it would exclude refinanced mortgages from these low rates.

A. Bernanke called for more principal write-downs by lenders, on the presumption that more homeowners are finding themselves with negative equity the longer the national housing skid continues. He suggested changes to the Hope for Homeowners effort, such as lowering the upfront insurance premium that lenders pay, by law 3% of a home’s principal value. Congress also could lower the 1.5% annual premiums that borrowers pay.

In addition, he said, Congress could reduce the interest rates that borrowers would pay under the new Hope for Homeowners loan, now set at 8%. The rate is high because the mortgages are underlying collateral in securities issued by Ginnie Mae, and there’s limited demand for this government-issued debt. The Treasury could buy the Ginnie Mae securities, thus creating space for lower mortgage rates.

A. Bernanke didn’t offer any price tags, but he signaled that any approach is going to be costly and probably will favor some homeowners over others.

A. Yes, and Bernanke thinks that this effort, too, can be expanded. The FDIC is modifying distressed mortgages held by the troubled banks it’s taken over, creating a standardized approach called "Loan Mod in a Box."

Although it’s a limited universe of mortgages, the approach gets mortgage payments to within 38% or less of a borrower’s monthly income, often by stretching a loan into a 40-year fixed-rate mortgage. FDIC Chairman Sheila Bair wants this to become a nationwide approach, but she faces resistance from the Treasury, which thinks it’s too costly.

Bernanke suggested that this effort could be expanded to have the lender modify the mortgage and reduce costs to 38% of income, and where necessary the government would eat the cost of reducing the loan-to-income ratio down to 31%. Bair and Bernanke seek to make existing loans more affordable so that homeowners stay out of foreclosure and don’t drag their neighborhoods’ home values down further.

A. That’s yet another option suggested by Bernanke, who said the government could simply buy up all delinquent mortgages or those considered at risk because of sliding home prices in hard-hit areas.

These loans would be bought at depressed market value and could make money for the government when home prices rebound. The Treasury already has studied this, the Fed chief said, since the original purpose of October’s $700 billion Wall Street rescue was to help get bad mortgages off bank balance sheets.