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Have We Reached the Floor in Housing?

The recent uptick in real estate activity has really started to bring out the optimists.  I follow CNBC, the NY Times, and the FOX news organizations fairly regularly.  It hasn’t been until recently that I started to see stories with a positive tone regarding the housing market or the economy.  Who knows, maybe it’s that spring is here and flowers are blooming outside and better weather is upon us.  Needless to say, the recent rash of positive stories started to get me thinking of whether we actually might be at or approaching the bottom of the market. 

As I thought more about this possibility, I jotted down reasons for why people are considering this to be the bottom.  Here is what I came up with:

• Inventory numbers are decreasing
• Open houses are bustling with more potential buyers
• Properties are spending less time on the market
• Interest rates are at historical lows

These are all good signs.  Unfortunately, there are two things that are holding us back from becoming a true believer – foreclosures and short sales.  There appears to be some misleading information out there that the number of short sales and foreclosures coming on the market have slowed considerably.

One site, Trulia offers to explain this information. Trulia recently reported that despite the large volume of foreclosures (see the list below), there has been a significant drop in the number of foreclosure properties coming on the market in some states.

1.  Las Vegas, NV (31,983)
2. Phoenix, AZ (19,075)
3. Chicago, IL (16,038)
4. Los Angeles, CA (9,913)
5. Sacramento, CA (9,346)
6. San Diego, CA (7,668)
7. North Las Vegas, NV (6,852)
8. Bakersfield, CA (6,744)
9. Miami, FL (6,699)
10. Tampa, FL (6,487)
11. Indianapolis, IN (6,377)
12. Stockton, CA (5,924)
13. Atlanta, GA (5,859)
14. Orlando, FL (5,855)
15. San Jose, CA (5,802)

 What is the central cause of the drop?

According to the Trulia article, a number of states are Read more

Loan Modification Testimonial

“Loan Mitigation Advocates diligently worked to keep my family in our home, preserve my credit and obtain a modified mortgage payment we could afford. More importantly, meeting and working with Greg, one of the co-founders, has restored my faith in people and made me believe that there are good people in this world that can be trusted. Loan Mitigation Advocates is an example for other businesses in their industry to emulate; they truly believe and honor the code of putting their client’s best interest first.”

- Samantha

Loan Modifications get a Boost from the Stimulus Plan

A new plan has been hatched making loan modifications easier for struggling homeowners to obtain and lenders/servicers to provide.

Here are some of the details of the plan:

• Loans originated on or before January 1, 2009 are eligible
• First-lien loans on owner occupied properties where the unpaid principal balance is equal or less than $729,750 qualify
• Full documentation must be provided by all borrowers (including but not limited to income, pay stubs, most recent tax return and affidavit of financial hardship)
• An IRS 4506-T (Request for Transcript of Tax Return) form must be signed
• Property owner occupancy status will be verified via a credit report and other documentation
• Incentives will be offered to lenders and servicers to modify at risk borrowers who are current on payments
• Loans can only be modified once under the program
• The program will run through December 31, 2012          
• Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income
• Modification sequence first requires reducing the interest rate then if necessary extending the term or amortization of the loan up to 40 years.

If you are interested in discussing any of these items or to obtain a better understanding of how the plan may help you, feel free to contact Loan Mitigation Advocates directly.

Mortgage Rate Update Ending 02/25/09

Bankrate.com  conducts a weekly national survey on the interest rates for the five most common consumer banking products.  Here’s this week’s outcome:

• 30 Year Fixed Rate: 5.41 percent
• 30 Year Fixed Rate Jumbo: 6.87 percent
• 15 Year Fixed Rate: 4.93 percent
• 5/1 ARM (Adjustable): 5.4 percent
• 1 Year ARM (Adjustable): 5.58 percent 

Mortgage loan application and refinancing activity fell,  while applications for new purchases dropped 2.6 percent. Home prices fell 18.2 percent in the final quarter of 2008.  This is compared with the same period a year earlier.

Beware of Predatory Loan Modifiers

In a recent NY Times article, Swindlers Find Growing Market in Foreclosures, the author sheds light on the growing problem of predatory loan modification businesses.  A major problem with the practices of these “swindlers” is that time is of the essence in the loan modification process.  Many of the people reaching out to loan modification companies do not have time in their favor. They are in desperate need of some source of monthly financial relief and their mortgages tend to be the most significant drain. Loan modifications aren’t an overnight process. Making the initial contact, obtaining guidance, understanding the process, gathering materials needed for submission and the negotiation process with the lender all take significant time.  The predatory companies make it appear that they are acting on your behalf, however, it may be weeks to sometimes months before the consumer knows they have been taken advantage of.  This passing of time creates an even worse set of circumstances for the borrower.  The victims of these scams are put further into a financial hole with the passing of time and the potential for losing their home grows.

Another issue that is created by these swindlers is the negative image their behavior permeates across the industry.  This is like any other industry where a number of bad apples are spoiling it for the whole bunch.  As a legitimate loan modification company, we completely understand the damage that is being done.  For many people, a bad taste in the mouth already exists due to their original experience with obtaining a loan on their home. These individuals feel like they were taken advantage of by their lender or mortgage broker and did not clearly understand the payment or loan structure they were getting. In some cases, they shouldn’t have qualified for their loan in the first place. This lack of knowledge and affordability has led to the growing financial predicament being faced.  Couple this with Read more

Say Goodbye to the $15,000 Home Buyer Tax Credit. Say Hello to an $8,000 First-Time Homebuyer Tax Credit.

This whole tax credit thing feels like an auction gone awry.  For the last week, we have heard numbers from $15,000 to $7,500 and back up to $8,000. Loan Mitigation Advocates have been involved in discussions with clients and co-workers about the exact make-up of the tax credit – everything from the actual amount of the credit to whom it applies – first time home buyers or all home buyers.  For a while, it seemed that we wouldn’t have a definitive answer.

Well, it looks like we have some answers.  We recently read a blog from Jay Thompson, a Phoenix Real Estate Broker, who has been following the action closely.  Here is a link to his site for those of you who are interested in getting some more insight.  Also, Jay provided a synopsis on the breakdown for the first-time homebuyer tax credit.

The bottom line is that the $15,000 tax credit for home buyers has been reduced to $8,000 and is now only specific for first-time home buyers.

For a chart that breakdowns the first-time home buyer tax credit Read more

$15,000 Home Buyer Tax Credit

Besides loan modifications, another way Congress is looking to stimulate the housing market is to provide deeper incentives for purchasing a home.  The latest is in the form of a tax credit.  The Senate recently voted to include a $15,000 homebuyer tax credit to the American Recovery and Reinvestment Act. 

Here are some of the proposed highlights:

• The money would not have to be repaid to the government
• An income restriction on who can claim the credit does not exist
• The credit is nonrefundable and can be claimed over two years
• The tax credit would be limited to primary residences
• When the credit goes into effect is still unknown

Keep in mind, this is just a PROPOSED bill and the contents of the bill are subject to change.  Both the Senate and the House need to work out any differences in each of their individual versions.  The reconciled bill will go back to voting and must be passed by both groups.  President Obama is putting pressure for a quick resolution and is pushing to have the bill signed within the next few weeks.

Predictions for Residential and Commercial Real Estate

Take plummeting house prices, mix in an unprecedented number of foreclosure and short sales, sprinkle in a more restricted ability to obtain loans and then combine all of that with a weakening economy and you have a recipe that has made 2008 one of the worst real estate years on record.

Unfortunately, the sentiment out on the street is that 2008 may have been only an appetizer for 2009. The Wall Street Journal recently put together an article that sheds light on what might be coming down the pipeline for both residential and commercial real estate.  Here are some of the highlights:

Residential

• Some experts predict that trouble in the residential real estate sector is expected to continue.
• Many are urging the Obama administration to push for broad programs to limit foreclosures, stimulate demand for homes, and stop the slide in prices.
• The Treasury Department is considering Read more

Mortgage Rate Update Ending 01/14/09

Bankrate.com  conducts a weekly national survey on the interest rates for the five most common consumer banking products.  Here’s this week’s outcome:

• 30 Year Fixed Rate: 5.28 percent with points averaging: 0.42
• 30 Year Fixed Rate Jumbo: 7.07 percent
• 15 Year Fixed Rate: 4.89 percent
• 5/1 ARM (Adjustable): 5.51 percent
• 1 Year ARM (Adjustable): 6.13 percent 

Fixed-rate mortgages continued their decent toward record lows this week.  Refinancing activity was at levels similar to those found back in mid 2003. Activity increased 25.6% from the previous week.

Foreclosure postponements for Fannie Mae and Freddie Mac borrowers have been extended for an additional three weeks. The postponement should be valid through January 31.

As the economy worsens, more foreclosures and short sales will continue to drag home prices down.  The main culprits creating a worse housing condition are the poor economy and subsequent rising unemployment.

Hidden Amongst the Doom and Gloom, Signs of Hope for Housing in 2009

I have three words for you – mortgage interest rates.  This item has offered a glimmer of life amid the constant bombardment of painful and negative news about the economy and housing market.  The central entities directly impacting mortgage interest rates are Capitol Hill and in particular the Federal Reserve.  The Fed is taking an unprecedented commitment to restore the credit markets and promote an economic recovery.

In December of 2008, the Fed performed two moves.  They dropped its target rate to close to zero and committed to buying quantities of bad mortgage securities. These two moves are starting to have positive signs to the functionality of the market. The most obvious over the last month has been the impact to Read more

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