You are here: Home / Archives for Jeffrey Simons

Short Refinance Program Initiated

September 10, 2010 By Jeffrey Simons Leave a Comment

In an article on the CDPE Blog this week… A Short Refinance Program has been Initiated!

What this means to you is that – In an effort to help homeowners who owe more on their homes than they’re currently worth, the government will initiate its “short refinance” program on Tuesday, September 7, 2010.

According to an August 6 Mortgagee Letter released by HUD (click here to download the entire letter), the program will allow “borrowers who are current on their mortgage to qualify for an FHA refinance loan provided that the lender or investor writes off the unpaid principal balance of the original first lien mortgage by at least 10 percent.”

While lender consent is required and program participation voluntary, the FHA has stated the program could modify between 500,000 and 1.5 million upside-down mortgages.

Following are a few of the eligibility requirements detailed in the Mortgagee Letter:

Homeowner must have negative equity, be current on the existing mortgage, and have a FICO score greater than or equal to 500
It must be for the homeowner’s primary residence
Existing loan can’t be FHA-insured
First lien holder must write off at least 10 percent of the unpaid principal balance
Refinanced mortgage must have a loan-to-value ratio (LTV) no greater than 97.75 percent
Second liens must be re-subordinated so the new loan does not exceed a combined LTV of 115 percent
Because of this last requirement, this program may have difficulty when confronted with situations involving second lien holders.

While this is great news… it’s still going to take some time to get everything rolling. Your thoughts???

Filed Under: Selling your Home, Short Sale Updates, What's New?

Will I have to pay taxes on the $8000.00 tax credit money if I sell my home?

September 9, 2010 By Jeffrey Simons Leave a Comment

Recently I had a client ask a very profound question… Will I have to pay capital gains or taxes on the $8,000.00 tax credit that I collect when I sell my home and does this money need to be paid back? The best way to answer this is MAYBE. It depends on which credit you took, when your home closed escrow, and when you will be selling your home. According to William Perez, About.com guide, he outlines the program and information as follows:

First-Time Homebuyer Tax Credit – Up to $8,000 federal tax credit for first-time home buyers

Quick Summary of the First-Time Homebuyer Credit

For 2008: up to $7,500, the credit is paid back over 15 years.
For Jan – Nov 2009: up to $8,000, the credit does not need to be paid back.

For Dec 2009 – April 2010: up to $8,000 for first-time buyers, the credit does not need to be paid back.

For Nov 7, 2009 – April 2010: up to $6,500 for “long-term residents” buying a new home, the credit does not need to be paid back.

Until April 30, 2011: homebuyer credit continues to be available for qualified members of the U.S. uniformed services.

Dollar Amounts of the Homebuyer Tax Credit

The tax credit is worth 10% of the purchase price of the home. For 2008, the maximum credit is $7,500 ($3,750 for married couples filing separate returns). The credit is also limited to the same $7,500 maximum for unmarried persons who purchase a residence together.
For 2009 and 2010, the maximum credit is $8,000 (or $4,000 for married couples filing separately).

Long-term residents purchasing a new home have a lower maximum credit of $6,500, or $3,250 for married couples filing separate returns.

Limit based on Maximum Purchase Price

No tax credit is allowed if the purchase price of the home exceeds $800,000. There’s no phase-out or gradual reduction of the credit.
Qualifying as a First-Time Homebuyer

For the purpose of this tax credit, a first-time homebuyer is defined as someone who has not owned a primary residence in the three-year period ending on the date of purchasing the home. Married couples are considered first-time buyers if neither spouse has owned a residence in the previous three years.
Qualifying as a Long-Term Resident Homebuyer

People who already own a home can qualify for the tax credit if they buy another home. To qualify, individuals needs to have owned and lived in their residence for at least five consecutive years in the eight-year period that ends on the purchase date of the new property.
Extended Deadline for Qualifying Servicemembers

People serving in the U.S. military, intelligence community or Foreign Service on official extended duty outside of the U.S. have an additional year to qualify for the homebuyer credit.
Limited Time Period for Purchasing a Residence

The credit has a very limited life-span. Individuals will need to purchase a residence after April 9, 2008, and before May 1, 2010. Qualified servicemembers must purchase a residence before May 1, 2011.
What’s a Primary Residence

A primary residence is a residence in which an individual lives most of the time. A primary residence can be a house, condominium, co-operative apartment, houseboat, or mobile home.
Because the tax credit is for people who purchase their primary residence, individuals may qualify for the tax credit even if they own a vacation home or rental property as long as those properties were not their primary residence for at least three years preceding the purchase of their new home.

Income Phase-out Range

The credit is phased out for individuals with modified adjusted gross income between $75,000 and $95,000. For married couples filing a joint return, the phase out range is $150,000 to $170,000. Effective Nov 6, 2009, the phase out ranges start at $125,000, or $225,000 for married couples.
Modified AGI for the First-Time Homebuyer Credit

To determine if the tax credit is reduced or eliminated by the income phase-out range, individuals will need to determine their modified adjusted gross income.
For the purposes of determining income eligibility for this credit, adjusted gross income is modified by adding back the following excluded income:

foreign earned income;
income from Guam, American Samoa, or the Northern Mariana Islands;
income from Puerto Rico.
When to Claim the Credit

The credit is fully refundable, meaning taxpayers will be able to obtain an additional federal tax refund of up to $7,500 even if they have no other tax liabilities.
Taxpayers will be able to claim the credit on their 2008 tax return for homes purchased in 2008. For homes purchased in 2009, the IRS will allow the purchasers to file an amended 2008 return to claim the credit. For the 2009 tax credit to show up on the 2008 return, taxpayers will need to elect to treat the 2009 home purchase as if it were made on December 31, 2008. Guidance released by the IRS provides that taxpayers making this election are eligible for the higher $8,000 tax credit amount and do not need to repay the credit if they take their 2009 credit on their 2008 tax return. Similarly, for homes purchased in 2010, the credit can be taken either on a 2009 tax return or on the 2010 tax return.

Repaying the First-Time Homebuyer Credit

The 2008 credit needs to be repaid in equal installments over 15 years. Unlike any other tax credit, the first-time homebuyer credit must be repaid over 15 years. This pay-back feature applies only to homes purchased in 2008. The credit will works like this: you’ll get your refund when you file the tax return. Then the credit will be repaid as an additional tax on your tax return for the next fifteen years, starting with the 2010 tax return. For the maximum $7,500 credit, this works out to annual repayments of $500 per year. This tax credit amounts to an interest-free 15-year loan for first-time homebuyers.
The credit will also need to be repaid in full if the taxpayer sells the house within the fifteen-year repayment period. The credit also needs to be repaid in full if the property is no longer the taxpayer’s primary residence. The credit will be disallowed if a taxpayer sells the house before the end of the same year in which the house was purchased.

Additional information can be found on his article at:http://taxes.about.com/od/deductionscredits/qt/homebuyercredit.htm

Please contact your tax advisor for immediate tax help or if you need a great introduction, contact Edwin Simons at Simons Accountancy Corp. Ed can be reached via email at ed@simonscorp.com or via the web at www.simonscorp.com

Filed Under: Selling your Home, What's New?, first time home buyers

Fannie Mae says lenders must verify mortgage applicants’ debt loads before closing

September 8, 2010 By Jeffrey Simons Leave a Comment

By Kenneth R. Harney – August 29, 2010 – Reporting from Washington —

I just sent out a video about this and now they make changes… please read this and let me know your thoughts on what you think about the “lenders” obligation to report any change. How will that affect the buyer? The Realtors? The Lenders themselves? We shall see…

Despite earlier reports to the contrary, it turns out that your mortgage lender will not have to pull a second full credit report on you hours before closing on your home purchase or refinancing.

In a clarification of a policy announced this year, mortgage giant Fannie Mae now says that applicants will need to come clean about any debts they’ve incurred since they submitted their mortgage application — or debts they never disclosed during the application. But a formal pre-closing credit report will not be mandatory to confirm their creditworthiness.

Instead, loan officers can use other techniques to verify that you haven’t financed a new car, taken out a personal loan or even applied for new credit in any amount that might make it more difficult for you to afford your monthly mortgage payments. Among the techniques Fannie expects lenders to use on all applicants: commercial or in-house fraud-detection systems that have the capability of tracking applicants’ credit files from the day their loan request is approved to the moment of closing.

Though Fannie made no reference to specific services in its recent clarification letter to lenders, some commercially available programs claim to be able to monitor mortgage borrowers’ credit activities on a 24/7 basis, flagging such things as inquiries, new credit accounts and previous accounts that did not show up on the credit report pulled at the time of initial application.

One of those services is marketed by national credit bureau Equifax and dubbed Undisclosed Debt Monitoring. Aimed at what Equifax calls “the quiet period” between application and closing — often a month to three months — the system is “always on,” the company says in marketing pitches to mortgage lenders.

Home loan applicants failed to mention — or loan officers failed to detect — “up to $142 million in auto loan payments” during mortgage underwriting in first-mortgage files reviewed by Equifax last year alone, according to the credit bureau. Those loan accounts had average balances of $361 a month — more than enough to disqualify many borrowers on maximum debt-to-income ratio standards imposed by Fannie Mae, Freddie Mac and major lenders.

Why the sudden concern about new debts incurred after mortgage applications? It’s mainly because Fannie and others have picked up on a key type of consumer behavior pattern that has helped trigger big losses for the mortgage industry in recent years: Some buyers and refinancers delay creating new credit accounts until they’ve cleared strict underwriting tests on the debt-to-income ratios and been approved for a loan.

Then they splurge. Additional debt loads can run into the tens of thousands of dollars, executives in the mortgage and credit industries say. Had those new accounts been present on their credit files at application, borrowers might have been turned down for the mortgage, or required to make a larger down payment or pay a higher interest rate.

Fannie’s new policy puts the burden of detecting these debts squarely on lenders’ or loan officers’ shoulders. Whether they pull additional credit reports — still an option allowed under the revised policy — or use some form of monitoring service, lenders must guarantee that the debt loads stated in any mortgage package submitted for purchase by Fannie Mae are scrupulously accurate as of the moment of closing. If not, the lender probably will be forced to endure the most painful form of punishment in the financial industry: a forced “buyback” of the mortgage from Fannie Mae.

Billions of dollars in buybacks have been demanded by Fannie Mae and Freddie Mac this year alone — a fact that is likely to make lenders even more eager to conduct some type of refresher credit check or continuous monitoring of all new loan applicants.

What does this mean for you if you’re planning to finance a home purchase or refinance your existing mortgage into one with a lower interest rate? Tops on the list: Be aware that sophisticated new credit surveillance systems are being placed into operation in the mortgage industry.

Next, try not to inquire about, shop for or take on new credit obligations during the period between your application and the scheduled closing. If you want that new loan, keep your credit picture simple — no significant changes, no additions — until you get the mortgage.

During the heady days of the housing boom, nobody was looking for debt add-ons before closings. Now they are scanning for them all the time.

kenharney@earthlink.net – Distributed by Washington Post Writers Group. – Copyright © 2010, Los Angeles Times

Filed Under: What's New?

Diving home sales stoke new worries about economic recovery

September 7, 2010 By Jeffrey Simons Leave a Comment

While it’s very long… This is a great article By Alejandro Lazo of the Los Angeles Times – August 25, 2010

U.S. sales fall for the third consecutive month to the lowest rate since 1999, pushing down stocks and fueling fears of a ‘double dip’ in the housing market.

 

The end of a popular government stimulus program drove home sales in July to their lowest levels in more than a decade, fueling fresh concerns about the economic recovery.

Home sales fell 27.2% nationwide from a month earlier, the National Assn. of Realtors reported. That was a much bigger drop than expected, as the boost evaporated from a now-expired federal tax credit that had been driving sales this spring. The plunge came despite rock-bottom rates on home loans.

Concern over the summer swoon reverberated from Wall Street to the White House. The Dow Jones industrial average briefly slid below the 10,000 benchmark and was down 1.3% on the day.

“You are seeing the sales drop off a cliff again, and that is really starting to scare people,” C.J. Jones, head of institutional trading at Nollenberger Capital Markets, said Tuesday. “Are we going to have a double dip? Nobody knows.”

White House Deputy Press Secretary Bill Burton acknowledged that the drop-off probably was largely due to the expiration of the home-buyer tax credit and called the 27.2% decline a “tough number.”

“There’s a lot more work yet to do,” Burton said.

Randi Young didn’t need to see the latest sales figures to know the market has cooled.

Young, 63, listed her three-bedroom, two-bathroom house in Woodland Hills for $719,000 last month because she plans to take a new job as a hospital administrator in Tennessee.

She has yet to receive one offer on her property, she said, even though she and her agent believe the price is in line with recent sales.

“I may have to take a loss on the property in order not to be supporting two households,” she said, adding that she was fearful of having to rent it. “I don’t want to be in a situation where I get the renter from hell; then I have the expense of having to repair the damage.”

The Realtors association said the seasonally adjusted annual rate of sales was 3.83 million units in July, not only a big drop from June but also a 25.5% plunge from July 2009.

That was the lowest sales level since 1999. The sales rate for single-family homes, which accounts for the bulk of sales, was at its lowest level since May 1995, the group said.

Dan Greenhaus, chief economic strategist for New York brokerage Miller Tabak & Co., called the July downturn “a near, if not outright, collapse in housing.”

July was the third consecutive monthly decline after the April 30 expiration of the federal tax credit, which offered up to $8,000 for certain buyers.

Many people who rushed to beat the April 30 deadline to sign a sales contract were closing their deals in May and June, helping to boost purchase figures. With many of those deals now apparently closed, the market is faced with standing on its own.

Real estate experts said the tax credits led many buyers to speed up their plans to buy houses — a welcome development over the spring, but one that is now sapping demand.

A few months ago “we were getting eight or nine offers on every property, and we knew that we would have a tremendous drop-off, because it was being artificially stimulated,” said Gary K. Kruger, a real estate agent with HomeStar Real Estate Services in Hemet.

“Buyers were borrowing the money from a family member and promising to pay it back when the tax credit came through,” he said. “People still do not have cash to make a down payment.”

The worst drop was in the Midwest, which recorded a 35% decrease in sales of previously owned homes in July from June. The West fared better with a 25% decline. Sales fell 29.5% in the Northeast and 22.6% in the South.

The one bright spot of the report was that the national median home price for all housing types was $182,600 in July, up 0.7% from a year ago. Sales of distressed homes — those sold out of a foreclosure or when the seller is in default — accounted for 32% of sales in July, unchanged from June.

Although housing has historically given the U.S. economy a boost out of prior recessions — as low interest rates spurred buyers and new home construction — that does not appear likely to be the case this time around.

With demand faltering, many economists now expect that home prices — generally on the rise for the last year — may retreat again.

“The tax credit pulled a lot of purchases forward, so people rushed to buy a home to qualify for the credit and it would have been a weak market otherwise,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “Now we are looking at a very weak market and, obviously, people have to sell so we are probably going to see a plunge in prices through 2010.”

The question for some is: Can the housing decline derail the fledgling economic recovery?

“I don’t think a double-dip in housing necessarily drags the rest of the economy with it,” said Nigel Gault, chief U.S. economist for consultant IHS Global Insight. “But clearly it doesn’t help.”

Making matters worse, there are many more homes than buyers right now. Total housing inventory jumped 2.5% at the end of July to 3.98 million homes available for sale, representing a troubling 12.5-month supply at the current pace, up from an 8.9-month supply in June.

The dismal sales figures follow a report last week by MDA DataQuick of San Diego that showed a 20.6% July sales drop in the Southland over the previous month, with sales falling hardest in the Inland Empire counties of Riverside and San Bernardino.

Sales of cheap, foreclosed homes in the Inland Empire had been fueled by an abundance of foreclosure properties being bought up by first-time home buyers.

With prices weakening, buyers have little incentive to jump into the market.

“It’s an absolute standoff,” said Glenn Kelman, chief executive of the online brokerage firm Redfin. “Buyers know that time is on their side and sellers are hard up against their mortgage; they just can’t lower their price any more, so it’s hard to put deals together.”

Times staff writer Jim Puzzanghera in Washington contributed to this report.

Filed Under: Uncategorized

Foreclosures of million-dollar-plus homes on the rise

September 6, 2010 By Jeffrey Simons Leave a Comment

This is really no surprise; however Lauren did a great job of addressing the facts. Please check out her article and if time permits, click on the short video. It’s well work the time. The number of homes in the $1-million-and-up slice of the market that have become bank owned has tripled during the last three years in Los Angeles County, and the trend has shown little sign of slowing.
By Lauren Beale, Los Angeles Times – August 29, 2010

 
Foreclosure is blind.

After the mortgage meltdown and the plunge in home prices, record numbers of ordinary houses tumbled into foreclosure across Southern California as borrowers became unable or unwilling to pay their mortgages. But the rich aren’t so different after all: Million-dollar-plus homes have reverted to lender ownership in increasing numbers — previous sales prices, prime locations and even celebrity pedigrees have provided no immunity.

Earlier this year, Oscar-winning actor Nicolas Cage’s English Tudor joined the foreclosure fraternity. The nearly 12,000-square-foot house, once marketed at $35 million, now is listed for $11.8 million; the seller, Citibank.

The Bel-Air mansion wasn’t even the most expensive lender-owned property — known in the industry as REO, or real estate owned — in Los Angeles County, according to a records search of houses on the Multiple Listing Service in the county’s most posh ZIP Codes.

Higher priced still was the alleged Wells Fargo party house, which was listed nearly a year ago at $21.5 million and sold this month for $14.95 million. The beachfront house in gated Malibu Colony became the center of controversy when neighbors complained that it was being used by a Wells Fargo & Co. executive for social events; the executive was subsequently fired.

Although the pace of foreclosures has slowed in the general housing market in Southern California and much of the nation, it’s still rising for upper-tier homes.

The number of homes in the $1-million-and-up slice of the market that have become bank owned has tripled in the second quarter compared with the same period three years earlier in Los Angeles County, which has the majority of Southern California’s high-priced REO houses. And the trend has shown little sign of slowing, according to data from ForeclosureRadar.

By comparison, the number of homes reverting to banks in all price ranges combined peaked in the third quarter of 2008.

Many of the reasons the rich lose homes to foreclosure are no different from those of moderate- or low-income borrowers — poor financial management, the loss of a job, a drop in home value — said Mark Goldman, a foreclosure expert and loan officer who teaches about real estate investments and finance at San Diego State University. That the top of the market is still seeing increased foreclosures may reflect the staying power of owners with deeper pockets who could hold on to their homes when the economy first faltered, he said.

Some well-heeled homeowners were hit particularly hard when the stock market tanked and the financial scene fizzled. Others, such as the original owners of the Wells Fargo beach house, saw their investments wiped out by Bernard Madoff’s massive fraud scheme.

But none of that unsavory association was apparent in the polished staging and marketing materials about the 3,800-square-foot home prepared for Wells Fargo by listing agent Chad Rogers of Hilton & Hyland. (“Walls of glass create an unparalleled indoor/outdoor environment…. Wake up to the gleaming Pacific in the sumptuous master suite.”)

In fact, unless one reads the fine print, it is sometimes hard to identify a pricey property gone bad.

Rogers’ Hilton & Hyland colleague David Kramer, however, takes a different approach when selling bank-owned property. A 12,000-square-foot contemporary Mediterranean he has listed with other agents recently hit the market at $8.595 million. Included in the MLS remarks describing the property: “lender owned” and “originally listed at $16.95 million.” Who doesn’t want to know they are getting 50% off?, he said.

Not every REO is owned by a bank. Sometimes the new owner is a private money lender.

One such corporate-owned REO in the Beverly Hills Post Office area is an 11,000-square-foot Mediterranean on more than two acres with a tennis court and swimming pool that is priced at $7,999,000. The original owner had purchased the property in the 1990s, but after borrowing against the property for a business that didn’t survive the economic downturn, he couldn’t support the payments, said listing agent Danny Batsalkin of L.A.-based Boulevard Realty.

Unlike the bank-owned competition, the house comes with an offer of financing — 20% down at a 5.99% interest rate and three years of interest-only payments. “This does make it more attractive,” Batsalkin said.

Changes in banking requiring full-documentation loans have altered the financing picture in the upper end of the market, Goldman said.

“In 2006, you could borrow 70% to 80% on a $10-million house,” he said. “Today you might need 50% down.” Working with a seller that is a bank can present challenges.

“In general, my experience has been that banks are really bad at managing real estate,” Goldman said. “You probably have to go through three or four good offers before someone will sign on the line to sell the asset.”

The lender is not motivated to let the property go at a discount, because it still shows a higher value while it’s on the books, he said.

That opinion, however, is not shared by Karen Caskey, an REO property specialist with RS Capital who is based in Beverly Hills.

The bigger lenders all have specific documents and forms to file, such as proof of cash, said Caskey, who has worked with REO buyers and sellers since 1993. “If all their requirements are met, I’ve had an answer the same day.”

Caskey says she is sometimes competing against multiple offers for multimillion-dollar REOs.

Other lenders are lowering prices. A bank-owned property in Beverly Hills listed at $3.1 million that Caskey has been tracking was dropped to $2.65 million this summer. “There’s good savings in the $2-million- to $4-million range,” she said.

Though there has been much speculation about a so-called shadow inventory of REOs ready to hit the market and depress prices further, Goldman is not concerned.

“We’ve been waiting for a year and a half for the deluge of bank-owned properties, and it hasn’t happened yet,” he said.

Another reason to be less concerned about shadow inventory, Goodman said, is that now there’s more interest from banks to modify loans or go for a short sale, in which the house sells for less than the lenders are owed.

Some high-end homes have not returned to the market and instead are being leased back to their former owners.

“The banks will sell them in four or five years” when prices have rebounded, Caskey said.

In the current market, it can take years to get a new owner into a property that went into default. Retired pro ballplayer Jose Canseco lost an Encino home in 2008 to Washington Mutual. He had purchased the property for $2.785 million. A sale finally is pending on the REO, listed at $2.125 million.

Whether luxury REOs represent bargains that won’t be available again for years remains to be seen.

Bryan Ochse of Media West Realty in Burbank, which works with 11 lending institutions and specializes in REO sales, isn’t betting on it.

“We believe the high end is ready to fall apart,” he said.

Goldman is more optimistic about the market’s recovery.

There has been a lot of talk recently “about a double-dip” in the housing market, Goldman said. “I’ve been thinking of the housing market as a light airplane landing and it kind of bounces. Until things stabilize, we’re going to see some up and down here.”

lauren.beale@latimes.com
Copyright © 2010, Los Angeles Times

I’m curious… what are your thoughts? I would love to hear your take on the high end market. Please send me a comment.

Filed Under: Selling your Home, Short Sale Updates, What's New?

Federal foreclosure prevention program is struggling

September 4, 2010 By Jeffrey Simons Leave a Comment
Photo: foreclosure

Under the main Obama administration program to ease foreclosures, fewer than 37,000 homeowners received permanently lowered mortgage payments in July. Modification cancellations are up.
Jim Puzzanghera, Los Angeles Times * August 21, 2010

Reporting from Washington — Just as the housing market recovery has stalled, so has the Obama administration’s main program to ease home foreclosures.

Only 36,695 homeowners received permanently lowered mortgage payments in July through the much-criticized Home Affordable Modification Program, the smallest increase since December, administration officials said Friday.

And the number of people dropping out of the program continued to soar. Overall, nearly half the homeowners who entered the program since it launched in March of last year have dropped out.

Many had hoped the $75-billion program would be a silver bullet to the foreclosure problem, but it’s turned out to be a dud, said independent banking analyst Bert Ely. That’s not surprising, he said, given the depth of the housing market crash and recession, combined with a slow recovery.

“Even with a substantial reduction in mortgage payment and even some reduction in principal, you still have people who are over their head financially because of their reduced financial circumstances,” Ely said. “Isn’t it time to just rethink this whole business of modification … and let the market clear through foreclosures and short sales?”

The Los Angeles-Orange County area continued to have the most active trial and permanent modifications under the program, with 44,617 total modifications in July, or 6.6% of the national total. But that was down from 48,846 total modifications in June.

The Inland Empire was third nationwide, with 35,169 total modifications in July, or 5.2% of the total.

So far, 434,716 homeowners nationwide have received permanent modifications since the program began last year. The pace had picked up significantly starting in December after administration officials began pressuring mortgage servicers to convert more three-month trials under the program into permanent modifications.

The number of permanent modifications nearly tripled from January to May. Even in June, the administration reported that more than 50,000 new permanently modified mortgages were added.

July’s slowdown in the program’s growth comes amid a struggling real estate market.

During the second quarter of the year, there were a record 269,952 home foreclosures, up 38% from the same period a year earlier, according to Irvine research firm RealtyTrac. Last month, Southern California home sales plunged 21.4% compared with a year earlier, according to research firm MDA DataQuick of San Diego.

“While there has been some stabilization in the housing market, it remains clear that we have more work ahead,” said Raphael Bostic, an assistant secretary at the Department of Housing and Urban Development.

The Obama administration program provides cash incentives to servicers to modify mortgages. Homeowners who qualify first get a three-month trial modification with lower payments. If they make those payments, the modification can be made permanent. Only at that point does the servicer get the incentive payment.

The administration’s stated goal was to modify 3 million to 4 million mortgages through 2012.

The pace of new, temporary mortgage modifications under the program slowed in July, increasing just 1.3% to 1.3 million. Overall, about 47% of trial modifications started since the program began have been canceled. In addition, 12,912 permanent modifications have been canceled, mostly because the homeowner missed at least three straight payments.

Increasing numbers of cancellations were the latest problem for the administration’s modification program, which has been plagued by complaints from homeowners of bureaucratic runarounds by servicers, including lost paperwork and unreturned phone calls.

Herbert M. Allison Jr., the Treasury Department’s assistant secretary for financial stability, said the administration expected cancellations to continue as mortgage servicers work through earlier modifications that were made without documentation. Those stated-income modifications were needed last year because so many people were in need of quick foreclosure assistance, he said.

Many of the homeowners who got those early modifications under the program were removed because it turned out they “did not meet the qualifications for various reasons, such as income levels or the fact that they were not in the home itself,” Allison said.

But many of those who were canceled out of the program have been helped by modifications made outside of the Obama administration program.

For the eight largest mortgage servicers, including Bank of America, CitiMortgage and Wells Fargo Bank, 45% of homeowners whose trial modifications were cancelled received an alternative modification. Wells Fargo reported Friday that 87% of the 520,399 active modifications it had done from Jan. 1 to July 31 were through its own programs.

Administration officials said the housing market had stabilized significantly since Obama took office in January 2009, and stressed that homeowners with permanent modifications had a median payment reduction of 36%, or more than $500 a month.

But Bostic said administration officials are not “in happy land” and that the market was not yet “out of the woods.”

Ely said one flaw with the administration’s modification program is that it does not adequately take into account all the other debts faced by homeowners.

“There’s been this hype that you could wave a magic wand, change a few things [with the mortgage payment] and everything would be hunky-dory,” Ely said. “It’s not playing out this way.”

jim.puzzanghera@latimes.com
Copyright © 2010, Los Angeles Times For another great article visit: More Modifications Seem to be Sticking by the Associated Press

Filed Under: Selling your Home, Short Sale Updates, What's New?

Housing Fades as a Means to Build Wealth, Analysts Say

September 3, 2010 By Jeffrey Simons Leave a Comment
Adam and Allison Lyons plan to rent their condo in Chicago until the housing market recovers.

By DAVID STREITFELD * The NY Times – Published: August 22, 2010

Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.

Adam and Allison Lyons plan to rent their condo in Chicago until the housing market recovers.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.

Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.

“People shouldn’t look at a home as a way to make money because it won’t,” Mr. Baker said.

If the long term is grim, the short term is grimmer. Housing experts are bracing themselves for Tuesday, when the sales figures for July will be released. The data is expected to show a drop of as much as 20 percent from last year.

The supply of homes sitting on the market might rise to as much as 12 months, about twice the level of a healthy market. That would push down prices as all those sellers compete to secure a buyer, adding to a slide that has already chopped off as much as 30 percent in home values.

Set against this dismal present and a bleak future, buying a home is a willful act of optimism. That explains why Adam and Allison Lyons are waiting to close on a $417,500 house in Deerfield, Ill.

“We’re trying not to think too far ahead,” said Ms. Lyons, 35, an information technology manager.

The couple’s first venture into real estate came in 2003 when they bought a condo in a 17-unit building under construction in Chicago. By the time they moved in two years later, it was already worth $50,000 more than they had paid. “We were thinking, great!” said Mr. Lyons, 34.

That quick appreciation started them on the same track as their parents, who watched the value of their houses ascend for decades. The real estate crash interrupted that pleasant dream. The couple cannot sell their condo. Unwillingly, they are becoming landlords.

“I don’t think we’re ever going to see the prosperity our parents did, but I don’t think it’s all doom and gloom either,” said Mr. Lyons, a manager at I.B.M. “At some point, you just have to say what the heck and go for it.”

Other buyers have grand and even grander expectations.

In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds of new owners in four communities — Alameda County near San Francisco, Boston, Orange County south of Los Angeles, and Milwaukee — once again said they believed prices would rise about 10 percent a year for the next decade.

With minor swings in sentiment, the latest results reflect what new buyers always seem to feel. At the boom’s peak in 2005, they said prices would go up. When the market was sliding in 2008, they still said prices would go up.

“People think it’s a law of nature,” said Mr. Shiller, who teaches at Yale.

For the first half of the 20th century, he said, expectations followed the opposite path. Houses were seen the way cars are now: as a consumer durable that the buyer eventually used up.

The notion of housing as an investment first began to blossom after World War II, when the nesting urges of returning soldiers created a construction boom. Demand was stoked as their bumper crop of children grew up and bought places of their own. The inflation of the 1970s, which increased the value of hard assets, and liberal tax policies both helped make housing a good bet. So did the long decline in mortgage rates from the early 1980s.

Despite all these tailwinds, prices rose modestly for much of the period. Real home prices increased 1.1 percent a year after inflation, according to Mr. Shiller’s research.

By the late 1990s, however, the rate was 4 percent a year. Happy homeowners were taking about $100 billion a year out of their houses, which paid for a lot of good times.

“The experience we had from the late 1970s to the late 1990s was an aberration,” said Barry Ritholtz of the equity research firm Fusion IQ. “People shouldn’t be holding their breath waiting for it to happen again.”

Not everyone views the notion of real appreciation in real estate as a lost cause.

Bob Walters, chief economist of the online mortgage firm Quicken, acknowledges that the recent collapse will create a “mind scar” just as the Great Depression did. But he argues that housing remains unique.

“You have to live somewhere,” he said. “In three or four years, people will resume a normal course, and home values will continue to increase.”

All homes are different, and some neighborhoods and regions will rebound more quickly. On the other hand, areas where there was intense overbuilding, like Arizona, will be extremely slow to show any sign of renewal.

“It’s entirely likely that markets like Arizona will not recover even in the 15- to 20-year time frame,” said Mr. Humphries of Zillow. “The demand doesn’t exist.”

Owners in those foreclosure-plagued areas consider themselves lucky if they are still solvent. But that does not prevent the occasional regret that a life-changing sum of money was so briefly within their grasp.

Robert Austin, a Phoenix lawyer, paid $200,000 for his home in 2000. Five years later, his neighbors listed a similar home for $500,000.

Freedom beckoned. “I thought, when my daughter gets out of school, I can sell the house and buy a boat and sail around the world,” said Mr. Austin, 56.

His home is now worth about what he paid for it. As for that cruise, “it may be a while,” Mr. Austin said. Showing the hopefulness that is apparently innate to homeowners, he added: “But I won’t rule it out forever.”

A version of this article appeared in print on August 23, 2010, on page A1 of the New York edition.

Filed Under: Selling your Home, What's New?, first time home buyers

Mortgage delinquencies remain high at 1 in 10 loans

September 3, 2010 By Jeffrey Simons Leave a Comment

A brief but to the point article addressing the current state of the Mortgage Market Delinquencies. Written by — E. Scott Reckard of the LA Times

One in 10 American households with a home loan was behind on payments by at least one month this summer, the Associated Press reported.

The wire service quoted a Mortgage Bankers Assn. report on second-quarter delinquencies as saying that 9.9% of borrowers fell into that category as of June 30.

In a worrisome sign, the number of homeowners starting to have problems paying their home loans rose after trending downward last year. But the number of homes in the actual foreclosure process fell slightly, the first drop in four years, according to the Mortgage Bankers Assn. quarterly report.

The report arrived amid fears that a sagging economy could result in another round of declining home prices and rising defaults.

Earlier reports this week showed weaker than expected home sales in July following the expiration this spring of federal tax credit for home buyers. Sales of new homes were at their lowest point since the government began keeping records in 1963.

– E. Scott Reckard

Filed Under: Selling your Home, Short Sale Updates, first time home buyers

Mortgage Fraud Is Rising, With a Twist

September 1, 2010 By Jeffrey Simons Leave a Comment
New data suggest losses from mortgage fraud nationwide rose 17% last year. Above, a view of Las Vegas, where home prices have fallen.

Crooks, Thieves and Cons always find a way around the system, and they are doing it again… the challenge is that it cost you thousands and really slows down the system. Lenders continue to loose trust! Yoru thoughts?

Adapting to Tighter Rules After Collapse, Scammers Turn to More Complex Plots – ROBBIE WHELAN of the Wall Street Journal

New data suggests that mortgage fraud—which got tougher to pull off after the collapse of the U.S. real estate market—is returning in a big way.

Data prepared for The Wall Street Journal by research firm CoreLogic, examining about seven million home loans made by hundreds of lenders, show that losses from mortgage fraud—ranging from falsified credit reports to identity theft—rose 17% last year after declining 57% in the two years after its 2006 peak.

In 2009, $14 billion in loans, or about 0.7% of all mortgage loans made in the U.S., were originated with fraudulent application data.

The figures are a fraction of the mortgage market, but the increase is sharp.

CoreLogic, which tracks fraud only by mortgage value, examines about 7 million loans each year using a proprietary computer program that detects discrepancies in loan documents and predicts the likelihood of fraud. The real losses to banks won’t be known for several years when banks are forced to write off the value of the loans’ value.

Bloomberg News - data suggest losses from mortgage fraud nationwide rose 17% last year. Above, a view of Las Vegas, where home prices have fallen.

Some of CoreLogic’s profits come from selling market research to lenders aiming to cut losses from mortgage fraud.

Investigators and lenders say they are seeing a similar upswing in fraud.

The Federal Bureau of Investigation in June indicted a Phoenix man for mail and wire fraud among other alleged crimes when the agency says he tried to steal a house from his landlord. Also in June, federal prosecutors in New Jersey charged 29 defendants—including 12 real-estate agents, four mortgage consultants, an appraiser, a bank employee and a mortgage broker—with wire fraud in an alleged scheme involving 17 properties in the state and losses of $5.5 million.

“Even though we have certain compliance measures in place, people will adapt whatever scheme,” said Sharon Ormsby, the FBI’s section chief for financial crimes. “It doesn’t matter if the market is going up or down.”

The kinds of fraud that contributed to the mortgage crisis and the collapse of the housing market were relatively simple. Crooks took advantage of the size of mortgage loans and the lax rules governing who qualified for them.

In one common con, they would recruit as accomplices “straw buyers” with good credit to apply for “no-doc” loans, which required no documentation or proof of income, to buy their house. Good credit was required because lenders generally did check a borrower’s credit score, even if they didn’t require pay stubs or bank statements.

When the bank sent funds, typically to make a down payment or for a home-equity loan, the schemers and the fake buyer would split the profits and walk away, leaving the house to fall into foreclosure and the bank stuck with the loss.

Since the mortgage crisis, banks and the government-sponsored entities that underwrite or insure mortgages, including Fannie Mae, Freddie Mac and the Federal Housing Administration, have tightened lending standards and closely scrutinize mortgage applications.

No-doc loans are a thing of the past, and many lenders now require borrowers to furnish proof of employment, tax forms, credit reports, bank statements and other documents.

Fraudsters have adapted to the new restrictions. With banks less apt to lend to borrowers with shaky finances, criminals rely more on falsifying documents, recruiting loan officers and other bank insiders to work for them, and stealing identities to get loans, federal investigators and mortgage industry research reports.

In the Phoenix case, prosecutors allege, Jose Victor Buencamino did all three. Some people who knew Mr. Buencamino describe him as a large, friendly man devoted to his children, the life of many a party and a passionate golfer. Gary Weaver, who rented a home to Mr. Buencamino last year, has a different impression. He said the Arizona businessman tried to snare him in an elaborate mortgage scheme.

According to a federal indictment unsealed in June, while Mr. Buencamino was renting Mr. Weaver’s house on the golf course at Moon Valley Country Club, he intercepted mail intended for Mr. Weaver and obtained his social security number, then applied for a driver’s license in Mr. Weaver’s name.

Then, the indictment alleges, with the help of a friend who worked as a loan officer at a local branch of Compass Bank, a unit of Spanish bank Banco Bilbao Vizcaya Argentaria SA, Mr. Buencamino obtained a $245,000 cash-out mortgage on the property. A homeowner using a cash-out mortgage refinances the home loan for more than the mortgage is currently worth and pockets the difference in cash.

A Compass Bank spokesman didn’t respond to requests for comment. Mr. Buencamino, who couldn’t be located for comment, has not responded to the charges.

A federal agent said he had been tracked to Vancouver, where the agent said he is applying for Canadian residency. Prosecutors involved in the case said he didn’t have an attorney on whom they could serve court papers. U.S. authorities said they were seeking his extradition.

“Fraud continues to be a pervasive issue, growing and escalating in complexity,” said an April report from LexisNexis’s Mortgage Asset Research Institute, which cited as reasons easy access to records via the Internet and, in many cases, though not Mr. Weaver’s, the vulnerability of cash-strapped homeowners.

MARI’s breakdown of the numbers reflects the shift in technique. Fraud related to falsified credit reports has declined each year since the boom years, MARI reports, while the share of mortgage fraud involving false appraisals jumped 50% between 2008 and 2009.

Application fraud—in which borrowers lie about their names, where they live, how much money they earn, their employment, their debt or their assets—remains high, accounting for 59% of all mortgage fraud.

One of the defendants in the New Jersey dragnet, a mortgage consultant with Newark-based Invest & Investors LLC named Viviane Bernardim, allegedly paid accomplices $15,000 apiece to steal the identities of several New Jersey residents who earned $90,000 or more and had good credit ratings. She used those identities to obtain second mortgages on a number of homes in the Newark area, according to U.S. Attorney Paul J. Fishman, head of the office prosecuting the case.

But since good credit ratings are no longer enough to get a mortgage, Ms. Bernardim also needed friends who worked for the lenders to pull off the caper.

“Having players at every level of a conspiracy makes it easier to carry out fraud,” said Mr. Fishman. “But each bad actor and criminal act is also another chance for law enforcement to find a way in.”

Maria Delgaizo Noto, an attorney for Ms. Bernardim, said that she had no comment until an indictment was unsealed, but that her client “maintains her innocence of any criminal activity.”

Associated Press
Beth Phillips, left, a U.S. Attorney in Missouri, announces a pair of indictments Aug. 4 in Kansas City in a $2.7 million mortgage-fraud case.

In Phoenix, Mr. Buencamino’s alleged fraud was assisted by an insider, but also by easy access to public documents on the Internet. After intercepting mail intended for Mr. Weaver and obtaining his Social Security number, Mr. Buencamino applied online for an Arizona driver’s license in Mr. Weaver’s name, according to the criminal complaint and law enforcement agents involved in the case.

When he received the permit, he submitted mortgage application documents by mail to Compass Bank and, with the help of co-conspirator William Baxaveneous, the Compass loan officer, obtained a second mortgage on Mr. Weaver’s home—which had no mortgage—without ever having to meet any bank officials face to face, Mr. Weaver said. He said he learned this from the federal agents investigating the case.

Mr. Baxaveneous’s attorney said he was trying to settle the case and declined to comment further.

Filed Under: Uncategorized

Sherwood Village’s Finest…

August 30, 2010 By Jeffrey Simons Leave a Comment
Exterior Front

Sherwood Village Way is an incredible townhome nestled in the heart of Placentia in the highly sought after community of Sherwood Village . This generous free-flowing floor-plan is nicely appointed with upgrades throughout. Some of the spectacular improvements include Pergo style flooring, hand troweled ceilings downstairs, ceramic tile kitchen counter tops with an updated stove and microwave, updated light fixtures, modern paint, and newer window coverings. The master bathroom has been remodeled with an new tub surround and sliding doors, update tile flooring, and new fixtures. Additionally; the property offers an updated heating and air system and much, much more. The association offers a spacious clubhouse, a great pool and spa area, tons of greenbelts, walk ways and plenty of guest parking.

For Additional Information… Visit: www.1581SherwoodVillageWay.com

Filed Under: Featured Listings
« Older Posts