THE NEW HOME PURCHASE TAX CREDIT EXPLAINED

With the extension of the first time homebuyer tax credit and the addition of a tax credit for existing homeowners there have been changes that need to be noted. Please find compiled the most important facts associated with the new laws. You will find below a break down of both the $8,000 first time homebuyer tax credit and the $6,500 existing homebuyer tax credit.

$8,000 First Time Homebuyer Tax Credit

The income limits have changed. In order to receive the full tax credit amount, the income limit for a single person is $125,000 and a married couple is $225,000. They can earn more than that but the amount received will be phased out to a maximum income of $145,000 for a single person and $245,000 for a married couple. In addition, no tax credit is available if the cost of the home exceeds $800,000. The buyer may not acquire the property from any relative on either side of the family.

The same restriction applies as before which is they cannot have owned a home in the last three years and they must continue to live in the new house for 3 years or it will be required to pay the credit back. The buyer must enter into a binding contract to purchase by April 30, 2010 and close no later than July 1, 2010. In order to receive the tax credit the buyer must file his or her federal tax return with the Internal Revenue Service along with the HUD-1 and IRS Form 5405. As an example, if the first time buyer owes the government $5,000 in tax, they will receive a $3,000 check from the Internal Revenue Service, not the entire $8,000.

$6,500 Existing Homebuyer Credit

To qualify the buyer must have owned and lived in a home for at least five of the last eight years. The existing home may have already sold and not been replaced in the last year or two. The home purchased must be the primary residence and the existing home may become a rental property or second home. The new purchase does not have to cost more than the existing one.

If the existing home is sold, taxable profits from the sale will be added to the buyer’s other earnings to determine if the adjusted gross income exceeds the allowable thresholds. Remember, some profits from the sale of the existing home do not count as income. Taxpayers are allowed to exclude $250,000 per person or $500,000 per couple if they lived in the home two of the last five years. The $6,500 tax credit also phases out for singles earning more than $125,000 and couples earning more than $225,000. Always consult a professional tax advisor for tax advice.

NEW REAL ESTATE LAWS THAT EFFECT CALIFORNIA

On October 11th, Governor Schwarzenegger signed a mountain of legislation into California law. Apparently, the State has finally had enough of the abuses in the lending business that have resulted in the current financial crisis that we are all suffering. I cannot address each of the changes here, since there were so many of them, but some of the major changes include:

SB 36 Requires a real estate license endorsement from the Commissioner in order to engage in the business of a Mortgage Loan Originator. Penalties apply if a real estate licensee fails to obtain a license endorsement before conducting business as a Mortgage Loan Originator, and authorizes the Commissioner to suspend or revoke a real estate license for a failure to pay these penalties. Applicants for a license endorsement as a Mortgage Loan Originator must furnish specified background information to the Nationwide Mortgage Licensing System and Registry. This new law sets standards for issuance and renewal of a license endorsement to act as a Mortgage Loan Originator, including satisfying specified educational requirements. Real estate licensees must annually submit business activities reports, and other reports that may be required, to the Commissioner. The Commissioner also may examine the affairs of real estate brokers, including those who obtain a license endorsement as a Mortgage Loan Originator. The Commissioner is required to report violations of the provisions regulating real estate brokers and mortgage loan originators to the Nationwide Mortgage Licensing System and Registry. Recipients of a license endorsement as a Mortgage Loan Originator must use or disclose a specified unique identifier provided by the Nationwide Mortgage Licensing System and Registry in their advertisements and solicitations. No person is required to have a Mortgage
Loan Originator license under the California Finance Lenders Law or the California Residential Mortgage Lending Act before July 1, 2010, nor a Mortgage Loan Originator license endorsement under the Real Estate Law before December 1, 2010;


AB 260 "Higher-Priced Mortgage Loans" are a new category of regulated loans - defined as those secured by the consumer's principal dwelling (Residential 1-4 units) with an APR that exceeds the average prime offer rate (the average APR that is offered to low risk borrowers as set and published at least weekly by the Federal Reserve Board) by 1.5 or more percentage points for loans secured by a First lien on a dwelling, or by 3.5 or more percentage points for subordinate loans. The new rules regarding higher-priced mortgage loans apply to both DRE licensed and CFL lenders;

* Negative Amortization on higher-priced mortgage loans is prohibited;
* Prepayment Penalties for higher-priced mortgage loans are limited - licensees cannot charge more than 2 percent of the principal balance prepaid for prepayment of the loan during the first 12 months after the loan is made, or 1 percent of the principal balance prepaid for prepayment of the loan during the second 12 months following loan consummation. If a licensee violates this provision, they can receive no commission, fees, points, or other compensation in connection with the loan;
* Licensees cannot divide any loan transaction into separate parts for the purpose and with the intent of evading the provisions of this new law. This Bill clearly confirms that a mortgage broker owes their client(s) a fiduciary duty, and it emphasizes and expands the penalties that licensees may receive for making any false, deceptive, or misleading statements or representations regarding higher-priced mortgage loans, The Bill authorizes DRE, the Department of Corporations, or the Attorney General to enforce the provisions regulating higher-priced mortgage loans. Civil penalties of up to $10,000 may be imposed against a licensee who willfully and knowingly violates the provisions of this law, and any violation(s) would nullify prepayment penalties or yield spread premiums that violate the limits set forth above. The statute provides that Mortgage brokers must place the economic interest of the borrower ahead of his or her own economic interest;
* Your license may be revoked or suspended if you: knowingly authorize, direct, connive at, or aid in the publication, advertisement, distribution, or circulation of a material false statement or representation concerning your designation or certification of special education, credential, trade organization membership, or business, or concerning a business opportunity or a land or subdivision, offered for sale. Your license may also be in jeopardy if you willfully use the term "Realtor" or a trade name or insignia of membership in a real estate organization of which you are not a member;
* DRE penalties are also imposed if you fail to disclose to the buyer of real property, in a transaction in which the you are an agent for the buyer, the nature and extent of your direct or indirect ownership interest in that real property. The direct or indirect ownership interest in the property by a person related to the licensee by blood or marriage, by an entity in which the licensee has an ownership interest, or by any other person with whom the licensee has a special relationship also must be disclosed to the buyer.
* A mortgage broker who arranges only higher-priced mortgage loans must disclose that fact to a borrower, both orally and in writing, at the time of initially engaging in mortgage brokerage services with that borrower;
* A mortgage broker who provides mortgage brokerage services shall not steer, counsel, or direct a borrower to accept a loan at a higher cost than that for which the borrower could qualify based upon the loans offered by the persons with whom the broker regularly does business;
* No licensed person shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a higher-priced mortgage loan that refinances all or any portion of the existing loan or debt;
* Violation of federal RESPA, the federal TRUTH IN LENDING ACT, the federal HOME OWNERSHIP EQUITY PROTECTION ACT, the Franchise Investment Law, the Corporate Securities Law of 1968,or other federal laws or regulations now constitute a violation of State licensing laws too;
* If a licensee makes a higher-priced mortgage loan in violation with the terms set forth above, but is acting in good faith, they have 90 days after the loan closes to: (1) Notify the borrower of the compliance failure, (2) Tender appropriate restitution, and (3) Offer to make the loan compliant with the law's requirements or change the terms of the loan to benefit the borrower so that the loan is no longer a higher-priced mortgage loan, at the borrower's option;
* In addition, the new law makes it a felony to commit fraud on a loan application;
* The new law applies to all higher-priced mortgage loans originated on or after July 1, 2010.

Many of the violations set forth above, regarding licensees' conduct, were already illegal, and licensees know that they are subject to discipline for violations of these laws and regulations. But the State is now getting more serious about enforcing these provisions, and many new limitations and penalties have been imposed by AB 260.

SB 239 modifies the Penal Code to create a new crime, a felony, for those who commit fraud on loan applications. A person commits mortgage fraud if, with the intent to defraud, the person does any of the following: (1) Deliberately makes any misstatement, misrepresentation, or omission during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process, (2) Deliberately uses or facilitates the use of any misstatement, misrepresentation, or omission, knowing the same to contain a misstatement, misrepresentation, or omission, during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process, (3) Receives any proceeds or any other funds in connection with a mortgage loan closing that the person knew resulted from a violation of paragraph (1) or (2) of this subdivision, (4) Files or causes to be filed with the recorder of any county in connection with a mortgage loan transaction any document the person knows to contain a deliberate misstatement, misrepresentation, or omission. Effective January 1, 2010;

AB 329 The Reverse Mortgage Elder Protection Act of 2009 imposes additional new disclosure requirements (clearer and more information) for reverse mortgages. This law becomes effective January 1, 2010;

SB 237 creates a program which requires registration of appraisal management companies, which are defined as, any person or entity that satisfies all of the following conditions: (A) Maintains an approved list or lists, containing 11 or more independent contractor appraisers licensed or certified pursuant to this part, or employs 11 or more appraisers licensed or certified pursuant to this part, (B) Receives requests for appraisals from one or more clients, (C) For a fee paid by one or more of its clients, delegates appraisal assignments for completion by its independent contractor or employee appraisers. This law makes any provision under the Real Estate Appraisers' Licensing and Certification Law that relates to appraisal management companies inoperative 60 days after the effective date of any federal law that mandates the registration or licensing of appraisal management companies with an entity other than the state regulatory authority with jurisdiction over appraisers. Effective January 1, 2010;

AB 957 The Buyer's Choice Act gives buyers of residential 1-4 unit properties at a foreclosure sale the power to choose the escrow officer and title company, rather than being forced to use the lender's services. The penalty for a seller violating this statute is damages equal to three times the cost of the escrow services or title insurance policy. This statute went into effect on October 11, 2009;

AB 1160 Requires lenders to provide to borrowers loan documents for mortgages to be written in the same language as that in which the negotiations primarily took place: Spanish, Chinese, Tagalog, Vietnamese or Korean. Becomes operative beginning on July 1, 2010 or 90 days after issuance of a form, whichever occurs later. This law does not change a real estate broker's obligations to their client(s);

First Time HomeBuyers - Time Is Running Out

Start house-hunting now to qualify for tax credit for first-time home buyers. First-time homebuyers—those who have not owned a home for at least three years—may be eligible for the $8,000 federal tax credit, but the window of opportunity is closing rapidly. To qualify for the credit, the buyer must close escrow by midnight on Nov. 30, when the tax credit expires. Buyers hoping to take advantage of this benefit are advised to start house-hunting early, as the buying and lending processes takes time.


THINGS TO KEEP IN MIND:

• Finding the right house can take some time, so REALTORS® recommend home buyers start looking for a home as soon as they are able and ready to purchase. Buyers also should build in extra time to accommodate the lending process, which is taking approximately two weeks longer to process this year compared with last year.

• The tax credit is equal to 10 percent of the purchase price, up to $8,000, subject to income limits. Single taxpayers are eligible if their modified adjusted gross income is $75,000 or less, while married taxpayers filing jointly must have a modified adjusted gross income of $150,000 or less.

• Only primary residences are eligible for the federal tax credit, including new or existing single-family homes, townhouses, condominiums, manufactured homes, custom homes, and houseboats. Vacation homes and investment properties do not qualify.

• Purchases must be arm’s-length transactions, meaning the seller cannot be the buyer’s parent, grandparent, child, grandchild or spouse.

• Married people filing as such cannot claim the credit if either spouse has owned a primary residence within the last three years. However, unmarried joint purchasers may allocate the credit in any way they see fit, as long as it does not exceed the $8,000 maximum.

• The government will allow those who finance their purchases with a federally insured loan to apply their anticipated credit immediately toward closing costs or as additional down payment, rather than waiting until they file their 2009 taxes to receive the refund.

NEW LOAN DISCLOSURE FULES MAY POTENTIALLY AFFECT CLOSE OF ESCROW

Starting July 30, 2009, if the APR on an initial Good Faith Estimate is no longer accurate (within a 0.125% range) at close of escrow, a lender must generally provide a residential borrower with a new disclosure and a three-day right to rescind before consummating the loan. REALTORS® are forewarned that, because of this new three-day waiting period, a lender's failure to timely provide corrected disclosures has the potential of delaying funding of the loan and close of escrow.

This new requirement is part of the Mortgage Disclosure Improvement Act (MDIA) implementing new loan procedures to protect borrowers and foster greater transparency in mortgage lending. For loan applications submitted on or after July 30, 2009, the new MDIA changes to the Truth In Lending Act are generally as follows:
• Applicability: The new MDIA rules pertain to federally-related mortgage loans covered under RESPA and secured by a consumer's dwelling. The rules apply to both purchase and refinance loans.
• Early Disclosures: A lender must provide a borrower with an initial Good Faith Estimate within three business days of receiving the borrower's written loan application as specified. For this provision, a "business day" is generally defined as a day on which the lender's offices are open for business.
• Upfront Fees Restriction: Neither a lender nor any other person may impose an upfront fee on the borrower (except for credit report) until the borrower has received the early disclosures in person or, if mailed, three business days after the early disclosures are mailed. For this rule, a "business day" is defined as all calendar days except Sundays and legal public holidays as specified.
• Seven-Day Waiting Period: A lender must wait seven business days after providing the early disclosures before consummating the loan. For purposes of this waiting period, a "business day" is defined as all calendar days except Sundays and federal legal holidays as specified. A borrower may waive the waiting period in writing in case of personal financial emergency, such as an imminent foreclosure sale.
• Re-disclosure Requirement: If the final Annual Percentage Rate (APR) at loan consummation varies more than 0.125% (or 1/8 of one percent) from the initial APR on the early disclosures of a regular transaction, the lender must provide the borrower with a corrected disclosure at least three business days before the loan is consummated. For purposes of this waiting period, a "business day" is defined as all calendar days except Sundays and federal legal holidays as specified.
• Three-Day Waiting Period: For corrected disclosures, a lender cannot consummate a loan until three business days after the the borrower receives the corrected disclosure in person. If the corrected disclosure is mailed, the borrower is deemed to have received it three business days after it is placed in the mail. A borrower may waive this waiting period in writing in case of a bona fide personal financial emergency, such as an imminent foreclosure sale.

HOW TO FIND THE BEST PLACE TO LIVE

The current economic situation has brought out many home buyers and also has caused some to relocate for new jobs. Finding the right home and one that has the best chance of holding or increasing in value can be challenging; however, real estate experts say that areas where homes retain their values best in tough times tend to have certain factors in common.

KEEP THIS IN MIND
• Since real estate markets are local and vary neighborhood to neighborhood, home buyers should work with REALTORS® who are familiar with the areas in which the buyers are interested.REALTORS® can help narrow down the number of properties to those that meet the buyers’requirements.
• During the height of the market, many home buyers only could afford to purchase in the exurbs.However, long commutes and high gas bills also can take their toll on homeowners. According to Ken Shuman at Trulia.com, homes more than 40 miles outside city centers generally have declined in value the most. For example, Shuman says that homes in Antioch (45 miles from San Francisco) lost 37 percent of their value in the past 12 months, while those in Walnut Creek (25 miles away) declined 18 percent.
• Towns where zoning regulations make it more difficult to build have experienced smaller prices declines than towns that experienced huge building booms in recent years. “Prices are more likely to go higher if you can’t expand supply,” says Daniel McCue, research analyst the Harvard University Joint Center for Housing Studies. Towns nestled against barriers such as large lakes or protected wetlands also usually limit expansion.
• Buyers can call the town or county planning office and ask how many acres of vacant land are in town, how much of it is zoned for residences, and the maximum number of homes that can be built. Requesting a copy of the town’s master plan also should tell buyers how much the housing stock is set to expand in the next 10 years.
• Homes in towns with stores, banks, and movie theaters are more likely to hold value than those that are nearly all residential, as people like to live near these services and jobs, and provide the town a stronger tax base to fund public service items, such as police.

HOME AFFORABLE REFINANCE ELIGIBILITY EXPANDED TO 125% LTV

Fannie Mae last week announced the Home Affordable Refinance Program (HARP) will be expanded to permit refinancing of existing Fannie Mae and Freddie Mac loans with current loan-to-value ratios (LTVs) up to 125 percent, an increase from the current LTV limit of 105 percent. Fannie Mae characterized the expansion as a move to help lenders serve more borrowers with a demonstrated track record of paying their mortgages, but who have been unable to refinance due to significant property value declines. Loans with LTVs above 105 percent will be eligible for a same-servicer refinance under the Refi Plus manual underwriting option, and the new loan must be a fully amortizing fixed-rate mortgage with a term greater than 15 years, up to 30 years. Fannie Mae is evaluating potential updates to Desktop Underwriter to allow LTV ratios above 105 percent.

In conjunction with the LTV expansion, Fannie Mae also announced it is offering a 0.50 percentage point reduction in the loan-level price adjustment (LLPA) charged for manually underwritten Refi Plus loans with LTVs above 105 percent and loan terms greater than 15 years, up to 25 years. Refi Plus mortgage loans with LTV ratios that exceed 105 percent are eligible for whole loan purchase or delivery into MBS on or after September 1, 2009. Please refer to Announcement 09-23 for information about a new MBS prefix and other operational and delivery details for loans with LTVs above 105 percent.

The Basics: 2009 First-Time Home Buyer Tax Credit

Bringing the Dream of Homeownership Within Reach

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers.

Here is more information about how the 2009 First-Time Home Buyer Tax Credit can help prospective home buyers become part of the American dream.

Breaking news: Tax Credit Can Be Used on Closing Costs.

Who Qualifies?
First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?
The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Will the Credit Be?
The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:

The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000.

The buyer's income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit.

Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

Homebuyer Tax Credit Can Now Be Applied To Purchase Costs

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent down payment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of the announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate.

This is GREAT NEWS!!!

Mortgage Rates Likely To Remain Stable For Rest of Year

Despite differences in weekly surveys, the lending industry's consensus is that rates won't change dramatically soon.

By Mary Ellen Podmolik May 22, 2009

Are mortgage rates on the way up or down? It depends on whom you ask.Two groups came out with their weekly mortgage rate surveys Thursday, with nearly a half-percentage-point difference between their averages for traditional 30-year mortgages.

The good news, though, is that there seems to be consensus in the lending industry that mortgage rates aren't expected to change dramatically soon. Bankrate.com said its weekly national survey taken Wednesday showed an uptick in rates, with the average 30-year fixed mortgage rate rising to 5.24% from 5.21%. The average 30-year fixed-rate mortgage carried a 0.43 discount and origination points.The average 15-year fixed-rate mortgage inched down to 4.74% from 4.76% last week, Bankrate.com said.

Just to confuse things, Freddie Mac said its survey for the week ended Thursday pegged the average 30-year fixed mortgage rate at 4.82%, with an average 0.7 point, compared with 4.86% last week. In the same weekly period a year earlier, the average rate on a 30-year fixed-rate mortgage was 5.98%.Freddie Mac said the 15-year fixed-rate average also fell, to 4.5% from 4.52% last week.Looking beyond the weekly numbers, Bankrate's Rate Trend Index found that among analysts surveyed, 38% predicted declining rates in the next 30 to 45 days, while 55% said they expected rates to remain about the same as now."With the Federal Reserve buying large quantities of mortgage-backed debt and government bonds, that will keep a lid on mortgage rates for the balance of 2009," said Greg McBride, senior financial analyst for Bankrate.com."Mortgage rates have shown very little volatility in recent weeks as concern about the weak economy is balanced out by worries surrounding the supply of government debt. There's a little bit of a stalemate going on right now."

Podmolik writes for the Chicago Tribune.

House Hunting? It's Not A Buyer's Market Everywhere

By Chip Jacobs Los Angeles Times

The median price in Southern California may have plummeted, but in more desirable neighborhoods, home buyers are still engaging in bidding wars.

The confident smile Sam Rivero wore as he hunted for his first house had a lot to do with the buzz thumping in his ears. Ever since home values began sinking, pundits have touted the juicy opportunities for aspiring buyers priced out of the market before, and the young business-development executive heard that cue like a sonic boom. Out he ventured into Mount Washington, Glassell Park, Eagle Rock, Montecito Heights and other desirable middle-class communities northeast of downtown Los Angeles, searching for a bargain in the $400,000 range. Candidates came and went, and Rivero, who is getting married, was upbeat. Considering the pulverized housing values, with the median price of a Southland home today -- $250,000 -- at half of its 2007 level, the properties should come gift-wrapped, right?

As the Glendale resident and his fiancee, a makeup artist for the television show "Entourage," discovered, the supposedly wondrous buyers' market seems more consumer myth than easy pickings.They bid $50,000 over asking price for a "great" four-bedroom contemporary in Valley Village, only to lose out to one of the 16 other offers tendered, Rivero, 33, said. A North Hollywood house he had been eager to see attracted so many people walking around with sales fliers that he couldn't find parking and drove off from the "vultures" who got there first."Every open house I've been to has been a zoo," said Rivero, who has examined 35 properties during the last three months. "If you follow what the [general] media say, you'd think sellers are desperate to sell a house, but when you get there it's totally the opposite."

So what's going on? Real estate brokers and investors say would-be buyers misunderstand how the drop in housing prices has affected desirable neighborhoods. Just because an abandoned house in a troubled part of San Bernardino County might be going for $200,000, it doesn't mean you can get a nice place in Sherman Oaks for that amount -- or even twice that amount. House hunters are trying to pounce on deals from sellers they expected to be frantic -- if not curled in the fetal position. What they're finding instead are bidding wars as low interest rates and pent-up demand in traditionally stable or chic areas have kept prices up -- not as high as the market's peak, but not nearly as low as they had hoped. "The biggest problem," said agent Phyllis Harb, "is that people are overreacting to housing statistics, thinking they can come in and make an offer 20% below price." As sales figures and home buyers' anecdotes are underscoring, when the residential real estate bubble burst, it set off several distinct sprays that created false hopes and confusion. Though nearly 20,000 homes in Southern California sold in March, a 52% jump from a year earlier, a sizable number of those transactions occurred in Riverside and San Bernardino counties, where foreclosures exploded. In the region overall, foreclosure sales accounted for 55% of March's deals. Bank-owned or not, the cheaper properties are dominating the sellers' block in the notoriously expensive L.A. County real estate market. In March, 2,871 homes under $300,000 were sold compared with only 734 a year earlier, according to real estate information firm MDA DataQuick. At the higher end, just 202 homes priced above $1.2 million changed hands last month, compared with 354 in March 2008. Houses priced from $400,000 to $800,000 represented less than a quarter of the market in March, down from about 45%, meaning fewer offerings for would-be buyers in that mid-market or pickier sellers, according to DataQuick. Mark down Nicky and Bunny DeMarinis as frustrated. They offered about $1 million for a 3,300-square-foot traditional in the Los Feliz area. Though it boasted a magnificent view, the house was an ode to passe, with cheesy frescoes, gold trimming and 1970s-era kitchen appliances, they said. For all the updating it required, the owner came down only a fraction from his $1.7-million asking price and passed on the DeMarinises. The couple, who own Nicky D's Wood-Fired Pizza in Silver Lake, have seen about 50 houses so far. They don't know where to vent their anger: lenders demanding higher down payments and less-favorable terms, talking heads distorting the market with oversimplifications or listing agents itching for bidding wars. "You get out there and think you can grab something at a fantastic price, but that's not the case," Bunny DeMarinis said. "Each time we look at a house and see these inflated prices and our offer is rejected, we feel rejected too. We had an unrealistic portrait of what was really happening. It's disillusioning."It's becoming a populist theme among potential local buyers and a contentious topic on websites devoted to the post-bubble market. Real estate investor Burt Slusher said home shoppers should disregard the broad trends and focus instead on nuances and inventory in finely drawn areas. Take the 40% jump in L.A. County home sales in March compared with a year earlier. In studying the data, Slusher said, he found that a large batch of those deals transpired in Palmdale, Compton, Inglewood and other communities that suffered as a result of "treacherous subprime mortgages."

People interested in properties in coveted niche markets such as Pasadena, Culver City and Santa Monica have read or heard too much about frenzied activity in the bottom of the market, he said, without comprehending that it held little relevance for them. Slusher's advice is to muster patience, because he believes there's still an over-inventory of mid- and upper-priced properties that will drive overall prices down into 2011.

"Buyers hear about foreclosures and bank sales and a bad economy and think they can offer a beer price for a wine home," Slusher said. "But the market is not a homogenous place, where everything is the same."In classic economics, buyers should have a decided advantage in neighborhoods in which supply dwarfs demand. Where there's typically a six-month inventory of houses for sale in coveted Beverly Hills, Pacific Palisades and West Hollywood, for instance, there's a year to two years' worth today, agent Christopher Hain said. Hain has a theory about why all that supply hasn't translated into blocks full of delirious new homeowners. He calls it the "sucker syndrome," in which buyers are nervous about overbidding when nobody truly knows whether Southland home values have reached their bottom. Said Slusher, "Nobody wants to be the sucker who paid too much, so they combat that fear by offering unrealistically low amounts. But if you're trying to time the bottom, you're going to end up with junk. It's always the best houses and cheapest houses that sell first."More should be known about the market for more-expensive properties when "jumbo" loans -- ones exceeding $417,000 -- become available this summer, according to DataQuick. In a sign of how locked-up conditions are, jumbo loans represented 40% of all Southern California purchases in 2007. In March they accounted for 10% of the activity. On a recent Sunday, an open house for a vintage 3,159-square-foot Craftsman near Occidental College in Eagle Rock drew 105 people in the first hour despite sweltering temperatures, a Lakers playoff game and a list price of $699,000. Never mind the hilly curb appeal or the aroma of freshly baked cookies that listing agent Tracy King baked. There was plenty of head-shaking among would-be buyers about the absence of bargains. Jose Mares, 38, a Huntington Park police officer, said he'd been searching for eight years for a house. To him, the dark-shingled house needed too much renovation to justify the tab. He thinks he knows why it's priced where it is: There's not a glut of quality competition close by, and the owner and listing agent know their edge."Some want to charge $550,000 for a starter house," Mares said. King, the agent, said she'd heard earfuls about that, and noted that this was not your father's housing crash. Today, everyone is savvier, able to analyze properties with a few keystrokes or see a street view using Google. Instant information, though, also means fiercer competition and fewer hidden gems. As an example, King cited a 1,625-square-foot, midcentury-style fixer-upper in La Crescenta priced at $299,000. Forty people were standing on the front lawn within an hour of its listing, she said. Ultimately, there were 80 bids, 15 of them exceeding $400,000. The winning bid was $480,000."What I'm seeing is that perceived bargains are going in multiple offers for more than the asking, and buyers are very disappointed," King said. "Real estate is hyperlocal, so a [regional] $250,000 median price is meaningless here. "Predicting where values are headed is hardly a science either, no matter what the cable-TV experts or the galaxy of websites with every imaginable statistic say. For one thing, people selling costlier homes tend to have deep pockets buffering them from needing a fire sale to stay afloat. If they don't like the bids, they can pull their property off the market. Banks are an even bigger X factor, and not just because of their stricter lending requirements and bailout havoc. USC real estate professor Tracey Seslen said she'd heard that lenders were carefully timing the release of homes they'd repossessed to avoid further flooding the market and driving prices down more. Those institutions also know that a fresh avalanche of foreclosures from people with resetting loans may be looming."So the banks are playing this game too," Seslen said. "They're keeping prices artificially high."

Rivero, the soon-to-be-married business-development exec, wishes that weren't so, and hopes his tenacity pays off."We've learned not to get our hopes up because it sets us up for heartbreak," he said. "What's driving me is that I actually want a house." realestate@latimes.com

Bidding Wars Are Emerging On Foreclosures Prices Are Generally Falling, But A Few Markets Have Shortages of Midpriced Homes

By JAMES R. HAGERTY

Falling home prices are starting to ignite bidding wars in a few parts of the U.S. as first-time buyers compete with investors for the same foreclosed properties. In most of the nation, the supply of unsold homes continues to swamp demand. Home prices in many markets continue to fall, and foreclosures, which slowed in late 2008 as mortgage companies delayed taking action against delinquent borrowers, are picking up again. But real-estate brokers say multiple offers on certain homes have recently become more common in parts of California and Arizona and the Washington, D.C., and Minneapolis-St. Paul metropolitan areas.

Early Signs of a Turnaround?
Some home buyers are bidding against each other on foreclosures: The action is confined to certain markets, including parts of California, Arizona and the Washington, D.C., and Minneapolis-St. Paul metro areas. Many markets, including South Florida and New York City, remain glutted. The supply of bank-owned homes is expected to grow over the next few months.

Tamby Leonard of Santa Ana, Calif., southeast of Los Angeles, says she has been outbid four times since January when trying to buy a home for her family of five. The more appealing bank-owned homes in her price range, around $300,000, tend to be sold quickly to investors who can pay cash. The market for homes in the Santa Ana area in that price range is "blazing hot," says Ed Mixon of Altera Real Estate, Ms. Leonard's agent. On Wednesday, the Federal Housing Finance Agency reported that home prices nationwide rose a seasonally adjusted 0.7% in February from January, led by gains on the West Coast. When compared with a year earlier, however, home prices were down 6.5%.

Bidding wars -- common during the housing boom -- had all but disappeared soon after the market peaked about three years ago. Even now, they remain the exception rather than the rule. The Wall Street Journal's quarterly survey of 28 major metro areas shows that there is still a glut of homes available in most markets. But the glut has shrunk, and some areas are running into shortages of moderately priced homes in middle-class neighborhoods.

Many housing economists expect the market to bottom out gradually over the next couple of years, with some parts of the country stabilizing well before others. California and Washington, D.C., for instance, are likely to recover faster than South Florida, which has an immense glut of vacant condominiums, and the New York City area, which has been hurt by Wall Street's collapse, says Kenneth Rosen, chairman of the Fisher Center for Real Estate at the University of California, Berkeley.

Across the nation, there is still a tug of war between bullish and bearish forces. On the bullish side, falling prices and the lowest mortgage rates since the 1950s have made homes far more affordable, luring shoppers like Ms. Leonard, who has been renting for years. Adding to the attraction, the U.S. government is offering tax credits for certain people who buy homes before Dec. 1. The credit -- equal to 10% of the purchase price, up to a maximum of $8,000 -- is available to buyers who haven't owned any other primary residence in the U.S. during the three years before the date of purchase.

On the bearish side, rising unemployment has knocked many people out of the housing market and made those who still have jobs skittish. Even those with secure jobs who want to buy can't always get loans on attractive terms because of today's tightened credit standards.

In addition, the supply of bank-owned homes is expected to grow over the next few months because many mortgage companies have ended moratoriums during which they refrained from proceeding with foreclosures. The moratoriums artificially reduced the supply of foreclosed homes listed for sale, says Chad Neel, president of LPS Asset Management Solutions Inc. in Westminster, Colo., which sells such properties for banks. Now "there's a flood about to come on the market," Mr. Neel says. Foreclosures are likely to weigh on the market for years as courts and mortgage companies struggle to catch up with huge backlogs of unresolved cases.
Foreclosures, though far above normal levels in most of the country, are heavily concentrated in a few states, including California, Arizona, Nevada, Florida and Michigan. In areas with large numbers of bank-owned homes, buyers are mainly concentrating on those properties. That leaves ordinary homes languishing as owners generally refuse to slash prices enough to compete with banks.

In the Sacramento, Calif., metro area, about two-thirds of all March sales were foreclosures, says Michael Lyon, chief executive of Lyon Real Estate. The supply of foreclosed homes currently listed for sale is enough to last only about a month at the recent sales pace, he calculates. But there are plenty of homes listed for sale that aren't bank-owned, enough to last more than eight months.

In West Sacramento, a buyer represented by Cherie Hunt of Prudential California Realty recently competed against two other bidders for a three-bedroom home built in 2001. Ms. Hunt's buyer won by agreeing to pay about $220,000, or nearly $10,000 above the asking price. But that's still way down from $405,000, the price at which the same home sold in 2005.
"I have 20 buyers looking desperately," says Ms. Hunt.

Frank Borges LLosa, owner of FranklyRealty.com, a real-estate brokerage in Arlington, Va., is advising clients that banks favor all-cash bids or offers from people who seem certain to qualify for financing. Sellers may well choose the offer least likely to fall through rather than the highest bid, he says. He and other brokers say banks appear to be deliberately setting asking prices low in some cases to provoke bidding battles.

"There are a lot of buyers who think they can lowball," says Connie Vaughn, an agent at ZipRealty in the Los Angeles area. But in some cases mortgage companies already have cut asking prices enough to generate multiple bids. One of her clients recently prevailed over more than 30 other bidders by offering about $86,000 -- or $20,000 above the asking price -- for a four-bedroom house in Adelanto, Calif., that had sold for $200,000 in 2004.

A mortgage company recently slashed the asking price on a two-family home in Norwich, Conn., to $73,900 from $144,900. That price cut prompted five offers that the company is now considering, says Linda Davis of Re/Max Realty Group, the listing agent. She says the price cut was unusually steep but adds, "At some point, [banks] just decide to let it go." That's encouraging, says Ronald Peltier, chief executive of HomeServices of America Inc. in Minneapolis, which owns real-estate brokerages in 19 states. "We do need to flush out the distressed inventory," he says, before the rest of the market can stabilize.

One positive trend is affordability. A family earning the national median pretax income of $52,800 a year needs to spend 25% of that income to buy a median-priced home, down from 44% in mid-2006, according to John Burns, a real-estate consultant in Irvine, Calif. For the Los Angeles metro area, that ratio has dropped to 45% from 102%. In Phoenix, it is down to 19% from 46%. Among the markets Mr. Burns expects to recover earliest are the metro areas of Washington, D.C.; San Antonio; Raleigh, N.C.; Denver; Sacramento; and San Diego.
Write to James R. Hagerty at bob.hagerty@wsj.com

Rates On Bigger Mortgages Finally Should Come Down

By Kathleen Pender
Thursday, April 23, 2009

Home loans from $625,500 to $729,750 in high-cost regions, including most of the Bay Area, should get cheaper in the next few weeks. To make bigger mortgages cheaper, the economic stimulus act passed in February increased the conforming loan limit in high-cost regions to a maximum of $729,750 from $625,500 for single-family homes through the end of this year. The conforming-loan limit is the biggest mortgage that can be purchased by Fannie Mae and Freddie Mac. Anything over the limit is called a jumbo loan, and they cost considerably more than conforming loans because Fannie and Freddie can't buy or guarantee them.

Raising the limit should bring down the price of loans between $625,500 and $729,750. But more than two months after the stimulus bill was signed, loans in that zone are still being priced like jumbo loans. Why? Lenders say they couldn't lower their rates until Fannie and Freddie issued underwriting criteria. Fannie issued its criteria March 30 and Freddie on April 16. Both will start buying loans of up to $729,750 from lenders on May 4.

That opens the door for lenders to begin making them. Wells Fargo says it will start making conforming loans of up to $729,750 on Monday. Bank of America will begin making them "by mid-May," says Vijay Lala, a product executive with the bank. As they and other lenders start making these loans, the price should come down. By how much remains to be seen.

Before last year, the conforming loan limit was the same across the continental United States.
Last year, Congress pegged the limit to median home prices in each region, with a minimum of $417,000 and a maximum of $729,750 for single-family homes. Later in the year, Congress changed its formula for calculating the regional limit, which dropped the maximum to $625,500 after the end of 2008. (Different limits apply to homes with two to four units.)

This has created two tiers of conforming loans. Those below $417,000 are true conforming; those above are often called super-conforming. Super-conforming loans have always cost a bit more than true conforming loans, partly because an industry group has decided that certain securities backed by conforming loans can't have more than 10 percent super-conforming.
The interest rate on a super-conforming loan is typically one-fourth to one-third of a percentage point higher than the rate on true conforming loans, says Keith Gumbinger, a vice president with HSH Associates. But Dick LePre, senior loan officer with RPM Mortgage, says super-conforming rates are "gigantically volatile from day to day."

It's not clear whether banks will price loans between $625,500 and $729,750 the same as loans between $417,000 and $625,000 or create a third tier of conforming loans. Brad Blackwell, national sales manager for Wells Fargo Home Mortgage, says his firm will price them the same.
On Wednesday, Wells was charging about 4.75 percent on a true conforming loan below $417,000, 5 percent on a super-conforming loan up to $625,500 and 6.25 percent on a jumbo loan above $625,500. If the new conforming loan up to $729,750 had come out the same day, it also would have been at 5 percent, Blackwell says. (All rates are for 30-year fixed-rate mortgages.)

Bank of America's rates for a 30-year fixed-rate loan were 4.875 percent for true conforming, 5.25 percent for super-conforming up to $625,500 and 6 percent for jumbos over $625,500. Lala also says BofA will price loans between $417,000 and $729,750 the same. Even if they are priced the same, it could be harder to get a conforming loan up to $729,750 than one up to $625,500.

Fannie and Freddie will, in some cases, buy true conforming loans for up to 95 percent of the home's value, but on loans up to $625,500, the loan-to-value ratio can't exceed 90 percent.
On loans up to $729,750, Fannie will go up to 90 percent loan-to-value but Freddie will only go as high as 80 percent. Fannie and Freddie will require a "field review" by a second appraiser on loans that are greater than $625,500 and more than 80 percent of value. John Abraham of Redwood City is eagerly awaiting the new loans. The rate on his $690,000 loan has been fixed for almost six years, but it will start adjusting in a year or so and he's very worried.
He would like to refinance into a fixed-rate loan. All he can get now is a jumbo at close to 6 percent, which would make his payments soar. If he got a conforming loan around 5 percent, he could afford the payments and relieve a major source of stress. "Our main objective is to create long-term stability for our family," he says.

HOW TO GET A VALUABLE FIRST-TIME HOMEBUYER CREDIT

Congress included an attractive tax credit in the economic-stimulus law, but the fine print is tricky. Here’s help to see if you qualify, and to determine whether to claim it this year or next.

The recently enacted economic-stimulus law contains an unusually attractive new tax break for many homebuyers — if they can only figure out how it works. The new law sweetens a provision known as the "first-time homebuyer credit." In essence, if you meet certain qualifications, you may be eligible for a tax credit of as much as $8,000. You also have a choice of claiming the credit on your federal income-tax return for 2008 or 2009. A credit is typically more valuable than a deduction, since it eliminates your taxes on a dollar-for-dollar basis — and in this case, you may get it even if you don't owe any taxes.

But Congress made the homebuyer-credit fine print so devilishly tricky that many Americans are likely to have to pay an expert for help in deciphering it. "We've had numerous calls because people are confused," says Claudia Hill, owner of Tax Mam Inc., a Cupertino, Calif., tax-services firm. "The problem is when things are this complicated, many people don't get the benefits that Congress intended for them."

Internal Revenue Service officials recently issued a revised form and instructions. Even so, Nancy Mays of H&R Block Inc., the Kansas City, Mo.-based tax-preparation company, describes the credit as "crazy complex." Here are answers from IRS officials and tax advisers to some questions about the credit.

Q: Who can claim the credit?
A: In general, the IRS says you may be eligible if you bought your main home, located in the U.S., after April 8, 2008, and before Dec. 1, 2009 — and if you (and your spouse, if you're married) haven't owned any other main home during the three-year period ending on the date of purchase. That means you might be eligible even if you owned a home for many years before that period. However, there are numerous other qualifications.

Q: How much is the credit?
A: That depends on when you bought the home and other factors, such as your income and the home's price. If you bought during the 2008 period and qualify for the credit, the maximum credit is generally $7,500. But it's only half that amount if you're married and filing separately from your spouse. Even though it's called a credit, it's really an interest-free loan. You generally have to repay it over a 15-year period, without interest, in 15 equal installments, the IRS says. (There are several exceptions to this repayment rule. We warned you this was tricky.)
The rules are more generous if you buy a new home during the 2009 period and meet all the qualifications. In that case, the maximum amount generally is $8,000, or half that amount if you're married and filing separately. More important, you don't have to repay the credit at all unless that home "ceases to be your main home within the 36-month period beginning on the purchase date," the IRS says. Initially, there was some confusion about whether the $8,000 maximum credit would apply if someone bought a home in 2009 and chose to claim the credit on his return for 2008. It's now clear that the $8,000 maximum limit does indeed apply, says Mark Luscombe, principal tax analyst at CCH, a Wolters Kluwer business. Naturally, though, "this doesn't help people who actually bought homes in the 2008 qualifying period and who are limited to a $7,500 credit that must be repaid," he says. Additionally, the credit generally is limited to the amounts mentioned above — or 10% of the home's purchase price, whichever is less. For example, if you bought a new home this year for $70,000, the maximum amount of the credit would be limited to 10% of that amount, or $7,000.

Q: How do the income limits work?
A: You may be eligible for the full amount of the credit if your adjusted gross income, with certain modifications, is $75,000 or less — or $150,000 or less if married and filing jointly. However, the credit begins to disappear, or "phase out," if your income exceeds those amounts. You can't claim the credit at all if your income is $95,000 or more, or $170,000 or more if married and filing jointly, the IRS says.

Q: What if I built a new home? How does that work?
A: You are considered to have purchased it "on the date you first occupied it," the IRS says.

Q: I own more than one home. How do I figure out which is my "main" home? And does it have to be a house?
A: The IRS says your main home is "the one you live in most of the time." No, it doesn't have to be a house. It can be "a house, houseboat, house trailer, cooperative apartment, condominium or other type of residence."

Q: Are there are other qualifications?
A: Yes. You can't claim it if your home is located outside the U.S. You also aren't eligible if you're a nonresident alien, if you inherited the home or got it as a gift, or if you acquired it from a "related person," such as your spouse, parents or grandparents.

Q: Will the credit help me if I don't owe any tax?
A: Yes. The credit "may give you a refund" even if you owe no tax, the IRS says.

Q: What form do I use?
A: Form 5405. The IRS recently revised it and posted it on its Web site, along with instructions. Dean Patterson, an IRS spokesman, says "programming is being done to electronically process Form 5405" to claim the $8,000 credit for homes bought in 2009. The IRS was "able to process these returns electronically beginning March 30" this year, he says.

Q: Where do I put the credit on my Form 1040?
A: Line 69.

Q: I've already filed my return for 2008. Can I still claim the credit? If so, how?
A: Yes. File what's known as an "amended" return. Use Form 1040X and attach Form 5405.

Q: If I buy this year, should I claim the new credit on my 2008 or 2009 tax return?
A: That can be tricky, and you may need to consult a tax pro. In general, most people who buy this year and qualify for the new credit probably will want to take it on their tax return for 2008, Hill says. "They'll get their money more quickly," she says.
But some people might be better off claiming the credit on their 2009 returns. These would include eligible homebuyers who buy this year, whose financial circumstances changed during 2009 and who might qualify for a larger credit on their returns for 2009 than the prior year. An example would be someone whose income was too high to get any of the credit for 2008 but who recently lost his job and thus would be eligible for the full credit on his 2009 return, to be filed next year.

By Tom Herman, The Wall Street Journal

24394 Overlake Lane, Lake Forest, CA 92630

$522,000

3 bedroom/2 bath

Steps to Lake I

U.S. Home Sales Rise Unexpectedly

The Associated Press
Published: March 23, 2009

WASHINGTON: One month does not a recovery make. But a surprising leap in existing home sales in February was a welcome if tentative sign of hope that the real estate market may be stabilizing. While sales of existing homes remain at lows not seen in more than a decade, economists were encouraged by the news, saying it reflected buyers who were taking advantage of deep discounts on foreclosures and other distressed properties. That's essential if home prices are to find their long-awaited bottom.

Prices plunged by almost 16 percent from a year ago in February and are expected to keep falling well into 2009. Tens of thousands of homes remain tied up in the foreclosure process and are not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines. "The four-letter word in the housing market is 'jobs,'" said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies. "If you're worried about having a job tomorrow, you're not likely to buy a home now."

Sheryl Morgan, a real estate agent in Canonsburg, Pa., about 20 miles south of Pittsburgh, recently lost two potential clients after strapped local employers cut back on pay. "Instead of selling and buying a new home, they're staying and refinancing," she said. The National Association of Realtors said Monday that sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January.

It was the largest monthly sales jump since July 2003, with first-time buyers accounting for about half of all transactions. Home sales activity has returned to December's levels, but still remains lower than most of last year. Without adjusting for seasonal factors, though, sales nationwide were down more than 10 percent from a year earlier. The West was the only part of the country to show increased sales, rising nearly 24 percent from a year earlier. February's sales figures don't reflect the new $8,000 tax credit designed to lure even more first-time buyers into the market. However, the credit has begun to attract buyers like Mindy Robbins, 30, of Billings, Montana. Robbins, who is scheduled to close next month on a $129,000 house with three-bedroom and two baths, said, "I wanted to take advantage of the stimulus package."
Buyers like Robbins should help invigorate spring and early summer sales, but how much will depend on the overall condition of the U.S. economy.

"If the economy stabilizes around midyear and financial conditions improve, then sales will probably begin to slowly increase as buyers step back into the market," wrote JPMorgan Chase analyst Abiel Reinhart. He noted that homes are now far more affordable to average Americans due to far lower prices and attractive mortgage rates. The median sales price in February skidded to $165,400, down from $195,800 a year earlier. That was the second-largest drop on record and prices are now off 28 percent from their peak in July 2006. However, in a positive sign, sellers' asking prices are starting to rise in places like San Diego and Orange County, Calif., said Lawrence Yun, chief economist for the Realtors. That could be an early indication that prices are stabilizing in the most distressed parts of the country.

Meanwhile, in contrast with the housing boom, when buyers took out ever-riskier loans and maxed out their home equity lines, "homebuyers are not over stretching" Yun said. "They want to stay within their budget." The number of unsold homes on the market last month rose 5 percent to 3.8 million, a typical increase for the winter months. At February's sales pace, it would take almost 10 months to rid the market of all of those properties. "Inventories are still high relative to sales rates, and would probably be even more so if all those wishing to sell their home actually had the house on the market instead of pulling it off in the face of rapidly eroding prices," wrote Joshua Shapiro, chief U.S. economist at MFR Inc. Sellers don't want to compete with foreclosures that have swamped the market, especially in California, Florida, Nevada and Arizona.

Up to 45 percent of sales nationwide are foreclosures or other distressed property sales, which typically sell at a 20 percent discount, according to the Realtors group. That's great news for buyers, who are paying the most attractive prices in years. Plus, interest rates have sunk to historic lows, with the national average for a 30-year fixed rate mortgage sinking to 4.98 percent last week, just above record lows, according to mortgage giant Freddie Mac.

Mortgages: A Waiting Game for Refinancing

Excerpt for The New York Times
Mortgage professionals are advising clients on the fence about refinancing not to wait.
By BOB TEDESCHI
Published: March 6, 2009

IN the weeks before the Obama administration announced its housing plan, some members of Congress were lobbying the government to subsidize 4 percent mortgages for homeowners who were current on their loans. But that proposal never made it into the plan. Rather, the administration has decided so far to focus on helping distressed borrowers more easily refinance or modify loans, with terms typically reflecting today’s market rates, now in the low 5-percent range for qualified borrowers. (Only loans owned or backed by Fannie Mae and Freddie Mac would qualify.)

While mortgage professionals have not lost hope that low-rate, government-subsidized mortgages could eventually happen, they are advising clients on the fence about refinancing not to wait. Interest rates remain near historic lows, but at the same time, lending standards have tightened and property values have fallen. If those trends continue, some borrowers may no longer be eligible to refinance.

The waiting game is particularly risky for homeowners in areas where property values are dropping sharply, and for those with barely above 20 percent equity in a home — the typical minimum for qualifying for any home loan. If the borrower has already secured a mortgage commitment during that time, most lenders are likely to proceed with the transaction even if a property’s value has dropped, according to Regina Garlin, an owner of RCG Mortgage in Montclair, N.J. “If a rate is locked and the loan was approved,” she said, “most lenders will usually honor the original agreement.”

To prevent any problems, though, Ms. Garlin suggests that borrowers have at least an informal home appraisal beforehand. “I recommend having a real estate agent provide comparable sales within the most recent three to six months,” she said. “While it’s not as exact as a certified property appraisal, it can serve to prepare for the unexpected before incurring costs or wasting time.”

These days, home loans are taking longer to review. Lenders are scrutinizing applications more closely, and because of industrywide layoffs, many banks now have fewer loan processors to help vet applicants. Ms. Garlin said it used to take four to six weeks to complete a purchase mortgage, and three to four weeks for a refinance mortgage. Now, she said, a refinance can take as long as six weeks, and a purchase mortgage can take as long as two months.

Loans insured by the Federal Housing Administration are an exception, mortgage experts say, because lenders can more easily sell these loans to investors. Nicholas Bratsafolis, the senior managing director of structured refinance at Lend America, a mortgage bank based in Melville, N.Y., says his company can complete an F.H.A. loan in 12 days or less from the time that initial contact is made with a borrower. The loan process is also faster, he said, because his company no longer works with brokers. “Many banks who bought loans from brokers were badly burned,” Mr. Bratsafolis said, referring to banks that did business with brokers during the housing boom. “So while the broker put together the loan package, the fear for a bank is that there’s something in the package that may not be correct or verifiable.”

Reflecting a move toward more conservative business practices, many major lenders have either chosen not to work with brokers, or are working with far fewer brokers than in years past. But Alan Rosenbaum, the chief executive of the GuardHill Financial Corporation in Manhattan, said consumers who go directly to a major lender do not always have the experience described by Mr. Bratsafolis of Lend America. Mr. Rosenbaum said borrowers who go to a bank’s retail branch can sometimes wait 90 days for a loan to close, because the lenders are so backed up. “We know which banks are slow or fast,” he said, “so we can place loans with the banks with the best rates and the best service levels.”

2009 Economic Real Estate Forecasts by Gary Watts

For the Buyer:
1. Buyers putting down less than 20% must have a FICO score of at least 720.
2. All assets and income must be verified and could be re-verified at closing.
3. Fixed rate mortgages account for 69% of funded loans.
4. New conforming residential loan amount for Orange County is $625,500. (loan limits may vary by county)
5. Only 2.9% of buyers are taking an adjustable rate mortgage vs 85% in 2005.
6. Short-sales are selling for 97% of list price, while foreclosures sell for 101% of list price.
FHA is the New Big Player
1. Up-front insurance premium (MIP) is now 1.75%.
2. Down payment is 3.5% and the FICO score must be at least 580.
3. Down payment assistance programs have been abolished.
4. 45% front end and 55% back end debt ratios and 2 year employment history.
5. Must be greater disclosure to buyer on monthly payment changes.
6. Borrower must have a valid Social Security Number and be a legal resident of the U.S.
7. Owner-occupied properties only, but gift is still available for down payment.
A. Kiddy condos for kids in college.
8. FHA appraisers must be certified, which will cause a decrease in the number of appraisers.
9. New FHA loan limits for Orange County, are: (loan limits may vary by county)
One Unit Two Units Three Units Four Units $625,000 $800,775 $967,950 $1,202,100

For Lenders:
1. Some lenders may no longer use in-house appraisers.
2. Financial institutions will be held liable for any misleading advertising.
3. Adjustable sub-prime loans cannot have a pre-payment penalty for 4 years.
4. Fixed sub-prime loans cannot have a pre-payment penalty for 2 years.
5. Truth in Lending statement must be printed in the native language of the borrower.

For The Investor:
1. No more than 4 investment properties can be financed.
2. If investor puts down less than 20%, it introduces: PMI; higher rates; added approval by
insurance companies.
3. Loan rates are usually .75% higher to 1% higher than owner-occupied financing.
4. Investor loans are more difficult to get, because 40% of foreclosures are investment properties.

Source: FHA, Mortgage Bankers Association, Federal Reserve
*The above excerpts are from Gary Watts economic forecast dated 1/28/2009

Fast Real Estate Facts

Calif. median home price - December 08: $281,100(Source: C.A.R.)
Calif. highest median home price by C.A.R. region December 08: Santa Barbara So. Coast $875,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region December 08: High Desert $137,560(Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Fourth Quarter 08: 59 percent (Source: C.A.R.)
Mortgage rates - week ending 2/19/09 30-yr. fixed: 5.04% Fees/points: 0.7% 15-yr. fixed: 4.68% Fees/points: 0.6% 1-yr. adjustable: 4.8% Fees/points: 0.5% (Source: Freddie Mac)

The New Rules of Mortgage Lending

By Les Christie, CNNMoney.com staff writer
February 4, 2009: 1:35 PM ET

NEW YORK (CNNMoney.com) -- If you're shopping for a mortgage these days, it's a whole new world out there. "There have been a huge number of changes over the past few years in mortgage borrowing," said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors. Of course, many of the subprime loans that helped fuel the housing boom - those that didn't require borrowers to show any proof of income, or that let homeowners make minimum payments - are are simply no longer available. But even buyers looking for a traditional mortgage are now faced with different factors to consider.

Here is what you need to know:
Paying up-front points. Borrowers can pay points - one-time, up-front fees - in order to reduce their mortgage's interest rate over the life of the loan. One point represents 1% of the mortgage value. But they often assume that they should never pay points, according to Alan Rosenbaum, founder of mortgage broker Guardhill Financial. That's a mistake, in his opinion. When interest rates were high, paying points didn't make sense because borrowers were very likely to refinance after rates dropped. They wouldn't hold their original loans long enough to recoup their up-front costs. But now borrowers can get a lot more bang for their buck. The old rule of thumb was that paying one point at closing could lower their mortgage's interest rate by a quarter percentage point or so. "Today the spread is worth a half point to a full point on the rate," said Rosenbaum.

It means paying $2,000 on a $200,000 mortgage at closing can shave as much as a whole percentage point off the loan's interest rate, changing a 6% loan to 5%. That would save $126 a month, and pay for itself in 16 months. Even if the rate were only lowered to 5.5%, that would still save $64 a month, paying for itself in 32 months. Still, not everyone is convinced. Rosenbaum recently had a client who chose a 15-year fixed rate loan at 5.875% with zero up-front points on a $800,000 loan, instead of paying a point to get a 5.375% loan. Had the borrower chosen to pay that point, he would have recouped that cost in about three years, and then gone on to save more than $200 a month for the remaining 12 years of the loan.
Of course, there are caveats. Buyers who are planning to refinance or sell within a few years shouldn't pay points, since the strategy simply doesn't pay in the short term.

Making more than the minimum down payment. If you can afford to put 25%, 30% or more down, should you do it? Most lenders require a minimum down payment of 20%; anything less and borrowers will need to obtain private mortgage insurance. And if a buyer could afford to put more than 20% down, it was generally assumed that they should. The traditional thinking was, "If you have the capital to commit, why not?" said Keith Gumbinger of mortgage research firm HSH Associates. "It will give you a smaller balance to pay off. But now, in light of declining home markets, not everyone would agree with that." High down payments can be wiped out in severely declining markets. Nicholas said he knows of a couple in Arizona who put a whopping $400,000 down on a million dollar house a couple of years ago. That gave them, they thought, a nice home equity cushion should they run into financial trouble. "But prices are down so much, the couple still fell underwater," he said. "It would have been better to conserve that cash in case home prices continue to decline."

Locking in the mortgage rate. Many borrowers choose not to lock in when rates are falling, as they have been, since they assume that the deals will only get better. But that's often a mistake. "We almost always recommend that if you have the numbers that make your deal work, then lock it in," said Gumbinger. His reason: Interest rates tend to jump up much faster than they inch down, meaning that buyers are much more likely to get stuck with a higher mortgage rate than they are to get lower one because they waited. Besides, locking in at the currently very affordable rates can give borrowers peace of mind, which is no small matter when you're trying to buy a house. "You'll sleep better at night," said Gumbinger.

FIX HOUSING FIRST ACT

The Fix Housing First Act is a part of what the Senate approved last week in their version of the Economic Stimulus Package. The following provides the highlights of this Act:

· Through lower mortgage rates, provides the equivalent of more than a $400 per month tax cut for 30 years to more than 40 million creditworthy American homeowners.
· Provides an additional $15,000 tax credit for the purchase of a new home.
· Includes targeted income and business tax cuts to help create new jobs.

How it Works
4.0 to 4.5% Fixed-Rate 30-Year Mortgages
· New and refinanced mortgages would be available for 4.0 to 4.5% -- providing a monthly savings of more than $400 for the average homeowner’s mortgage payment.
· Banks would issue these lower fixed-rate mortgages on primary residences – both for new home purchases and for refinanced mortgages for responsible homeowners.
· To encourage banks to issue these mortgages, the government will direct Fannie Mae and Freddie Mac to purchase these newly originated loans. Homeowners already holding loans from Fannie and Freddie would also qualify.
· The new, lower rate would be roughly between 4.0 to 4.5% today. The rate would be calculated based upon the historic spread between the 10-year Treasury bill and the 30-year fixed mortgage rate.
· The program would not be for “jumbo” loans.
· These mortgages would be available only until the end of 2010 – the time period of a targeted stimulus.
· The cost of the program is capped at $300 billion, though economists believe it would actually be much less.

$15,000 Homebuyer Tax Credit

· The proposal expands the current first-time homebuyer tax credit to make it more attractive and effective.
· Specifically, the size of the tax credit is doubled from $7,500 to $15,000 (or 10% of the purchase price, whichever is less) and the program is expanded to cover all primary residences and all homebuyers, not just first time homebuyers and vacant or foreclosed properties.
· Available for purchases made between January 1 and December 31, 2009.
· The cost in lost revenue to the government is about $20 billion.

Loan Modifications
· Privately securitized mortgages are at the core of the housing crisis. They account for more than 50% of all foreclosure starts, despite accounting for only 15% percent of all outstanding mortgages.
· This provision could substantially limit foreclosures at an estimated cost between $9B and $12B by:
o Temporarily (for 3 years) compensating servicers who modify privately held mortgages to allowhomeowners facing foreclosure to pay lower monthly payments.
o Temporarily (for 3 years) eliminating legal barriers to loan modification and creating a “safe
harbor” from lawsuits for servicers who act in good faith to do loan workouts.

A Real Stimulus: More Bang for the Buck
· At a cost to taxpayers of only $300 billion, the 4% mortgage plan could provide up to $6.1 trillion in savings to homeowners over the course of the 30-year loans – up to $150,000 for the average homeowner.
· That’s over $5,000 each year they can spend on other priorities for their families – spending that will spur job creation.

Restoring Homeowner and Financial Security
· The economic downturn began with a collapse of the housing market; no stimulus plan will work if we fail to address housing. If we don’t fix that problem, we’ll only be treating the symptoms.
· More than 860,000 properties were repossessed by lenders in 2008, more than double the 2007 level.
· The Fix Housing First Act will bring security to homeowners, thereby stabilizing the housing market and financial markets:
o Increases home sales by lowering costs for new homebuyers, reducing the extensive backlogs of housing inventories
o Decreases foreclosures by allowing eligible homeowners to refinance into more affordable
mortgages and by incentivizing mortgage servicers to do loan workouts
o Helps stabilize housing prices by increasing the number of homes sold and decreasing
neighborhood foreclosure effects
o Helps facilitate loan modifications for struggling homeowners
o Eliminates the uncertainty for the value of securitized mortgages held by financial institutions,
lowering their need to hoard capital and increasing their ability to lend
o Stabilizes credit markets by providing new cash flow to financial institutions

Targeted Tax Cuts to Create More Jobs
· To spur job creation and help struggling families, the legislation also includes targeted tax cuts:
o Help for Families: Income tax cuts for low and middle-income families: a two-year reduction of marginal income tax rates on the lowest brackets, from 15 to 10% and from 10% to 5%.
o Create Jobs, Stimulate Spending: Extension of Bonus Depreciation for 2009: reduces costs of
buying new equipment to encourage business growth, including for small businesses.
o Effectively Utilize Losses: 5-year Carryback of Net Operating Losses: helps businesses that have seen profits turn to losses during this recession.
o Help Our Heroes: Incentives to Hire Veterans: provides a tax credit to businesses that hire
veterans.
o Inject Liquidity into Our Economy: Delayed Recognition of Certain Cancellation of Debt Income: provides targeted tax relief to companies when settling debts with their creditors, which helps save jobs.
o Encourage Investment: Small Business Capital Gains: based on President Obama’s proposal,
eliminates capital gains taxes for start-ups and certain small businesses.
o Infrastructure Investment: Broadband Internet Access Tax Credit: encourages companies to
provide high-speed internet access to areas without such service today.

Fast Real Estate Facts

Calif. median home price - December 08: $281,100(Source: C.A.R.)
Calif. highest median home price by C.A.R. region December 08: Santa Barbara So. Coast $875,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region December 08: High Desert $137,560(Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Third Quarter 08: 53 percent (Source: C.A.R.)
Mortgage rates - week ending 1/22/09 30-yr. fixed: 5.10% Fees/points: 0.7% 15-yr. fixed: 4.80% Fees/points: 0.7% 1-yr. adjustable: 4.9% Fees/points: 0.6% (Source: Freddie Mac)

Keller Williams Realty Bucks National Business Trends During the Toughest Real Estate Market on Record

Reprinted from Forbes magazine. Bailout. Credit crunch. Foreclosure. Despite these words permeating the headlines and airwaves, there are companies out there moving forward - even in real estate. Keller Williams(R) Realty Inc., the fourth largest real estate company in North America, announced today that it outpaced the market in 2008, while remaining free of debt, and gave back more than $30 million in profits to its agents.

"Our strategy is no secret. We faithfully follow the sound financial model of leading with revenue - the same model our market centers follow," said Mark Willis, CEO of Keller Williams Realty Inc. "As we watch companies throughout the country take on billions of dollars of debt, we are proud to say that our company has not one dollar of financing debt and we remain strong and financially sound. It is our joy to be able to give back to our agents during these times."

Despite pervasive downward trends in the real estate industry, Keller Williams Realty continues to outperform the industry. For the first 11 months of 2008, existing home sales for the United States fell 17 percent when compared to the same period the year before. By comparison, Keller Williams Realty is poised to outdo those numbers by 10 percentage points, and in addition, the company experienced a much smaller contraction in its agent base compared to the National Association of REALTORS(R), who saw a 10 percent decline in membership.
"Keller Williams was founded 25 years ago during one of the toughest markets on record - when interest rates were higher than 18 percent. We continue to urge our agents to zero in on lead generation and reducing expenses so they can thrive during this market," said Mary Tennant, president and COO of Keller Williams Realty Inc. "We admire our agents' spirit, tenacity, and dedication to their businesses. They just keep powering forward."

Throughout 2008 Keller Williams Realty launched new products and services specifically to boost its agents' businesses, including two new books: Your First Home: The Proven Path to Home Ownership for first-time home buyers, and SHIFT: How Top Real Estate Agents Tackle Tough Times. Both books are written by Gary Keller, co-founder and chairman of the board of Keller Williams Realty, who also authored national best sellers The Millionaire Real Estate Agent and The Millionaire Real Estate Investor.

About Keller Williams Realty Inc.:
Founded in 1983, Keller Williams Realty Inc. is the fourth-largest real estate franchise operation in North America, with more than 690 offices and 70,000 associates in the United States and Canada. The company, which began franchising in 1990, has an agent-centric culture that emphasizes access to leading-edge education and promotes an economic model that rewards associates as stakeholders and partners. For more information, visit Keller Williams Realty online at (www.kw.com).
SOURCE: Keller Williams Realty Inc. Keller Williams Realty Inc. Amber Presley, 512-327-3070 amber.presley@kw.com

Homebuyers Get a Bonus in the Stimulus Bill

First time buyers could receive a $7,500 tax credit if they purchase soon.
By Les Christie, CNNMoney.com staff writer
Last Updated: January 29, 2009: 5:18 PM ET

NEW YORK (CNNMoney.com) -- If you're thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that's now before Congress.
Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week.
Technically, the stimulus bill is actually changing the terms of the $7,500 tax credit that was issued as a part of the Housing Recovery Act, which Congress passed last summer. That legislation required that the tax credit be repaid over 15 years, making it more of a no-interest loan. Not surprisingly, the measure had little impact on the market. The stimulus bill now under consideration would make that tax credit a true credit that doesn't need to be repaid.
Many in the housing industry believe this credit could do a lot to jump start the moribund housing market.
"Our economists have studied the effect [of the credit] and they say there could be a 10% increase in home sales if it's implemented," said Mary Trupo, a spokeswoman for the National Association of Realtors. "It gives people who are sitting on the fence or who have inadequate funds for closing costs an incentive to act now."
A 10% increase would yield an extra half million sales this year.
Who qualifies
To be eligible, buyers cannot have owned a home for the past three years, and the new home has to be used as a primary residence. The credit phases out as income rises above $75,000 for singles and $150,000 for couples, and disappears entirely at $95,000 and $170,000, respectively.
Applying for it is easy, or at least as easy as doing your income taxes. Just claim it on your return. That's it. No other forms or papers have to be filed.
Both the Senate and the House versions of the new act remove the requirement that buyers repay the credit. The Senate bill applies retroactively to any purchase completed between January 1, 2009 and the end of August. The House version is also retroactive to the start of the year, and expires at the end of June. As long as buyers don't sell for at least 36 months, they keep the money.
And the credit is refundable, meaning that it can be claimed even if the amount of the credit earned exceeds the buyer's tax liability. So even if your total tax bill comes to just $5,000, you can still qualify for a full $7,500 refund.
The housing industry has been pushing this idea for many months, arguing that first-time homebuyers are the key to boosting home sales. First time buyers who purchase from existing homeowners free those sellers to trade up to bigger, better houses.
Buyers beware
But the credit has its drawbacks, according to Bob Williams, a spokesman for the Tax Policy Center, which gave it a mediocre C+ grade in its Tax Stimulus Report Card.
Williams argues that the credit is poorly targeted because it goes to every first-time buyer, not just the ones who wouldn't buy without it. So, it merely provides a windfall for many people who would have purchased anyway. (See correction, below).
And in the end, a $7,500 tax credit, regardless of the details, does nothing to address the issue that's holding most buyers back - the suspicion that prices are going to keep falling.
"As long as people are uncertain about what markets are going to do, this won't help much," said Williams. "It's not enough to change that."
The industry would like to make the tax credit stronger by making it available to all homebuyers, not just first-timers. And it's pushing to have the credit last through the end of the year, at least.
"By the time it's implemented," said Trupo, "there could be very few months left to act."
An earlier version of this story incorrectly stated that the tax credit for a home purchased in 2009 could only be taken off of 2009 taxes. However, homebuyers can choose to take the credit for 2008, according to the IRS. Even if they buy a home after they've filed their 2008 taxes, they can file an amended return.

Updated Fast Facts

Calif. median home price - November 08: $285,680(Source: C.A.R.)

Calif. highest median home price by C.A.R. region November 08: Santa Barbara So. Coast $1,200,000 (Source: C.A.R.)

Calif. lowest median home price by C.A.R. region November 08: High Desert $148,580 (Source: C.A.R.)

Calif. First-time Buyer Affordability Index - Third Quarter 08: 53 percent (Source: C.A.R.)

Mortgage rates - week ending 1/15/09 30-yr. fixed: 4.96% Fees/points: 0.7% 15-yr. fixed: 4.65% Fees/points: 0.7% 1-yr. adjustable: 4.89% Fees/points: 0.5% (Source: Freddie Mac)

California Association of Realtors Update

This week’s C.A.R. Mortgage Update contains information about loan limits, paying down a mortgage, mortgage rates, refinancing, home loan applications, and foreclosure suspensions.
Will loan limits rise? Congressional leaders from both parties have been lobbying President-elect Obama to increase the limits of conforming loans – mortgages eligible to be purchased by Government Sponsored Enterprises (GSEs), like Fannie Mae and Freddie Mac – in high cost areas from $625,500 to $729,750 as part of an economic stimulus package. Qualified borrowers with conforming loans receive the best interest rates, because many in the financial industry believe conforming loans carry less risk.

Last year, as part of the federal government’s economic stimulus package, the conforming loan limit was temporarily increased to $729,750 in high-cost areas. Beginning Jan. 1, 2009, the conforming loan limit was lowered to its original level of $625,500 for high-cost areas.
In California, the new conforming loan limits for metropolitan areas range from $474,950 in the Sacramento-Arden-Arcade-Roseville metropolitan area, covering El Dorado, Placer, Sacramento, and Yolo counties to $625,500 in the Los Angeles-Long Beach-Santa Ana metropolitan area.

To read the full story, please click here:
http://www.nytimes.com/2009/01/11/realestate/11mort.html?_r=1

Paying down mortgage faster can make sense – sometimes Homeowners who find themselves with extra cash may be considering paying down their mortgage. While this can help some people in certain situations, like seniors close to retirement age or those with adjustablerate
mortgages, it may not be the best choice for all homeowners. Paying down the mortgage more quickly can save homeowners a significant amount in interest in the long run. However, some financial experts advise clients, especially those with fixed-rate loans at favorable interest rates, to use extra money to pay down high-interest debt and build up an emergency fund.
To read the full story, please click here:
http://www.washingtonpost.com/wp-/content/article/2009/01/10/AR2009011000173.html

Mortgage rate relief might not last long
The Federal Reserve’s announcement that it’s purchasing up to $500 billion of securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae, has contributed to a reduction in mortgage rates to record lows. However, some mortgage experts warn that the low rates may not last long and could actually rise as early as this summer. According to Celia Chen, senior director of housing economics at Moody’s Economy.com, in the second half of this year, the Federal Reserve’s program will have run its course and other issues will move to the
forefront, which could push mortgage rates higher.

To read the full story, please click here:
http://www.reuters.com/article/ousiv/idUSTRE5077SJ20090108

Fast Real Estate Facts

Calif. median home price - November 08: $285,680(Source: C.A.R.)
Calif. highest median home price by C.A.R. region November 08: Santa Barbara So. Coast $1,200,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region November 08: High Desert $148,580 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Third Quarter 08: 53 percent (Source: C.A.R.)
Mortgage rates - week ending 12/24/08 30-yr. fixed: 5.14% Fees/points: 0.8% 15-yr. fixed: 4.91% Fees/points: 0.7% 1-yr. adjustable: 4.95% Fees/points: 0.6% (Source: Freddie Mac)

Mortgage Rates Fall to New Low

By Maryann Haggerty
Washington Post Staff Writer Wednesday, December 24, 2008; 11:22 AM

Mortgage rates continued tumbling, as Freddie Mac reported today that interest on 30-year loans averaged 5.14 percent this week, the lowest point since it began tracking in 1971.
That was down from 5.19 percent last week, itself a new low point. A year ago, rates stood at 6.17 percent. Rates have fallen for the past eight weeks as evidence of the economy's problems has accumulated.

At 5.14 percent, the monthly principal and interest payment on a $200,000 loan is $1,091. That's $130 a month less than the same loan would have cost at last year's rates.
The low rates have been a bright spot amid a torrent of downbeat economic and housing news. Homeowners have rushed to refinance their loans to cut costs or switch from adjustable-rate mortgages to fixed-rate loans. Last week, mortgage applications jumped to the highest level in five years, according to a report from the Mortgage Bankers Association.

More than 80 percent of those were applications were for refinancing, but the association also measured an 11 percent increase in applications for home purchase loans. The 30-year mortgage rates as stated in Freddie Mac's survey include 0.8 points. A point is an upfront financing charge equal to 1 percent of the mortgage.

Freddie Mac also reported that 15-year fixed-rate mortgages averaged 4.91 percent with an average 0.7 point, down from last week when it averaged 4.92 percent. That's the lowest since April 2004.