"Latest News"

Low mortgage rates tough to get.

2009-01-08T20:40:00.000-08:00

Mortgage rates are at their lowest level in decades, but thousands of Bay Area residents are discovering that qualifying for a loan is tougher than it has been in years.

Banks are reluctant to lend at favorable rates to all but the most bulletproof of borrowers, according to area mortgage brokers. Unless you have a gold-plated credit score, low credit-card debt and a big down payment or a lot of equity, those rates of 5 percent or less on a 30-year fixed-rate mortgage may be out of reach.

Adding to the difficulty for many people hoping to refinance loans taken out in the past few years is that the collapse in home values has eroded their equity so much that they don't qualify for a new loan.

"It's like cable TV — there's 200 options and nothing worth watching," said Andy DelGesso, a hospital department manager who failed to qualify to refinance his loan on his San Ramon home because his equity had declined to less than 20 percent of its value.

"We were all spoiled the last few years when it was so easy to qualify," said Patrick Dudum, area sales manager for Equitas Capital in Los Gatos. "Relative to 2004 it is difficult, but if you have followed the market for any length of time, this is a normal market."

A couple of years ago, you wouldn't have needed much of a down payment. These days, to get the absolute lowest rate, it's likely you will need a big down payment and a credit score of 720 or above, and be able to document your income. Banks don't want to see much credit-card debt, either. They say much depends on individual circumstances, with no two borrowers exactly alike.

In any case, government actions to revive the housing market appear to be bearing fruit, even as the lending industry has returned to the tighter standards that prevailed before the housing bubble.

There are still loans for those who don't meet those requirements, but they cost more and carry higher interest rates.

"The credit is available, it's just not as favorable," said Keith Gumbinger of HSH Associates, a New Jersey firm that tracks loan rates. A person with a 620 credit score putting less than 20 percent down "could be looking at 6.5 percent or more," he said. (Credit is rated on a scale of about 300 to 850 in a system known as FICO.)

"It's more back to the basics," said Cathy Warshawsky, president of the Silicon Valley chapter of the California Association of Mortgage Brokers.

Warshawsky said people who have less than 20 percent equity or who are trying to take cash out in a refinance are being told they need to buy mortgage insurance. Also, loans above $417,000 but below $625,500 -- Fannie Mae's limit on so-called "jumbo" loans that meet its standards -- still cost half to three-quarters of a percent more in interest.

"Standards across the country absolutely have tightened," said Arlene Allert, a Wells Fargo Home Mortgage retail regional sales manager responsible for the Bay Area. She said Wells already had tight standards, so it hasn't had to change them as much as others have.

But the biggest hang-up for refinancing is the decline in home values, Warshawsky said.

Jerry McClain of S&L Home Loans in San Jose, who is hospital department manager DelGesso's broker, said he's seeing lots of people who have perfect payment histories, good credit scores, stable income and low credit-card debt being turned down because their equity isn't enough to satisfy lenders.

"In the Bay Area, we not only have microclimates, we have micro-neighborhoods," McClain said. Some areas have lost value dramatically, while others are at least holding their own. If you aren't in one of those areas, unless you have a great deal of equity, you're having a rough time getting a loan.

The banks are demanding tougher appraisals, too.

"Everything has to be explained in greater detail," said appraiser Greg Walker of San Jose. But if you qualify for a loan, the rates are truly great, the best in a generation.

So, despite the stricter standards, first-time buyers are beginning to snap up homes -- still mainly foreclosures and short sales -- tempted by the unique combination of lower prices and low interest rates. They're the people who sat on the sideline during the boom, saving money for a first home.

"I've been stoked about this market for the last three months," said Dudum of Equitas. "The government is going to throw everything in their power at this problem to fix it. We're going reap the benefits. We're going see a boom in the next 24 months, and the last one will pale in comparison."

State Budget Crisis Impacts CalHFA.

2009-01-05T15:58:00.000-08:00

CalHFA- the State of California’s First Time Buyer Program- has frozen lending on all loan programs except the Community Stabilization and Smart Loan Programs. To blame is the State’s current budget crisis.

CalHFA will re-assess the state of the budget crisis and the possibility of lifting the freeze in January. Until that time, only loans currently reserved with CalHFA will be eligible to fund.

What is the Community Stabilization Home Loan Program (CSHLP)?

A conventional 30 year fixed rate 1st mortgage (currently at 5.5%) used to purchase REO properties of participating financial institutions to a max LTV of 100%. For a list of eligible properties go to: http://www.calhfa.ca.gov/homeownership/programs/cshlp_properties.pdf.

What is the SMART Loan Program?

A conventional, FHA or VA 30 year fixed rate 1st mortgage (currently at 5.5%) used to purchase CalHFA REO properties as selected by CalHFA to a max LTV of 100%. For a list of eligible properties go to: http://www.calhfa.ca.gov/homeownership/programs/smart/properties.pdf.

Looks like things are looking up...

2008-12-26T16:33:00.000-08:00

First-time home buyers and investors chasing foreclosures continued to fuel the housing market in Riverside and San Bernardino counties last month, pushing prices down and sales up despite worsening economic conditions, according to figures released Tuesday by a real estate information service.

In Riverside County, where foreclosures represented more than 70 percent of the market, there were almost 49 percent more sales last month than in November, 2007, although the median price of the homes that sold fell more than 38 percent to $220,000. In San Bernardino, where repossessed homes accounted for almost 68 percent of sales, the median price dropped to $185,250, down almost 44 percent from a year earlier, while sales increased almost 39 percent.

Throughout Southern California home sales outpaced last year for the fifth consecutive month in November, with 55 percent of buyers of resale homes choosing repossessed properties, said San Diego-based MDA DataQuick in its monthly report on the housing market.

"Bargains and bargain hunters have kept this market alive through some of the bleakest financial news in memory. There's this renewed sense that you can score a 'deal' - something that had been missing for many years," DataQuick President John Walsh said in a prepared statement.

But last month's home sales in Southern California were still the second lowest for any November in 16 years, Walsh added.

Robert Kleinhenz, deputy chief economist for the California Association of Realtors said November sales held up remarkably considering the blows to the nation's financial market that occurred in September and October, including the federal government's takeover of lenders Fannie Mae and Freddie Mac.

Sales are being buoyed by mortgage money that the federal lenders are pumping into the housing market and by low mortgage rates and dramatically more affordable home prices, Kleinhenz said. However, the lending industry's fear of risk is making it difficult for people to qualify for mortgages, he added..

Foreclosures will continue because of high-risk loans made during the housing boom, now combined with rising unemployment, Kleinhenz said. He said he expects foreclosures, which are depressing home prices, will peak in the second or third quarter of next year. "We have not seen a bottoming out of home prices," he said, predicting that the summer of 2009 is the earliest that home prices may stop falling.

Improved affordability is providing opportunity for first-time home buyers. "A lot of people were left out in the first part of the decade," Kleinhkenz observed.

INCOME PROPERTY

Also investors are taking advantage of an attractive market for buying income properties. At today's low home prices it is easy for an investor to charge enough rent to cover the monthly mortgage, said Bruce Norris, who operates a real estate investment firm in Riverside.

However, foreclosures in the resale market are depressing sales of new homes, with home builders struggling to compete on price, said Mark Knorringa, chief executive of the Building Industry Association of Riverside County. In some cases, he said, builders are not able to sell new houses for enough to cover the cost of construction and development fees.

Changes to FHA as of the 1st of the year...

2008-12-21T19:17:00.000-08:00

As we come to the end of a wild and crazy year full of change in real estate, we wanted to remind you of Changes to FHA Loans that will be taking place soon.

Required Down Payment Increases to 3.5%
Effective 1/1/09. *Remember- the down payment may come from borrower’s own funds or from family member’s gift and the seller may pay buyer’s closing costs, not to exceed 6% of the purchase price.

Minimum Required Credit Score 580
This was recently announced and now matches Fannie Mae and Freddie Mac’s minimum credit score requirement. The effective date will vary from lender to lender as HUD is requiring that all loans delivered to them by March 2009 meet this criterion- lenders will likely mandate the 580 minimum in advance of that date so that the loan funds and is shipped to HUD prior to the cut off. *Remember- manually underwritten loans with nontraditional credit will be exempt from this policy.

Fannie, Freddie execs turned aside warnings...

2008-12-10T16:06:00.000-08:00

Top executives at mortgage finance companies Fannie Mae and Freddie Mac ignored warnings that they were taking on too many risky loans long before the housing market plunged, according to documents released Tuesday by a House committee.

E-mails and other internal documents released by the House Oversight and Government Reform Committee show that former Fannie CEO Daniel Mudd and former Freddie Mac CEO Richard Syron disregarded recommendations that they stay away from riskier types of loans.

"Their own risk managers raised warning after warning about the dangers of investing heavily in the subprime and alternative mortgage market. But these warnings were ignored" by the two chief executives, said Rep. Henry Waxman, D-Calif., the committee's chairman. "Their irresponsible decisions are now costing the taxpayers billions of dollars."

The two companies were seized by government regulators in September. A month later, Freddie Mac asked for an injection of $13.8 billion in government aid after posting a massive quarterly loss. Fannie Mae has yet to request any government aid but has warned it may need to do so soon.

Lawmakers questioned Mudd about an internal Fannie Mae presentation from June 2005 that showed the company at a "strategic crossroads," at which it could either delve into riskier loans or focus on more secure ones.

Questioned about the presentation, Mudd defended his company's effort to compete against Wall Street banks that were pouring money into subprime and other exotic loans.

"We couldn't afford to make the bet that the changes were not going to be permanent," Mudd said.

Mudd and three other former executives of the two companies defended their stewardship in a hearing held by the House committee.

"It's important to remember that Freddie and its sister institution, Fannie Mae, did not create the subprime market," said Richard Syron, Freddie Mac's former CEO.

But Rep. Darrell Issa, R. Calif., blasted Syron and Mudd, along with former Fannie Mae CEO Franklin Raines, and former Freddie Mac CEO Leland Brendsel.

"All four of you seem to be in complete denial that Freddie and Fannie are in any way responsible for this. Your whole excuse for going to risky and unreasonable loans that are defaulting at an incredibly high rate is that everyone is doing it. If we don't do it, we'll be left out."

Fannie and Freddie own or guarantee around half the $11.5 trillion in U.S. outstanding home loan debt. The two companies are the engines behind a complex process of buying, bundling and selling mortgages as investments.

They traditionally backed the safest loans, 30-year fixed rate mortgages that required a down payment of at least 20 percent. But in recent years, they lowered their standards, matching a decline fueled by Wall Street banks that backed the now-defunct subprime lending industry.

Republicans blame Fannie and Freddie, and homeownership policies of the Clinton administration for sowing the seeds of the financial meltdown. Democrats defend the companies' role in encouraging homeownership and stress that Wall Street banks - not Fannie and Freddie - led the dramatic decline in lending standards.

For years the two companies flexed their lobbying muscle in Washington to thwart efforts to impose tighter regulation.

Internal Freddie Mac budget records obtained by The Associated Press show $11.7 million was paid to 52 outside lobbyists and consultants in 2006. Power brokers such as former House Speaker Newt Gingrich and former Sen. Alfonse D'Amato of New York were recruited with six-figure contracts.

The more difficult questions, however, will come next year, when lawmakers weigh what role, if any, the two companies play should play in the mortgage market.

Options include taking the companies private, morphing them into a public utility or a federal agency, or leaving them as government-sponsored entities that have private shareholders and profits, with tougher regulations.

Fannie gives Holiday Hope to Troubled Homeowners...

2008-11-26T07:46:00.000-08:00

Fannie Mae announced today that they will be suspending foreclosures. This comes just in time for the holidays, to the relief of many troubled homeowners.

Fannie Mae will suspend foreclosure sales and the completion of evictions from occupied SFR properties scheduled to occur from November 26, 2008 through January 9, 2009.

The temporary suspension of foreclosures is designed to allow affected borrowers facing foreclosure to retain their homes while Fannie Mae works with mortgage servicers to implement a streamlined modification program scheduled to launch December 15. The initiative applies to loans owned or securitized by Fannie Mae.

How does your client know if this announcement applies to them?

A homeowner can contact their current lender/loan servicer to find out if their loan is owned or securitized by Fannie Mae and if this foreclosure suspension will benefit them. Also, borrowers who have Fannie Mae loans that are scheduled for foreclosure between November 26, 2008 and January 9, 2009, will be contacted directly by the attorney handling the foreclosure.

Should a Homeowner with a Fannie Mae loan work with their existing lender even if they’ve been turned down previously for a modification?

Yes. As part of Fannie Mae’s "Second Look" program, Fannie loan servicers are prepared to work with borrowers during this period, even if previous workout efforts have been unsuccessful.

For more information and a direct link to the Fannie Mae announcement, go to: www.fanniemae.com

2008-11-21T11:59:00.000-08:00

As we’ve come to expect, loan underwriting guidelines continue to change. Here is an update on the status of some of our local first time buyer programs:

CalHFA (State of California’s First Time Buyer Program)

Funds are still available for CalHFA 30 year fixed rate 1st mortgages and CHDAP & ECTP silent 2nd mortgages. As of yesterday CalHFA has changed their underwriting guidelines (again). Credit score requirements are higher and the debt ratio allowances are lower on a tiered basis. Also, CalHFA is now requiring that a borrower come in with 3% down payment from their own funds. Even if a silent 2nd mortgage is used for down payment assistance, the borrower needs to come in with 3% down either from their savings or by gift from a family member.

The County of San Bernardino HAP

As of mid September HAP ran out of money but was able to get interim funds. We were notified today that there are only funds available for 2 more families. HAP funds are first come first served and can be reserved with an accepted and fully executed purchase contract. They will NOT be taking a waiting list when funds are depleted. Their funds will be replenished July 2009.

The County of Riverside down payment assistance program

Out of money since mid September and will have funds replenished July 2009.

The City of San Bernardino

The City of San Bernardino ran out of one of their funding sources but still has down payment funds available for 20% down payment assistance. The borrower must meet the City’s Affordable Housing Payment calculation.

The City of Redlands

Redlands ran out of funds within a week or two of getting their money in July. Their funds will be replenished in July 2009.

We have more information available on all of the above programs. Our toll free number is 1-877-367-8844

As always, in this very dynamic market, if you have been pre-qualified already, please call to get it updated!

2008-11-20T13:56:00.000-08:00

For Immediate Release

November 20, 2008

Statement of FHFA Director James B. Lockhart

“The foreclosure suspension announced today by Fannie Mae and Freddie Mac will help homeowners and servicers utilize the new streamlined loan modification program (SMP) announced by FHFA, Fannie Mae, Freddie Mac and HOPE Now. With this suspension, seriously delinquent borrowers may have an opportunity to avoid foreclosure and work out terms to stay in their homes.”

S.B. County to use funds to target foreclosed homes.

2008-11-20T11:33:00.000-08:00

San Bernardino County plans to use $22.8 million in federal funds to help the local housing market get through the foreclosure crisis.

A portion of the funds would be used to help homebuyers purchase foreclosed homes. The county also plans to fix up and sell blighted homes, and to fix up apartment complexes and make them available to low- and moderate-income residents.

The money was made available through a program approved by Congress in July. Department of Housing and Urban Development officials have notified San Bernardino County that it's eligible for $22.8 million and must apply by Dec. 1.

The Board of Supervisors signed off on its application and approved an action plan for the funds at its Tuesday meeting.

County officials expecPublish Postt to begin implementing the plan by February or March.

"Our region was one of the hardest hit by the foreclosure crisis," said 1st District Supervisor Brad Mitzelfelt.

"It's incumbent upon us as local elected officials to do all we can to preserve our county's quality of life for our residents."

About 42,000 homes in the county are now in foreclosure, said Mitch Slagerman, director of community development and housing for the county.

Eight cities, including Fontana, Rialto and San Bernardino, also expect to receive funds through the federal program, with the amount they receive based on their foreclosure rates.

The county's share will be used in the unincorporated parts of the county plus 13 cities that did not get separate grants. They include Colton, Grand Terrace, Highland, Loma Linda, Redlands and Yucaipa.

US home construction sinks to new record low.

2008-11-20T10:58:00.000-08:00

Construction of new homes plunged last month to the lowest level on records going back nearly 50 years as U.S. builders slashed production while Wall Street nosedived.

Embattled homebuilders, who enjoyed a five-year boom, are now building new homes and apartments at a record-low pace, according to government data released Wednesday. New building permits, a barometer of future activity, also plummeted to the lowest pace on record.

With construction dropping, the number of unsold homes should fall quickly in the coming months, wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics. "But right now housing is a disaster area," he said.

The Commerce Department reported that construction of new homes and apartments fell 4.5 percent in October, the fourth straight monthly decline. Construction sank to an annual rate of 791,000 units from an upwardly revised September rate of 828,000 units.

The results were the lowest on government records dating back to January 1959. Previously, the slowest pace had been in January 1991, when the country was in recession and going through a similar housing correction. Analysts surveyed by Thomson Reuters had expected construction to fall even further to a rate of 780,000 units

Wachovia Corp. economist Adam York forecasts that construction will fall to around 650,000 units by next summer. While that's going to be painful for the nation's homebuilders, it will help stabilize the overall U.S. housing market, he said.

"The broader housing market needs fewer homes," York said in an interview. "We built too many homes in the United States and building less is one way to work off the excess inventory."

The declines in construction last month were led by a 31 percent drop in the Northeast, where construction of single family homes fell to a new record low. They also dropped 13.7 percent in the Midwest. Construction rose 7.5 percent in the West and 1.5 percent in the South.

Applications for building permits, considered a good sign of future activity, fell by 12 percent in October to an annual rate of 708,000 units, the weakest on records dating to early 1960. New permits for single-family houses fell 14.5 percent to 460,000, the lowest level since February 1982.

That decline was surprisingly large, wrote Global Insight economist Patrick Newport, adding that builders "will take a big hit from the financial problems that erupted in September," when the government seized control of mortgage finance companies Fannie Mae and Freddie Mac, and extended a financial lifeline to insurance company American International Group Inc.

The U.S. housing recession has triggered severe economic problems and calls for further action in Washington. Builders' sentiment about market conditions dropped to a record low in November, according to the latest survey from the National Association of Home Builders.

The trade group's housing market index, which started in January 1985, tumbled five points to nine in November, reflecting growing worries over the U.S. financial crisis, rising unemployment and weakening consumer confidence. Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April.

Tighter lending standards, rising defaults and fear about the housing market's future have sidelined buyers, an absence felt acutely by homebuilders such as D.R. Horton Inc., Pulte Homes Inc. and Centex Corp.

In recent weeks, homebuilders have ratcheted up pressure on Congress to take steps that go beyond trying to reduce foreclosures. The industry wants lawmakers to enact new incentives aimed at getting reluctant homebuyers back into the market.

Specifically, the group is asking for a 10 percent tax credit of up to $22,000 for homebuyers that purchase a home over the next year, and a temporary interest-rate reduction on 30-year mortgages.

Would-be homebuyers find themselves in ownership limbo...

2008-11-19T14:20:00.000-08:00

When Ryan Zimmermann last month arrived for a walk-through of the four-bedroom Corona house he had just bought at a bank auction, he got a big surprise. Someone else had moved in.

Unable to close escrow on his $483,000 purchase, Zimmermann is living in a camper near his job in Anaheim. His wife and two young sons are staying with relatives in Montana while he waits for Deutsche Bank, from whom he bought the house, to prevail as the legal owner.

David Dobbs, 27, refuses to leave. Neighbors said he showed up late one night a few weeks ago and unloaded his belongings from a small trailer. He filled the once empty swimming pool and spa and had cable hooked up to his wide-screen television.

Ryan Zimmermann cannot close escrow on the Corona home he “won” at auction because a “renter” has moved into it.

Police allowed him to stay after he showed them a rental agreement and what he said was the deed proving this landlord is the owner.

"I have the legal documents to be here. That's why I'm not gone," Dobbs said in an interview.

Squatting in vacant homes typically is the lifestyle of derelicts and the homeless, who stay a few nights and leave quickly when they are discovered.

However, the legal standoff keeping the Zimmermann family out of the home, say real estate agents, is the work of an organization that is seizing foreclosed houses in Riverside County by producing deeds that, at first glance, look legitimate because they have been notarized and filed with the county recorder.

The organization, which claims to be a religious corporation and to have "sovereign" immunity from federal and local laws, is under investigation by the Riverside County district attorney, said Jim Larsh, the district attorney's senior investigator.

Gwendolyn Johnson, the woman whose signature is on a number of the documents purporting to deed houses to Sovereign Solomon Brothers Archbishop Sole, denies that anything that organization is doing is illegal or that the people living in the houses can be legally evicted.

Johnson said in a telephone interview that the organization is based in Nevada and headed by an archbishop who is her uncle, King Solomon II. She described herself and her uncle as sovereign, which she said means among other things they are not required to pay taxes, mortgages or homeowner association fees.

Johnson, 34, said she is a Corona resident and previously worked for 11 years in the mortgage industry as an underwriter. She said since July she has deeded into sovereign ownership 23 houses in Riverside and San Bernardino counties.

A search of public records in San Bernardino county failed to find any such deeds.

Recording Deeds

However, 10 deeds were recorded in Riverside County between July 24 and Oct. 8 that purport to transfer ownership of houses to "Sovereign Solomon Brothers Archbishop Corp. Sole." The houses were in the cities of Corona, Murrieta and Palm Springs and in the unincorporated communities of Romoland and Victoria Grove.

As of Nov. 3, RealtyTrac, an online foreclosure research firm, found that six of those houses had been repossessed by banks and the legal owner of a seventh house was an individual in default.

King Solomon II did not answer a letter asking for an interview that was sent to the mailing address of Sovereign Solomon Brothers at 160 W. Foothill Parkway, a mail box center in Corona. He also could not be reached at a house in Fallbrook that is described in court records as the home of Terry Lee Herron, also known as King Solomon II, a 42-year-old with a previous felony conviction for auto theft who was charged earlier this year for illegal possession of a firearm.

The Fallbrook house was posted with the same kind of signs saying "spiritual sanctuary" and "no trespass" that can be found on other houses deeded over to Sovereign Solomon Brothers.

By filing deeds that cloud title to a house, someone can get free shelter and "hold a house ransom" by demanding cash from banks that want to avoid the delay and expense of an eviction process, which can take 60 days or longer, said Pete Nyiri, owner of Top Producers Realty & REO, which specializes in selling bank repossessed houses.

"This is going to be the next big wave of rip-offs because it is so easy," Nyiri said.

The vacant houses claimed by Sovereign Solomon routinely display a paper entitled “notice of forfeit.”

Oversight

Obtaining a blank deed is easy. Such forms can be purchased at stationary stores or downloaded from the Riverside County assessor's Web site.

Larry Ward, Riverside County's assessor-county clerk-recorder, said it is the role of his office to record documents in order to make them public, not to determine whether the chain of title was broken illegally with a phony deed.

Ward said the recorder's job is very narrow: to make sure the document contains all the information required for recording, such as the signatures of the grantor and grantee and legal description of the property, and that it is notarized.

Bobbi Schutte, Riverside County's chief deputy recorder, said that at the request of the district attorney, the office has been watching for Johnson and on Oct. 30 the police were called and stopped Johnson from recording deeds on four more houses in Riverside and another in Corona.

Once squatters take over a house, the problem of getting them out can be challenging. When police are confronted with dueling ownership claims, each supported by paperwork, they typically refuse to oust the occupants and defer a decision about who is the rightful owner to the civil court system.

"The police are not set up to be a judge and jury. They don't know who's telling the truth," said Barry Lee O'Connor, a Riverside attorney who specializes in evictions and landlord tenant law.

A bank that ousts a squatter from a foreclosed house typically declines to sue for damages or to seek criminal prosecution, said Ken Kellermann, president of Corona-based Sales Advantage Group, another firm that sells bank-owned homes.

But Larry Roberts, lead deputy district attorney in charge of San Bernardino County's real estate fraud unit, said such schemes could involve multiple crimes. He said the corrupting of public records with a phony deed is a felony.

Also, someone who collects rent from tenants put into a house he does not own commits a crime called rent skimming, also a felony, Roberts said.

Biblical Authority

Riverside County records show that on Sept. 25, Johnson deeded the house at 3240 Star Canyon Circle to Sovereign Solomon Brothers Archbishop Sole.

A representative of First American Title said in tracking the ownership of the house from person to person he could easily see that the last legitimate owner in the chain of title was Deutsche Bank, from whom Zimmerman said he had expected to take title.

No one ever deeded the property to Johnson, which raises the question why she believes it was hers to give away.

Inside the front windows of vacant houses claimed by Sovereign Solomon is routinely displayed a paper entitled "notice of forfeit" that in murky language claims the legal owner has 24 days, excluding the Sabbath, to accept an amount of silver as payment for the property. References cited as authority for the notice are biblical verses from Leviticus, Exodus, Psalms and Ecclesiastes.

Johnson said if no one responds to a notice of forfeit on a house, she is free to deed that house to the sovereign nonprofit religious organization. The people she puts in such houses, she said, do not have the credit or income necessary to buy such a home. They are happy to become "caretakers" of the houses for which they pay no rent but pay a "pledge" of $500 a month, she said.

"I am making somebody happy. That's a blessing," she said.

'Legally Ridiculous'

Johnson's argument for claiming vacant properties has no basis in law, say legal experts.

"Finders keepers doesn't work with houses," said Detective Steve Sears of the Corona Police Department, who had started a preliminary investigation before turning it over to the district attorney's office.

Edward Treder, managing partner for Barrett, Daffin, Frappier, Treder & Weiss, a law firm representing mortgage firms in eviction and other litigation, said he is familiar with the practice of groups claiming to be sovereign and beyond the government's authority.

"It is legally ridiculous, but there are a growing number of people out there that believe this," he said.

"People like this have always been around, but in times of rising defaults and foreclosures it really presents an opportunity for them to spread their message and expand their following."

Heidi Beirich, spokeswoman for the Alabama-based Southern Poverty Law Center, a nonprofit civil rights group that has been tracking sovereign citizen groups for decades, said she knew nothing about Sovereign Solomon Brothers.

But she said organizations that similarly proclaim themselves sovereign from the U.S. government and exempt from taxation thrived in the 1970s through the early 2000s and attracted members who were largely, poor, white and rural.

She said what started as a white, anti-government movement in the last year "has shockingly become part of the black nationalist scene."

The new black sovereign groups, she said, are concentrated in cities and suburbs and are notorious for their involvement in financial schemes.

Terry Lee Herron, left, and Gwendolyn Johnson

IRS Alerts

Besides taking possession of vacant foreclosed homes, Sovereign Solomon Brothers and an affiliate, King Solomon II Archbishop Sole, have been granted title to houses by former owners who expect they can thereby avoid paying mortgages and property taxes, Johnson said.

The Internal Revenue Service in the past has issued alerts for taxpayers to be wary of promoters offering a scheme that misuses "corporation sole laws" to enable people to escape paying federal income taxes and other personal debts.

The IRS says such laws were intended to allow religious leaders to incorporate for the purpose of protecting from creditors property dedicated to the benefit of a legitimate religious organization.

At least one household is displeased with the help it received from Johnson and Solomon.

Shawna Clark, 30, said in July her fiancé, Anthony Fuller, deeded his house in Murrieta to King Solomon II Archbishop Sole as a last-ditch effort to avoid foreclosure after he lost his job and fell behind on mortgage payments.

Clark said Johnson was a friend she had known since they were teenagers in Santa Ana. She said Johnson assured her that the sovereign organization had the power to get her fiancé a modification of his mortgage to make it affordable. She said Fuller paid $500 for the assistance.

But Clark said instead of saving the house from foreclosure, Johnson's uncle, Solomon, told Fuller he would have to start paying rent or get out.

She said Solomon tried to change the locks on the house and later threatened that if Fuller and Clark did not leave in 72 hours he would put them out with "Homeland Security."

Clark said she and her fiancé reported the threat to the police. The Murrieta Police Department verified that a report by Clark was made. Clark said she and her fiancé also told Solomon and Johnson that they did not owe them rent because the house has been repossessed by Bank of America.

Johnson could not be reached to comment on Clark's complaints.

Lookout for Squatters

The homeowner association of Victoria Grove, an 1100-home gated community in southwestern Riverside County, in its Oct. 23 newsletter, told residents to "beware" of squatters who have been pulling for-sale signs out of the front yards of bank-owned homes and moving in.

"It is like something out of the 'Twilight Zone,' " said Scott Elliot, a retired lawyer and president of the association. Elliot said it looks like the squatters have obtained the combinations to locks boxes and so have not had to break into the homes.

Elliot said the association has reported the problem to the Riverside County district attorney's office in hopes of stamping it out.

"Why should someone have the benefit of a $400,000 house if they don't pay for it?" Elliot said.

Robert Hesslink Jr. owns a house on Brianwood Drive in Victoria Grovenot far from one on which Sovereign Solomon Brothers has recorded a deed. He said he became suspicious when he saw two adults and several children arrive in the upper-middle income neighborhood with a small trailer and a beat-up Suburban loaded with clothes.

Hesslink said since the squatters have moved into the neighborhood, he has worried about his family's security and bought a dog he hopes will bark to warn him of trespassers.

Kellermann said Sovereign Solomon Brothers' "notice of forfeit" one day appeared on his Brianwood Drive listing next to where alleged squatters live. He said he tore it down and replaced it with signs that say "This is bank property, not for rent or lease."

Determined to keep the squatters at bay, Kellermann said he has screwed shut the windows and has someone drive by the house every 24 hours to make sure no one tries to get inside. He said he may also pull out the toilets.

He said he can't cancel the utilities because he needs lights to show the house and water to keep the lawn green.

Prudential California Realty agent Tom Tennant said Monday, with the help of the Riverside County Sheriff's Department and an alert neighbor, he was able to take back control of the Brianwood Drive house that Deutsche Bank owns but which squatters had occupied for seven weeks.

Tennant said Sunday a neighbor called to tell him that one group of squatters on which Deutsche Bank had begun an eviction process had moved out but within 15 minutes another group had arrived to take their place.

Tennant said was able to convince sheriff's deputies Monday that the new squatters were there illegally and had them locked out.

'Crazy Nightmare'

Tennant, also the agent trying to sell the house on Star Canyon Circle that Sovereign Solomon Brothers has claimed, said when one of his agents asked Dobbs what it would take for him to leave, he said $10,000 but that Deutsche Bank refused his demand. When asked about the $10,000, Dobbs said he had been joking.

At Prudential's request, the city of Corona has turned off the water to the house.

On Wednesday, police responded to neighbors' complaints about water flowing off the property, apparently the result of Dobbs trying to gain access to water after the city meter was removed. He was arrested and charged with vandalism and theft of public utilities.

Tennant said he hopes that lack of water will put the residence in violation of the city's health and safety codes and force Dobbs out. He said Southern California Edison Co. and The Southern California Gas Co. as a matter of policy will not refuse service.

Tennant said the Corona Police Department also as a matter of policy refuses to evict Dobbs, leaving that responsibility to the courts.

"Unfortunately I am at a standstill," Tennant said.

Zimmermann, a 34-year-old plumbing equipment salesman, said he will try to get back most of the $25,000 down payment he made on the house in Corona but he still wants to keep the escrow open in case the bank can sell the house to him before he finds another.

He said when he told his wife about the squatters, "She cried a while. ... But then you have to laugh. It is like a crazy nightmare."

Eviction takes time

Steps required for eviction in California after a house is repossessed:

The former owner gets a three-day notice to vacate and a tenant gets a 60-day notice.

The bank then files an unlawful detainer lawsuit in Superior Court after which the occupant of the house has five days to answer.

If the bank is unable to serve the occupant in person with the lawsuit after three attempts over two days, the bank applies for a judicial order to have a copy of the lawsuit posted on the outside of the house and sent to the occupant by certified mail.

If the lawsuit is sent by mail, the occupant of the house has 10 days to file an answer in Superior Court.

If the occupant fails to file an answer to the unlawful detainer, the bank can get a judgment and have a writ issued by the court clerk to retake possession of the property. The bank submits the writ and instructions to the sheriff to lock out the occupant. The process can take two weeks.

If the occupant of the house files an answer to the bank's lawsuit, the bank then must file a request for a court hearing, which is scheduled in two weeks. However legal motions can further delay the start of the hearing and if the persons being evicted requests a jury trial, the wait will be longer.

If the court judgment is in favor of the bank, the sheriff will perform a lock out.

After an eviction, the bank gets restitution papers to ensure that anyone who later moves into the house without the bank's permission will be presumed to be a trespasser and subject to a sheriff lock out.

Bailout Efforts Shift To Consumer Debt.

2008-11-15T19:53:00.000-08:00

A guest post from Frank Shump. Frank is a veteran from the financial services industry, and currently authors a blog called Thefinancecastle.com, which documents his thoughts on money matters and his adventures in self employment.

From its inception, the primary focus of the $700 billion bailout package was on businesses or, more importantly, banks and financial institutions. The plan was aimed at providing financial support to a system that had ceased to function properly, with credit markets freezing up and firms gasping for the additional capital they needed with no one willing to give it to them. Of course once the government gave them that capital it’s been having a hard time persuading them to lend it out again. Still, it appears that the Treasury is ready to broaden the bailout’s goals and provide assistance to an entirely new demographic: Consumer debt.

Treasury Secretary Henry Paulson came out today to let us know that Uncle Sam would not only be bailing out banks and other troubled lenders, but is going to (attempt) some rescuing of consumer debt firms as well. This “second stage” of the bailout, as it’s being called, officials are hoping to bring in some private money as well, which would give the bailout efforts more weight. In a surprising change in focus, Paulson said that the government will no longer be planning to buy troubled mortgage assets, which was its original intention, but will continue to examine ways to help homeowners so that they can somehow stem the tsunami of foreclosures that’s appeared in recent months to be gaining momentum.

Paulson noted that “Although the financial system has stabilized, both banks and non-banks may well need more capital given their troubled asset holdings, projections for continued high rates of foreclosures and stagnant U.S. and world economic conditions, “Second, the important markets for securitizing credit outside of the banking system also need support,” he said. “Approximately 40 percent of U.S. consumer credit is provided through securitization of credit card receivables, auto loans and student loans and similar products. This market, which is vital for lending and growth, has for all practical purposes ground to a halt.”

What this means is that the Treasury will not be aiming efforts at loosening up another important aspect of our economy: consumer spending. These consumer finance companies that he mentioned are the ones who provide us with car loans, student loans, and credit cards. Much like investors don’t want securities that are backed by mortgages anymore, they’ve lumped investments backed by other loans into that pack as well, and so firms like American Express are having some trouble getting the funding they desperately need.

The thinking is that by providing them with capital, they’ll once again begin lending out to consumers, which should get us to spend more and help support the economy. Then again that was the idea when they bailed out the banks, too, and getting them to start lending again has been much akin to pulling teeth. As a result there’s been a good amount of criticism that these banks are using the money for their own purposes rather than helping struggling homeowners and the overall economy. What’s stopping consumer lending firms from doing the same?

Sellers out of touch with realty reality...

2008-11-15T16:50:00.000-08:00

The housing market may have bust, but many homeowners are still living in a bubble.

Despite dismal housing headlines and reports showing falling prices nationwide, owners in some once-hot areas still believe their home is gaining value or at least holding its own. And by hanging onto too-high expectations, sellers are unwittingly keeping the market from finding a bottom.

Real estate professionals across the country are reporting difficulty convincing sellers the true market value of their homes.

"It's like pulling teeth in this market," said Twyla Rist of Reece & Nichols Realtors in Kansas City, where prices are off between 7 percent and 15 percent. "Even with everything being said, you still have people that think my house is better than everybody else's."

A recent Coldwell Banker report showed that more than three-quarters of its real estate agents surveyed said most sellers have unrealistic initial listing prices for their homes.

Likewise, an unscientific study released last week by real estate Web site Zillow.com found that half of homeowners polled think their home's price has increased or stayed the same in the past year.

"We expected people to get a little more in touch with reality especially over the summer, because you couldn't turn on the TV or read the newspapers without seeing that home prices are falling," said Amy Bohutinsky, a spokeswoman for Zillow.com. "It was very surprising to see this kind of disconnect."

In fact, the median sales price of an existing home dropped 9 percent to $191,600 in September from a year ago, according to the National Association of Realtors.

It took John Cicero and his wife an appraisal, some convincing by their real estate agent and some hard-to-swallow facts to get them to lower the $525,000 listing price on their five-bedroom home in Valrico, Fla. They closed two weeks ago for about $380,000.

"We didn't really understand the severity of the market," Cicero said. "We lost close to $100,000 in equity so we were walking away from real money."

They built the stucco home four years ago for $380,000 and poured more than $80,000 into it, putting in hardwood floors, granite countertops, ceiling fans, blinds, drapes and a built-in surround-sound stereo system. They also expanded the deck by the pool, turning it into what Cicero called an "executive entertainment area."

"You think you have this wonderful home and people will want to buy it," he said, "but you're wrong."

Dan Ariely, a behavioral economics professor at Duke University's Fuqua School of Business and author of "Predictably Irrational," said the "better-than-average" effect is at play. And knowing your next-door neighbors sold their house for $500,000 makes it even more imperative for a homeowner to top that price.

"We feel that we're better than other people. We're unique. We're special," he said. "It stands to reason that our houses are also special."

The attachment to a house only intensifies the more a homeowner personalizes it, creating an extension of themselves.

"The moment we invest in something, we fall in love with it," Ariely said, which applies to something as sentimental as children or as trivial as origami.

That puts real estate agents in a precarious position of pricing a house to sell, but not insulting the homeowner by recommending a lower asking price. To a homeowner, a low, but realistic, listing price is "like someone calling your kids ugly," Ariely said with a laugh.

Nancy Batchelor, a real estate agent at Esslinger Woooten & Maxwell Realtors in Miami, says she usually agrees to list the owner's asking price as long as they can reevaluate the price in 30 days if the house doesn't sell.

"I would like to believe their house is different, but I also don't want to do them a disservice," Batchelor said.

Joni Herndon, an appraiser in Tampa, said real estate agents are calling her in to help homeowners grasp the reality of their home's value. Herndon frequently fields questions from disappointed homeowners after an appraisal, and has to explain how broadly the market is declining and why what a neighbor got two months before for his house doesn't apply anymore.

"But sometimes you just can't get through to people," she said.

She said homeowners who bought newly built homes at the height of the boom are the most stubborn because they're trying to get back every penny they spent on customized changes.

One homeowner Herndon did an appraisal for refused to lower her listing price for the third time, insisting that such features like a raised roof and more space between two windows in an upstairs bonus room set her house apart from others just like it.

"It's the mine is better than yours mentality," Herndon said.

The homeowner originally asked the builder to move the windows another foot apart and raise the roof by 12 inches so the wall could fit her big-screen television. She also spent $15,000 in extra landscaping and exterior lighting, and $2,900 on designer fans, Herndon said.

"You could have put $1,000 worth of fans in the house and blown just as much air," Herndon said.

"Owners are very concerned about how much they paid for particular changes, but buyers out there don't value them," she said.

Herndon appraised the house, also in Valrico, Fla., at $430,000. The seller put it on the market in April at $500,000, and cut the asking price to $469,5000 in July. The home is still on the market, and the seller declined to be interviewed.

The market would bottom out sooner if sellers weren't so stubborn and didn't keep prices artificially high, Arielly said.

Homeowners can't stand taking a loss on their properties, yet keeping their home on the market at an inflated price could wind up costing them more.

Homeowners need to look at the larger financial picture, Ariely said, and determine how much there is to gain or lose by keeping a home on the sales block longer.

Real estate agents press this point on their clients, saying no one wants to buy the most expensive house on the block.

After the first reduction in listing price, a psychological barrier, subsequent cuts come easier, most agents say.

Meltdown 101: Mortgage help from banks, government.

2008-11-13T10:11:00.000-08:00

With more than 4 million homeowners behind on their mortgage payments, the government and major banks are scrambling to help at-risk borrowers avoid foreclosure.

What exactly have they done — and can they do more?

For one thing, the government and the mortgage industry said Tuesday a new plan will allow lenders to alter delinquent loans more quickly. That follows Citigroup's announcement late Monday that it would expand its efforts to help its beleaguered borrowers. Other national banks have initiated similar programs.

But what else is on the table?

Here are some questions and answers about mortgage assistance:

Q: What is a foreclosure moratorium?

A: A foreclosure moratorium is when a lender holds off on starting a foreclosure or completing a foreclosure sale on a delinquent borrower, to give both parties time to rework the loan or set up a repayment plan.

Oftentimes, the lender sets conditions for a moratorium. They might require, for example, that the home be the borrower's primary residence and that the borrower have enough income to make affordable mortgage payments.

Q: What is a repayment plan?

A: When a lender works out a plan for a borrower to pay back missed payments, it's called a repayment plan, or forbearance. A lender can increase the monthly payment until the missed payments are paid off or add the missed payments to the total principal the borrower owes.

Q: Can a restructured mortgage include an interest rate reduction?

A: Yes — to lower monthly payments, a lender might decrease the mortgage interest rate either permanently or temporarily.

Q: What is a principal reduction?

A: A principal reduction, or forgiveness, lowers the total principal amount the borrower owes on the mortgage. That, in turn, decreases the monthly payment.

Q: How can changing the length of the loan help a struggling borrower?

A: To lower payments without changing the interest rate, a lender can extend the time required to pay off the loan. For example, a lender might restructure a 30-year mortgage as a 40-year loan, shrinking the payments by stretching them over an extra 10 years.

Q: What is a short sale?

A: A short sale is when a lender allows a borrower to sell the home for less than what's owed on the mortgage, and accepts that amount as enough to satisfy the debt. For a borrower, a short sale is less detrimental on a credit report than a foreclosure, but it's still a hefty stain.

Q: What other methods could lenders be using to help at-risk borrowers?

A: Lenders and the government are using all the tools available to them to help struggling borrowers. However, many of the most far-reaching remedies weren't made available until it was too late for many homeowners. And the continued rapid decline in housing prices, the stalled credit markets and the weakening economy have only made matters worse for troubled borrowers.

Q: Why is it hard to rework a loan?

A: In the late 1980s, Wall Street started to slice up mortgages and repackage them into securities that were sold to investors. As a result, many different investors could end up owning pieces of the same mortgage.

Now many of these investors are reluctant to allow significant modifications of the loans they partly own — like reducing the principal balance — because they don't want to take a huge investment loss.

Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged into these sorts of investments.

Q: Who else can help borrowers?

A: Borrowers are encouraged to contact their lenders or mortgage servicers as soon as they think they may fall behind on a payment. The sooner contact is made, the easier it is to head off larger problems.

Homeowners can also contact a nonprofit housing or credit counseling service to help with lender negotiations. Reputable services can be found, state-by-state, on the Department of Housing and Urban Development's Web site, and the Homeownership Preservation Foundation has a 24/7 toll-free hot line: 888-995-HOPE (4673).

Mortgage Rescue Program Coming...

2008-11-12T15:36:00.001-08:00

Payments that do not exceed 38 percent of a borrower's income will be considered affordable.

The regulator for mortgage finance companies Fannie Mae and Freddie Mac said it would unveil on Tuesday a new loan modification program that is meant to make mortgage payments more affordable and prevent foreclosures.

Sources had told Reuters on Monday that under the plan, mortgage servicers will lower a homeowner's monthly payments to affordable levels if such a move will keep those borrowers in their homes.

Payments that do not exceed 38 percent of a borrower's income will be considered affordable, the sources said.

Officials from the Federal Housing Finance Agency and the Treasury and representatives from the mortgage lending industry will hold a news conference on the plan at 2 p.m. EDT.

Since Fannie Mae and Freddie Mac are the nation's two largest mortgage finance companies, their business practices often become the industry standard. Policy-makers hope the new plan will encourage other mortgage finance companies to show forbearance on troubled loans.

LOAN MODIFICATION MODEL:

The plan is similar to one conceived by the Federal Deposit Insurance Corporation to better match a troubled borrower's income with his monthly payments.

The FDIC turned IndyMac Bancorp Inc into a petri dish for such loan modifications when it seized the failed company in July.

FDIC Chairman Sheila Bair is not scheduled to take part in the event on Tuesday, which will take place at the offices of the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac.

Separately, the Department of Housing and Urban Development is considering an expansion of its own aid program -- Hope for Homeowners -- under which HUD's Federal Housing Administration can tap a $300 billion kitty to underwrite failing loans, the sources said.

That program, which Congress approved in July, went into effect in October. However, it got off to a slow start and officials are eager to loosen the terms and cut some red tape to make it more appealing to mortgage companies.

Under the program in its current form, a mortgage finance company must have a home reappraised and then erase ten percent of its value before the loan can win a government guarantee. Policy-makers are considering lowering that required write-off, sources said.

The HUD does not plan to announce a change to the Hope for Homeowners program on Tuesday, an agency spokesman said .

The mortgage industry will be represented on Tuesday by HOPE NOW -- a coalition of lenders, mortgages services and investors brought together under the auspices of the Treasury Department to expand aid to homeowners.

While the group has helped conceive plans to ease loan terms, many consumer groups have said such an industry-led effort to staunch foreclosures is not enough.

Promises, promises: Vision to collide with reality.

2008-11-06T17:57:00.000-08:00

Over a two-year campaign, Barack Obama laid out a vision for the nation's future in soaring speeches that enthralled his audiences. With his victory in the presidential election on Tuesday, those goals will collide with daunting realities.

President Obama will inherit a budget deficit that many analysts say could hit a trillion dollars for the first time in history, severely crimping any promises for tax cuts or spending on new programs. He faces a diving economy that has traumatized Americans trying to buy a home, pay for college or plan for retirement. And he'll confront the complexities of trying to extricate U.S. forces from Iraq, and a resurgent conflict in Afghanistan. A look at Obama's campaign promises and the challenges that stand in their way:

THE ECONOMY, TAXES AND DEFICITS

The promise: Retain President Bush's tax cuts for families making less than $250,000 a year and provide more relief to the squeezed middle class by creating new tax breaks for lower-income families; protect middle-class taxpayers from the Alternative Minimum Tax; exempt seniors making less than $50,000 a year from paying income taxes, expand the tax credit for college and provide incentives to encourage savings, and help pay for child care and mortgage expenses.

For the shorter term, Obama supported the $700 billion financial bailout plan passed in October and backs a second stimulus plan that would provide up to about $150 billion on top of the $168 billion package of tax rebates passed earlier in the year. It could provide tax rebates or credits, extend jobless benefits and spending on infrastructure projects like roads and bridges, as well as sending food aid to the poor and money to states to pay their Medicaid bills. Separately, Obama also proposed a $1,000 emergency energy rebate to families and penalty-free withdrawals of up to $10,000 from 401(k)s and IRA's. He also proposes a $3,000-per-employee tax credit to companies for each new job they create.

The problem: Obama's spending plans and middle-class tax relief will confront exploding budget deficits - $438 billion this year, and growing as the down economy reduces tax revenues and increases spending on bailouts and anti-recessionary programs. The nonpartisan Tax Policy Center estimates Obama's proposals would reduce projected tax revenue by $2.95 trillion over the next decade, compared to what would happen if Bush's tax cuts were to expire as scheduled at the end of 2010.

ENERGY

The promise: A crash program to begin to wean the country off of its dependence on oil. The goal is to reduce U.S. petroleum demand by an amount equal to the 3.5 million barrels a day now imported from unfriendly Venezuela and the volatile Persian Gulf. Obama also would invest $15 billion a year over the next 10 years to spur commercial development of alternative energy - wind, biomass and solar - and more energy-efficient buildings and automobiles. And he wants a short-term rebate of $1,000 per couple to help with rising energy costs.

The problem: Here, too, the economic crisis throws new spending into doubt - including Obama's alternative energy plans. The $150 billion program also is tied to Congess tackling global warming by putting a price on greenhouse gases, a prospect that faces many obstacles. The call for an energy rebate also may lose its urgency as gasoline prices have dropped by more than a third and heating oil by almost half from their peaks last summer.

HEALTH CARE

The promise: Increase the number of people with health insurance by having the government subsidize the cost of coverage for low- and middle-income families. To help pay for that expense, increase taxes for those families earning more than $250,000. Obama also would require employers not offering health coverage to pay a percentage of their payroll toward a national health plan. Small businesses would be exempt. He would also mandate that children have health insurance, and he would expand who can participate in Medicaid and the State Children's Health Insurance Program.

Obama's plan would let people choose a public, Medicare-like plan or browse a shopping center of sorts for private insurance plans. The National Health Insurance Exchange would create rules and standards for participating private plans, and insurers would have to issue every applicant a policy regardless of pre-existing health conditions.

The problem: While the plan would help millions of people obtain health insurance, health analysts say it falls short of universal coverage. The Tax Policy Center says the Obama plan would reduce the number of uninsured by 18 million in the first full year of operation, from the current figure of 45 million. That still would leave millions of uninsured adults. Meanwhile, the penalty on employers that don't offer health insurance could increase the cost of operating a business. Also, the plan will cost an estimated $1.6 trillion over 10 years, according to the Tax Policy Center.

FOREIGN POLICY

The promise: Obama says he would engage both allies and adversaries to repair the U.S. image abroad and regain leverage and leadership that he says Bush squandered with the Iraq war. He says he will marshal international pressure against Iran, boost U.S. efforts against extremists along the Afghanistan-Pakistan border and get a faster and firmer start on Middle East peacemaking. He vowed to "renew the tough, direct diplomacy that can prevent Iran from obtaining nuclear weapons and curb Russian aggression."

The problem: The Bush administration has already reversed many of its policies that other nations saw as isolationist or bullying - for example, by joining international diplomatic efforts with "axis of evil" nations Iran and North Korea. But even those haven't produced great results and neither has yet to achieve its desired goal. Obama has suggested he would continue such efforts, but there is no guarantee they will yield greater success. The Bush administration has also in recent weeks engaged in unilateral strikes against extremists inside both Pakistan and Syria, prompting furious responses from those countries. Obama says he, too, will go after terrorists this way but any president wanting to step up such activities will face strong resistance from local authorities and probably pay the price for violating other nations' sovereignty by seeing cooperation cut back.

DEFENSE

The promise: Pull all U.S. combat forces out of Iraq within 16 months, send more combat troops to Afghanistan and provide better care for wounded troops and veterans.

The problem: A troop pullout by mid-2010 is feasible, although some argue that it risks shifting full responsibility to Iraq's security forces before they are ready. The Bush administration, which originally opposed setting any pullout date, has targeted departure by the end of 2011, although the Iraqis have yet to agree.

Until U.S. forces are pulled from Iraq, there are none to bolster the force in Afghanistan. Balancing needs in those two countries will be an immediate challenge for Obama. There is broad consensus on the need for more troops to combat an emboldened insurgency in Afghanistan and to train government troops there, but the trick is to accomplish that without giving up gains against the insurgency in Iraq and without robbing combat-weary soldiers and Marines of the rest periods they need.

Caring for veterans and the wounded entails enormous costs, and the scope of the health care requirements for returning troops is not yet fully known.

EDUCATION

The promise: An $18 billion plan that would encourage, but not mandate, universal pre-kindergarten; teacher pay raises tied to, although not based solely on, test scores; an overhaul of President Bush's No Child Left Behind law to better measure student progress, make room for subjects like music and art and be less punitive toward failing schools, and a tax credit to pay up to $4,000 of college costs for students who perform 100 hours of community service a year. Obama would pay for part of his plan by ending corporate tax deductions for CEO pay. He has backed away from his proposal to save money by delaying NASA's moon and Mars missions.

The problem: With the budget stretched thin, a huge infusion of cash for early childhood education or college costs seems unlikely. Federal spending on education has already been rising for more than a decade. Congress and the White House will be in no hurry to tackle No Child Left Behind, which was due for a rewrite in 2007; the economy, the war and health care are stickier and more pressing concerns.

Our housing outlook is promising.

2008-11-06T17:49:00.000-08:00

It is a measure of the importance of housing to our region's, nation's and world's economies that today's turmoil in global finance markets can trace its beginnings to California's housing shortage beginning in the millennium.

More importantly, the fact we are poised on the cusp of recovery speaks volumes of the success we enjoy when government and private enterprise form partnerships to deal with important issues.

The latest news locally is uniformly positive. According to the latest data from the major industry tracking firms DataQuick and the Construction Industry Research Board (CIRB) home sales in San Bernardino County are up nearly 88 percent, San Bernardino County home builders have constructed nearly 2,400 new single- and multi-family homes in the first eight months of this year and median home prices are returning to roughly the same level they would have been had the market not begun overheating in the early 2000s.

In addition, San Bernardino County homebuilders are building a much healthier balance of single-family and multi-family new home communities than in previous years. The relative shortage of multi-family homes such as condominiums, townhomes and apartment homes, was one of the key factors in causing the market to overheat in the first place by reducing the most affordable housing options for those demographics that needed them the most.

We are fortunate here in our county to be part of a recovering economy thanks in large part to the willingness of local and county authorities to partner with the homebuilding industry to streamline community development processes to reduce or defray many of the costs of building new home communities - costs that otherwise result in increased consumer costs and reduced competition among homebuilders.

However, given the magnitude of the impact of the correcting housing market, we still have much to do to beyond our own borders to restore order and help revive confidence in global financial markets.

In the wake of the disruption of the housing market nationwide that followed the correction here in Southern California, the flow of credit has been seriously curtailed for home buyers, student loans, housing and other business sectors, Congress passed the $700 billion rescue package approved by lawmakers in early October that was absolutely essential to prevent a collapse in our financial system that would have inflicted devastating damage to our economy.

Policymakers continue to adjust to the rapidly changing landscape. The latest response by U.S. and global leaders was to inject cash into the world's banks and guarantee their debt. The administration announced it would purchase up to $250 billion in non-voting shares of banks to encourage them to begin lending again.

This marks an important turning point in the effort to restart the banking system. In the weeks and months ahead, this rescue plan should help stabilize financial markets, get bad mortgages off banks' balance sheets and pave the way for home values to stabilize and consumer confidence to start building back up again.

The rescue package builds off this summer's historic housing stimulus bill, which includes a first-time home buyer tax credit and much-needed FHA reform. Some have criticized the tax credit on the basis of its payback provisions. But a $7,500 no-interest loan is a step in the right direction. To help Americans understand how it works, the National Association of Home Builders (NAHB) has a Web site in English or Spanish at www.federalhousingtaxcredit.com.

It's important to keep your eye on the big picture. Over the long-term, both San Bernardino County and the nation definitely are on a growth path. Our population will rise by about 35 million over the next 10 years, and all of those people will need someplace to live.

Consider these facts:

America currently has about 105 million occupied housing units.

About 70 million of those are owner-occupied.

Total equity (value of homes minus mortgage debt) amounts to $9 trillion.

37 percent of all homeowners own their home outright, with no mortgage debt.

94 percent of those who have mortgages are making their payments on time every month.

It's going to take time to get credit markets and the banking system functioning again, to get the housing market moving, and to rebuild confidence. But once we turn the corner, the longer-term outlook is very promising.

Frank Williams is CEO of the Building Industry Association (BIA) Baldy View Chapter, which represents homebuilders and industry associates in San Bernardino County and the easternmost portion of Los Angeles County.

A new pot could help struggling homeowners.

2008-11-05T07:28:00.000-08:00

The Inland region could soon have access to another multimillion-dollar pot of money to help stem the tide of foreclosures and keep struggling homeowners from losing their houses.

A less-publicized part of a federal housing rescue plan approved this summer increased the amount of tax-exempt bonds local and state housing agencies could issue to provide financial assistance to homeowners.

San Bernardino County could get as much as $24.7 million if the bonds are issued and would use the money to provide below market-rate financing to homeowners on the verge of foreclosure, county officials said. Riverside County still is evaluating how to proceed.

The legislation, known as the Housing and Economic Recovery Act of 2008 and signed by President Bush in July, increased the amount of tax-exempt bonds states and local agencies could issue by $11 billion nationwide. California's share is $1.2 billion.

But scant details on how the program would work are available, raising concerns among San Bernardino County supervisors, who held a public hearing on the issue last week.

Agency Manages Funds

The county would not issue the bonds directly. Instead, supervisors on Oct. 7 assigned the county's $24.7 million allocation to the Independent Cities Finance Authority. That agency, an obscure joint-powers authority, would issue the bonds as part of a larger effort to get a lower interest rate.

The agency, mainly made up of Los Angeles County cities, has been around for two decades and has helped fund $413 million in community projects.

"Our intentions are that (the funds) be used in our county, but there is nothing in the agenda item that says how you are going to do that," Board of Supervisors Chairman Paul Biane said Tuesday.

"There is nothing that gives me any sense of security that they have any ability to do this," he said. "I don't know why we are not doing this through our own housing authority."

Time Limits Addressed

The federal government put a short time frame on the bond allocation, and Michelle Blakemore, a county lawyer, said other counties around California are giving their bond allocation back to the state because of the time constraints.

"We wanted to at least take a shot," she told supervisors on Tuesday.

Debbie Smith, with the Independent Cities Finance Authority, said the agency does have experience overseeing down payment and closing-cost assistance programs for homeowners. The agency has experience dealing with lenders, she said.

Smith said the agency is committed to spending the money within San Bernardino County.

"All of the funds if you like, we can certify that those funds will only be issued within the county of San Bernardino," she said.

Before bonds are issued, supervisors asked that the matter come back to the board. The county should enter into a legal agreement with the Independent Cities Finance Authority outlining specifically how the agency will spend the money, supervisors said.

San Bernardino County officials say the foreclosure problem they are facing is massive. With an estimated 40,000 homes in some stage of foreclosure, even an additional $24 million will only go so far, said Paul Herrera, a spokesman for the county Economic Development Agency.

"You are not getting anywhere near the problem," Herrera said. "The market needs to come back."

Still, every bit helps, he said.

As part of the same legislation, Inland cities and counties will get $133.5 million -- $49 million for Riverside County and $23 million for San Bernardino County -- in actual cash to fight blight stemming from foreclosures.

Unlike the bond money, this pot of cash cannot be used for preventative measures such as refinancing of subprime loans, officials said.

Once the money is on hand, deciding how to use it will be a challenge in part because of the scale of the problem, officials said. Some homeowners on the verge of foreclosures owe more on their mortgage than what their home is worth on the current market.

Tom Freeman, a spokesman for the Riverside County Economic Development Agency, said county officials are awaiting a response from their financial advisers. Any money Riverside County would receive from the bond issue could be used to refinance loans.

"The challenge in many of these cases is that so many of subprime loans are now upside down, meaning they are worth less than is owed," Freeman said. "We have not made a recommendation to the Board of Supervisors and will not do so until we hear from our financial advisers in the next 10-15 days."

Home Prices Plummet; Sales Up for Southern California Homes.

2008-10-30T11:16:00.000-07:00

According to a report released by MDA DataQuick, Southern California home sales volume, particularly in San Diego County, has rebounded while homes prices in almost all counties plunged at a six year-record low.

Based on the firm’s data, median home prices in San Diego County plummeted by $22,000 to $328,000 for the month of August. Comparing it to the $517,000 peak last November 2005, the present figure clearly shows a 34.6 percentage decline.

As for home sale activity, there was a 56.4 percent rise in the number of sales transactions closed for September. Compared to 2,152 transactions last year, record showed 3,366 for the said month. This jump in sales activity was observed in the entire Southern California and only emphasized the really low home sales activity last year, when the foreclosure crisis was holding the market.

One of the things quite noticeable in the report is the increase in foreclosure sales, which basically showed that home buyers are favoring these repossessed properties over other homes. Of course, this is not surprising considering that these foreclosed properties are much more affordable and offer greater return potential.

The report also showed that about 47.3 percent of the sales transaction last September involved homes that were repossessed in the past 12 months. This is a significant rise to August’s 43.2 percent and September 2007’s 45.3 percent.

In a couple more days, the firm is expected to release new reports regarding the number of foreclosures in the state. If the current trend continues, the number of homes entering foreclosure will surely outpace the sales of these repo homes. In addition, DataQuick also expects more foreclosures after the financial market meltdown.

Home prices in Riverside and San Bernardino counties dropped by 36.8 and 36.9 percent respectively. Orange County’s declined by just 25.4 percent while Los Angeles County home prices was down by 31.4 percent.

Foreclosures spur jump in SoCal home sales.

2008-10-23T17:11:00.001-07:00

Home sales soared a record 65 percent across Southern California during September as foreclosures continue to drive an unprecedented price slide that's luring bargain hunters back into the market, an industry tracker said Monday.

Foreclosures accounted for 50 percent of last month's 20,497 sales, said San Diego-based MDA DataQuick. A year ago they accounted for 13 percent.

September's sales total is the most since December, 2006. And sales made a rare gain - 6 percent - from August, the company said.

However, September's big increase is from a record low 12,455 sales a year ago after a widespread credit freeze curtailed home financing.

That's still impacting the market and last month's sales number is the second lowest since DataQuick began keeping records in 1988.

"The pitifully low September 2007 sales numbers weren't tough to beat. More impressive was that this September's sales volume bucked the seasonal norm and rose above August," said DataQuick president John Walsh.

Credit still remains tight despite wide-ranging federal intervention and many economist believe the country has sank into a recession that will deepen into next year.

During September the median price of new and previously owned houses and condominiums plunged 33 percent to $308,500 from $462,000 in the six-county region. Prices are now back to levels last seen in May, 2003 and the median is 39 percent below the record $505,000 reached in spring and

summer of last year.
More price slashing is likely because foreclosures remain on a record pace, DataQuick said, and less expensive properties are making up the bulk of sales.

Prices are reaching fire sale levels in the Inland Empire. The median in San Bernardino County fell an annual 37 percent to $205,000. It also fell 37 percent in Riverside County to $237,500.

Walsh said September's sales reflect buying decisions made weeks ago before the dramatic worsening of the nation's financial markets.

DataQuick said that problems in the jumbo mortgage market continue impede high-end home sales. Before the credit crunch hit last August, 40 percent of sales were financed with jumbos, then defined as over $417,000. Last month just 13.2 percent of purchase loans were over $417,000.

Home sales jump, prices don't.

2008-10-21T17:48:00.000-07:00

Home sales jumped sharply in September across Southern California from record lows of a year ago, as foreclosure sales continue to dominate the market.

More than 20,000 homes and condominiums closed escrow last month, including 7,382 in Riverside and San Bernardino counties, DataQuick Information Systems reported today. More than half the sales in the six-county region were the result of foreclosures.

Median prices fell to $237,500 in Riverside County and $205,000 in San Bernardino County. That's roughly a $10,000 decline in the median price in both counties since August. Prices are down about 40 percent since the peak of the housing price bubble about two years ago.

A DataQuick analyst said in a statement that declining prices in the Inland region has helped the affordability levels and spurred sales.

Local leaders explore buying up troubled mortgages.

2008-10-20T18:22:00.000-07:00

Banks are sick of the Inland Empire's nonperforming mortgages, and Wall Street can't afford them on its books.
But those toxic loans are looking lucrative to investors willing to accept a huge risk.

Government and business leaders from San Bernardino and Riverside counties decided at a Wednesday meeting to keep pursuing a proposal that would open the door for Los Angeles-area investors and Inland Empire cities to buy up thousands of troubled mortgages behind the region's economic problems.

At stake: every aspect of the Inland Empire's economy.

The region's hammered real-estate market could spiral downward even further if the concept doesn't come together, which could slide the local economy into a deeper recession than expected, proponents say.

"It could devastate our economy for the next decade," said Steve PonTell, president of Upland-based La Jolla Institute, a nonprofit economic research organization.

But the proposal's advocates are also looking out for themselves. If their plan doesn't work, and if home prices fall even more, they might see millions of dollars in losses.

After the federal government takes collapsing mortgage-backed securities off the hands of Wall Street - just like it did during the 1980s savings-and-loan crisis - the Treasury Department is poised to repackage that debt and sell it to investment firms across the nation.

That worries local business owners and politicians who argue

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that nationwide investors with no stake in the Inland Empire's economy are bound to turn local properties into rentals, which would make real-estate values drop further.
They're proposing a public- private partnership between cities and investors, which would buy distressed Inland Empire mortgages and shut out investors from outside the Los Angeles region.

Real-estate developers, auto- dealership owners and some other entrepreneurs across the two-county region are tentatively on board with the concept.

But envisioning the dream and realizing it are two different things.

Right now, lobbyists and congressional representatives are imploring Treasury Secretary Henry Paulson to add specifics into recent bailout legislation that would let an Inland Empire public-private partnership purchase local mortgages.

"Wall Street wants to make this so complicated because they want control over this," said Lance Larson, legislative director for San Bernardino County. "They want to keep (local assets) on the securities side."

San Bernardino and Riverside counties ratified a resolution supporting the concept in early October. Nothing is set in stone, but proponents say they might call it the Inland Empire Asset Value Recovery Corporation.

Larson said the Inland Empire has 100,000 homes in default or foreclosure - a $30 billion problem that doesn't include thousands of previous and future foreclosures.

"We're also trying to increase demand," Larson said about drawing out buyers and propping up the region's devastated real-estate values.

Montclair Councilman Bill Ruh, a strong advocate for affordable housing, questions whether a public-private partnership is a good thing for the region.

He thinks it might usher in an artificial price floor on real-estate values, which would keep local blue-collar workers from finally being able to afford the American dream.

"When homes were running up in price, we never said, `They can only go this high' - so why stop prices from dropping?" Ruh said. "What's wrong if a home's price drops low enough for a janitor to own one? There's nothing wrong with that.

"If a janitor who makes $35,000 a year can finally afford a home at Sierra Lakes (in Fontana), so be it," Ruh added. "If a retail sales clerk who works at Banana Republic can finally afford a home, so be it. It seems that cities are more afraid of rentals than actually dealing with the problem."

San Bernadino County (HAP) has $$$.

2008-10-17T09:55:00.000-07:00

San Bernardino County’s First Time Buyer Program (HAP) has received funds!

For any of your buyers that have been pre-qualified with the HAP program, the County just announced they have money for their down payment assistance program. The amount of funds they have is limited and available on a first come first served basis.

The county receives their regular HAP funds every July. This year the HAP funds were depleted by September. Due to overwhelming demand, the county has interim funds available for use. These funds are normally used up very quickly, so any HAP borrowers should plan on taking action very quickly.

As a reminder, HAP funds can be reserved after the borrower has been pre-qualified with an approved loan officer and with an accepted and fully executed purchase contract.

**Borrowers should be encouraged to update their loan pre-qualifications because of the enormous number of changes which continue to occur in the mortgage industry that may affect what type of loan and how much of a sales price they qualify for**

HomeBuyer Tax Credit

2008-10-15T16:07:00.000-07:00

UNCLEAR ON HOW THE HOMEBUYER TAX CREDIT WORKS? HERE’S SOME CLARIFICATION...

The Housing and Economic Recovery Act, which was passed in July, allows for some home buyers to receive a tax credit. There have been a lot of questions as to exactly how that works so here goes;

Who Qualifies for the Tax Credit?

Buyers who have not owned real estate in the last 3 years who are purchasing their primary residence. The credit is good for homes purchased April 9, 2008-July 1, 2009.

Are there Income Limits?

Yes. They are $75,000 for individuals and $150,000 for households. Individuals whose income is between $75,000 and $95,000 can still take the credit but on a reduced basis. The same applies to households earning up to $170,000. Buyers should consult their tax preparer for specifics on whether the income limits are based on their gross, net or adjusted income as well as what their reduced tax credit would be if they are over the base income limits.

How Much Is the Tax Credit?

10% of the home’s purchase price, not to exceed $7,500

When Does the Buyer Receive the Tax Credit?

After the home is purchased, the entire tax credit can be claimed in a single tax year. If the borrower purchases their home in 2008, they would receive their tax credit when they file their 2008 taxes. If they buy their home during the first half of 2009 (up until the July 1, 2009 cut off date), they may claim the credit on their 2009 taxes. The credit essentially reduces a taxpayer’s tax bill or increases their refund, dollar for dollar. The credit will be paid out even if the borrower owes no tax or the credit is more than the tax that they owe.

Does the Tax Credit Have to be Repaid?

Yes. The tax credit has been touted as an “interest free, 15 year loan from the government”. Payments will start beginning with the second tax year after the year the credit is claimed. It’s repaid in equal increments over a 15 year period as an additional tax on the borrower’s tax return. So if the buyer claims the full $7500 tax credit on their 2008 taxes, they would repay $500/year until year 2025.

Are there any Restrictions?

Yes. The buyer will NOT be eligible for the tax credit if:

1. the buyer uses tax exempt bond financing (such as the State of California’s first time buyer program- CalHFA, or the Maricopa County, AZ first time buyer program)

2. the buyer purchases the home from a close relative (including a spouse, parent, grandparent, child or grandchild)

3. the buyer stops using the property as their primary residence

4. the home is sold before the end of the year

5. the buyer is a non-resident alien.

** If any buyers have questions about their particular tax situation, they should consult their tax preparer for the best answer. Following is a link to the IRS with additional information on the tax credit http://www.irs.gov/newsroom/article/0,,id=186831,00.html.

Inland economist, borrowers await effect of rate cut.

2008-10-14T09:12:00.000-07:00

Inland Southern California consumers and businesses could see some relief with Wednesday's interest rate cut, but experts say it will take time and an atmosphere of trust to nurse a sick economy back to health.

The Federal Reserve's emergency move to drop its key lending rate from 2 percent to 1.5 percent will help some borrowers, including some homeowners with adjustable-rate mortgages, and credit card holders.

The hope is that by lowering the rate it charges major banks to borrow money, the Federal Reserve will entice banks to lend to businesses with plans to expand.

There is no way to know whether banks that are sitting on billions of dollars in bad loans will respond the way the government wants.

Making it easier for businesses to borrow would allow them to expand and help boost the job market in Riverside and San Bernardino counties. The jobless rate in the Inland area was estimated at 9.2 percent in August, and there were 25,000 fewer jobs than a year ago.

Economists and others say the rate cut was one of many steps needed to improve the bleak outlook for the national and Inland economies. Banks have to feel like there's a comfort zone for their own risk before they start lending money, meaning there won't be instant relief.

"It is a higher dose of medication but the patient is still sick," said Scott Anderson, vice president and senior economist for Wells Fargo.

Lower interest rates will not stave off the flood of foreclosures that are depressing the economy, said Christopher Thornberg, an economist and principal with Los Angeles-based Beacon Economics. Mortgages are not failing because interest rates are too high, he said.

"Real estate is in a free-fall because prices are too high and people borrowed too much," Thornberg said. "People can't afford (their mortgages) if they cut the interest rate to zero."

Leslie Appleton-Young, chief economist for the California Association of Realtors, said the difficulty of getting mortgages -- not the affordability of interest rates -- has been hurting home sales.

"The mortgage rates are very affordable," Appleton-Young said. "It is not a question of interest rates right now. It is about the availability of capital and the willingness of lenders to make loans. We hope the rate cut will calm markets and provide stability to the financial sector and unfreeze credit markets so it is easier for people to get mortgages."

Anderson said the lowering of the rate for banks to borrow money from the Federal Reserve was "a much needed move because the credit markets are frozen solid right now."

Anderson said the financial crisis and the negative reaction to it, including the stock market declines, is likely to delay the recovery of the housing market for as long as six months. He predicted that sales in Inland Southern California could recover by the end of the first quarter of 2009, but home prices could drop into 2010.

He said the rising unemployment rate could lead to more delinquencies and foreclosures, which could flood a market already brimming with unsold inventory and further push down home values.

"I can't see people going out and buying large-ticket items like houses and cars until we get clarity on how long this recession is going to be," Anderson said.

Inland economist John Husing said he spent part of Wednesday meeting with entrepreneurs who had expansion ideas that would lead to new jobs. But, he said, none of them had the capital to accomplish that goal.

"The Fed is doing anything they can to get the banks to start lending again," Husing said.

Stephen Wacknitz, president and chief executive officer of Temecula Valley Bank, said since money the bank borrows is tied to the prime lending rate, the Fed's move could make it easier for the bank to obtain funds it can loan to local customers.

Also, the bank has a portfolio of Small Business Administration loans that reset quarterly, meaning those rates would become more favorable on Jan. 1, Wacknitz said.

He added that the Fed stepping in could help businesses' psyches.

"The psychological benefits of this will have some impact," Wacknitz said.

Richard Green, director of the Lusk Center for Real Estate at the University of Southern California, is less optimistic. He does not expect Wednesday's rate cut to stimulate the economy because he does not think banks will respond by increasing their lending.

"They are more afraid of losing money than of not making money," Green said.

Esmael Adibi, chief economist at Chapman University, said there is enough fear to go around for all parties. The Fed's move is not going to solve the problem unless the banks and other lenders start trusting each other again.

"Ultimately the problem is a lack of confidence, and I think the only solution is time," Adibi said. "Once some time goes by and we see the bailout kick in, the banks will start lending to each other again."

Latest House Sales / Price Trends (Housing Tracker)

2008-10-13T10:56:00.000-07:00

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Quote of the Day

“This feels like 1987. It’s not even close to ’73 or ’74, when people used to feel sorry for you if you told them you lived in New York City.” – Luxury real estate broker Barbara Corcoran, on the current stock market turmoil as compared to previous stocks market crises.. (NY Times, Oct. 4)

House Sales/Price Trends

California Officials Try to Avoid Second Housing Hit. “Officials in San Bernardino and Riverside counties are determined to avoid a repeat of what happened 20 years ago, when the savings-and-loan crisis led to a massive selloff of distressed real estate in the area by the federal government's Resolution Trust Corp. Many of those properties… were sold at fire-sale prices to investors who unloaded them quickly and… turned [them] into largely rental communities, further depressing property values and delaying an economic rebound… [Local] government representatives [are] mustering support for a federal bill that would allow local businesses and governments to buy up some of the real estate.” (WSJ, Oct. 7)

Middle-Income Earners Priced Out Of Homes. “NY State Association of Realtors: The search for a modest house at an affordable price in Putnam County has been a challenge in a county where the median single-family home price is $418,000. Even though prices in Putnam have fallen in the past two years, the prices are still too high for some… First-time homebuyers in Rockland and Westchester are experiencing a similar challenge, even as home prices drop in both counties. In Westchester, where the median income for a family of two is $77,200, and in Rockland, where the median income is $67,852, families are struggling to find places they can afford.” (LoHud Journal, Oct. 7)

America's Fastest-Selling ZIP Codes. “[Some] neighborhoods are appreciating and selling well. That is, if you're willing to pay up. The median home sale price in most of these areas is more than $700,000, which puts them in the richest 1% of ZIP codes in the country. They include 10069, a part of New York's Upper West Side, 94111 in San Francisco, Cold Spring Harbor's 11724 and Fisher Island, Fla., ZIP 33109.” (Forbes, Oct. 7)

Survey Finds Expansion of Housing in the U.S. “Census Bureau 2007 American Housing Survey: The number of houses, apartments and mobile homes in the nation rose by almost four million from 2005-2007, to 128.2 million... Renters occupied 32% and owners 68%... The vast majority, 80 million, were detached single-family homes. The data does not account for the full impact of plummeting prices since the subprime and credit crises struck… Median home value over all rose about 16% to $191,471, from $165,344 in 2005... The number of houses and apartments valued at over $300,000 soared more than 20% since 2005. The 2007 survey found more than four million occupied homes valued at $750,000 and up and another 92,000 for sale at those prices.” (NY Times, Oct. 6)

End of an Era on Wall Street: Goodbye to All That Connecticut: “Once a hamlet for the moneyed old guard, Greenwich has found itself in recent years overrun by flashy hedge fund and private equity managers. But with the markets in flux, some high-end homes with price tags as high as $3M-$8 million that sat unsold for six months or longer are now being offered as rentals, said Barbara Wells, a local Realtor… Some of the new homes offered for rent were houses built on spec. Luxury realtor Barbara Corcoran: In all likelihood, the real estate market could be frozen for the next 6-18 months or so as buyers and sellers struggle to reach agreement on prices.” (NY Times, Oct. 4)

Buffett’s Homeservices Plans $200M Expansion. “If cash is king, then you can courier that crown and scepter over to the Minneapolis headquarters of HomeServices of America Inc.The nation’s second-largest real estate brokerage plans to spend $200 million over the next couple of years paying 20 to 25 cents on the dollar for distressed brokerages around the country. That capital, which will triple the company’s market presence, comes from…Warren Buffett’s Berkshire Hathaway Inc. (BRK.A).” (Minneapolis/St. Paul Business Journal, Oct. 3)

Manhattan Apartment Sales Drop as Prices Extend Five-Year Gain. “New York City's residential real estate market is somewhat protected by financing rules set by co-op boards, which often require 20% down payments for even the smallest apartments, plus a cash cushion before they approve would-be buyers… The number of apartments for sale at the end of the quarter rose 35% and was about 23% higher than the average over the last five years, appraiser Miller Samuel said.” (Bloomberg, Oct. 3)

Banking & Finance: Wamu's Buyer Vows To Build On Apartment Unit's Success. “Largely overlooked in coverage of JPMorgan’s colossal takeover of WaMu is a treasure buried inside WaMu’s troubled real estate loan portfolio — apartments. WaMu had grown in recent years to become the national leader in financing small apartment projects: WaMu’s $33 billion small-balance apartment mortgage portfolio was performing exponentially better than its single-family portfolio... “They have a nice multifamily lending unit,” JPMorgan Chase Chairman and CEO Jamie Dimon told reporters right after the Sept. 25 takeover. “We want to build that out.” (Puget Sound Business Journal, Oct. 3)

HUD: Lenders Now More Willing To Write Down Bad Loans.

2008-10-10T08:24:00.000-07:00

HUD Secretary Preston said today lenders are more receptive to writing down the principal of homes on the verge of foreclosure, expressing hope that more will utilize a new $300 billion government program designed to place at-risk borrowers into a fixed-rate loan they can afford. Preston noted lenders are loath to write down the principal of a loan, preferring less costly alternatives such as reducing interest rates or extending the maturity to keep owners in their homes. But Preston said he has sensed a change among lenders due to the severity of the foreclosure crisis and the availability of the new program, which will allow certain subprime borrowers to refinance under a new fixed-rate loan guaranteed by the Federal Housing Administration.

Lenders will take a hit under the program, which started Oct. 1, because the new mortgage can only be up to 90 percent of the home's appraised value. However, "for the first time we are beginning to see more and more lenders take that action because it is necessary to make these loans affordable," said Preston during an interview at HUD's national housing summit. Lenders successfully lobbied against legislation this year that would have authorized bankruptcy judges to reduce a mortgage to its current market value, claiming that would make the cost of home loans more expensive because investors could not be guaranteed a rate of return. Some academics disagree with the claims. The recently enacted $700 billion economic rescue bill also contains two significant provisions that would expand the program, which is slated to help 400,000 borrowers. One would make it easier to buy out lenders who have a second mortgage on the property, the other would allow HUD to increase the 90-percent threshold under certain circumstances. Preston said the latter provision "may encourage more lenders to come into the program." But the recent changes will not have an immediate effect because they will likely have to undergo a comment period before they can be implemented, Preston cautioned.

HUD also is ramping up its efforts to distribute $3.9 billion in funding to 308 states and communities to buy and rehabilitate foreclosed properties, and in some cases offer down-payment and closing assistance. The funding was provided in the housing-stimulus measure enacted this summer. "The communities [and] the states out there right now are in ... a high-activity mode, which is to make sure they understand the program, think through how they would use the funds and to put in place an action plan," Preston said. Plans must be submitted by Dec. 1. HUD recently released its allotments per state, prompting some criticism that the allocations were not just based on foreclosure rates but on how many properties are actually abandoned. For example, Florida topped the list with $541.4 million, while California received $529.6 million. The difference resulted from the fact that Florida had a more severe crisis with abandoned properties across the state, whereas California's foreclosures were more concentrated in certain areas such as Riverside and San Bernardino counties. Florida also had the highest number of grant recipients in the program, with 49.

Local control for troubled mortgages.

2008-10-09T20:43:00.000-07:00

Now that the multi-billion dollar rescue plan has made it through Congress, the federal government must engage local leaders when determining the future of troubled mortgage assets that are underwriting this unprecedented taxpayer investment.
The swift and staggering meltdown of America's mortgage-lending markets has had grave global economic consequences.

But nowhere is the pain felt more acutely than in thousands of neighborhoods across our nation where unsound mortgage-lending practices have foreclosed on the dreams of American families.

In the past 18 months, our fast-growing Inland Empire has suffered some of the highest foreclosure rates in the United States. As a result, we have suffered some of the most severe economic and social losses.

Last week, supervisors in San Bernardino and Riverside counties adopted resolutions calling upon federal lawmakers to recognize the significant role local governments and business leaders should be granted in the restoration and preservation of our communities as the federal government moves forward on the rescue plan.

The supervisors' resolutions call for creation of regional public-private partnerships to manage troubled mortgage assets, rather than turning them over to faraway bureaucrats and distant business interests with no motivation to provide local returns on the assets from which they would profit.

Here are five reasons why a regional public-private partnership plan is undoubtedly in the best interests of taxpayers.

1. Ensure fair pricing: Local marketplaces are unique. During the savings and loan bailout of the early 1990s, the Resolution Trust Company bundled properties across states, which inherently was unfair to Southern California. Regional public-private partnerships would prevent large bureaucracies and corporate interests that don't recognize differences between the Arkansas, Nevada and Southern California marketplaces from bundling and selling properties within those regions. Recognizing unique marketplaces would facilitate fair pricing practices.

2. Keep profits in local economy: During the savings and loan bailout, New York and Wall Street conglomerates bought properties lumped into large portfolios for pennies on the dollar. They would then "dump" the undesirable properties, selling to regional and local buyers for 40 to 50 cents on the dollar. This "spread" resulted in the loss of millions in profits to the East Coast. Regional partnerships would ensure returns on local investment.

3. Prevent a housing glut: Community experts with knowledge of the local economy would systematically release properties into the marketplace to prohibit the dumping of homes for far less than their worth and devaluation of entire neighborhoods. The 1990s taught us that outsiders and faraway bureaucrats are not inclined to pay heed to the negative economic and social effects that property dumping has on communities.

4. Encourage taxpayer returns: All of the securities being issued in the rescue plan are backed by real properties. All real estate markets are local and regional partnerships with local expertise are best-suited to manage local assets. Putting local properties into the hands of remote business interests that fail to recognize the difference between Southern California and Oklahoma marketplaces portends big losses for taxpayers. Ignoring the expertise of community leaders would be a disservice to taxpayers across this country.

5. Ensure safer communities: Properties retained by the government fall off the tax rolls and have potential to become magnets for criminals and squatters. Conveying properties to a public-private partnership would ensure continuing management of the properties and an ongoing tax-revenue stream to local governments. Tax revenues pay for vital public services such as police and fire.

As we move ahead, communities must have a voice in their future and a stake in the enormous investment that taxpayers are making to restore our financial markets.

Congress must do its part to protect Main Street from unsound business practices by entrusting its future to the people who live there.

Escrows delayed under Victorville Water Department, agents say.

2008-10-08T19:22:00.000-07:00

VICTORVILLE • Three-day weekends and late bills from the Victorville Water Department have stopped a multitude of homes from closing escrow on time, according to local real estate agents.

“I would estimate we’ve had at least 15 homes delayed,” said Lynda Thomasson, a listing agent with Keller Williams Realty of Hesperia. “When you have a situation where you’re trying to rebuild a community and you have people who are ready and willing to fix them up, yet you hold them off at the end of escrow ...”

Thomasson said it most often happens when escrow is due to close on a Friday but can’t because city offices are closed.

Escrow is on hold for one family after it took the new department longer than anticipated to combine water and trash bills, which also left many customers without either bill for up to three months.

Now the department is taking 14 days to produce a delinquent bill that Thomasson said fell through the cracks in the process.
“It jeopardizes the buyers’ loans, and it’s already so hard to qualify,” she said.

Fred and Claudia Valdez are trying to purchase a bank-owned, abandoned home on Thompson Road to fix up as a rental property. They wired their money, and escrow was set to close last week, but just days before they found out there was a lien from the water company.

“I was thinking I was going to be delivering them keys and I had to deliver them bad news,” said Deana King, the Valdezes’ agent with Keller Williams.

Keller Williams pays the bills on properties it lists so that clients can be certain the plumbing works. But Thomasson said they never received notice that there were late fees resulting in a lien from the previous tenant.

“Like everyone else, she didn’t get her bill,” Claudia Valdez said.

City spokeswoman Yvonne Hester said the delay is not related to late bills and that the lien was sent to the San Bernardino County tax assessor on Sept. 3. She said the notice likely went to the property owner — the bank, in this case — and that they’re not required to notify other parties.

Valdez said the delay is holding up plans to start refurbishing the abandoned home.

“Now that we thought it was almost ours, this happens,” she said. “We have roofers waiting to start work.”

The family could face even further delays if they’re forced to redo loan documents after escrow failed to close.

Thomasson said that in the year since the city took over the water district, there have been delays in reimbursements when payments are overestimated to help make sure a lien doesn’t stop escrow.

Hearing on proposed water hike Tuesday

The Victorville Water District is proposing a rate increase of up to 26.9 percent in the coming year, or $12.80 each month for the average customer.

The public hearing for the proposed hike in fees is scheduled during the council meeting starting at 7 p.m. Tuesday in City Hall, at 14343 Civic Drive.

Written or oral protests against the increase can be submitted to the city clerk until Tuesday, or during the council meeting.

Without a majority protest, the increase will show up on all bills sent after Nov. 1.

Local cities will receive $13 million to fight foreclosure blight.

2008-10-08T19:15:00.000-07:00

Apple Valley, Hesperia and Victorville to benefit from federal HUD grant

With some of the highest foreclosure rates in the state, three Victor Valley cities will receive a total of nearly $13 million in federal funding to remove the blight that abandoned homes have left behind.

Apple Valley will receive $3 million, Hesperia $4.5 million and Victorville $5.3 million from the U.S. Department of Housing and Urban Development, or HUD.

The funding is part of nearly $4 billion HUD is allotting to local governments across the country, to stabilize neighborhoods hit hard by the foreclosure epidemic.

The cities will be able to use the grant to purchase foreclosed homes at a discount, demolish or redevelop them, or to offer down-payment assistance to low- to moderate-income home buyers.

“What we have to do now is put together a proposal on how we will spend the money,” said Kathie Martin, spokeswoman for the town of Apple Valley.

Martin said the proposal is due back to HUD around December. She said the town hopes to work with neighboring cities to develop a program with similar requirements and eligibility, in order to be consistent and get the most for their money.

Yvonne Hester, spokeswoman for the city of Victorville, said city officials were surprised and thrilled to learn how much they’d be getting under the program. She said the city was granted nearly a third of what many whole states received.

Hester said there are no definite spending plans yet, but that the economic development department is doing an analysis of how the funds can do the greatest good.

The three Victor Valley cities are considered high risks for abandonment of homes, where foreclosed properties are not resold.

Hesperia and Victorville are among the top-10 highest foreclosure rates in the state among cities eligible for the grant. Both exceed 11 percent.
Apple Valley ranked in the top 15, with more than 10 percent of homes in foreclosure.

Though Adelanto was not eligible for funding, because it is not a Community Development Block Grant entitlement community, the city may get a portion of the $22.7 million allotted to San Bernardino County or the $145 million granted to the state, according to HUD spokesman Brian Sullivan.

By the numbers
• 10.3 — Percent of Apple Valley homes in foreclosure.
• $3 million — Amount Apple Valley was allotted to stabilize neighborhoods hit by foreclosures.
• 11.2 — Percent of Hesperia homes in foreclosure.
• $4.5 million — Amount Hesperia was allotted.
• 11.1 — Percent of Victorville homes in foreclosure.
• $5.3 million — Amount Victorville was allotted.
• 9.6 — Percent of San Bernardino County homes in foreclosure.
• $22 million — Amount San Bernardino County was allotted.
• 6.7 — Percent of homes in foreclosure statewide.
• $4 billion — Amount county and local governments across America were allotted.

Source: HUD.

Tightening of credit strikes nerve among consumers.

2008-09-26T15:06:00.000-07:00

-When Deb Freitag applied for a credit card so she could replace her roof, her leaky refrigerator and her old dishwasher, she was offered a $1,000 line of credit, not the $5,000 she needed.

When Mark Ryan finally scraped together more than enough to buy a home, he found that the mortgage a bank promised him earlier in the year was no longer available.

In a land where TV blares no-money-down pitches and everything from homes to furniture to college education is bought with borrowed money, the crisis on Wall Street is causing the credit market to seize up. On Main Street, this means fewer loans and smaller loans at higher rates — when they are available at all.

No one is quite sure how bad it will get, especially with the fate of the proposed $700 billion government bailout unknown. But people's inability to borrow has potentially dire effects, since consumer spending accounts for two-thirds of U.S. economic activity.

"If not fixed fairly soon, we may find that individuals and smaller businesses have much higher costs for borrowing — or in the worst case are unable to borrow at all," said David Stowell, finance professor at Northwestern University's Kellogg School of Management.

Freitag, a 43-year-old freelance writer in Cincinnati, was surprised when she tried to get a credit card from home improvement chain Lowe's Cos. this month. She got the skimpy $1,000 credit line bumped up to $2,000 after she complained, but even that wasn't enough.

Freitag calculated that her purchases would add up to almost $9,000, including the $6,000 for her roof, which was damaged in a wind storm this month. Now she will have to take out a consumer loan, which has bad consequences: Merely searching for the loan could hurt her credit rating, and she will have to start paying it back right away.

"These are needs," said Freitag, whose husband recently lost his job in corporate video production. "I am not going out and buying a designer kitchen."

Ryan, 37, a social worker in New York City, can finally afford a home in one of the most expensive housing markets. But he can't get a mortgage.

Swiftly pre-approved by his bank for a loan last February, he went back this month after finding the apartment he wanted. But he was told he had to fill out a 17-page application to get re-approved — even though he had since added $50,000 to his bank account. While he waited for approval that ultimately never came, the apartment was sold out from under him.

"As a first-time homebuyer, in a way conditions couldn't get any better," he said. "If you can get your mortgage, rates are going down to the point where average people can afford them. But with the banks so paranoid, it's just tough getting one."

Homebuyers are not the only ones hard-pressed to get a loan. Calvin Parker, 39, a mechanic, was shopping for car parts in Harrisburg, Pa., to keep his 1997 Dodge Caravan going until he can meet the daunting terms for a new car.

"They want too much down," he said. "And the interest rates are too high. I believe I wouldn't be able to get a loan without paying $1,500 to $2,000 down."

Oona Rokyta felt the credit squeeze in her education loans. The 27-year-old publicist consolidated her four student loans — one for each year of college — in late August. She paid an average of 9 percent on them but wanted them redone as a single loan, in part to benefit her parents by removing them as co-signers.

The intention was good but the math worked out against her: Wells Fargo & Co. offered her an 11.75 percent interest rate and wanted the new loan paid back within seven years rather than the standard 15. Those changes boosted her monthly payment to $502 a month, from $301.

"I feel like I've been punished for maintaining good credit," she said.

Some mortgage brokers say there is still no problem for qualified borrowers.

And Ron Kelly, manager of the appliance and electronics department at a Sears in Wausau, Wis., said it was business as usual at his store: "It hasn't affected people applying for credit cards that I have seen. We haven't changed anything."

Shelton Head, a 60-year-old resident of Glendale, Ariz., pulled into a Phoenix strip mall Friday destined for a coin shop with a blue velvet box full of 1942, 1943 and 1945 silver dollars.

Unemployed, he said he has tried several times in recent months to get a loan but was rejected every time for not having sufficient income. Now he needed money for gas and groceries.

He left the coin shop 15 minutes later with $65.

$700 billion question: fate of bad loans.

2008-09-26T13:30:00.000-07:00

Debate rages around Treasury plan

The Bush administration's plan to allow the Treasury Department to buy up to $700 billion in troubled mortgage-related assets could help thaw the credit crunch by helping big financial firms move bad loans off their books.

But critics of the plan want the government to provide more protections for taxpayers and help for individuals struggling with their mortgage payments -- goals that may be inherently contradictory.

The battle that's shaping up in Congress over the plan isn't expected to derail it, but the debate over its particulars could complicate or delay its implementation, as lawmakers must authorize the issuance of the Treasury securities that would finance it.

While the plan put forward by Treasury Secretary Henry Paulson on Saturday seems simple enough on its face, the details of how it is implemented could have profound implications for the hardest-hit housing markets and the plan's ultimate cost to taxpayers.

Once taxpayers are in charge of these assets, will troubled borrowers be more likely to get loan modifications or workouts to keep them in their homes? If the government becomes the owner of hundreds of thousands of foreclosed homes, will it sell them quickly at fire-sale prices to investors, or more gradually over time to earn a better return?

While there is general agreement that the government must take action to keep the financial system functioning, the question then becomes: What happens next?

"You save the banking system, now what are you going to do with all this distressed property?" said Dennis Hedlund, president and founder of the mortgage market forecasting firm iEmergent.

As detailed by Paulson, the plan envisions that the mortgage-related assets Treasury buys would be managed by private managers "to meet program objectives."

If the government creates aggressive objectives to keep people in their homes -- by forgiving some of the principal on their loans, for instance -- "that could very quickly solve a lot of problems" in housing markets where prices continue to fall, Hedlund said. But that approach would mean larger losses up front, and perhaps a bigger bill for taxpayers in the long run.

"If the government does more modest workouts and hopes home values sort of correct themselves, there's a danger home prices would continue to fall, and this could really stretch out," Hedlund said. "It's really a question of how fast do you want to get it over with? The faster you want to get it over with, the more the government will foot the bill, so there will be political pressure not to do that."

Hedlund said a less aggressive approach at preserving home ownership could have a "devastating" impact on 50 to 60 urban areas, and rural communities with large numbers of moderate-income homeowners.

"My opinion is that the recovery back to normal lending patterns and purchase trends easily could be five years," Hedlund said. "This thing could go on forever, especially if nothing happens to (check the decline in) home prices."

In an e-mail to clients, K&L Gates attorney Larry Platt noted that Treasury has not spelled out any requirement to seek to preserve home ownership or otherwise deal with foreclosures and loss mitigation, "which is one of the biggest criticisms leveled at the plan by the Democrats. That doesn't mean that Treasury will not implement an ambitious loan modification program; it just means that (as proposed Saturday) Treasury does not have to do so."

During the savings and loan crisis, the Resolution Trust Corp. disposed of assets over a period of four years, said Donald Kelly, a spokesman for real estate valuation company Zaio Inc.

Kelly said commentators are suggesting that the Treasury would buy troubled assets at a discount, but with the design of managing them with a possibility of a positive return for the government down the road.

"There is a real sense of urgency, in the financial markets, within the administration, and in Congress," Kelly said in an e-mail. "One thing is clear: Decisive action must be taken and taken soon. Postponing a solution will only cause additional instability. From what I have seen, FHA and the secondary market players are ready to continue operations now, but to some extent it is conditional as everyone awaits the details of the financial stability package."

Many securities are being valued at pennies on the dollar due to the very high leverage ratio and illiquidity of some mortgage-backed securities, National Association of Realtors President Richard Gaylord said in a statement.

"Unrealistically low valuations are paralyzing the balance sheets of financial institutions and have hindered liquidity flow," Gaylord said, urging Congress to take action to "stabilize financial markets to allow rational valuation of assets, expedite refinancing and relief efforts for homeowners, and ... reestablish a level of confidence in the housing credit markets."

Some Democrats and consumer groups see the Paulson plan as an opportunity to push through new restrictions on lenders and help for borrowers that didn't make it into HR 3221 -- the sweeping housing bill signed into law on July 30 -- or other recent housing legislation.

The Center for Responsible Lending, for example, has renewed a push for Congress to allow bankruptcy judges to rewrite the terms of troubled borrowers' mortgages -- an idea that has the support of presidential candidate Barack Obama. The lending industry has opposed granting judges such power, saying it would worsen the credit crunch by undermining investors' confidence in mortgage-backed securities.

The center maintains that judicial modifications -- derided as "cramdowns" by industry critics -- would save 600,000 homes from foreclosure, while the Paulson plan to buy mortgage-related assets would save none.

"Only by preventing the 6.5 million foreclosures expected in the next few years -- and the $356 billion drop in surrounding property values that will result for an additional 46 million families -- will the economy begin to recover," the center said in a statement.

Rep. Henry A. Waxman, the California Democrat who chairs the House Committee on Oversight and Government Reform, expressed "serious reservations" about the Paulson plan in a statement, saying it "appears designed to maximize returns for Wall Street and minimize protections for the taxpayer."

The Mortgage Bankers Association said resurrecting bankruptcy cramdowns would be "wholly unproductive" and "runs counter to the bipartisan efforts to restore liquidity to the global capital markets." The issue is irrelevant, the group said in a statement, because once the Treasury buys distressed mortgages, it can write down loan balances itself, without Congress giving bankruptcy judges that authority.

Senate Banking Committee Chairman Chris Dodd, D-Conn., today released Democrats' proposed changes to the Treasury plan, which include granting bankruptcy judges the power to modify mortgages.

"After a year of efforts to get servicers and lenders to modify loans, the industry's voluntary HOPE Now program has fallen far short of what is needed," Dodd said in a statement posted on the Banking Committee's Web site.

Dodd's proposal would allow the Treasury Department to buy a wide range of troubled assets but would require it to hand over mortgage loans and mortgage-backed securities to the Federal Deposit Insurance Corp. (FDIC) for management.

The FDIC, Dodd said, "has shown a commitment to modifying mortgages both to ensure long-term affordability and to protect the taxpayer. The FDIC estimate performing loans are worth about 87 percent of their face value, while nonperforming loans are worth only about 36 percent of par. "Modifying loans to ensure affordability increases the value of the loans," Dodd said.

Democrats will also push for looser criteria for the Federal Housing Administration's HOPE for Homeowners loan guarantee program, which was authorized at $300 billion in HR 3221.

Supporters of the Paulson plan say that without quick government intervention, the financial system is in danger of collapse. Keeping investment dollars flowing into mortgage lending will eventually help slow the decline in home prices in some markets, they say.

In a statement, President Bush acknowledged there will be differences over some details of the plan, "and we will have to work through them. That is an understandable part of the policy-making process. But it would not be understandable if members of Congress sought to use this emergency legislation to pass unrelated provisions, or to insist on provisions that would undermine the effectiveness of the plan."

As Congress kicks off a week of debate -- Dodd's Senate Banking Committee will hear from Paulson and Federal Reserve Chairman Ben Bernanke Tuesday, and the House Financial Services Committee has scheduled a hearing for Wednesday -- lawmakers will also be looking for clarification on details of the plan that are, for the moment, unclear.

In his e-mail to clients, Washington, D.C.-based K&L Gates attorney Platt outlined some important issues still to be resolved, such as what assets Treasury would be authorized to buy.

The Treasury Department has defined "mortgage-related assets" as "residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages" originated or issued on or before Sept. 17.

Platt said Treasury appears to be preparing to buy loans regardless of priority of the lien or the purpose of the loan -- meaning investor loans would be eligible. While it doesn't look like credit default swaps or other "synthetic instruments" tied to performance of mortgage pools would be included in the plan, "the phrase 'related to' could encompass a wide array of instruments that bear some indirect relationship to mortgage loans," Platt said. "We'll have to see."

***

What's your opinion?

New home sales plummet in August, prices tumble.

2008-09-25T10:15:00.000-07:00

New home sales tumbled in August to the slowest pace in 17 years, while the average sales price fell by the largest amount on record, demonstrating the depth of the problem that Washington is trying to solve.

The Commerce Department said Thursday that new homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991.

It was a much bigger sales decline than the small 1 percent drop that economists had been expecting. The average price of a new home sold in August dropped by a record amount of 11.8 percent to $263,900, compared to the July average of $299,100. The median price was also down, falling 5.5 percent to $221,900.

The big drop in new home sales followed news Wednesday that sales of existing homes were down 2.2 percent in August to a seasonally adjusted annual rate of 4.91 million units. Both segments of the market remain under pressure from the steepest housing downturn in decades.

That housing slump has contributed to a record surge in mortgage defaults, leading to billions of dollars in losses by financial firms and spawning a severe credit crisis that is threatening to send the country into a steep recession.

In a nationally televised speech Wednesday night, President Bush said the credit crisis could trigger a "long and painful recession" unless Congress acts quickly to pass a $700 billion bailout plan for the nation's financial system. Negotiations on that plan were continuing Thursday with expectations that an agreement would be reached soon.

Besides the weak housing report, the government said Thursday that new claims for unemployment benefits shot up last week to the highest level in seven years. Orders to factories for big-ticket manufactured goods fell by a much-bigger-amount than expected amount of 4.5 percent in August. Both indicate the rising pressures facing the economy.

The report on new home sales showed that business was off in every region of the country except the Midwest, which posted a 7.2 percent increase. Sales plunged by 36.1 percent in the West and were down 31.9 percent in the Northeast. Sales fell a more modest 2.1 percent in the South.

Sales, prices sink in August.

2008-09-24T19:18:00.000-07:00

Sales and prices of existing homes in August fell approximately 10 percent from a year ago, as total for-sale inventory declined by 128,000 units, according to data released today by the National Association of Realtors.

The seasonally adjusted sales rate, which includes single-family, townhomes, condominiums and co-ops, sank to 4.91 million units last month -- a 2.2 percent drop from 5.02 million in July and 10.7 percent lower than the 5.5 million in August 2007.

The national median existing-home price for all housing types was $203,100 in August, down 9.5 percent from $224,400 a year ago.

While total housing inventory at the end of August (4.26 million units) was 2.9 percent lower than a year ago (4.38 million units), the supply of homes for sale actually rose during the period from 9.6 months to 10.4 months, indicating longer days on market.

By region, existing-home sales fell sharpest in the South (-15.1 percent) compared to a year ago, followed by the Northeast (-15 percent) and Midwest (-12.3 percent). Sales in the West gained 4.9 percent over their year-earlier numbers.

Prices declined greatest in the West (down 23.9 percent to $251,600) compared to a year ago, followed by the Midwest (down 5.6 percent to $168,000), Northeast (down 3.8percent to $271,000), and South (down 3.4 percent to $176,500).

"The highest concentration of foreclosures is in the West, which is weighing down the median price because many buyers are taking advantage of deeply discounted prices," Lawrence Yun, NAR's chief economist, said in a statement.

CalHFA responds to market uncertainty

2008-09-23T12:19:00.000-07:00

The State of California’s first time buyer program –CalHFA- announced major changes to their program today that may affect you.

Acknowledging recent market turbulence, CalHFA has made the following changes effective until some stabilization occurs:

1. Rates increased for all CalHFA programs (they set their own interest rates separate from the rest of the market)

2. The CHAP silent 2nd mortgage, used for down payment assistance, is suspended

3. All conventional 1st mortgages (including conventional 30 year fixed, 40 year fixed and 35 year interest only plus) are suspended

4. The normally discounted interest rate for low income and extra credit for teacher program (ECTP) are currently not discounted

FHA CalHFA 1st mortgages are still available as are the CHDAP and ECTP Program silent 2nd mortgages for down payment and closing cost assistance.

If you are pre-qualified with CalHFA financing please have your pre-quals updated to reflect current underwriting guidelines.

Thank you...

First effort to clean up S&L mess misfired.

2008-09-23T11:31:00.000-07:00

News analysis: Lessons to be learned this time around

Over the weekend, Treasury Secretary Henry Paulson sent a financial bailout proposal to the U.S. Congress that gives the Treasury Department broad authority to buy mortgage-related assets.

To calm the markets, step one is announcing a plan and proposing legislation to isolate and liquidate bad mortgages. But execution is the next challenge for the Bush administration, and it is no easy task if the record of our last real estate cleanup -- the savings and loan crisis in the 1980s -- is closely observed.

As many as 1,500 savings and loans went under during the country's last financial and real estate debacle, and the U.S government lost $160 billion. Ultimately, a government-created entity, the Resolution Trust Corp. (RTC), sold off the bad real estate for as little as 10 cents on the dollar.

The overall record of the RTC is considered by most financial historians to have been a good one, but the first couple of years of the cleanup were bogged down in politics that should not be ignored this time around. Plus, the rush to liquidate the real estate, which the government acquired when a series of savings and loans went under with billions of dollars of insured deposits, may not have yielded the government the best return on its investment in the cleanup.

The RTC was not the first organization created to clean up the S&L mess. The first agency was called the Federal Asset Disposition Association, and its first CEO was Roslyn B. Payne, a very savvy San Francisco Bay Area real estate dealmaker with an MBA from Harvard.

After two years on the job, Payne was dumped, FADA was dissolved and the RTC was created, which stalled the emergency program.

At the time, Payne was allegedly the highest-paid executive on the federal payroll, which sparked a controversy even though she technically worked for a private company created by the Federal Home Loan Bank Board. Her salary was $250,000 a year: compare that to the compensation of a series of sacked Fannie Mae and Freddie Mac executives over the last five years.

The payroll controversy covered up deeper issues within FADA. While Payne was attempting to create a fair and competitive structure for letting go of property assets to get the best return for the federal government, some private contractors who wanted more of the disposition work were not happy with her and allegedly pressured the U.S. Congress to dismiss the female executive and kill FADA.

She got beat up by the media for her salary and the speed or care -- depending on how you look at -- that she was taking to sell the assets. Payne once walked off the set of an interview with CBS News.

She also came under political pressure by Congress. At the time, many members of Congress were knee-deep in the financial mess through their association with S&L executives. Who knows what Payne -- known to be tenacious when it comes to details --might have uncovered in her diligence?

There are lessons to be learned here if political, government and private business leaders take the time to peel back the onion on the story behind the RTC.

Fannie-Freddie Rescue Averted Collapse.

2008-09-23T11:21:00.000-07:00

News analysis: Data shows private MBS drop-off

New data shows that if the U.S. government had not rescued Fannie Mae and Freddie Mac, the secondary mortgage market would have collapsed, leaving the housing market in worse shape with a virtual halt on mortgage lending.

In the last year, Fannie and Freddie Mac provided $1.1 trillion in new mortgage credit, while private mortgage-backed securities issuance fell from $900 billion to nothing, according to the Federal Reserve's Flow of Funds data.

"A surge in agency (Fannie and Freddie) issuance has offset a total collapse in 'private' MBS issuance," according to the "Follow the Money" blog written by Brad Setser for the Council on Foreign Relations -- private MBS refers to mortgage-backed securities that did not have a guarantee from the secondary mortgage entities. "Agency lending has been absolutely essential," he writes.

In February of this year, the Office of Federal Housing Enterprise Oversight, which regulated Fannie and Freddie, lifted restrictions on the amount of mortgages the government-sponsored companies could hold on their books. Loan limits were also increased last fall.

The federal takeover earlier this month, while controversial, was necessary to avoid even more serious problems with the housing market. While Fannie and Freddie are owned by the U.S. government and have a much skinnier footprint, they are central to the housing market stabilizing.

At their peak, Freddie and Fannie purchased about 50 percent of the $12 trillion mortgage market. While the private MBS market backed much riskier loans, the bloated portfolio of the two agencies is what got them into trouble as the housing market collapsed.

Both agencies have been reined in with new management and a revived public purpose: to fund the mainstream housing market.

Down Payment Assistance

2008-09-22T16:20:00.000-07:00

For your first time homebuyer (those who have not owned real estate in the last 3 years), here’s an update on the local down payment and closing cost assistance programs.

State of California First Time Buyer Program (CalHFA)

Has funds available for use towards down payment and/or closing costs!! They’re also still offering their Extra Credit for Teacher Program with discounted interest rates for teachers and classified employees in schools with API ranks of 1-5.

County of San Bernardino HAP, Down Payment and Closing Cost Assistance

Effective last week, the county has committed all of its funds for the 2008 fiscal year. It looks like they’re going to try and obtain interim funds but that hasn’t been confirmed yet.

County of Riverside Down Payment and Closing Cost Assistance Program

Effective last week, the county is has committed all its funds for the 2008 fiscal year. Unless they inform us otherwise, they will replenish their funds July 2009

City of Redlands Down Payment Assistance Program

The city ran out of funds almost as soon as they received them in July. They generally receive enough money to assist 10 families. By August, their funds were committed and they had a waiting list. Their funds should be replenished July 2009.

Snag for FHA Hope

2008-09-22T16:06:00.000-07:00

Although Wall Street's woes got a lot of attention on Capitol Hill last week, so did the continuing crisis in home foreclosures.

Starting October 1, home owners who owe more on their mortgage than their property is worth may be able to qualify for new FHA "Hope" refinancings that cut their debt, lower their interest rates and help them start rebuilding equity.

Sounds like a great opportunity for hundreds of thousands of hard-pressed owners, but there's a huge potential snag: Their lenders and loan servicers have to agree to participate, and they may not.

Why? Because among other requirements, lenders and bond market owners of mortgages will have to agree to write down the balances due on the loans below current market values for the house -- in other words, they'd need to take immediate and sizable losses on those mortgages.

At a House financial services hearing last Wednesday, a top Bank of America executive, Michael Gross, said Congress may have unrealistic assumptions about how many lenders and investors will agree to participate in Hope refinancings.

"My biggest concern," said Gross, "is that expectations for (this) program might be too high."Rather than booking instant losses many banks and bond investors might prefer to work out customized loan modifications with borrowers instead -- renegotiating loan balances, reducing monthly payments and even interest rates - without having to deal with FHA.

But Congressional critics like House financial services committee chairman Barney Frank say the banks have already been doing that -- and foreclosure rates are still rising in many markets.Frank is threatening to make massive -- though as yet unspecified -- changes in the federal rules governing home mortgage servicing that would force lenders to be more responsive to borrowers stuck with underwater properties.

In the meantime, borrowers who believe they might benefit from a Hope refinancing, should start talking with their servicers to see whether there's a chance. The law expressly makes the decision voluntary for all financial institutions -- borrowers cannot compel them or take them to court to force their hands.

But Barney Frank's ominous warning to lenders just might get some banks' attention and soften their stances on taking part in the Hope program. At the very least, home owners who talk to their lenders about Hope refinancings could open the door to customized loan modifications that help them out of their jams.

FHA Hope Program - Highlights

2008-09-22T15:26:00.000-07:00

FHA Mortgage Refinance and Insurance Program

The Act establishes the HOPE for Homeowners Program under the FHA with a Board to administer standards and requirements for that program. The Act authorizes the FHA to insure payment of up to $300 billion of mortgage loans originated from October 1, 2008 through September 30, 2011. The program would be voluntary for eligible borrowers, and their lenders would have to agree to release the existing mortgages at a discounted payoff amount from the proceeds of a new FHA-insured loan. To participate in the program, borrowers and their mortgage loans must meet the following eligibility criteria:

Eligibility of the borrower:

The borrower must be unable to pay the existing mortgage loan and must certify that he or she has not intentionally defaulted on that loan. The mortgage debt-to-income ratio on the existing loan, using only verified and documented income in the computation, must be greater than 31 percent as of March 1, 2008;

The borrower must occupy the mortgaged property as his or her principal residence; and -The borrower must have no fraud conviction in the previous 10 years; Eligibility of the existing loan to be refinanced: -The loan was originated on or before January 1, 2008; -The existing lender(s) must waive any prepay penalties or other outstanding fees related to default or delinquency; and -The existing lender(s) must accept the proceeds of the insured loan as payment in full of all existing mortgage debt and extinguish all liens.

Officially, this program will commence October 1, 2008 and will run to September 30, 2011

EFFECTICE IMMEDIATELY:

2008-09-22T13:10:00.000-07:00

Borrowers using FHA mortgages will no longer be allowed to qualify for their loans using rental income from their existing primary residence.

What the “buy and bail” is:

HUD has issued their interpretation and rule on the issue of borrowers vacating their current residence to purchase another residence- some with the intention of letting their current residence foreclose after the transaction. This increasingly popular phenomenon has been dubbed the “buy and bail”.

HUD’s Rule as of Today:

For the new purchase loan, the borrower must qualify with both their existing payment and the proposed payment on the property being purchased. This is applicable to borrowers who have not yet been assigned an FHA case number. Case # assignment is sort of like registering a loan # with HUD, which is tied to a property for which there is an executed purchase agreement. If you have borrowers in escrow with FHA loans that already have a case # assigned, this rule is not applicable to them.

Exceptions to the Rule:

1. Relocation
The homebuyer is relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally recognized commuting distance. A properly executed lease agreement (i.e., a lease signed by the homebuyer and the lessee) of at least one year’s duration is required. Most FHA underwriters will also require evidence of the security deposit and/or evidence the first month’s rent was paid to the homeowner.

2. Equity in current home
The borrower has at least a 25% equity position in their current residence.

The HUD Mortgagee letter is attached if you’d like to forward it to borrowers who are currently looking for homes and were planning on using rental income from their current primary residence to qualify for the new loan. It explains HUD’s position and reasoning for this decision.

Free Foreclosure Prevention Clinic

2008-09-22T11:09:00.000-07:00

Mabuhay Alliance, a non-profit organization and a HUD approved housing counseling agency in collaboration with Housing Opportunity Collaborative of San Diego is conducting a Free Foreclosure Prevention Clinic to help distressed homeowners address their concerns about mortgage defaults, foreclosure, bankruptcy and short sale.

Housing counselors, mortgage counselors and attorneys will be in site to give valuable information to assist homeowners in making an informed decisions.

To register, please log on to mabuhayalliance.org

or housingcollaborative.org.

Sponsors for this event are Wells Fargo, Bank of America and Hispanic Chamber of Commerce.

Time and location of the counseling workshop is:

Where: Ontario Senior Center at 225 E. B St. Ontario, CA 91764

Date: Saturday, October 4, 2008

Time: 10:00 am to 3:00 pm

Mabuhay Alliance, Inc.

1-858 586 7382

www.mabuhayalliance.org

The Price is Right.

2008-09-22T10:56:00.000-07:00

Southern California home sales were up over last year for the second straight month in August as prices continued to decline.

San Bernardino County posted the biggest year-over-year price decline, with its median home price plummeting 40.3 percent in August to $215,000 from $360,000 a year earlier. Sales, however, were up 16.4percent in August.

Riverside County's median home price fell 37.3percent to $247,450. Sales in August increased by a whopping 43.9 percent.

Los Angeles County's median price fell 30.9 percent in August to $380,000 compared with $550,000 a year earlier. Sales remained down by 7.7 percent.

Feds to pick up bad mortgages.

2008-09-21T16:20:00.000-07:00

Fannie, Freddie will also boost purchases...

The U.S. government is attempting to head off a collapse of the financial system by promising to provide "hundreds of billions" of support for financial markets and institutions by purchasing troubled mortgages from banks and other institutions.

Bush administration officials including Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have briefed lawmakers on Capitol Hill on the "urgent need for Congress to pass legislation approving the federal government's purchase of illiquid assets, such as troubled mortgages, from banks and other financial institutions," President Bush said today.

"This is a decisive step that will address underlying problems in our financial system," Bush said. "It will help take pressure off the balance sheets of banks and other financial institutions. It will allow them to resume lending and get our financial system moving again.

"The details of the move to create an agency similar to the Resolution Trust Corp., which was created by Congress in 1989 to sell off the assets of failed thrifts, have yet to be hammered out.

Bush and Paulson said the government would also provide insurance for trillions of savings held in money market mutual funds -- a critical source of capital for lenders that could disappear if investors panic and withdraw funds.

The U.S. Securities and Exchange Commission also issued new rules temporarily suspending the practice of short-selling the stocks of 799 publicly-traded financial institutions -- a move that sent stocks soaring.

At a press conference, Paulson said that Fannie Mae, Freddie Mac and the Treasury Department will boost purchases of mortgage-backed securities to fund new loans but that the government must also take bad loans off the books of banks and financial institutions to unfreeze credit markets.

"We have acted on a case-by-case basis in recent weeks, addressing problems at Fannie Mae and Freddie Mac, working with market participants to prepare for the failure of Lehman Brothers, and lending to AIG so it can sell some of its assets in an orderly manner," Paulson said.

Despite these steps, he said, the government must take "further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses."

Investments backed by mortgages have become difficult to trade and "are choking off the flow of credit," Paulson said. The clogging of financial markets "has the potential to have significant effects on our financial system and our economy."

Investments backed by troubled mortgage loans are "parked" on the balance sheets of banks and other financial institutions, preventing them from financing productive loans, Paulson said. "The inability to determine their worth has fostered uncertainty about mortgage assets, and even about the financial condition of the institutions that own them. The normal buying and selling of nearly all types of mortgage assets has become challenged."

The government, by taking on the assets that are weighing down financial institutions and threatening the economy, can prevent more failures of financial institutions and thaw a frozen credit market that's unable to fund economic expansion.

Paulson said Fannie Mae and Freddie Mac will boost purchases of mortgage-backed securities (MBS), and the Treasury Department will also boost spending on a program in which the government buys such securities directly.

The Mortgage Bankers Association welcomed that aspect of the plan, saying it should provide support for mortgage rates.

"The fear was that the illiquidity in the financial markets we have seen this week would have reversed the recent drops in mortgage rates," said John Courson, MBA's chief operating officer.

"The broader steps outlined by Treasury are aimed at ending the further meltdown in the financial markets and are designed to minimize the resulting impact of the market turmoil on the broader economy," Courson said. "It is another step in the long-term process of restoring a balance between the supply and demand for housing in a number of markets and thus addressing the continuing problem of mortgage delinquencies and foreclosures."

Boosting purchases of mortgage-backed securities will provide some initial support of the financial system, Paulson said, but not enough. Many banks and financial institutions hold are stuck with securities that don't meet the regulatory requirements to be eligible for purchase by Fannie or Freddie, or by the Treasury program.

Congress must authorize the government to buy bad loans, Paulson said, through a "troubled asset relief program" that would likely involve an investment of "hundreds of billions" of dollars. Bush acknowledged "a significant amount" of taxpayer dollars will be on the line, but that the plan is for the money to eventually be paid back.

"The vast majority of assets the government is planning to purchase have good value over time, because the vast majority of homeowners continue to pay their mortgages," Bush said.

The risk of not acting would be far higher, Bush said, because further stress on financial markets "would cause massive job losses, devastate retirement accounts, and further erode housing values, as well as dry up loans for new homes and cars and college tuitions. These are risks that America cannot afford to take."

Appearing on "Good Morning America," Senate Banking Committee Chairman Chris Dodd, D-Conn., said the United States was "days away from a complete meltdown" of the financial system, which Congress would work to prevent.

After meeting with Paulson and Bernanke Thursday night, House Speaker Nancy Pelosi, D-Calif., said "time is of the essence" and that she hoped Congress would move "very quickly," the Associated Press reported.

Augustine Faucher, director of macroeconomics at Moody's Economy.com, said that while it's unclear what mechanism the federal government will use to purchase debt, it's safe to assume companies unloading illiquid securities on the government would take "huge losses" on the face value of those assets. But taking those losses would allow the firms to continue providing the loans that make the global economy function.

In a column for the Dismal Scientist newsletter, Faucher said the government could dispose of the debts gradually, "without the pressure to dump it all at once and thus push down prices, exacerbating the problem."

Faucher said the reluctance of banks to lend each other money demonstrated that drastic measures were needed. The TED spread -- the difference in yields between three-month Treasury bills and the three-month LIBOR banks charge each other for loans -- soared above 300 basis points Wednesday, higher even than the aftermath of the stock market crash of 1987, he said.

"In normal times, no one would want the federal government buying hundreds of billions of dollars worth of financial market instruments," Faucher said. "But these are obviously not normal times.

"The American Bankers Association was critical of the plan to insure money market mutual funds."

Today's action will undermine the role of banks during this current crisis and has the potential to have an extremely negative impact in the future," ABA President and CEO Edward L. Yingling said in a letter to Paulson and Bernanke. "Simply put, the ability of banks to attract and keep deposits is being compromised in a profound fashion. Our bankers are, understandably, very upset by the action."

Faucher characterized the proposal to insure money market mutual funds and the temporary ban on short-selling financial stocks as "minor." What really matters, he said, "is that someone needed to step in and take control, and the Treasury and Federal Reserve have done so."

Writing on his blog, The Big Picture, Fusion IQ Chief Executive Officer Barry Ritholtz called the Bush administration's plan "the new New Deal," reffering to the government programs created during the Great Depression in the aftermath of the 1929 stock market crash.

"We now see that the grand experiment of deregulation has ended, and ended badly," Ritholz said. Ironically, he said, proponents of deregulation "have effectively turned the United States into a massive Socialist state, an appendage of Communist Russia, China and Venezuela."

Quick sale seen for home.

2008-09-20T15:54:00.000-07:00

FONTANA - There is a good chance the home at 14738 Rosemary Drive will be sold in the next couple weeks.

The bank-owned home has been on the market for 13 days at $132,900 and already has three offers.

"We've accepted an offer on it and we're now waiting for escrow to open," said Siama Ahmed, real estate agent with Blackstone Realty. "I think we may even close above the list price."

Ahmed said she is confident this home will sell quickly because, while the housing market is saturated with homes in the $200,000 to $300,000 range, this one is "way below that."

Although the home is in an unincorporated area, the average sale prices for bank-owned homes in Fontana and Rialto is between $130,000 and $235,000, with an average sale price in September of $260,000, Ahmed said.

Selling point

Someone has the potential to make a lot of money off the 8,100-square-foot piece of property, Ahmed said.

The site of the two-bedroom, one-bathroom home has two other homes, each with two bedrooms and one bathroom. "In my opinion, the other pieces do not have permits," Ahmed said.

Ahmed said if potential owners do their part by getting the necessary permits on the other structures, they have a better chance of benefitting from the land.

"Most millionaires become millionaires because they can take these types of bank-owned properties, invest in them and then once the market changes make a whole lot of money," she said.

Like most homes around it, the lot is gated.

The street is quiet, doesn't have a lot of traffic and most residents keep to themselves, said longtime resident David Estrada.

But the 58-year-old recalls a time when the street was alive with music.

"I used to be in a rock 'n' roll band and jammed with Sammy Hagar," he said. "He really liked my mom's tortillas.

"Although the street hasn't seen the likes of Hagar for more than a couple of decades, Estrada said he hopes his future neighbors like music."We still play our music," he said.

Developer outlook

John Schatz, principal planner with San Bernardino County, said the area west of the home is zoned for special development with an emphasis on commercial use.

"There is a chance for the development to be mixed-use, but its emphasis is to have more commercial development," he said.

Schatz said that's because Auto Club Speedway is a mere two blocks away.

The nearest supermarkets are three miles away at Foothill Boulevard and Cherry Avenue, with the nearest gas stations less than a half-mile away at Valley Boulevard and Cherry Avenue.

Good news, bad news

The biggest change Estrada has seen in his community has been the presence of law enforcement.

"I really think these scrap yards just west and north of here have really brought in a lot of heat," he said. "There are always positives and negatives when it comes to cops coming down your street, but I guess it's good to know they're coming down here and in some ways it makes me feel safe.

"Estrada, who has lived in the neighborhood since the 1950s, said it is safe and kid-friendly, but that crime does happen.

Ahmed said she did have to board up the windows of the house due to vandalism."The property was vandalized before it was listed and once we found out, we took action to prevent anything else from happening to the home," she said.

Estrada said the law enforcement patroled the area two weeks ago because of a robbery that took place at the Circle K on Valley Boulevard.

"They closed down the street and were asking people questions," he said.

"We don't hear gunshots or anything, but I guess if you're going to live here, don't expect everything to go according to plan."

Home Prices Fall One-Third.

2008-09-20T11:24:00.000-07:00

SAN DIEGO -- The value of a Southern California home price fell dramatically from last year, according to a local research firm.

MDA DataQuick said in its report Wednesday that the median price for new and resale homes and condos fell 34 percent in August year-to-year, dropping to $330,000 in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties.

The median San Diego County was valued at $475,000 in August 2008. That figure dropped to $350,000 last month, the report showed. A DataQuick spokesman said the median price had not been that low since February 2003.

That's down from the market peak of $500,000 in August 2007 and down 5.2 percent from $348,000 in July. That is a drop of more that 26 percent.

A total of 19,366 homes and condos were sold during the month, up 9.1 percent from August 2007 but down 4.7 percent from July.

Foreclosures accounted for 45.5 percent of all resold properties last month, up from 10 percent in August 2007 and 43.7 percent in July.

DataQuick: Almost Half of SoCal House Sales are Foreclosure Resales.

2008-09-19T11:20:00.004-07:00

From DataQuick: Southland home sales post second annual gain; another record price drop.

Southern California home sales downshifted slightly in August from July, but were higher than a year ago for the second consecutive month. The median sales price continued to tumble, declining the most where buyers were the most active, a real estate information service reported.

The median price paid for all new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties was $330,000 last month, down 5.2 percent from $348,000 in July and down a record 34 percent from $500,000 in August 2007, according to San Diego-based MDA DataQuick.

Last month's median stood at the lowest point since November 2003 when it was also $330,000. The median peaked at $505,000 in the spring and summer of last year.

We have to be careful with the median house price because that can be impacted by the mix of homes sold. Most of the foreclosure activity is at the low end, and this pushes down the median. A better measure of prices are repeat sale indices.

Sales have picked up most - sometimes at double or more last year's pace - in inland communities where home values have plummeted and foreclosures have soared. Foreclosure resales made up 45.5 percent of all Southland resales last month, up from 43.7 in July and 10 percent a year ago. The figure represents the percentage of homes resold in August that had been foreclosed on at some point in the prior 12 months.

Foreclosure resales were highest in Riverside County, at 65.2 percent of resales, and lowest in Orange County, at 33.4 percent.

Almost half the sales in SoCal are foreclosure resales. Wow...

Regional home prices continue to fall.

2008-09-19T11:20:00.003-07:00

Southern California home prices continued their free-fall in August and are now as low as they were five years ago, a real-estate research form reported today.

Sales have accelerated sharply from a year ago in Riverside County and were also up in San Bernardino County, according to DataQuick Information Systems. But the activity is largely centered on foreclosures and other sales of distressed properties, which is keeping other sellers away from the market.

DataQuick President John Walsh said in a statement home values have fallen sharply in the Inland housing markets, where sales interest in foreclosed homes is highest.

The median price of a resale home in Riverside County was $247,500 in August, down from $260,000 a month earlier and 37.3 percent lower than August 2007, DataQuick reported.

In San Bernardino County, the median sales prices slipped to $215,000, down from $230,000 in July. The price has dropped 40.3 percent in the last 12 months.

The all-time highs were $432,000 in Riverside County and $380,000 in San Bernardino, both recorded in late 2006.

HOUSING: Banks haven't wiped out all risky loans.

2008-09-19T11:20:00.002-07:00

As housing prices plummet and foreclosures dominate the real-estate market, major banks across the nation have continued to issue loans some analysts consider risky.

Lenders continue to make mortgages that require little or no down payments in areas where housing prices have fallen as much as 3 percent each month.

Meanwhile, some analysts have identified exotic loans as one of the culprits behind the region's foreclosure problem.

In some cases, loans issued as recently as June already exceed the market value of the home.

Whether a mortgage with a small or zero down payment in a rapidly depreciating market is inherently risky is cause for debate among analysts.

Some point to studies, such as one by the Federal Reserve Bank of Boston, that suggest price decline is a more accurate indicator of foreclosure than a loan with high interest rates. Also, they say, if a borrower owes more than the home is worth, the homeowner is more willing to enter foreclosure.

Collateral v. Borrower

If many homeowners adopt that philosophy, one of the entities in biggest trouble would be the Federal Housing Administration, a government agency that insures loans for first-time home buyers with a down payment of just 3 percent.

"You could literally be under water for most of the FHA loans made since January," said Bruce Norris, a real estate investment adviser based in Riverside who covers Southern California. "In Riverside County, you could be 30 percent under water from January. And I think those could turn into a pile of foreclosures.

"However, other analysts said the quality of the borrower, not the value of the house, matters most.

Mortgage brokers, real estate agents and lenders said underwriting guidelines have tightened, meaning many of the dicey loans, such as applications that required no proof of income, made during the real estate boom of three years ago have been eliminated.

"Banks still have to lend money to stay in business," said Shawn Harris, a mortgage broker based in Oceanside. "They're just betting that people are not going to walk away.

"Over the last year, 30 percent of all new mortgages in Riverside and San Bernardino counties, or about 16,000 loans, carried a down payment of 10 percent or less, according to data from First American CoreLogic and DataQuick Information Systems, two real estate research firms.

During that time, the median price in Riverside County has fallen 35 percent, according to DataQuick.

Drowning right away

Further, some loans in the region were made on properties that real-estate agents said were overvalued at the time of purchase. In south Escondido, prices at one condominium complex increased by 31 percent while the median price in the area tumbled by 54 percent.

Units at Brookhaven Condominiums at the corner of 15th Avenue and Escondido Boulevard were the only condos to sell in 2008 for more than $300 per square foot. The average price in the area was $141 per square foot, according to Sandicor, a local real estate listing and sales database.

Not only did the condos sell at double the price of comparable units, but banks also approved loans that carried very little down payments.

For one unit, Washington Mutual approved a no-money-down mortgage in December 2007 at the price. Seven months later, a notice of default, the first step in the foreclosure process, was filed on the condo, according to county records.

Washington Mutual declined to comment, citing privacy concerns. The nation's largest savings and loan institution, Washington Mutual's shares have plunged 92 percent over the last year over concerns that it might not survive multibillion dollar writedowns on its mortgage portfolio.

In total, 12 units sold at prices that baffled real estate agents. All carried loans with down payments of 12 percent or less, according to county records.

Four mortgages carried down payments of 5 percent or less.

"The prices are not at market value, they're just not," said Troy Sauvageau, a real estate agent in Escondido.

Potentially widespread problem

But the Brookhaven condos were not the only recent house sales to carry mortgages with low down payments.

For example, Flagstar Bank, a Michigan-based lender, originated a 5 percent down payment loan on an Oceanside home in the 92057 ZIP code, an area in northeast Oceanside that has led northern San Diego County in foreclosure filings and seen some homes lose as much as 50 percent in value.

The home sold for $162,000 and carried a loan of $153,900. Just one week later, a similar-sized home down the street sold for $140,000.

Flagstar Bank declined to comment, citing privacy concerns.

It isn't just banks. The Veterans Administration has guaranteed several loans with no money down in the middle of Oceanside's foreclosure cluster.

Also, the Federal Housing Administration continues to insure loans with very little down payment. But mortgage brokers and economists said the government agencies will avoid high foreclosure rates because of tight income guidelines.

Analysts said banks are making a bet that home values won't drop much more, and if they do, qualified borrowers will not be willing to wreck their credit scores for a cheaper home.

But critics said foreclosure becomes attractive, even economically sensible, when the homeowners start to see six-digit losses.

However, mortgages on apparently overpriced condos such as the ones made at Brookhaven raise larger issues, said Paul Leonard, director of the California office of the Center for Responsible lending.

"It does raise serious questions about whether the banks are doing a good job of establishing good, strong collateral under the loans," he said. "You would think that after the huge market meltdown that banks and lenders would be paying a whole lot more attention to make sure they're appropriately pricing that collateral."

Bargain hunters fuel housing market.

2008-09-19T11:20:00.001-07:00

Bargain hunters continued snapping up local foreclosure properties in August, as repos accounted for eight in 10 homes sold and local home prices hovered near 2003 levels, according to a report released Wednesday.

The number of existing homes sold in August declined from July, but soared 150 percent compared to August 2007, according to Victor Valley Multiple Listing Service figures collected by Larry Trombley of Century 21 Rose Realty.

For the month, home prices dropped 3.6 percent. The average home that sold in August was 1,872 square feet, selling for $182,859 or $92 per square foot. That’s equivalent to August 2003 levels.

“The bottom is in sight,” said Bobby Tarango, head of business development for Chicago Title in Victorville. “The good deals are out there, and there are multiple offers on the good deals. It is a buyers market — but buyers don’t buy in a buyers market.

”While cautious about making predictions, Tarango said the end of the housing slump may be nearing.

“Based on some of the numbers we’ve been seeing, it could be the end of spring when we get to the bottom,” he said. “The bottom is in sight.

”While Jack Fales of Ambassador Realty is seeing some stabilizing of the local housing market, he said an interest rate cut and federal backing of mortgage giants Fannie Mae and Freddie Mac would significantly strengthen the housing market.

“I am seeing now a lot of bank repos selling, naturally,” said Fales, who along with his wife Shirley, has been in the local real estate market for more than 30 years. “If the government loosens up the interest rates there will be a lot more people buying.

”Across the High Desert, one in nine homes for sale sold, and real estate experts say that equates to about a nine-month’s supply.

The decline in home prices has been good news for first-time homebuyers. Tarango said he’s seeing more first-time buyers. Entry-level housing affordability doubled in second quarter 2008 compared with a year ago, according to the California Association of Realtors. The High Desert region was the most affordable area in the state.

Fales said he expects new home builders to resume construction when they see the housing inventory shrink to an eight-month supply.

“I think we’re going to see some good stuff in the next month or two.” said Fales. “I’ve been here 38 years and I’m still going to be here.”

One family’s lost dream is another’s opportunity.

2008-09-18T16:43:00.000-07:00

VICTORVILLE — Record foreclosures in the Victor Valley are creating opportunities for those looking to invest.

Recently, about 800 people were registered to attend an auction at the San Bernardino County Fairgrounds to bid on the 163 foreclosed homes that were on the market.

Rob Friedman, chairman of Real Estate Disposition Corp., conducted the auction and said the banks are very motivated to get rid of the properties and are taking some big losses.

“We are liquidating foreclosures for numerous banks. A lot of major national banks have decided they need these properties off their books,” Friedman said.

One example is a large home that was valued at more than $300,000 and the winning bid was $70,000.

“The banks realize that if they leave them on the market without a tenant or without someone in them, they tend to (deteriorate) and the properties get vandalized. So it’s better for them to take their losses and take their medicine, rather than wait for a year or two for it to sell at a higher price,” Friedman said.

However, after the auctioneer says “sold,” banks still have a final say on acceptance of the bid.

Locally at least 41 percent of homes listed for sale are foreclosures, said Caroll Yule, president of the Victor Valley Board of Realtors and a partner in Shear Realty. She said the number of bank-owned homes has created a whole new niche market of home buyers.

“For the first time in years and years we have people getting back into the home-buying market that have been closed out. So on the good side, it is a very exciting time for young people who thought they would never be able to buy their own home in California,” Yule said.

She said the number of foreclosed homes is about 1,600 to 1,700 and she expects that number to increase over the next four to six months.

Yule said most of the foreclosures didn’t happen overnight and in many cases it is a combination of factors that lead to a family losing their home, with the biggest issue being equity.

“People got this gift of equity. We went up 130 percent in home values between 2000 and 2005, so people got this imaginary gift and people borrowed it all,” Yule said.

As a result, mortgages went through the roof and now Yule said homeowners will never be able to get that amount back because homes recently dropped in value by about $100,000 based on current market estimates.

Jason Landon with Hamilton Landon GMAC Real Estate says buyers are perceiving that the best values right now are in the bank-owned properties, but he warns buyers to beware when purchasing a foreclosure residence.

“You’re missing a chance to talk to the prior owner, get full disclosure on the history of the property. So, yes, you’re getting a better buy, but you may be buying problems you’re unaware of,” Landon said.

FHA's new down payment and LTV requirements.

2008-09-13T20:40:00.000-07:00

Here are the 5 things you need to know about these changes...

1. One single down payment requirement of 3.5% for all purchases

2. Closing costs/prepaids are in addition to the 3.5% down (6% seller contribution allowed)

3. New maximum LTVs (based on lower of sales price or value) are:

96.50% for all purchases.
98.28% for all regular rate and term refinances (cash out remains at 95%).
98.52% for all streamline refinances.

4. These changes are effective October 1st, 2008.

5. Purchases already in the pipeline will have until December 31st to be assigned a case number. After January 1st, 2009, all purchases will require the new down payment requirements.