If you are planning on buying a condo in 2010, you need to realize that you are not the only borrower.
With banks seeing a larger percentage of their late payments and foreclosures occurring in their portfolio of condo loans; guidelines for buying a condo have gotten more rigid.
Not only do you the buyer have to qualify for the loan, the condo project also has to qualify.
Banks want to ensure that the condo project and the home-owners association are financially stable and do not create additional layers of risk for the borrower.
This adds an extra level of underwriting and approval requirements to the process of buying a condo versus a single family residence.
Many agents who list condos will know if their condo project already have FHA approval, is in good standing for traditional lending, or may have some financial challenges.
The most common items that can make a condo project ineligible for bank approval or FHA lending are the following:
Money.com is reporting that the FHA and Congress are close to striking a deal that will make FHA loans more expensive for consumers.
Unfortunately, a higher number of FHA foreclosures over the last 3 years is causing the FHA and HUD to shore up there cash reserves by passing mortgage insurance costs onto new FHA borrowers.
The tragedy here is that loans currently being underwritten by FHA guidelines are done so under a more rigid set of rules, with an extra money going towards down payments, and in an mortgage environment where banks and underwriters are double checking every condition.
I would argue that as a whole, FHA borrowers today are better qualified than the borrowers from years past. This, in turn, means better borrowers of today are paying higher premiums for the foreclosures and poor repayment history of past borrowers. Furthermore, strategic errors by the FHA and poor underwriting over the last decade is causing financial penalties for more qualified current home-buyers.
Much like borrowing money today, and passing that cost on to future generations; this increase of costs by the FHA is pushing the financial burden of previously failed policy onto a younger group of buyers.
The full article can be viewed here:
http://money.cnn.com/2010/01/19/real_estate/fha_loan_requirements/index.htm
Over the weekend there was a virtual push among college teachers and students to get Californians to sign up for the facebook group “Fair Share for Fair Tuition”.
The group, which currently has 6,317 fans, is in support of California Assembly Bill 656. AB 656 is a bill proposed by Alberto Torrico which will add 12.5% in taxes to all oil pumped out of the ground in California.
The revenue generated from these taxes is estimated to add between $1,000,000,000 and $1,500,000,000 to California college budgets.
Money raised from this new tax would go to support higher education systems in California and includes funding for the Cal-State, University of California, and Junior College systems.
However, like many tax proposals, ‘free’ money for our education system is only part of the equation and is very misleading.
First of all, fundamentally speaking, what right does the Government have to arbitrarily select an industry and decide to legally gouge it for more taxes?
Currently, oil companies already pay real-estate tax on the property they drill into, tax on the equipment used for the extraction of oil, and taxes on the revenue produced from oil sold in California. In addition, oil dependent businesses like gas stations pay business tax on the revenue generated by providing refined oil and gasoline to the public. Furthermore, a simple google search will show that a large percentage of what every Californian pays at the gas pump is actually the cost of local, state, and federal taxes levied on each gallon of gas.
And speaking of Google… for fiscal year 2009 Google is one of the many California based companies which has netted a great profit margin than any oil company in the world. Why doesn’t California legislators go after Google for more of their profits?
It could even be argued that high tech fields where Google is the industry leader are the field most benefited by higher education.
Why not pass this tax onto those industries who benefit most from a highly educated work force?
Another concern of what can happen if this tax is passed is currently being voice by the residents of Kern County.
Citizens of Kern County are concerned that this tax could “deal a crippling blow not only to the oil industry in western Kern County but also to the county’s ability to deliver essential services to its citizens”.
At a recent press conference, Kern County Board of Supervisors Chairman Ray Watson stated, “This tax is aimed right at the heart of our economy,”
Watson further commented, “When is the [state] legislature going to learn that you can’t solve the state’s deficit by raising taxes that eliminate jobs?”
Watson and Les Clark Jr., executive vice president of the Independent Oil Producers Agency, summarized some of the affects of this tax bill:
What is most confusing about this bill is the fact that oil companies historically run at profit margins around 9%. Raising taxes on oil production by 12.5% will do little or nothing to cut into these profits, it will simply cause oil companies to pass the cost onto the consumer or shut-down business in California all together.
The State of California has made this mistake over and over again. Budgets, bond measures, and spending habits have been created based on revenue that is supposed to be generated by new taxes. However, like the tobacco tax has shown us, you can not raise costs (on the sale of tobacco or production oil) and expect the supply or the demand to remain constant.
In the late 1990’s and early 2000’s California sold state bonds by the billions and guaranteed their repayment by drastically raising taxes on cigarettes and cigars. However, what they forgot to factor in was that higher priced tobacco would drive down over-all tobacco sales and actually decrease tax revenue.
Currently California is on the hook for millions in “Tobacco Bonds” and is not sure how to repay them.
Now the California Legislature is trying to do the same thing with oil production without thinking about the long term ramifications. Knee jerk reactions to fiscal challenges and new taxation without a long term plan helped push California to the verge of bankruptcy in 2009. Shouldn’t the legislature be required to examine the full ramification of tax increases before arbitrarily going after one of the few productive businesses left in California.
Are you planning to buy a new home in 2010?
Are you self-employed or do you derive a majority of your income from 1099s, rental properties, or business investments?
If so, you will want to meet with your mortgage consultant prior to finalizing your 2009 tax returns.
The days of “low-doc” or “stated-income” loans are long gone and will not be returning for the foreseeable future. If you want to purchase a house in 2010 (or beyond), you are going to need to prove your qualifying income through two years of tax returns.
Many borrowers who are self employed, contract workers, or have large rental portfolios tend to be a bit more “aggressive” with their tax deductions.
Pushing the envelope or claiming tax write-offs that fall in the grey area of legal deductions may cause a borrower to depress their taxable income to a point where mortgage financing becomes unavailable.
If you plan to buy a home in the next three years, it is strongly recommended you have a conversation with your tax professional and your mortgage consultant.
In our new mortgage environment, borrowers may need to plan for buying a house years ahead of the actual purchase. Paying a few extra dollars in taxes to the Federal Government now, may ensure you are eligible for a home loan when the right property becomes available.
For the time being, the problems facing Freddie Mac and Fannie Mae should not affect the average consumers ability to secure a loan.
However, debt, poor management, and new Government directives are creating a scenario where-as the Government sponsored entities that currently run the mortgage markets could go bankrupt and/or cost tax payers over $1,000,000,000,000.
A full article from the Wall Street Journal is posted here:
Read the rest of this entry »
The first thing a client should hear from their real-estate agent before starting to look for a new home is “Get pre-approved”.
As a seasoned lender, if I had to advise on the next step after getting pre-approved, it would be for clients to get all their rate shopping and comparative analysis out of the way ASAP . Often times buyers decide to shop for a rate, compare mortgage terms, or try to negotiate for lower fees after they have an accepted offer and have opened escrow.
Unfortunately for these clients, this is a backwards way of doing business. By the time an offer is accepted and escrow has been opened, the count down on your 30 day escrow has already begun.
Spending the first 1-2 weeks of escrow trying to manipulate the system, find that magic lender who will provide a 0.125% lower rate, or pitting mortgage consultants against each-other in hopes of saving $500 is a waste of time.
In today’s market with a standard 30 day escrow, playing these games and trying to rate shop can easily delay a closing by 10 days or longer. These closing delays are not only frustrating to the buyer and the seller, but also be very costly and potentially put your transaction at risk.
Considering most foreclosures, short sale approvals, and many standard deals carry a $100-$200 per diem penalty for late closings , the savings a client may have managed to obtain by aggressively shopping can quickly get eaten up by these late fees and other closing concessions.
Additionally, during the time a client spends rate shopping and not committing to a lender, there is no guarantee rates will go down. As likely as rates are to drop, they are just as likely to rise.
So if you are thinking about doing some aggressive rate shopping or comparing the fees of ten different lender, I strongly recommend you do this prior to an offer being accepted.
-Contributing article by Thomas Bayles, found on facebook here
Here in Los Angeles, the number one economic concern is by far the housing market. Although unemployment is a close second, people are generally concerned about their jobs as a means to pay their rent or mortgage.
It was nearly a year ago that stimulus money totaling roughly $800 billion (that is $800,000,000,000.00) was approved by the Congress, George Bush, and later Barack Obama. These funds would become known as TARP money.
At the time, Americans were told TARP money was absolutely necessary in order to accomplish three major tasks during 2009:
Furthermore, taxpayers were told that this money would be borrowed, but also repaid as soon as possible. Hard dates were established outlining that money would start to be repaid by the end of 2010 and wouldnever be reutilized.
Currently we know the following to be true:
At the time of the stimulus, Senator John Ensign from Nevada (the state arguably hit the hardest by a declining housing market) made the following alternative proposal:
Federally mandate that every mortgage in American be immediately dropped to a 4% fixed rate for the remainder of the loan. Allow every purchase loan obtained in the next year to be fixed at 4% for 30 years.
The Senator’s plan was supported by several economists, captains of industry like Donald Trump, and touted in the Wall Street Journal as a reasonable alternative to the $800 billion politically driven bail-out.
Senator Ensign theorized that by giving all American homeowners a 4% rate, we would immediately see an increase in consumer confidence. Furthermore, with the medium home price in America at $200,000, the estimated savings to the average American homeowner would be $4,000 per year for the entirety of their loan.
The total cost to the Federal Government for this plan was estimated at $400 billion. However, economists speculated that this consumer savings would help stabilize the economy and transfer some of this savings on interest payments into worldwide purchasing power.
Senator Ensign wanted to trust the consumer and the American homeowner, not the banks or the Government, to get the economy back on track.
A year later, seeing how the TARP money has been utilized and loan modifications for struggling homeowners are a nightmare to complete, which plan would you have supported?
Recently Congress took up discussion on the cost for Americans to obtain an FHA loan. Items such as interest rates, required down payment, upfront mortgage insurance premiums, and monthly mortgage insurance premiums are all regulated by Congress and the Department of Housing and Urban Development (HUD).
Certain items [as they pertain] to FHA loans can be arbitrarily changed by HUD, other items require Congressional approval.
Regardless of who has the power to change policy, what should be important to the consumer is the fact that the cost associated with doing an FHA loan will most likely be increasing in 2010.
If you follow my updates, you know a standard FHA loan only requires 3.5% down. However, you also know that I recommend clients put 5.10% down in order to avoid “review” appraisals and additional underwriting criteria. It appears as though Congress may recommend that all FHA loans require 5.1% down. In the last two years the minimum down payment has been increased from 3.00% to 3.50%… I believe by the end of 2010, this minimum down payment will be at least 5.00%
Additionally, HUD (who controls FHA lending and underwriting guidelines) is currently facing a financial and funding shortage due to loan defaults. One way to close this financial gap is to charge new FHA borrowers a higher up-front mortgage insurance premium. Up-front MIP is the fee charged to borrower who put less than 20% down. By collecting this money upfront, HUD has a reserve fund to cover defaults on FHA loans. Unfortunately, in our current financial recession, these emergency default funds have been depleted.
Overall, there are several proposals being evaluated by HUD and Congress which will most likely increase the cost to FHA borrowers.
As always, if you need information on starting a new loan for the purchase or refinance of your home, contact me at trustyourlender@gmail.com
To all my real-estate agent friends,
I wanted to share with you a huge success story and also pass on an article from consumer guru Seth Godin. One of the agents I work with came from another industry where social networking was key in developing clients and contacts.
Adjusting that business model to real-estate, this agent immediately started “Facebooking”, “Tweeting”, and “Blogging” about real-estate in her area.
In the last few weeks this agent has been “tweeting” with some prospective clients and simultaneously building rapport. Last week, one of these contacts listed their $18 million dollar home for sale with this agent.
Obviously this is an extreme example. However, I think it illustrates how using social networking tools to build relationships is key to succeeding in our in the business of real-estate. The agent got a great listing, and the client got a great Realtor who will use a plethora of free on-line tools to market the property.
Recently, Seth Godin wrote a great post for companies or individuals who feel left behind on all this social networking jargon. Attached is his brief post about how to get you and your brand caught up. His tips are edited for content and relevance as it pertains to our industry: Read the rest of this entry »
First and foremost, sorry for the extended lay-off. Vacation, followed by a work computer melt-down has left little time to blog over the past two week.
Saw this story on CNN.com this morning and re-affirmed what I already knew. The affects of credit theft go well beyond the denial of credit. It’s up to me and anyone else who handles sensitive credit information to be very protective of personal data.
Check out this story:
(CNN) — Debra Guenterberg doesn’t have to go to a horror movie to get spooked. She says she’s been living a nightmare for the past 13 years.
The Wisconsin woman says she’s been stalked by two phantoms. Two men stole her name and her husband’s Social Security number. They used the information to obtain credit cards, buy cars and three homes.
Like many horror movie villains, the bad guys keep coming back. Thirteen years after the men stole their names, the Guenterbergs are still being turned down for credit because of the damage done by the men, she says.
“It’s a nightmare,” Guenterberg says. “We both feel physically and mentally exhausted. We feel hopeless because we can’t fix this.”
Most people know about the financial hit identity theft victims take. But less attention is paid to the emotional costs they also pay. Victims often experience paranoia, depression, rage — some even endure family breakups, security experts say.
There are many ways someone’s identity can be stolen. Much of it now occurs online. A person’s identity can be stolen from a social media site, through online banking or after they have clicked on a deceptive e-mail.
But no matter how it happens, the victim is going to pay — financially and emotionally, cybersecurity officials say.
The Guenterbergs say they’ve battled the IRS, elected officials and local sheriffs to reclaim their name. They’ve also undergone counseling.
“We’re angry,” Debra Guenterberg says. “We can’t sleep at night. … We want to move on.”
The hidden toll of ID theft
Moving on, though, often requires justice. And that can be elusive for victims of identity theft, security experts say.
The identities of an estimated 9.1 million Americans have been stolen by thieves lifting personal information off the Internet or through other means, according to a 2008 survey conducted by Javelin Strategy & Research, a financial services research firm.
But it often takes the average identity theft victim months, if not years, to resolve their case, security experts say. Some say that no matter what they do, they still encounter problems getting credit.
Robert Guenterberg tried to open a checking account earlier this year, but says the bank turned him down because it confused him with the men who had stolen his Social Security number.
“It never ends,” Robert Guenterberg says.
The Guenterbergs say their ordeal began 13 years ago when Robert Guenterberg tried to buy a Ford truck but was rejected because of poor credit. He got the same answer when he tried to get a home loan and a credit card.
When the collection agencies started calling, the Guenterbergs say they finally discovered the source of their problem. They say two men had stolen the couple’s name and Robert’ Guenterberg’s Social Security number.
The Guenterberg’s situation was especially thorny because it involved the loss of his Social Security number.
The Privacy Rights Clearinghouse, a nonprofit group that educates consumers about privacy protection, tells people that even if an imposter is using their Social Security number, the Social Security Administration will only issue a new number in extreme cases.
Michael Kaiser, executive director of the National Cyber Security Alliance, says getting a new Social Security number is tough and can complicate an identity theft victim’s life even more.
“They can [get a new Social Security number] but the hassle may not be worth it,” Kaiser says.
What the scammers say after they’ve been caught
Even if victims of identity theft are able to clean up their financial records, some must learn how to overcome their bitterness. Linda Foley had to learn that lesson.
Foley had just started working as a restaurant reviewer for a San Diego magazine when her employer asked her to fill out tax forms to get paid.
Foley says her employer then used her Social Security number to obtain three credit cards and a cell phone. She says she uncovered the deception when one of her credit card companies called during a routine credit check to verify her change of address.
That’s when Foley learned that her boss was living it up on credit cards with her name.
“She was getting gourmet meals home delivered,” Foley says. “She was getting vitamins; she was going on shopping sprees at department stores.”
Foley says she’s not the same person she was before her identity was stolen.
“It changes your life,” she says. “I don’t trust the way I used to. I don’t share things with people as much as I used to.”
Foley says she never talked to the woman who stole her identity, but she always wanted to.
The woman was eventually caught and apologized to a judge in court for stealing Foley’s identity. Foley was so angry that she wanted to personally confront the woman. But Foley says her lawyer restrained her.
“I came to understand that what she did was because of what she is,” Foley says. “How could she explain that to anybody? They [scammers] live a different life; they live in a different world.”
Foley says she and her husband, Jay, formed Identity Theft Resource Center, which educates individuals and businesses about identity theft. In her new role, Foley says she talked to identity theft scammers.
None of them saw themselves as criminals, she says.
“The reason they gave is, ‘No one is going to get hurt,’ ” Foley says. “They don’t see this as a crime of victimization.”
Some identity thieves are so cold-blooded that they even prey on their closest relatives, Foley says.
“I’ve worked with people whose parents have stolen their information for 25 years,” Foley says. “They’ve had their parents jailed.”
Tips for preventing identity theft are now well known. Only give out a Social Security number if you must; install a firewall on your home computer; don’t use biographical information in your passwords.
Linda Foley’s husband, Jay, co-founder of Identity Theft Resource Center, says one of the best precautions a person can take is something simple: Pay attention to what they click on the Internet.
“You get yourself into a big rush and something pops up in front of you, you deal with it and move and then you say, ‘What did I just do?’ ” says Jay Foley.
Perhaps one of the best precautions is to remember the struggles of people like the Guenterbergs.
Losing money to a thief is not the same as losing one’s identity, Debra Guenterberg says.
“If somebody steals your wallet and you notice what they’ve done on your credit report, you still have protection from that, though it’s still a nightmare, ” Debra Guenterberg says.
“But when someone overtakes your life and becomes you — that’s insane.”
Temporary FHA Conforming Loan limits Extended in 2010-
1 Unit $729,750
2 Unit $934,200
3 Unit $1,129,250
4 Unit $1,403,400
Tips for Agents to have a smooth loan transaction (especially on FHA)-
A new article from money.com states that the worst may be behind us when it comes to home values.
The attached article shows that the number of houses “under-water” is declining. This figure is key for a recovering housing market and may mean prices have stabilized. Read the rest of this entry »
The Home-buyers Credit just passed through Congress. The credit has been extended and expanded. The bill is on its way to the President and still needs to be signed into law. However, as far as we can tell, the credit will be available till April 30th, 2009.
Here is the press release from CAR:
NOVEMBER 5th -
“More good news for consumers, our members, and the housing market recovery. Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. As you may know, C.A.R. and our partners at NAR have worked for months urging Congress and the Senate to extend and expand this crucial piece of legislation. We expect President Obama to sign the legislation in short order.
As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.
Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.”
