FORECLOSED HOMEOWNER HAS CAUSE TO SUE BANK FOR FRAUD

This recent California appeals court ruling has established precedent that needs to be watched and followed. This is very important to all homeowners out there in trouble with their lender. A California appeals court ruled that a former homeowner's lawsuit against U.S. Bank (USB: 27.52 -0.61%) for fraud may continue after the bank allegedly reneged on a promise to negotiate a mortgage modification, opening the door for claims from potentially thousands of similarly situated troubled borrowers in the Golden State.

While the court ruled that a case for fraud–which includes claims for damages–could proceed, it also ruled that the homeowner, Claudia Jacqueline Aceves, lacked sufficient cause to get her home back after the foreclosure sale.

What could become a landmark foreclosure ruling appears to be both a win and a loss, for mortgage servicers and foreclosure defense attorneys alike. Mortgage servicers prevailed on issues of alleged defects in the foreclosure process, with the court ruling that none of the Aceves allegations of irregularities "would permit the trial court to void the deed of sale or otherwise invalidate the foreclosure." Aceves had claimed, for example, that the notice of default was defective and therefore void, a claim the court rejected outright. "Absent prejudice, the error does not warrant relief," according to the ruling.

The court spent most of its 15-page ruling, however, discussing how U.S. Bank had purportedly promised to negotiate a potential loan modification if the homeowner agreed to allow the bank to lift a bankruptcy stay, which had protected the home from seizure. Yet, when the homeowner agreed and attempted to begin negotiation on a loan modification, the bank allegedly opted to foreclose without negotiating.

"We conclude plaintiff could have reasonably relied on the bank’s promise to work on a loan reinstatement and modification if she did not seek relief under Ch. 13; the promise was sufficiently concrete to be enforceable; and plaintiff’s decision to forgo Ch. 13 relief was detrimental because it allowed the bank to foreclose on the property," according to the ruling, filed Jan. 27, in the Court of Appeal of the State of California’s second appellate district.

In April 2006, Aceves took out a 30-year, $845,000 loan at a rate of 6.35% with original payments about $4,860 per month. After two years, the rate became adjustable. In January 2008, Aceves could no longer make her payments, and a notice of default was filed in March of that year. Shortly thereafter, Aceves filed for Chapter 7 bankruptcy protection, which automatically stops foreclosure proceedings.

Aceves contacted U.S. Bank, which told her it "would work with her on a mortgage reinstatement and loan modification" as soon as the loan was out of bankruptcy, according to the ruling. Aceves said her intention was to convert the Chapter 7 case to Chapter 13, which allows a homeowner in default to reinstate original loan payments, pay the arrears over time and avoid foreclosure. U.S. Bank, meanwhile, filed a motion to lift the bankruptcy stay.

In November 2008, Aceves’ bankruptcy attorney received a letter from the attorney for the loan's servicer, American Home Mortgage Servicing. The letter asked for an agreement in writing to allow American Home to contact Aceves to "explore loss mitigation possibilities." When Aceves contacted the servicer, she was told American Home would not speak to her before the motion to lift the bankruptcy stay was granted. Aceves decided not to pursue Chapter 13 bankruptcy protection based on U.S. Bank’s promise to reinstate and modify the loan, according to the appellate court.

On Dec. 4, 2008, the bankruptcy stay was lifted. Five days later, without contacting Aceves, U.S. Bank scheduled the home for a Jan. 9, 2009, foreclosure sale. Aceves sent documents to American Home on Dec. 10 and was told on Dec. 23 that a negotiator would contact her on or before Jan. 13 (four days after the scheduled auction.). On Dec. 29, a negotiator called and said to forget about the foreclosure because the "file" had been "discharged" in bankruptcy. On Jan. 2, the negotiator called again and said American Home was incorrect and that it would reconsider.

On Jan. 8, the day before the scheduled sale, the negotiator said the loan's new balance was $965,926, the new monthly payments would be $7,200 and a $6,500 deposit was due immediately. The negotiator refused to put the terms in writing, according to the appellate court's finding. Aceves did not accept the offer, and the house was subsequently sold back to U.S. Bank the next day.

"U.S. Bank never intended to work with Aceves to reinstate and modify the loan," the latest ruling said. "The bank so promised only to convince Aceves to forgo further bankruptcy proceedings, thereby permitting the bank to lift the automatic stay and foreclose on the property."

During an original lower court case, U.S. Bank had prevailed with the court, which ruled there was no promissory fraud involved. Aceves filed the appeal spanning issues of standing as well as reiterating a claim for promissory fraud, on which the appellate court based its ruling.

For its part, U.S. Bank alleged that Aceves' bankruptcy case was filed in "bad faith."

U.S. Bank referred comments to the servicer, American Home Mortgage Servicing. A spokeswoman for American Home Mortgage Servicing said the company is still reviewing the court case and has no comment at this time.

Write to Kerry Curry.

Keller Williams Realty Announces Numbers for 2010, Continued Growth During Real Estate Downturn

Company Launches eEdge Industry’s First Lead-To-Close Business Solution Today

AUSTIN, TEXAS (February 21, 2011)–Keller Williams Realty reported today at its national convention that it ended 2010 with 79,315 associates, 701 market centers (offices), and associate profit share up 7.2 percent, with its agents receiving $34.6 million dollars back. Since the inception of the profit sharing program, the company has given back over $304 million in earnings to its agents. Additionally, CEO Mark Willis shared in his annual State of the Company address to more than 8,000 convention attendees that, since the real estate market’s sharp downturn in 2005, the company has grown 30 percent in agents, 40 percent in market centers, 21 percent in closed units and 11 percent in closed GCI.

“Keller Williams agents have outpaced the market in every way, through productivity and profit share. As a company, we are better off now than we were before the shift–and we have our associates to thank for that," said Willis.

The growth of the company can be attributed to the growth of its agents. Agent productivity continued to rise with units closed up 6 percent from December 2009 to 2010, while comparably, the NAR membership as a whole went down in closed units 4.8 percent. Overall the company’s associates saw productivity year on year percentage increases across the board in listings taken (up 13 percent), contracts closed volume (up 9 percent) and contracts closed units (6 percent).

“These numbers are the most important to us because they are proof that our agents are succeeding, making more money and growing their businesses. They are truly breaking through," Willis added.

Willis also did the honors of “turning on" the industry’s firstcomplete lead-to-close business solution, eEdge, during his address. This unique tool is now available to every Keller Williams associate at a fraction of the cost they would normally pay with functionality to build their leads, database and sales. Additionally, with the company-wide paperless transaction system, consumers can expect a faster, more seamless closing process.

“We want to thank our associates and their unwavering commitment to the growth of their businesses and leading the way in the industry in technology," said Mary Tennant, president and COO of Keller Williams Realty. “Keller Williams Realty wouldn’t be forging ahead with such an important product like eEdge without the support of our agents and their vote!"

In addition to reporting positive growth and technological advancement, the company received many accolades in 2010 including:
· Entrepreneur magazine, No. 1 ranked real estate franchise on the 31st Annual Franchise 500 list
· J.D. Power and Associates, highest in overall satisfaction ratings from home buyers among the largest full-service real estate firms for the third year in a row
· Inman News, Co-Founder and Chairman of the Board Gary Keller named one of the 100 Most Influential Leaders in Real Estate
· Training Magazine, highest ranking real estate franchise on the annual Training Top 125, #47 Overall


About Keller Williams Realty, Inc.:
Founded in 1983, Keller Williams Realty Inc. is the third-largest real estate franchise operation in the United States, with 690 offices and almost 80,000 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. The company also provides specialized agents in luxury homes and commercial real estate properties. For more information, or to search for homes for sale visit Keller Williams Realty online at (www.kw.com).

CALHFA ANNOUNCES FULL IMPLEMENTATION OF $2 BILLION EFFORT TO ASSIST HOMEOWNERS STRUGGLING TO REMAIN IN HOMES

SACRAMENTO – The California Housing Finance Agency today announced the full
implementation of four programs to fight the ongoing foreclosure crisis in California, with the primary goal to help families remain in their homes.
The programs, under the umbrella title of Keep Your Home California, are federally funded as part of the U.S. Treasury Department’s Hardest Hit fund, and are aimed at helping low and moderate income homeowners struggling to pay their mortgages amid the worst real estate crisis in decades.

“Our goal is to get the very most out of these federal dollars to assist California families,” said Steven Spears, Executive Director of CalHFA. “With families struggling through a number of financial hardships and the disruption in the real estate market, these programs will help those in need while stabilizing neighborhoods and communities severely impacted by foreclosures.”

California received a total of nearly $2 billion through the Hardest Hit fund. After consulting with community leaders throughout the state, four programs were created to assist California families. Mr. Spears said that all four programs are intended to help avoid foreclosure: three offer several forms of mortgage assistance, as well as a separate program that will provide transition assistance to borrowers who execute a short sale or deed in lieu transaction.

All of the programs are designed specifically for low or moderate income homeowners who are either unemployed or are facing another financial hardship, have fallen behind on their mortgages and owe significantly more than the value of their homes.
“In partnership with the federal government, Keep Your Home California is one more step we are taking to help low and moderate income California families who are struggling to remain in their homes,” said Assemblymember Norma Torres, Chair of Assembly Committee on Housing and Community Development. “No one program will solve the foreclosure crisis affecting our state, but together we hope to make a difference for as many families as possible.” "The foreclosure crisis continues to hinder our potential for economic recovery, and strips stability from our communities,” said Assemblymember Mike Eng, Chair of the Assembly Committee on Banking and Finance. “I'm pleased that the Keep Home California program is
ramping up to address these challenges and, as the program moves forward, I will continue to monitor its progress to ensure that it's an all around success at assisting California borrowers."

Specifically, the Keep Your Home California programs provide:
• Mortgage assistance of up to $3,000 per month for unemployed homeowners who are in
imminent danger of defaulting on their home loans.
• Funds to help homeowners who have fallen behind on their mortgage payments due to a
temporary change in a household circumstance. The program will provide up to $15,000
per household to reinstate mortgages to prevent foreclosures.
• Money to reduce the principal owed on a mortgage for a home where the low or
moderate income homeowner is facing a serious financial hardship and owes
significantly more than the home is worth. The program requires lenders to match any
assistance provided by the Keep Your Home California program.

A full description of the programs can be found at www.KeepYourHomeCalifornia.org
How to Apply: The programs will be limited to homeowners who meet a number of criteria, including owning and occupying the home as their primary residence, meeting income limits and facing a financial hardship. Homeowners who consummated a “cash-out” refinance are not eligible for Keep Your Home California programs.

To apply for the assistance, a homeowner should contact the Keep Your Home California call center toll-free at 888.954.KEEP(5337) or their mortgage servicer – the company to which the borrower sends monthly mortgage payments. Each of the mortgage assistance programs requires the participation of the mortgage servicer.
As of February 9, the following servicers are participating in all four Keep Your Home California programs:
 GMAC
 Guild Mortgage
 California Housing Finance Agency
 California Department of Veterans Affairs

Other servicers, including Bank of America, JPMorgan Chase, CitiMortgage and Wells Fargo are currently participating in some, but not all programs at this time. The list of participating servicers is expected to expand in the coming weeks. Full details regarding servicer participation can be found at www.KeepYourHomeCalifornia.org.

“The problems of unemployment and the unprecedented disruption in our real estate markets have impacted so many families,” Mr. Spears said. “These programs are designed to move homeowners who have been told ‘no’ into the ‘yes’ category and qualify them for a mortgage they can afford over the long term." Borrowers with questions about the program may call Keep Your Home California toll-free at
888-954-KEEP(5337).

THE END OF FANNIE AND FREDDIE

The White House outlined last Friday its plans to begin shrinking their support of both of the government sponsored entities (GSEs) Fannie Mae and Freddie Mac. While the process could take several years, the effects will be felt in coming months.

The government took over both GSEs in September of 2008 when the financial crisis took place. Both agencies have been in receivership which has cost tax payers an estimated $134 billion so far. If the housing market was not so fragile the timeframes would be much quicker to dissolve the two agencies.

Last year, Fannie, Freddie and FHA guaranteed 95% of all home loans. The role these government agencies have played has been crucial to the lender markets over the last 40 years. There would not have been a housing market the last two years had these agencies been dissolved as is the plan going forward. The goal is to have the private sector originate mortgages and securitize them without any government backing.

The proposed plan by the administration is to allow the maximum loan limits to fall to $625,500 from $729,750 beginning October 1st, 2011. The plan is to increase minimum down payments to 10% on all loans eligible for purchase by Fannie and Freddie. In addition, insurance premiums charged on new loans backed by the Federal Housing Administration (FHA) will also go up.

Waiting Period Requirements To Purchase A Home Again...

With all of the craziness in the real estate market, one question that continually arises is; "if I do this ... how long until I can purchase another home". Here are the current answers to this question based upon the type of loan you have/had.

The waiting periods in order to qualify for a home loan after a foreclosure, deed-in-lieu, short sale and bankruptcy varies both by the government agency purchasing or insuring the loan as well as the dollar amount of the loan.

Federal Housing Administration (FHA)

1) Foreclosure is 3 years
2) Deed-in Lieu is 3 years
3) Short Sale is 3 years
4) Bankruptcy is 2 years

Veterans Administration (VA)

1) Foreclosure is 2 years
2) Deed-in Lieu is 2 years
3) Short Sale is 2 years
4) Bankruptcy is 2 years

Conventional Conforming (FNMA/FHLMC)

1) Foreclosure is 7 years
2) Deed-in-Lieu is 4 years < 80% LTV and 5 years > 80% LTV for primary residences. 7 years for second homes and investment properties regardless of LTV.
3) Short Sales is 2 years < 80% LTV and 5 years > 80% LTV and 7 years > 90% LTV
4) Bankruptcy is 4 years

Conventional Non-Conforming (JUMBO)

1) Foreclosure is 7 years
2) Deed-in-Lieu is 7 years
3) Short Sale is 7 years
4) Bankruptcy is 7 years

Hope this information helps. Call me with any questions...

REALTOR GROUP LOBBIES AGAINST CREDIT SCORE HITS ONCE EQUITY LINE LIMITS ARE CUT

Article taken from The Washington Post
By Kenneth R. Harney
Friday, November 19, 2010; 12:59 PM

Here's a credit torture scenario that might have happened to you and that now has a major real estate lobby on Capitol Hill demanding immediate change.

Say you've had a solid payment record on just about all your accounts - three credit cards, your first mortgage, a home equity line and other important monthly bills. The last time you checked, your credit scores were comfortably in the 750s.

Suddenly you get a notice from the bank that because of "market conditions," your equity line limit has been cut from $60,000 to $35,000, slightly above the $30,000 balance you've got outstanding. Then one of your credit card issuers hits you with more bad news: Your $20,000 limit has been reduced to $10,000. Your balance on the card, meanwhile, is about $9,000.

Guess what happens to your credit scores in the wake of the bank cuts? You might assume that nothing happens. You haven't been late. You haven't missed a monthly payment. You're a good customer.

Wrong. Depending upon your overall financial situation, your credit scores could plunge into the upper 600s. This, in turn, could put you out of reach for a refinancing at a favorable interest rate or hamper your ability to buy a new home.

The reason for the score plunge: With the reductions in your line limits, you are now much closer to being maxed out. You are using a higher percentage of your available credit - $30,000 of the $35,000 revised limit (86 percent) on your home equity line and $9,000 of the $10,000 limit (90 percent) on your card. Credit scoring models typically penalize high utilization rates because they are statistically correlated with future delinquency problems.

No one ever warned you about this - certainly not the banks that cut your credit. Now the largest lobby group on Capitol Hill, the 1.1 million-member National Association of Realtors, is demanding that Fair Isaac Corp., the creator of the FICO score that dominates the mortgage market, take immediate steps to lessen the negative impact on consumers when banks abruptly cancel or slash credit lines of non-delinquent customers.

In a major policy move, the realty association is calling upon Fair Isaac to "amend its formulas to avoid harming consumers whose utilization rates increase because their available lines of credit [are] reduced" despite on-time payment histories. The group wants FICO to ignore the utilization rate for such consumers or compute the score as if the credit max had not been reduced.

Ron Phipps, president of the association, said, "We're seeing this across the country and it is hurting people who are responsible users of credit."

Tom Salomone, broker-owner of Real Estate II in Coral Springs, Fla., said, "There's absolutely no question these credit card and home equity line reductions are killing [home buying] deals and arbitrarily raising interest rates on people."

In an interview, Salomone said he has seen many situations where home buyers lost 20 to 30 points on FICO scores "but had done nothing wrong. The banks just lowered their lines." He added that the inability of FICO's software to distinguish innocent victims from people whose behavior actually merits credit-line reductions demonstrates that "FICO's model is archaic."

Asked for a response, Joanne Gaskin, Fair Isaac's director of mortgage scoring solutions, said the FICO model attaches such importance to consumers' available credit and utilization rates - they account for 30 percent of the score - because they are highly accurate predictors of future credit problems.

Research conducted by Fair Isaac last year found that consumers who utilize 70 percent of their available credit "have a future bad rate 20 to 50 times greater than consumers with lower utilizations." Ignoring this key indicator, the study said, would "decrease [the score's] predictive power."

The National Association of Realtors has also asked Fair Isaac to help out with the nationwide foreclosure crisis by revising its model to "recognize" lender codings on credit file accounts indicating that homeowners had received loan modifications approved under federally backed programs. Rather than treating borrowers' reduced post-modification payments as ongoing evidence that the mortgage was "not paid as originally agreed," which depresses scores sharply, the association said, FICO scores should reflect the reality that the lender agreed to lower payments and borrowers are making payments "as agreed."

The realty group also said it plans to push for legislation in the upcoming congressional session to provide free credit scores - one each from Equifax, Experian and TransUnion, the national credit bureaus - every time a consumer orders annual free credit reports. (You can obtain your free reports once a year, without scores, at AnnualCreditReport.com or 877-322-8228.

Great Article on Homeownership

The Wall Street Journal has been hard on housing, but recently published the following top 10 reasons why buying a home makes sense. Pass it around and let me know if you need a realtor.

http://online.wsj.com/article/SB10001424052748703376504575492023471133674.html

LOAN MODIFICATION HELP FROM BANK OF AMERICA

As the economy continues to falter and the unemployment rate remains high many homeowners continue to struggle with their house payments. There are government mandates on banks to assist borrowers whenever possible. One such mandate is for banks to offer loan modifications allowing homeowners to remain in their homes and to help them avoid a short sale or foreclosure.

Unfortunately, getting a loan modification can be a very time consuming and an arduous task for many homeowners seeking help. Massive delays, lost paperwork and redundant efforts can cause homeowners to give up and not succeed with their modification. However, for Bank of America customers in Southern California, there is now a better process in place.

Bank of America has established a modification department in Brea, California. Any borrower whose loan is with Bank of America can now call in and have someone answer the phone, listen to their issues and instruct them as to the process in order to proceed to receive a modification. The borrower is instructed as to what documentation is needed and an appointment is set to meet face-to-face with a Bank of America representative within one week. The results have been extremely helpful.

If you know of such an individual who needs help please instruct them to have their loan number ready when placing the call. The homeowner is the only person who may place the call. Please make a note of this phone number and feel free to furnish it to anyone who needs help. 714-987-5050.

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