Minor Mortgage Matters

Insanely low mortgage rates=insanely low mortgage payments. Buying vs. Renting revisited

2011-10-06T19:33:00.000-07:00

Mortgage rates are the lowest they have been since I began in this industry in 2003. Incredible market volatility and a global financial system teetering on the edge of disaster have made institutional money flow into the relative safety of mortgage lending. With more money supply the demand naturally decreases and the rates are so low its silly.

Today a 30 year fixed could be had at 4.000% at par (no points paid for the rate).

Mortgage payments by loan size at that interest rate:

$300,000 = $1432

$400,000 = $1909

$500,000 = $2387

$650,000 = $3103

If you want to pay the property off in 15 years the mortgage rates are stupid low. 3.25% is par. Payments as follows:

$300,000 = $2108

$400,000 = $2810

$500,000 = $3513

$650,000 = $4567

This means that in LA, the costs of buying vs. renting are becoming close to even in many neighborhoods. Check out this slick NY times calculator for detailed info about that equation. This is the perfect storm for the savvy real estate buyer. A very soft real estate market coupled with all time low interest rates.

Borrowing down payment money from 401k?

2010-11-01T15:29:00.000-07:00

Being a fierce advocate of frugality, I caution against anyone tapping into their retirement funds. The only time I can see it making sense would be for a down payment on a home that will be lived in for a long time. If the situation arises and buyers need funds to close escrow and buy their home, it is good to know the available options.

The cost of using funds in a 401K as down payment should be compared with the cost of mortgage insurance and the cost of a second mortgage, with allowance for the risks associated with each option. The best choice can vary from case to case. Whether you take funds from a 401K to make a down payment should depend on whether it costs more or less than the alternatives, which are to pay for mortgage insurance or for a higher interest second mortgage. Income tax regulations should also be taken of the risks inherent in these different options, because mortgages are most people's biggest tax break.

As an illustration, you want to buy a house in Eagle Rock for $500,000 but have enough cash to pay only $50,000 down. Lenders will advance only $400,000 on a first mortgage without mortgage insurance (MI). You need to come up with another $50,000 to close escrow. One source for the additional capital you need is your 401K account. A second source is your first mortgage lender, who will add another $50,000 to your first mortgage, provided you purchase mortgage insurance on the total loan of $450,000. A third option is to borrow $50,000 on a second mortgage, from the same lender or from a different lender. 2nd mortgages have become rare after the credit crunch because they are a risky investment for lenders. If you were lucky enough to find a 2nd mortgage in this market, it would be at a double digit interest rate.

The general rule is that money in 401K plans stays there until the holder retires, but the IRS allows "hardship withdrawals". One acceptable hardship is making a down payment in connection with purchase of your primary residence.

A withdrawal is very costly, however. The cost is the earnings you forgo on the money withdrawn, plus taxes and penalties on the amount withdrawn, which must be paid in the year of withdrawal. The taxes and penalties are a crusher, so avoid withdrawals if at all possible.

A far better approach is to borrow against your account, assuming your employer permits this. You pay interest on the loan, but the interest goes back into your account, as an offset to the earnings you forgo. The money you receive is not taxable, so long as you pay it back.

The cost of borrowing against your 401K is only the earnings foregone. (The interest rate you pay the 401K account is irrelevant, since that goes from one pocket to another). If your fund has been earning 6%, for example, that is the cost of the loan to you. You will no longer be earning 6% on the money you take out as a loan. If you are a long way from retirement, you can ignore taxes because they are deferred until you retire.

The major risk in borrowing against your 401K is that if you lose your job, or change employers, you must pay back the loan in full within a short period, often 60 days. If you don’t, it is treated as a withdrawal and subjected to the same taxes and penalties. 401K accounts can usually be rolled over into 401K accounts at a new employer, or into an IRA, without triggering tax payments or penalties, but loans from a 401K cannot be rolled over.

Borrowing from your 401K should not prevent you from continuing to contribute the maximum amount that can be shielded from current taxes. If it does, the cost gets high.

Mortgage Insurance (MI)

You can borrow the additional $50,000 you need from the first mortgage lender by paying for mortgage insurance. FHA loans, which are the most popular in low down payment situations like this currently charge .8-.99 for monthly mortgage insurance premiums. That is approximately $200 extra per month added to the payment or $2400 per year for MI premiums.

Mortgage insurance has income tax considerations also. The cost of mortgage insurance is roughly 5% above the after-tax mortgage rate.
For example, if your mortgage rate is 6% and you are in the 35% tax bracket, your after-tax mortgage rate is 6(1-.35) = 3.90%, and the mortgage insurance cost would be about 8.90%.

Second Mortgages As An Alternative

2nd mortgages have become very rare and difficult to find. The interest rates on 2nd mortgages are always higher than 1st mortgages, because in the event of default the 1st mortgage gets paid back before the 2nd mortgage gets a dime. Naturally, in a declining real estate market 2nd mortgages are very tough to come by.

Seller financing is an option, although the 1st mortgage lender may restrict this. Using seller carry backs is a great way to close escrow, but when dealing with bank-owned foreclosures it is never done.

The cost of a second mortgage is the interest rate adjusted for taxes. If the rate is 9% and you are in the 35% tax bracket, the cost is 9(1 -.35) = 5.85%.

To 401k or not to 401k?

While borrowing from a 401K account involves risk associated with changing jobs, the mortgage insurance and second mortgage options entail risk associated with changing houses. These options reduce equity in your house, increasing the possibility that a decline in real estate prices will leave you with negative equity. This could make it impossible to pay off the mortgages in the event you want to sell the house and move somewhere else.

In most cases, however, the risks involved in reducing your equity in the house are smaller than the risks associated with borrowing from your 401K. If the costs are close to being the same, leave your 401K alone.

For specific mortgage questions, contact Sky Minor at 310-709-8283 or www.realestatesilverlake.com

Mortgage lenders being held back from foreclosing because of missing paperwork.

2010-10-16T00:51:00.000-07:00

Much hubbub this month in the Mortgage/Foreclosure world about banks having to halt foreclosures in many states because they do not have all of the legally required paperwork. This Foreclosure Freeze has hundreds of thousands of homeowners hopeful. In most states, to bring about foreclosure the lender must furnish the signed note. During the peak of the run and gun mortgage backed securities days the loans were getting transferred many times and some of the notes were lost. It has long been a foreclosure prevention tactic for distressed borrowers to make their lenders show the note. If the lender cannot, some judges around the country are postponing foreclosure until they can. This impressive loophole has caught on like wildfire across our default-laden country. While I am certainly all for homeowners avoiding foreclosure, I can see that this is not a good thing for the market at large.

Yes, foreclosures are a bad thing, but delaying them is even worse. I have two points to justify that statement. The first is the money tied up in the house that can't be recovered or re-lent to anyone else. Those servicing companies who have put a moratorium on foreclosing on the property often times still owe the ultimate investor the scheduled monthly interest, based on their contract. And if the loan is possibly subject to a buyback situation, the originator of the loan (whoever sold it to Chase, for example) is certainly going to argue that it is not "on the hook" for interest charges that Chase voluntarily stopped making and thus owed. No one will pay and the note will be in limbo awaiting some legal verdict from a judge who is also dealing with thousands of other distressed mortgage cases. The legal system will draw out these cases and whatever money is left from these mortgages will take longer to recirculate into the lending pool. In a word, there will be less liquidity. The current foreclosure issues increase uncertainty - and markets don't like uncertainty. Bank stocks are down, and they continue to hold on to trillions of "lendable" money because of nervousness about the future. Chase announced that it would now be reviewing 115,000 foreclosure cases in 41 states. PHH's president and CEO stated, "PHH Mortgage is actively cooperating with its regulators, is responding to such inquiries and has completed a comprehensive review of its foreclosure procedures. Based on this review, PHH Mortgage has not halted foreclosures in any states and has no plans to initiate a foreclosure moratorium." When push comes to shove, the courts will tie up the process between lenders and homeowners and only the lawyers will win.

The second problem with delaying foreclosures is that it will create unnatural demand for the properties on the market because there will be less supply. Prices will be driven up in the short term, as with all bubbles but then once the bottleneck eases and the huge numbers of bank-owned foreclosures hits the market, the opposite will be true. At that point you could see a rash of new foreclosures from recent buyers who are now underwater because of price softening due to the "normal" amount of foreclosures being on the market. In Los Angeles the competition is fierce to buy properties right now. This is causing overbidding and tremendous buyer frustration when buyers have to write 25 offers to get one accepted. Stopping foreclosures is an indirect manipulation of the real estate market and will ultimately slow a true recovery by causing peaks and valleys. A natural and balanced market can only exist if all of the foreclosures are purged from the system and all the bad debt is finally settled so the banks know how much money they have.

New sites and videos

2010-10-07T00:10:00.000-07:00

Hi all, I'm excited about having some new web projects out. First is the freshly polished site for Silver Lake Real Estate. We are making moves (pun intended) on both sides of the hill, in zip codes 90039, 90027, 90065, 90042 and 90041. Silver Lake in particular is an area we are focusing on because of it's large number of unique and architecturally significant properties and it's new (unofficial) status as the hub of LA's East Side. Silver Lake home values were the least effected out of all the East Side neighborhoods in the 2007 real estate downturn. That is attributable to heavy gentrification and real wealth moving into the area, the kind of money that can afford to hold on through downturns. Silver Lake will be the powerhouse market for years to come, and Preferred Realty and Loan will be well positioned to service the market.

Secondly, Roger has debuted my first Youtube commercial. It's quite a little production, I must say I am quite happy with how it turned out. Check it out here. We are debating running it during the Super Bowl, the jury is still out.

That's all for now. Thank you for your continued support.

Sky Minor

Bad jokes about the bad economy.

2010-08-05T12:50:00.000-07:00

The economy is so bad, I bought a toaster oven and my free gift with purchase was a bank... If the bank returns your check marked "Insufficient Funds," you call them and ask if they meant you or them...Angelina Jolie adopted a child from America...My cousin had an exorcism but couldn't afford to pay for it, and they re-possessed her..When Bill and Hillary travel together, they now have to share a room.

OIY GEVALT!

Transactional Funding

2010-07-28T11:46:00.000-07:00

There has been much talk lately announcing the return of profitable flipping conditions in LA. California and Los Angeles County has been among the highest in the nation in foreclosures since the real estate bubble burst approximately three years ago, and we have seen our home prices plummet by as much as 50% in some areas. Simultaneously, this wave of foreclosures has created a demand for rental properties as former home owners become home renters. This has resulted in rents that have remained relatively stable as the prices of homes have steadily dropped. This unique set of circumstances has generated bargain investment property prices for investor buyers that haven't existed in LA since the mid 90's Northridge earthquake. It has also created a niche for those looking to flip properties once again. Purchase demand is still very strong in most areas despite a large backlog of inventory held by the banks.

Most of the foreclosures that are being sold at auction and through bank owned REO listings need only minor, cosmetic repairs to bring them up to rental or FHA financing standards. Investors willing to purchase these properties, can put $5K-$10K into them and then turn around and sell them to investors for a reasonable profit. These investors are still able to purchase the property at a price that makes it possible for the property to generate strong positive cash flow at prevailing market rents.

The catch in this process is that, in order to acquire a property at the Trustees' Auction, the prospective buyer has to come with cash. Many flippers lack the personal cash reserves to tie up more than one or two properties at a time. This is where transactional funders enter the picture. My transactional funders loan money on a very short term basis for investors to purchase properties at the auction or through the banks. They require that the end buyer (the person who the investor is selling to), must have loan approval and be under contract on the property. Once that happens the transactional lender will fund the loan to the investor and the investor will enter escrow with the buyer. The investor is coming up with little or none of their own money for the deal and making a hefty profit.

These transactional funds are always protected by a first position lien on the property. Once the properties have been successfully rehabbed or otherwise turned over,(Max 30 days holding time), they are resold and the transactional funders are repaid in full. The transactional funders usually see their money tied up for no more than 30 days and they are paid 3-6% on their investment. This equates to 50%-125% annualized returns on the average transaction for them, which is phenomonal. Everyone wins.

If you are seeking transactional funding, contact me here or call/sms 310-709-8283.

Stated income loans axed by new Obama bill.

2010-07-21T12:45:00.000-07:00

Stated income loans were mortgage loans made to borrowers without proving their income sources. They were largely removed from circulation after the 2007 mortgage meltdown. After that, loans made without income and sometimes without assets became extremely rare and coveted. Several intrepid portfolio lenders getting their money from alternative sources like hedge funds and local pension funds would offer the loans and be completely swamped by eager borrowers. Their $500m portfolios would fill in a matter of months and they would stop funding new loans. For borrowers and brokers it became a hunt for a slot with the next lender before they filled up. The market for stated income loans (also called no-doc, SIVA, Low-doc, etc.) was on its last legs.

Today that dying market was given it's Coup De Grace. The reform bill signed in by Obama outlaws stated income and no doc loans. The market already did not want these loans and now the government has finished them, albeit with some degree of nebulous wording.

Part 1074 (b) of the bill reads:

“No creditor may make a loan secured by real property [i.e., a mortgage loan] unless the creditor, based on verified and documented information, determines that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan … and all applicable taxes, insurance, and assessments.”

The bill also outlines the steps mortgage lenders must take to verify a person’s ability to repay. As is the typical practice now they must review the borrower’s credit history, current income, current financial obligations, and debt-to-income ratio. To verify the borrower’s income, the lender must review IRS W2+1040 statements, tax returns, bank records, and payroll receipts / pay stubs. This means underwriter. Loan officers at banks or mortgage brokers cannot issue a pre-qualification without seeing all this documentation. This is already effectively in place now so it's not too big a shock.

I personally think that the lenders will find way to circumvent this regulation once the market will return. When prices+inventory+employment stabilize then support will be found for loans as risky as stated income. I am a believer in the market always finding ways to do what it will naturally despite outside influences. There have been quite a lot of outside influences in the mortgage market lately and the industry itself is in a state of flux. It is reinventing itself and rewriting its rules in the midst of the best interest rate environment in recent history. When the dust settles I think that stated income loans will return but until then, get those W2s and 1040s ready.

Rapid Fire FHA mortgage loan payment tables

2010-07-13T11:51:00.001-07:00

For pocket reference, this is the all included PITI payment amount for an FHA loan assuming the borrower puts only 3.5% down.

Loan Amount=Monthly Payment
150k = $1197
250k = $1923
300k = $2012
500k = $3792
729k = $4280

Go forth and finance!

Rachel and Sky hike some of the Naapali coast crestline

2010-06-21T02:55:00.000-07:00

Sky Minor and Rachel Mintz hike in Kauai 2010.

The first timer's guide to getting a mortgage loan.

2010-03-27T23:45:00.000-07:00

I was writing an email to a first timer who just got her offer accepted on a building and will be getting an FHA loan. As I was telling her the steps that we would be taking together, I realized the need to syndicate instructions for getting a mortgage because there is a lack of knowledge with the general public in regards to this detailed and exacting process. Considering that getting a home loan is the largest financial transaction of most people's lives I think it's important to educate and prepare those who are about to get their first mortgage. Getting your offer accepted on a property is just the beginning. Here is my letter, I've crossed out her name for privacy reasons, and because she's a mega-huge celebrity. (OK, that last part may be true).

"Hi xxxx, since this is your first time I'll outline our process here for getting you your mortgage in case you are interested in what lies ahead.
Once you send me everything I need (bank statements, paystubs, W2s, Tax Returns, ID) and I get the purchase contract and title prelim report from escrow, I will submit your loan to the lender. Danielle my processor will be running xxxx's credit and information through a computer underwriting program called DU. It underwrites the file electronically and gives me feedback and a case number which I can use to take the loan to different lenders. Right now I'm using a bank called xxxx because they are the quickest and smoothest FHA lender on the market. I can also use Wells, Citi or Metlife as the need may arise. Most lenders have the same rates because they are all selling the loans to the same place-Freddie Mac. You will have to get an appraisal for the property, which is paid by you and refunded at closing. The appraisal for a one unit property in LA is usually $300-$350. Once the appraisal is completed, the bank underwriter will look at all the items in the loan package and issue a loan approval with conditions attached. Those conditions will be things like updated paystubs, bank statements, gift letters, etc. I'll be asking you for these items and it's important that you return them quickly. We will lock our interest rate in after loan approval and at that point, the clock will be ticking. We will have 30 days to fund our loan or else re-lock it for a fee of about $500. I will consult you when its time to lock the rate. After we satisfy the underwriters conditions, you will sign your loan docs. Usually escrow sends a notary to sign with you, or you go into the escrow office to sign. After the loan docs are returned there will be some finalizing from the underwriter and then your loan funds into escrow, they give the seller the money and give you the deed and record everything at the county recorder. Once that's done the property is all yours. You usually get 1.5 months until your first payment is due. You can choose if you want your property tax and fire insurance impounded (paid monthly with your mortgage payment) or not. I recommend getting impounds because it makes less bills to manage. The lenders give you a better rate if you impound also because they know the taxes and insurance will be paid.

If there is any further questions you may have, don't hesitate to ask."

So there it is, the steps involved with closing a mortgage loan. The process has gotten more difficult since the mortgage industry meltdown of 2007-2008 and it's important to use a lender who knows what they are doing and has kept abreast of the rapid fire mortgage guideline changes. As always, I'm happy to answer any inquiries or add you to my list of 200+ closed loans.

Getting your offer accepted is just the beginning.

The Return of Foreign National Mortgages

2010-03-08T23:20:00.000-08:00

Getting a mortgage is not easy. It's made even harder when you are a foreign citizen trying to get one. First of all, you have no social security number and therefore no credit in the US, your income is from another country and is not verifiable by US lenders, and your assets are in non-US bank accounts. It's a daunting process and it has been neigh impossible since the credit bubble/mortgage meltdown of 07.

I have come across a pair of foreign lenders (in California only). They both only go to 65% LTV for purchase or refinance loans. Their rates are between 7-9%, neither will require income documentation but both will need to see 12 months of payments in reserves. The maximum loan amount is $1m. This is a tough loan scenario to make for most situations. Considering the apparent lack of any significant bank or broker programs lending to foreign nationals here in California, I think it is a step in the right direction.

As always, you can reach me at 310-709-8283 or here

New FHA guidelines. The times they are a changin'

2010-03-08T12:00:00.000-08:00

FHA has been under close scrutiny as of late because, quite simply, they give out mortgages to many borrowers with shaky credit histories and questionable abilities to repay. Hoping to mitigate potential losses, the government is instituting several new policies bent on making the trillion dollar FHA-insured loan portfolio less prone to subprime-style blowout.

1. UFMIP increased to 2.25% with case numbers after April 5, 2010. This is the amount that borrowers have to pay at closing for their mortgage insurance. This fee is why FHA loans are so expensive compared to conventional ones.

2. Seller contribution to closing costs reduced to 3% effective in the summer (exact date TBA).

3. Increased lender enforcement. (This means we must be diligent in the loans we approve and close-expect more patriot act type verification of identity).

4. HUD is also asking Congress for authority to increase the cap on the annual MIP.

5. Waiver of property flips. (Our lenders have verbally informed us that once a mortgagee letter is sent by HUD, they will follow the flip waiver guidance shortly thereafter). This is the good part, as many flippers will sell their finished houses to FHA first timers who don't want to do fixup work.

On the surface this looks like HUD is getting stricter, however in an effort to protect the FHA insurance fund these changes are necessary to ensure longevity in the fund. Keep in mind that HUD has had a history of lowering MIP’s once the fund improves along with the overall economy. FHA remains the only choice for many borrowers, and I believe that FHA is the linchpin that is supporting the revival (or at least sustenance) of the residential housing market.

2010 Mortgage outlook.

2010-01-03T17:52:00.000-08:00

I hope everyone had a very happy holiday season and is ready for the new decade! 2010: The Year We Make Contact was a notable sci-fi movie and also could be an apt catch phrase for the real estate market this year. I predict that quite a few first time home buyers will "make contact" in 2010 thanks to a continued stream of REO foreclosure properties coming on the market keeping housing supply high and prices low. Extended tax-credit incentives coupled with low-down FHA financing programs make the down payment requirements less restrictive which will enable many to purchase. When it's possible to get a $400,000 house with $15,000 down payment and then later receive a $8,000 check from the IRS essentially getting into a home for $7,000 out of pocket, the buyers are going to be coming out of the woodwork. (Although it should be noted that monthly mortgage payments on low down payment FHA loans are notably higher than conventional loans). Equally important to the first time buyer or anyone getting a mortgage is the historically low interest rates, currently about 5% on a 30 year fixed mortgage under $729,000. Our $400,000 example above with only $15,000 down would be a monthly mortgage payment of $2157 at 5% interest. All of these buyer-positive factors will allow many buyers to make contact with their first homes in 2010.

Where will mortgage rates head in 2010? I personally believe that with so many dollars being printed in the last 18 months, the US has MASSIVE inflation looming. Supply and demand states that the more of any one item there are, the less valuable it becomes. The US dollar is no exception. Those who want to maintain the value of the dollar (all Americans, the gov't, the fed) must increase interest rates in order to make holding $USD more attractive. Over the longer term I believe that interest rates have nowhere to go but up, as much as Uncle Ben and the Fed will try to keep them down to encourage economic growth. Unless the fed wants to devalue the dollar to hyper-inflationary German levels it must move interest rates up. Moving rates up will increase mortgage rates. I am advising all mortgage clients to fix in their rates right now.

Remember that a fixed rate mortgage is as good a hedge against inflation as any other investment (Gold, Commodities, Chinese Yuan, etc). As the value of the dollar decreases, the amount of dollars that a borrower owes against their property remains the same but the market price for that property is increasing because dollars are worth less. It takes more dollars to buy the same things, because the value of a dollar is decreasing as more are created. Taking a 30 year mortgage loan at fixed interest will be at a fixed dollar/value ratio based on the day the loan is created. That ratio will continually diminish as inflation continues. For an example consider a person who bought their house in 1960 for $50,000 and got a $40,000 mortgage. Annual inflation back then was about 4%. So by 1970, their dollars were worth about 60% of what they were when they borrowed the $40,000 in 1960, but they still owe only $40,000. That $40,000 is now worth $66,000 but they still owe only $40,000(This example is oversimplified for educational purposes.) Track the progress of the 1960 vs. the modern day dollar here. $1 in 1960 is worth $7.15 in 2010 which means the real dollar value of the mortgage loan decreased by 710% in that time. Even if the fair market value of the real estate did not increase at all, an owner would have seen a 710% return simply because of inflation. Real Estate prices in Eagle Rock, CA and Los Angeles at large have increased by much more than that. In this case, the borrower would have paid off the mortgage from 1960 with much cheaper 1990 dollars. A fixed rate mortgage is one of the best inflation-fighting investments around.

2010 will bring a new set of guidelines and paperwork for mortgages. Banks and brokers are updating to a totally reworked set of disclosure forms. These forms were designed by HUD with the intention of making it easier for the consumer to understand the terms of their mortgage. Some think the new forms are an improvement and others do not, it is a point of contention in the mortgage world and the residential real estate industry at large. All RESPA effected institutions are required to conform to this new legislation as of 1/1/2010. I will be interested to see the general public's feedback for the new protocol in the months ahead. If you are getting a new mortgage loan in 2010, please comment here on your experience (especially if you have gotten one before-compare the old and the new). FHA appraisals will now have to be done through AMC (Appraisal management companies) which means more FHA loans will fall out because of low appraisals. This situation with AMCs has been the norm for conventional loans for a long time, much to the chagrin of many mortgage originators, brokers, appraisers and agents. Now FHA will be similarly effected. What causes the controversy with AMCs is that frequently the properties will appraise below what the buyer has purchased it for, and the lender will not fund the mortgage. Because of AMC regulation, the borrower must pay for the appraisal ahead of time (Typically $415-$720 in Los Angeles) without knowing if it will appraise for that amount. The appraisal order goes to the lowest bidder, who sometimes comes from 100 miles away and knows very little about the market conditions of the property they are appraising. Real estate is a localized thing and different zip codes can mean drastically different values. This fact usually gets overlooked by bargain AMC appraisers and their appraisals are not accurate. Getting stuck with a low appraisal is not a pleasant situation for a borrower, so if you are buying a property in a multiple-bid situation, exercise prudence with your overbidding. Having a good real estate agent and realistic expectations of value will remain important in 2010.

Still NOT allowed in 2010 are electronically signed loan docs and/or disclosures. Although a handful of pioneering lenders are adapting to E-signatures, the majority of banks and lenders are not allowing them. In this regard, I believe the mortgage industry is lagging far behind other paperwork-heavy industries. The benefits of E-signing are self-evident and numerous: Requiring paper kills trees. It costs money for paper, ink and storage and takes much longer than electronic signing. Usually the mortgage industry is an early adapter of technology, when I began in the business in 2003, the processors were already using Twitter-like dispatching programs to get conditions delivered, and were advanced systems allowed large files to be transferred easily. The lenders all had very advanced back-end programs and it seemed everyone was very high-tech. (I joined Myspace that year, incidentally from a mortgage contact.) The industry is still buzzing with tech, but is stonewalling a ground-floor innovation with E-signatures. It is confusing to me why the mortgage industry at large would not be using electronic signature technology.

To ask me any questions about mortgages email me at Sky@skyminor.com. I hope 2010 is a productive and eventful year for everyone.

List of REO available in LA 12/4/09. All at $.68 to the dollar on today's appraised value. Contact me to buy.

2009-12-04T10:26:00.000-08:00

These are listings from a bulk REO buyer who is selling one property at a time. Every property here is being offered at 68% of CURRENT FMV which is reflected in the $0.68 figure. To buy any of these please contact me directly at 310-709-8283. Sky

2315 Highbury Ave. (Condo#3) Los Angeles 90032 $138,675 $0.68 $94,299
2860 S. Corning Street Los Angeles 90034 $486,975 $0.68 $331,143
488 S. Bonnie Beach Place Los Angeles 90063 $391,300 $0.68 $266,084
1017 Stockton Street Compton 90221 $154,800 $0.68 $105,264
18 Pepper Court Inglewood 90302 $334,325 $0.68 $227,341
12918 Gollar Avenue Norwalk 90650 $260,150 $0.68 $176,902
1818 E. Hardwick Street Long Beach 90807 $362,275 $0.68 $246,347
21917 S. McHelen Avenue Long Beach 90810 $367,650 $0.68 $250,002
1230 Pacific Court Duarte 91010 $383,775 $0.68 $260,967
121 n. Adam Street #2 Glendale 91208 $321,425 $0.68 $218,569
12169 Claretta Street Sylmar 91342 $242,950 $0.68 $165,206
24081 Stone Creek Drive Santa Clarita 91354 $724,550 $0.68 $492,694
18620 Hatteras Street #278 Tarzana 91356 $163,400 $0.68 $111,112
28936 Gladiolus Drive Canyon Ctry. 91387 $290,250 $0.68 $197,370
13820 Olive Street Baldwin Park 91706 $230,050 $0.68 $156,434
12224 Portsmouth Place Chino 91710 $201,025 $0.68 $136,697
304 E. Stephanie Drive Covina 91722 $267,675 $0.68 $182,019
10239 Railroad Drive El Monte 91731 $252,625 $0.68 $171,785
1624 3rd Street La Verne 91750 $330,025 $0.68 $224,417
1468 E. Merion Court Ontario 91761 $283,800 $0.68 $192,984
2549 S. Prairie Dunes Ontario 91761 $284,875 $0.68 $193,715
1039 W. Francis Street #49 Ontario 91762 $73,100 $0.68 $49,708
540 D Street Upland 91786 $204,250 $0.68 $138,890
403 W. 8th Avenue Escondido 92025 $206,615 $0.68 $140,498
6961 Renkrib Avenue San Diego 92119 $326,800 $0.68 $222,224
21046 Neola Road Apple Valley 92308 $106,425 $0.68 $72,369
1400 Nancy Street Barstow 92311 $66,650 $0.68 $45,322
1111 Desert avenue Barstow 92311 $72,025 $0.68 $48,977
8881 Pepper Avenue Fontana 92335 $96,750 $0.68 $65,790
14605 Woodland Drive #23 Fontana 92337 $84,925 $0.68 $57,749
10628 Portland Avenue Hesperia 92345 $204,250 $0.68 $138,890
7519 Spring Meadow Court Highland 92346 $263,375 $0.68 $179,095
12345 Ava Loma Street Victorville 92392 $161,250 $0.68 $109,650
13637 Hamlet Street Victorville 92392 $155,875 $0.68 $105,995
13060 Evanston Street Victorville 92392 $123,525 $0.68 $84,065
15042 Highlander Victorville 92394 $146,200 $0.68 $99,416
15064 Dakota Street Victorville 92394 $84,925 $0.68 $57,749
1474 Yardley Street San Bernardino 92407 $178,450 $0.68 $121,346
2868 Rosarita Street San Bernardino 92407 $144,050 $0.68 $97,954
1758 Karley Way Riverside 92501 $215,075 $0.68 $146,931
17932 Timberview Drive Riverside 92504 $414,950 $0.68 $282,166
11144 Doverwood Drive Riverside 92505 $140,825 $0.68 $95,761
419 Lombard Court Hemet 92544 $150,500 $0.68 $102,340
1489 Bluejay Way Hemet 92545 $167,700 $0.68 $114,036
22483 Country Crest Drive Moreno Valley 92557 $216,075 $0.68 $146,931
31995 Corte Albano Temecula 92592 $179,525 $0.68 $122,077
42242 Harwick Temecula 92592 $299,925 $0.68 $203,949
45349 Escalon Street Temecula 92592 $211,775 $0.68 $144,007
29471 Dry Dock Cove Laguna Niguel 92677 $311,750 $0.68 $211,990
314 E. Santa Clara Ave. Santa Ana 92706 $345,075 $0.68 $234,651
320 S. Ash Street Anaheim 92805 $304,225 $0.68 $206,873
26795 Eagle Run Street Corona 92883 $213,925 $0.68 $145,469
4163 Adobe Drive Palmdale 93552 $112,925 $0.68 $76,755
5112 Pacifica Avenue Palmdale 93552 $124,700 $0.68 $84,796
3308 Esplanade Circle Folsom 95630 $211,775 $0.68 $144,007
1620 Conifer Circle Corona 92879 $235,425 $0.68 $160,089
7199 Kaiser Avenue Fontana 92336 $160,175 $0.68 $108,919
17615 Boulay Street La Puente 91744 $193,500 $0.68 $131,580
3422 Hope Street Huntington Pk. 90255 $271,975 $0.68 $184,943
6062 Jay Mills Avenue Long Beach 90805 $231,125 $0.68 $157,165
656 Millbury Avenue La Puente 91748 $205,325 $0.68 $139,621
1165 W. Hampshire Avenue Anaheim 92802 $325,725 $0.68 $221,493
2856 E. Cinnamon Place Anaheim 92806 $407,425 $0.68 $277,049

HVCC cranking it up a notch.

2009-10-29T12:16:00.000-07:00

Implementation of the “Home Valuation Code of Conduct" (HVCC) has gotten off to an uneven if not shaky start since May 1st with NEW and FUTURE issues likely to focus more attention on alternative solutions. And, with FHA requiring HVCC appraisals starting January 1, 2010, nearly 97% of all loans in 2010 will have to comply with HVCC appraisal requirements. If you’re not already on board, read on and get caught up on what HVCC is, and how it is impacting the industry.

A Quick Review of HVCC:

Both FNMA and FHLMC currently require collateral valuation representations and warranties that appraisals have been ordered and delivered under HVCC compliance. Here is a summary of the HVCC’s seven core requirements:

1. Appraisals must be independently ordered and delivered without ANY influence or direct contact with the appraiser. This virtually necessitates use of a third party as an intermediary in the ordering and delivery process.

2. Third parties (such as Appraisal Management Companies or AMC’s) must also be in full compliance with HVCC. The most critical requirement is that appraiser selection must be made by a random draw from a pool of locally knowledgeable, appropriately licensed appraisers.

3. Appraisals are to be made portable (re-usable) from lender to lender with written assurances as to HVCC compliance in procurement.

4. Borrower MUST receive a copy of the appraisal not later than 3 days prior to close.

5. Legacy or “in-house appraiser panels" that meet HVCC operating guidelines are allowed, but the provisions of HVCC must be fully applied, including verifying the level of independence from the origination.

6. The appraisal’s requestor (initiator, processor, closer) may not have any financial conflict of interest either through direct compensation or indirectly through related reporting relationships.

7. Lenders must adopt significantly increased QC requirements to verify compliance with HVCC to include all of the following: annual audits to the code, written policies and procedures, vendor management audits, and QC testing of 10% of the appraisals.

For a more comprehensive summary and description of HVCC offered by FHLMC click here:
http://www.freddiemac.com/singlefamily/pdf/hvcc_746.pdf

So, as of November 1, we’ll be six months in. How is HVCC doing?

Most would offer that this has been a rough transition on arguably the single most critical element to underwriting a loan – collateral valuation. Further, existing and future issues loom large on the horizon and threaten to complicate the landscape:

1. Appraisal quality today: Appraisal Management Companies (the current defacto source for independence) responded to HVCC by forcing lower fees to appraisers to account for their increased portion of the management pie, but the result has backfired:

Overall qualifications of appraiser panels and the quality of the appraisals have diminished. Forced lower fees have proven hazardous to the end quality of the appraisal, and originators are just now fighting back by rethinking their AMC’s.

2. Effective October 1, FHA is now requiring all appraisals be completed not just by licensed appraisers but by HUD CERTIFIED appraisers. This has reduced the pool of qualified appraisers dramatically with some AMC panels caught short of HUD certified appraisers.

3. Some lenders have chosen to independently build HVCC compliance (management) departments to achieve “separate, arms length, HVCC conforming” appraisals. Here too, the jury is out as this choice puts increased warranty risk on the lender in the event of any poor implementation -- regardless of the level of true independence achieved. Increasingly, those lenders who had started down this path are rethinking it, and are beginning to migrate out to protect themselves from the persistent warranty risk.

4. What about appraisal “portability”? Under HVCC, the consumer is insulated from multiple appraisal charges by requiring re-use of a previously completed appraisal if created in accordance with HVCC. To date, lenders have lagged behind in the adoption of this provision of HVCC, yet standards are emerging that allow written “certifications of HVCC compliance,” which will increase portability.

5. Effective January 1, all FHA appraisals will also have to comply with the HVCC. FHA has additional requirements regarding the appraiser’s level of local market knowledge and experience.

6. FNMA has near term plans to require submission of an original first generation digital copy of the appraisal for up-front Quality Control and assessment into a central database. FNMA will use it to score appraised values by creating an independent QC repository and benchmarking.

Clearly the entire market, lenders, the GSE’s and brokers, is still in the process of responding and adjusting to HVCC as evidenced by the slow adoption of the code.

For more insights and answers on HVCC, refer to FNMA’s FAQ’s at https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/hvccfaqs.pdf

In coming months, as greater clarification allows and standards are presented, Informative Research will continue with ongoing HVCC education and access to best practice coverage of the appraisal management process.

Look too, for our own recently announced appraisal service solution: The Appraisal Concierge specifically addresses current HVCC problems with a different business model that retains high quality appraisers.

For more information on HVCC and Informative Research’s new Appraisal Concierge Service go to www.informativeresearch.com/appraisals

How about those rates!

2009-04-30T22:42:00.000-07:00

Holy geez, are they low. And staying there. I'm refinancing my parents house, which is a tremendously gratifying feeling to be able to contribute something to the house besides carpet stains from well-timed high school keggers. EVERYONE should refinance their mortgage now even if you have no equity.

All of the mortgage lenders are backlogged with files. I've seen in a mortgage company, it's hectic. Everyone that is still in business has pared back every conceivable expense to survive the last two years and now their skeleton crews are trying to catch a swimming pool of applications with a dixie cup. It's taking about 22 business days just to get your darn loan approved. Funding is taking 4-5 weeks.

Give me a call or email and get your tax returns together, a 4.5% rate is in your future. My rule of thumb for easy mortgage qualification is that every $25,000 of salary will qualify for $100,000 for a loan. Talk to you soon.

Why mortgage brokers are a important aspect of the economic landscape.

2009-02-13T08:09:00.000-08:00

This CNN article was brought to my attention by esteemed L.A. mortgage broker Justin Bayle. It summarizes the role of a mortgage broker, why we are important to the home-buying public at large and why the big banks are trying to squeeze us out of business.

Lenders drop mortgage brokers
Some big banks are cutting out mortgage brokers and having lending generated by their own people. That could be bad for consumers.

NEW YORK (CNNMoney.com) -- Some big banks have cut back on doing business with mortgage brokers - and if the trend continues, many mortgage brokers could close down.

That may be bad news for consumers because fewer brokers could lead to a less competitive marketplace and more expensive home loans resulting from consumers not being able to easily comparison-shop rates.

"The banks want to get rid of mortgage professionals to reduce competition," said Alan Rosenbaum, founder of GuardHill Financial, a New York City-based brokerage firm. "It's not good for consumers."

A few years ago, according to Rosenbaum, mortgage brokers were responsible for 80% of the mortgage-lending business in America. He said that's probably under 70% now and dropping.

The actions of two big banks have helped push that percentage down.

JP Morgan Chase (JPM, Fortune 500) announced in January that it would end its so-called wholesale operations. It will no longer fund loans arranged through brokers, instead it will make loans mostly through its own offices. And Citigroup (C, Fortune 500) said it will cut back the number of mortgage brokers it works with to 1,000 from 10,000.

"Our customers are best served when a mortgage officer works directly with them, explains our products clearly and then helps them carefully evaluate the choices in light of their personal financial situation," according to an internal Chase memo.

However, brokers say they perform a needed consumer service by monitoring offers from an array of lenders, picking and choosing the best deals. That helps keep rates low because lenders have to make their terms attractive to keep their volume flowing.

Borrowers going into a Chase branch for a mortgage loan would, on the other hand, only receive the terms available through Chase. If brokers disappeared, borrowers would have to shop all the individual banks to compare deals.

Marc Savitt, president of the National Association of Mortgage Brokers, suspects that banks like Chase may think they can increase profits by cutting out the middlemen, but the added costs of bricks-and-mortar operations will ultimately make the business less efficient. Loan officers may find themselves sitting around waiting for customers to come in rather than fielding applications from mortgage brokers.

Chase opened a slew of new branches lately, including 2,200 as part of the Washington Mutual acquisition it made this past fall.

"Five years ago, we had 600 branches, now we have 5,000," said Thomas Kelly, a Chase spokesman.

Despite Chase and Citigroup's actions, John Courson, president of the Mortgage Bankers Association, does not think all mortgage brokers will be driven from the business.

"Every lender has its own business model," he said. "Chase made a decision to only lend through its personnel, [but other large lenders] will still need loan production. Mortgage brokers will continue to be an important part of the mortgage channel."

Chasing higher profits
Chase took the step of discontinuing its wholesale lending for two main reasons, according to Kelly. For one, "The best people to originate the loans, we believe, are those working in our bank branches," he said. Secondly, Chase determined that loans originated by brokers defaulted at higher rates than did bank-originated loans.

The brokers scoff at that. "Mortgage brokers don't develop their own products, their own guidelines and parameters," said Savitt. "They take applications; Chase makes all the decisions."

"Mortgage brokers have been blamed for everything from tooth decay to global warming, and it's baloney," added Allen Hardester, a Maryland-based broker.

He pointed out that no mortgage broker ever underwrites a loan, creates a loan program or approves an application. Lenders always have the final say.

And, if the loans from brokers did perform poorly, it's because lenders encouraged, nay prodded, brokers into bringing them more and more poor-quality customers during the boom years. Subprime mortgages were very profitable, before they started to default at higher and higher rates.

"The lenders dangled large carrots in front of brokers," said Rosenbaum. "They told me, 'Unless you give us more subprime business, I can't improve your pricing for your good customers.'"

Now, he hardly deals with big banks at all. "We haven't done much business with them for more than a year. Banks are throwing the baby out with the bath water. They don't know the good mortgage brokers from the bad."

So far, the other big banks, Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500), have not followed Chase and Citi's leads. "[These] lenders may be looking at this as an opportunity," Savitt said. "They said they were committed to the broker channel and would expand it," he said.

If that's true, it shouldn't affect the market too much even if two big-hitters drop out.

"It will remain a competitive environment," said Courson.

Plus, he said, the there will be a flight to quality. "I think even for banks that continue to take mortgage broker-originated loans, there will be much higher standards."

That includes requiring brokers to show greater stability by demonstrating higher net worth and posting higher surety bonds (a kind of performance guarantee).

Sky's quick and painless Mortgage qualifier.

2009-02-10T22:46:00.001-08:00

Here's the quick and painless mortgage qualifier from Sky Minor, mortgage broker.

1. Have a credit score of at least 580.

2. Take your household's gross annual salary or taxed income and divide it by 12 to get your monthly income.

3. Take 1/3 of that monthly income number.

4. Divide this number by 666.

5. Multiply the answer by 100000. That is how much you will qualify for a 30 year fixed rate mortgage loan at 7% interest.

For an example, let's use a household earning an income of $100,000 per year.

$100000/12=$8333 monthly

8333/3=2777

2777/666=4.17

4.17x100000=$417000. This household will safely qualify for at least $417000 mortgage.

This is only an estimation but it's a good tool to know if you are ready to buy a property.

I am a fully licensed and certified mortgage broker in all 50 states for residential and commercial properties. Together with Rachel, my partner we have over 180 loans under our belt including all of our own purchase and refinance loans to build our own portfolio of properties. To leverage our experience and apply for your mortgage with us please click here.

Lenders have generally become more stringent with underwriting practices but they are still funding loans to borrowers who can show they have the ability to repay the loan. I have access to a program that does not require income verification for first time home buyers with a credit score over 720 and a 20% down payment. If you meet that criteria you can go here to qualify.

Buying income property one is allowed to use 75% of the properties' existing rental income to qualify for the mortgage. The buyer will need to have 20% down payment. It's an especially good time to be buying small income properties under 5 units in this real estate downturn. The pros are scooping up income producing properties at fire-sale prices.

It is said that "If you want something done right, you've got to do it yourself" and I believe that is very true in the process of financing real estate.

Always save your money.

OK I just can't resist sharing this awesome image.

2009-01-30T00:31:00.001-08:00

Too cool to resist.

Here comes another dangerous tidal wave of mortgage lending aptly explained by I Love Lucy!

2008-12-07T22:58:00.000-08:00

With mortgage interest rates at 2004 levels, people are scrambling to refinance their mortgages even with severly tightened underwriting guidelines. Since 90% of mortgage companies are either out of business or severly understaffed because of the mortgage meltdown, we are going to dramtically understaffed underwriters being pressured to approve a tidal wave of mortgage applications.
Everyone scrambling to get refinanced can get an idea of the inner workings of a mortgage company by watching this I Love Lucy video. It's a wonderfully apt metaphor for what's about to happen in mortgage underwriting offices all around the country.

While you're watching the video, think of:

-Lucy and Ethel as mortgage underwriters.
-Chocolates as mortgage applications of excited mortgage candidates looking to capitalize on truly historical rates.

As the pace of chocolates picks up, the girls in the Wrapping Department get overwhelmed quickly. Two people can only do so much and the chocolate is going to keep on coming.

Relating to mortgages, as long as rates stay low the chocolate will continue to spit out. Understaffed lenders will be pressured to keep up and that may a bad thing for quality control. Even with draconian underwriting policies.

Rehab loans- Buy a fixer, get 100% financing for the property and the rehab costs!!

2008-10-19T20:36:00.000-07:00

This is a great program for the current state of the market. It is an FHA loan, called the 203k. Bascially it breaks down like this:

You find a 1-4 unit property that needs work and is undervalued. You get a licensed contractor to give a work estimate, you get a loan for either ALL of the costs of buying the property AND ALL of the costs of rehabilitating it OR you get 110% of the as-completed value of the property when you are done with the work. (Lesser of the two) For fix and flippers, a quote comes to mind from a old Cars song "I guess you're just what I needed!". Let's examine a Minor-fied oversimplified example of this loan in action using the details of a real transaction for a four plex property in Los Angeles.

$250000 purchase price
$85000 rehabilitation costs
$335000 total cost for purchase and renovation.

As-completed Value $450000

In this case, we are getting a loan for $335000 which will cover our purchase price and all rehabilitation costs. The loan will automatically convert to a 30 year fixed when the construction is completed. If you are interested in the lurid details of this transaction, this savvy buyer will be putting four section 8 tenants in the building when it is renovated and getting $6400 monthly rent. (The mortgage payment, taxes, insurance and water costs will be $3155 monthly). This is what is called a "Good deal" in Real Estate. The less simplified step by step instruction of this FHA 203k loan are below, taken directly from the HUD website.

This describes a typical step-by-step application/mortgage origination process for a transaction involving the purchase and rehabilitation of a property. It explains the role of HUD, the mortgage lender, the contractor, the borrower, consultant, the plan reviewer, appraiser and the inspector.

A. Homebuyer Locates the Property.

B. Preliminary Feasibility Analysis. After the property is located, the homebuyer and their real estate professional should make a marketability analysis prior to signing the sales contract. The following should be determined:

1) The extent of the rehabilitation work required;

2) Rough cost estimate of the work; and

3) The expected market value of the property after completion of the work. Note: The borrower does not want to spend money for appraisals and repair specifications (plans), then discover that the value of the property will be less than the purchase price (or existing indebtedness), plus the cost of improvements.

C. Sales Contract is Executed. A provision should be included in the sales contract that the buyer has applied for Section 203(k) financing, and that the contract is contingent upon loan approval and buyer's acceptance of additional required improvements as determined by HUD or the lender.

D. Homebuyer Selects Mortgage Lender. Call HUD Field Office for a list of lenders.

E. Homebuyer Prepares Work Write-up and Cost Estimate. A consultant can help the buyer prepare the exhibits to speed up the loan process. If a plan reviewer is the consultant, item G can be skipped and the exhibits can go directly to the appraisal stage.

F. Lender Requests HUD Case Number. Upon acceptance of the architectural exhibits, the lender requests the assignment of a HUD case number, the plan reviewer, appraiser, and the inspector.

G. Plan Reviewer Visits Property. The homebuyer and contractor (where applicable) meet with the plan reviewer to ensure that the architectural exhibits are acceptable and that all program requirements have been properly shown on the exhibits.

H. Appraiser Performs the Appraisal.

I. Lender Reviews the Application The appraisal is reviewed to determine the maximum insurable mortgage amount for the property

J. Issuance of Conditional Commitment/Statement of Appraised Value. This is issued by the lender and establishes the maximum insurable mortgage amount for the property.

K. Lender Prepares Firm Commitment Application. The borrower provides information for the lender to request a credit report, verifications of employment and deposits, and any other source documents needed to establish the ability of the borrower to repay the mortgage.

L. Lender Issues Firm Commitment. If the application is found acceptable, the firm commitment is issued to the borrower. It states the maximum mortgage amount that HUD will insure for the borrower and the property.

M. Mortgage Loan Closing. After issuance of the firm commitment, the lender prepares for the closing of the mortgage. This includes the preparation of the Rehabilitation Loan Agreement. The Agreement is executed by the borrower and the lender in order to establish the conditions under which the lender will release funds from the Rehabilitation Escrow Account. Following closing, the borrower is required to begin making mortgage payments on the entire principal amount for the mortgage, including the amount in the Rehabilitation Escrow Account that has not yet been disbursed.

N. Mortgage Insurance Endorsement. Following loan closing, the lender submits copies of the mortgage documents to the HUD office for mortgage insurance endorsement. HUD reviews the submission and, if found acceptable, issues a Mortgage Insurance Certificate to the lender.

O. Rehabilitation Construction Begins. At loan closing, the mortgage proceeds will be disbursed to pay off the seller of the existing property and the Rehabilitation Escrow Account will be established. Construction may begin. The homeowner has up to six (6) months to complete the work depending on the extent of work to be completed. (Lenders may require less than six months.)

P. Releases from Rehabilitation Escrow Account. As construction progresses, funds are released after the work is inspected by a HUD-approved inspector. A maximum of four draw inspections plus a final inspection are allowed. The inspector reviews the Draw Request (form HUD-9746-A) that is prepared by the borrower and contractor. If the cost of rehabilitation exceeds $10,000, additional draw inspections are authorized provided the lender and borrower agree in writing and the number of draw inspections is shown on form HUD-92700, 203(k) Maximum Mortgage Worksheet.

Q. Completion of Work/Final Inspection. When all work is complete according to the approved architectural exhibits and change orders, the borrower provides a letter indicating that all work is satisfactorily complete and ready for final inspection. If the HUD-approved inspector agrees, the final draw may be released, minus the required 10 percent holdback. If there is unused contingency funds or mortgage payment reserves in the Account, the lender must apply the funds to prepay the mortgage principal.

Avoiding foreclosure with a loan modification-Communication is Key!

2008-10-17T13:29:00.000-07:00

It's no secret. The U.S. Real Estate market is in the biggest slump since the great depression. When the real estate bubble burst, it sent property values plummeting downward across the nation. The tidal wave of short-term adjustable mortgage loans increasing in payments is upon us and it is causing foreclosures to spread like a dark plague. People cannot refinance because they have no equity in their homes and in many cases owe more than the property is worth, and simultaneously mortgage lenders have tightened up their lending guidelines making a refinance loan all but impossible. Everyone knows someone who is affected by foreclosure. Entire neighborhoods are being compromised by this wretched and hostile process. If just one home goes into foreclosure on an otherwise desirable street, the other properties could see up to a 55% price reductions in their own homes, just from one low-priced sales comp. Foreclosure is devastating to everyone involved, and also negatively affects others peripherally. The saddest part of this is that the large majority of foreclosures are UNNECESSARY.

The LAST thing the lender wants is to own (another) foreclosed home. The lender only wants the income off of their investment and when that income stream stops, in most cases the mortgage lender and servicer will do everything in their power to restart the flow of income even at a reduced rate. This is one of the tragedies of the whole foreclosure epidemic. People are just giving up and walking away from their home without even attempting to do something. There is a dearth of misinformation floating around now and many half-truths about loss mitigation, foreclosure avoidance and loan modifications in general. The bottom line is this - IF A HOMEOWNER BECOMES LATE ON THEIR MORTGAGE PAYMENTS AND THEY CAN SHOW A STEADY SOURCE OF INCOME, THEY STAND AN EXCELLENT CHANCE OF WORKING OUT A SOLUTION WITH THEIR LENDER(S).

There are several solutions to "loss mitigating" (that's bank-speak for avoiding foreclosure). They are-

Loan Modification, whereby the lender agrees to modify the terms of the original loan and in most cases reduce the monthly payments to what the homeowner can afford. Usually this will involve taking the amount of delinquent payments owed and combining them into the existing principal of the mortgage then lowering the interest rate or making the loan otherwise within reach of the homeowners budget. Alot of urban myths are out there about lenders reducing principle balance on mortgages by hundreds of thousands of dollars. This is very rare, most often the balance stays the same or increases by the amount of late payments but the rate will be reduced and will usually become fixed if it is adjustable. Loan Modification is the best option that a financially solvent homeowner who wants to keep their property can hope for.

Repayment Plan, whereby no change is made to the terms, rate or payment of the loan but the amount of late payments is paid back with some kind of agreed-upon plan and when that plan is completed, the loan resumes where it initially was before the delinquency occurred. This can be beneficial for the homeowner if the reason for the delinquency was short-lived and the original loan is on good terms (fixed rate, less than 7%).

Forbearance agreement, whereby the lender agrees to reduce or suspend payments for a certain period of time and then resume the normal billing cycle of the loan. This is most appropriate for short term reductions in income, i.e. loss of a job with the ability to get another job with some certainty.

Deed-in-Lieu of Foreclosure, whereby the borrower had made good faith efforts to sell the property on their own (and in many cases, short sale) but have not gotten any acceptable offers and agrees to deed the property back to the lender and leave. This saves the foreclosure black mark on the homeowners credit report and saves the lender the time and financial expense of going through the full foreclosure process.

Short Sale, whereby the homeowner lists the property for sale at an amount lower than the balance owed on the mortgage(s) on the property. Again, this saves the credit from receiving a foreclosure blemish and saves the lender's time and money in going through with the entire foreclosure process. Many myths are heard about short sales and "great deals" to be had from buyers picking them up for a fraction of their value. The truth is that lenders are very unwilling to short sale without getting something from the homeowner. We have seen lenders demanding that borrowers use other properties as collateral, sign a note guaranteeing the payment of the amount the lender lost, sending six-figure 1099's to the borrower at the end of the tax year and several other dirty tricks to try and recoup their short sale losses. Also worthy of mentioning, short sales usually don't go through in time because the lender has already started the ball rolling on the foreclosure process and their loss mitigator finds an unrealistically priced comparable sale to gauge the properties value and will hold out until they receive that dollar amount, regardless of the realities of the real estate market.

With foreclosure, time is of the essence. The longer the homeowner waits to speak with the lender, the less options are available to them. If you are even one payment behind on your mortgage, you must take action to prevent foreclosure.

Many people ask if they can negotiate a modification/repayment plan/short sale with their lender themselves. The answer is yes, of course someone could do it for themselves. It is not advisable however, unless the person has extensive experience in Real Estate, Mortgage Banking and Servicing and Law. It is much like representing yourself in court without an attorney- totally possible but not a good idea by any one's account. Retaining us to obtain a foreclosure solution is the best choice for anyone in default. Please call us toll free at Operation HOPE 888-388-4673.

All about Loan Modifications.

2008-10-14T09:53:00.000-07:00

Trust Deed investing-anyone looking for a conservative 13% interest?

2008-10-13T21:31:00.000-07:00

Lending on Real Estate has always been a steady source of income for the wealthy since medieval England when the gold peddlers began lending to their lords to finance war expenses and collateralized their investment with liens on royal land. The practice of lending money that is secured by property has been in practice for thousands of years, nothing nonfunctional lasts that long. With the current mortgage/real estate market crash many are fearful of lending against Real Estate because of concerns about plummeting value and the dreaded "F" word coming up in everyday conversation. This widespread fearful mindset presents a dearth of opportunities for the sharp and contrarian-minded investor. Hard money trust deeds (a.k.a. mortgage for you non-Californians) are typically lent at 60% or less of a properties' fair market value- That's usually less than Zillow, people. Often times hard money lending will also factor in the income of the property and therefore the ability to make loan payments. If both of these factors are carefully assessed before making an investment in a trust deed, the investor will almost always make a giant yield and have a low risk return on monies invested. Consider the first investment listing below on a commercial property in Orange County. The property appraises at $2,600,000. The 1st trust deed is for $975,000 making it 39% loan-to-value.

J.P. Getty said when asked about evaluating business decisions "I always ask myself what is the worst thing that could happen in this situation. When I've determined what the worst possible outcome could be and consider that outcome acceptable I will commit to the venture and make darn sure that outcome doesn't happen."

Let us consider this properties' worst case scenario. If the borrower defaults on this loan, the lender would foreclose on the property and have plenty of padding between the sales price and the amount of money invested. Let's say the lender decides to sell the building for 70% of it's appraised value. That is a sales price of $1,820,000. Paying $20000 in seller's closing costs will net the lender $1,800,000. Now in California law, the lender is not allowed to keep all the proceeds of the sale in a foreclosure. The lender is entitled to the full repayment of their investment plus all expenses, carrying costs until the sale and pre-agreed interest, if applicable. The remainder is refunded to the borrower. Typically the lender will collect expenses from 5% to 11% of the loan amount on a commercial loan. With such a large cushion of equity, trust deed investments can be very secure and conservative investments. (Considering the state of the banking industry, some might argue that they are more secure than money in the bank!!.)

In keeping with the spirit of Getty, let us make certain that the worst case scenario doesn't happen. We will ensure that by looking at the income of the property and the ability of the property to pay the note. The note will be $10875 per month. Property taxes are another $2705 per month and insurance will be at most $500 per month. With the existing income of $16000, and total monthly payments of $14080 the income from the property alone can easily service the monthly obligations on the proposed trust deed and thus old J.P. is satisfied.

To invest in trust deeds in California, contact us at 310-709-8283 or my mortgage website. The listings below are a smattering of what comes across our desks weekly.

Available Trust Deed Investments
October 13, 2008

Trust Deed Investors,

Below is a list of all Trust Deed Investments currently available. Some TD's are completed and available for immediate investment purchase and others are still in process and have not yet been funded.

*Loans that are not yet completed may be negotiable (ie: loan amount, interest rate and other terms).

To connect with these investments contact me at 310-709-8283.

____________________________________________________________
1st T.D. -$975,000 (Santa Ana, CA)
santa ana ca Term: 5 years
Rate: 12%
LTV: 39%
Appraised Value: $2,500,000
Address: 1535 East 17th Street
Santa Ana, CA 92705
Comments:
Low LTV loan. Property generates approximately $16,000 monthly gross income. Purpose of loan is to pay off existing 1st mortgage that is due. Loan amount may be lowered to $775k and a $200k 2nd may also be arranged to go behind this loan.

1st T.D. - $55,000 (Oakland, CA)
davis oakland Term: 36 months
Rate: 13.99%
LTV: 39%
Prepayment Penalty: 1 year
Formal Opinion of Value: $140,000
Address: 426 Gramercy
Oakland, CA 94603

Description:
SFR Rental property that generates $950 monthly. Borrower has great credit and has owned the home for 8 years. LTV is very low at 39%. Purpose of loan was to do improvements to property. Loan was funded and ready for immediate purchase.

1st T.D. - $50,000 (Lakewood, WA)
lakewood WA Term: 36 months
Rate: 11.99%
Formal BPO Value: 160,000
LTV: 31%
Prepay: 2 years * Investor to receive 1 year perpaid interest in advance!
Address: 14503 Washington Ave., Lakewood, WA
Description:
Rental property that generates approximatley $600 monthly. Purpose of loan is for improvements and pay a few consumer debts.
1st T.D. - $67,000 (Roswell, NM)
clark NM Term: 36 months
Rate: 13.5%
Formal BPO Value: $175,000
Prepay: 2 years. 6 months prepaid interest to investor.
Address: 413 Tierra Berrenda, Roswell, New Mexico
Comments:
Purpose of loan was to pay off consumer debts.

1st T.D. - $175,000 (Roswell, GA)
kidd GA Term: 36 mos
Rate: 12.50%
Prepay: 1 year
BPO Value: 360,000
LTV: 49%
Address: 4147 Edinbergh Trail NE, Roswell, GA
Comments:
Rental property. Borrower as excellent credit. Rental property. Purpose of funds to purchase other investment properties.

1st T.D. - $50,000 (Honolulu, HI)

Comments:

Information will soon be available!

Thank you.
1st T.D. - $240,000 (Alta Dena, CA)
tilman BPO Estimated Appraised Value: $480,000
Term: 24 months (negotiable)
Rate: 12% (negotiable)
LTV: 50%

Address: 2261 Lincoln Ave.
Alta Dena, CA 90278

Comments:
Two structures, one home and a small market in rear on a large lot. Lot is C-3 zoned. Purpose of loan is to repair both structures so they can be rented out. New loan will also pay off existing $165k 1st TD. Projected rents: $2000-front home, $800 rear structure. *Value should be confirmed. A new appraisal can be ordered.

2nd T.D. - $175,000 (Bell Gardens, CA)
bell gardens industrial Term: 24 months
Rate: 12-14% (negotiable)
Existing 1st TD: $1.1MM Lehman Bros - good terms.
Recent Appraisal: $2,040,000
9 units Industrial Suites
CLTV: 61%

Address: 6750 Foster Bridge Blvd.
Bell Garden, CA 90201
Comments:
Owner had high 600 (good) credit. Purpose of loan is for another business endeavor. He generates over $12k in monthly gross income. Looking to net $150k. He has about $150k in the bank.

1st T.D. - $50,000 (Milwaukee, WI)
WI Term: 36 months
Rate: 12.99%
BPO Value: $125,000
LTV: 40%
Prepay: 2 years

Address: 6630 N. 84th St.
Milwaukee, Wisconsin
Comments:
Over 700 credit score. Rental property.

2nd T.D. - $350,000 (Rancho Palos Verdes, CA)
fernwood palos verdesRate: Negotiable (14%)
Existing 1st TD: $1.3MM Citimortgage - favorable terms
Terms of Loan: Negotiable
Completed Opinion of Value: $3.4MM-$3.5MM
CLTV: 49%
Address: 6061 Woodfern Drive, Rancho Palos Verdes, CA
Comments:
Property is a non-owner occupied SFR with panorama ocean views. Purpose of loan is to finish major remodel. Borrower has $500k of hi own money tied up in deal, needs appro. $300k to finish job, some interest carry and staging while property is listed for sale. Borrower says he has an offer on the table for $2.8mm, but wants to make as much as possible. He spent 9 months trying to purchase this proeprty that was previously in foreclosure.

1st T.D. - $435,000 (Los Angeles, CA)
Free and Clear Industrial Property(ies)!!!

Rate: 12% (negotiable)
Term: 24 months (negotiable)
Prepayment Penalty: (negotiable)

Property Description: Approximately 5800 square foot building built in 1971. Property is located adjacent to 4 or 5 other buildings that are nearly the same size. Borrower owns all buildings and lots.

Appraised Value: $675,000 of only single building, see below address. (Recently completeed Oct. 2008)

LTV: 65% - May be less if loan amount is lowered or loan is cross-colateralized by other adjacent buildings. This would significantly lower the LTV!

Address: 322 W. 131st Street, Los Angeles, CA 90061-1104

Comments:
Borrower has mid 600 credit scores. He has owned all of the buildings since 1959. He operates a plating company out of all buildings. Purpose of loan is to purchase a unique piece of equipoment that will allow him increase his business production and revenues.

1st T.D. - $90,000 (San Bernardino, CA)
Purchase Price: $71,000
Terms: Borrower would like 3-4 years
Rate: 12% (negotiable)
Value is $160,000 ( close comp at $180k)
LTV: 56%

Address: 773 Spruce Street, San Bernardino, CA

Description: 3 units

Comments:
Borrower is experienced buyer and investor. He has 700+FICO scores. Borrower has near $200k in bank. Property needs $20k to repair property. Ideally borrower would like to obtain $90k-$95 to cover purchase price and improvements. He can put money down and pay improvements, but the more he can finance the better. Borrower's opinion of value is at $160k, there is a close comp at $180k. Plans are to purchase, rehab, rent out hold. Anticipated rents $700-$800 per unit.

1st T.D. - $60,000 (Red Wing, MN)
mn Rate: 13.50%
Terms: 36 months
Recent BPO Value: $150,000
LTV: 40%

Address: 1230 Foursome St.
Red Wing, Minnesota 55066

Commments:
Rental property. More details available.

1st T.D - $85,000 (Palmyra, NJ)
nj deal Rate: 12.99%
Term: 36 months
BPO Value: $205,000
LTV: 41%
Prepayment Penalty: 2 year

Address: 514 Morgan Ave.
Palmyra, New Jewelry 08065

Comments:
Rental property. More details available.

_______________________

Ode to the fun and free things.

2008-10-09T14:00:00.001-07:00

With the deluge of financial bad news permeating all of the orifices of the nation, I thought I would make an attempt to steer the conversation to the positive side and recite a few things that I love about life right here, right now.

I love sleeping in.

I love jogging instead of driving, even miles away. So what if you're glistening and smelly when you get to TJ's and then you have to shlep your wine bottles in a backpack clinking all the way up back up the hill? Urban jogging is the new black.

I love making unecessary abrviatns.

I love sunsets in California.

I love the beach.

I love eating fruit off trees in the street.

I love meeting new people in most cases.

I love yoga.

I love freshly ironed shirts.

I love the blogosphere and having unlimited information at my fingertips.

I love street musicians.

That's it for now. In keeping with the economic climate of our current times, you will note that all of these are free. Let us not think that we can not have fun and love without spending money! Onward mine broke comrades!

More price cooling in the sunbelt

2008-10-01T14:56:00.000-07:00

LOOK OUT BELOW: Two years from now, house prices are almost certain to be lower in Florida, California, Phoenix and Las Vegas. Tell me something I didn't know!

Not exactly the most surprising news, but now we have numbers to support this forecast. The PMI Mortgage Insurance Co. has released its quarterly U.S. Market Risk Index, which gives the odds of price declines in the nation's 50 biggest metro areas. And the news is sobering if you plan to sell a house in Florida or California in the next two years.

According to PMI's risk index, there's a 99.5 percent chance that houses will lose value over the next two years in the Fort Lauderdale metro area in Florida and in the Riverside-San Bernardino metro in California. Other metro areas where the odds are 99 percent or greater: Orlando, Miami and Tampa-St. Pete, Fla.

Florida is the leader in sunshine and in burst bubbles. I can hear someone composing a blues tune about it now. I affectionatly refer to Florida as "God's Waiting Room".

Here in Southern California we have a 95.9 percent chance, or greater, of seeing price declines. In Vegas, the odds are 98.5 percent; in Phoenix, 96.3 percent. Sacramento and the Bay Area and Silicon Valley all are in the riskiest rank.

The metro areas with the least risk of a price decline over the next two years? My place of birth Dallas, TX. That is followed by Houston; San Antonio; Pittsburgh; Memphis, Tenn.; Indianapolis; Kansas City, Mo./Kan.; Austin, Texas; Columbus, Ohio; Denver; Cincinnati; Charlotte, N.C. -- they all have a less than 1 percent chance of house prices being lower two years from now, according to PMI's risk index.

RATES: Today is Wednesday, when Bankrate conducts its weekly rate survey. Last week, the 30-year fixed averaged 6.32 percent. It's hard to predict what the average will be today, because rates have been volatile lately. Safe to say that the average rate will be higher this week than last week.

Predicting the size of the increase is difficult, because bond yields have been swinging wildly -- rising a quarter of a percentage point one day and plunging nearly the same amount the next day. This is happening because of political turmoil. The mortgage industry is like a 6-year-old at Christmastime, the Senate is like a mom who promises lots of presents, and the House is like a dad who's threatening to give the kid a lump of coal. The poor kid is jubilant one day, despondent the next. Your mortgage industry in microcosm.

You just loaned the federal government $2165 for the bailout package.

2008-09-22T09:23:00.000-07:00

G.W. Bush and his administration have in 8 years taken us from a budget surplus at the conclusion of Bill Clintons' term to a multi-TRILLION dollar budget deficit. How exactly did this occur? Well, everyone knows about the Iraq costs- $400 million PER DAY for six years now. Added to this fracas is the recently publicized $700 billion bailout package. The crux of the matter with the mortgage meltdown, which started this entire crises, is that it was entirely engineered by the Bush administration. While they probably didn't set out to destroy this country's economy their repealing of bank legislation and regulation set the stage for everyone to jump on the subprime bandwagon and write the most ludacrious loans imaginable then package them and sell them to Bear Stearns, Goldman Sachs, Freddie Mac, Fannie Mae etc. Many of these loan packages had bond insurance underwritten by AIG-another $85 billion bailout. In a capitalistic system, greed left unchecked will inevitably eat itself and that is exactly what was allowed to happen under Bush's horrid regime, just like it was allowed to happen under Reagan with the SnL crashes. That recovery will look like a drop in the bucket compared to the nightmare of this $700 BILLION disaster. That is $2165 in debt from every man, woman and child in this country. Even Sarah Palin's newest illegitimate family addition will be on the hook for this. Maybe she can pay in Moose hides.

In all seriousness, the U.S. is perfectly enginering it's own demise, and quickly. I for one am disgusted by it all.

Withdraw $$$ from 401(k) VS. Going into foreclosure

2008-09-17T12:28:00.000-07:00

This article is from Robert Ashby, an all around good guy. During my work in foreclosure prevention this question has been asked to me several times and my standard answer is no-it is not advisable to use your retirement money to keep a sinking house afloat. This answer depends on the individual's situation of course, but I generally regard it as throwing good money after bad. Mr. Ashby goes into detail here. As always, if you are in some level of foreclosure you can reach me at Operation HOPE for no-cost foreclosure counseling

Many Americans are finding themselves facing potential foreclosure and lack any reasonable means to tap into money besides their 401k funds. That presents a major dilemma, not just for current finances, but for the long-term financial picture as well. Rather than debate whether or not these homeowners should have even been in the house in the first place, let’s just look at the choices they have remaining, neither of which are good.

On the one hand, they can just stop making those mortgage payments and set whatever money aside in preparation for the inevitable foreclosure. Believe it or not, this may make more sense than their other option. While foreclosure is not a good outcome, their finances may not be totally destroyed in the process. They may even keep enough liquidity in their control so they can survive in the longer term.

In many states, such as Florida, foreclosures take a long time and if the homeowner is able to live mortgage free during that time, they can accrue a reasonable savings instead of robbing their retirement and facing the other issues associated with doing that. In the long-term, they may actually be better off financially.

They other option presented here is that they can withdraw money from their 401k plan to pay for the mortgage. This is a bad decision on numerous counts.

For starters, there are penalties for taking the money out prior to age 59 1/2. Then you still have to pay taxes on the withdrawals and that withdrawal could even send you into a higher tax bracket as well. So, while you may be taking out some money, you could be left with considerably less, maybe even less than half, of that amount for paying off your mortgage. If you do use it all for your mortgage, Uncle Sam may be knocking at your door in the near future and that will not be a good meeting.

Another problem with withdrawing from your 401k is that you are robbing from your retirement funds, robbing yourself to pay the bank. The time value of money shows that you will have to work much harder in the future, even just 5 years down the road, in order to undo what you have done.

Yet another problem with the 401k solution is whether or not you are simply delaying the inevitable. If you are not in a position to sell the property or refinance quickly, you may be throwing good money after bad and simply “wasting” it away.

Don’t get me wrong, I am not condoning walking away from your obligations, but rather showing you of these two choices, you need to really think about their consequences and look at the long term picture, not just current reality.

There also may be other options you have not thought of yet. Make sure you are thinking clearly and not during a “panicky” state or you will likely make the wrong choices. Clear minds and a thorough thought process are required to make the best decision(s) for you and your family.

I am sure that many of you have something to say about this topic, so please chime in.

Fannie/Freddie Bailout lowers rates

2008-09-12T11:07:00.000-07:00

Hello all, as some of you may or may not know Fannie Mae and Freddie Mac have been taken over by the government as of last weekend. This is the latest in a series of unconcionable actions by the feds bailing out massively flawed financial institutions and devaluing our currency and our country. Essentially what the government is doing is telling these institutions that they do not need to be accountable for their titanic screw-ups and torpid decision making, they can just fall back on tax payer money to cover the tough parts. At the forefront of the public fleecing is Daniel "my name is" Mudd-the ousted CEO of Fannie Mae who is receiving $24 million in severance pay on his way out. http://news.yahoo.com/s/nm/20080909/pl_nm/fannie_freddie_pay_congress_dc. "Here you go, you completely failed in your duties as CEO-we'll use tax payer money to reward you for doing a manure-laden job!" ARRRGGGHHHH!!! WTF with this cronyism?

There is an upside to all of this. Mortgage rates have plummeted this week to about 5.5 on a 30 year fixed down from about a 6.25%. I recommend everyone that has a rate above 5.75% to evaluate refinancing so some good can come of all this hoopla.

Indymac moves toward a uniformed loan modification proceedure.

2008-08-20T17:24:00.000-07:00

This is from Indymac, a widely publicized financial institution that has collapsed. Indymac has made literally hundreds of thousands of Alt-A loans to people with low or no down payment, no income verification but excellent credit scores. Like nearly every other Alt-A lender, their outlook is disasterous as these loans begin to reset. This news release is a positive note and I hope that uniform regulations can be adopted to facilitate this happening.

FDIC Chairman Sheila C. Bair today announced that IndyMac Federal Bank, FSB will implement a new program to systematically modify troubled mortgages. The program is designed to achieve affordable and sustainable mortgage payments for borrowers and increase the value of distressed mortgages by rehabilitating them into performing loans. This in turn will maximize value for the FDIC as well as improve returns to the creditors of the former IndyMac Bank and to investors in those mortgages. The new program will help IndyMac Federal improve its mortgage portfolio and servicing by modifying troubled mortgages, where appropriate, into performing mortgages.

"I have long supported a systematic and streamlined approach to loan modifications to put borrowers into long-term, sustainable mortgages—achieving an improved return for bankers and investors compared to foreclosure," said Chairman Bair. "The program we are announcing today will provide affordable mortgages for eligible borrowers primarily in the so-called 'Alt-A' market. It provides a systematic approach for modifying troubled loans with payment resets due to negative amortization and other resets -- a market where we are seeing growing defaults and foreclosures. The modified loans will be underwritten to an affordable debt-to-income (DTI) ratio. By providing long-term sustainable payments, this program will reduce future defaults, improve the value of the mortgages, and cut servicing costs. Our goal is to get the greatest recovery possible on loans in default or in danger of default, while helping troubled borrowers remain in their homes. I believe we achieve that with this framework."

Chairman Bair continued, "Foreclosure is often a lengthy, costly and destructive process. Avoiding foreclosure not only strengthens local neighborhoods where foreclosures are already driving down property values, it makes good business sense. This is a 'win-win' program all around."

The former IndyMac Bank, F.S.B. Pasadena, California, was closed on July 11th by the Office of Thrift Supervision and the FDIC was appointed as receiver. On the same day, the FDIC was named as conservator for a new institution, IndyMac Federal Bank, FSB.

IndyMac Federal is focusing first on helping those borrowers with mortgages that are seriously delinquent or in default, but will seek to work with others who are unable to pay their mortgages due to payment resets or changes in the borrowers' repayment capacities. Based on this analysis, IndyMac Federal will extend proposed modification offers to borrowers for modifications or other loss mitigation designed to achieve affordable, long-term payments. IndyMac Federal will send an estimated 4,000 modification proposals to borrowers this week and thousands of additional proposals in the coming weeks. Once a borrower receives a modification proposal, he or she should begin making the modified payments and provide information to verify his or her income. Finalization of the modification agreement is contingent on the borrower providing information to allow verification of income to confirm that he or she qualifies for the proposed modification.

Under the IndyMac Federal program, eligible mortgages would be modified into sustainable mortgages permanently capped at the current Freddie Mac survey rate for conforming mortgages. Modifications would be designed to achieve sustainable payments at a 38 percent DTI ratio of principal, interest, taxes and insurance. To reach this metric for affordable payments, modifications could adopt a combination of interest rate reductions, extended amortization, and principal forbearance. Interest rate reductions below the current Freddie Mac survey rate may be made for a period of five years where such reductions are necessary to achieve a 38 percent DTI, and the reduced rate is consistent with maximizing net present value. For these loans, after five years, the interest rate would increase by no more than one percent per year until it is capped at the Freddie Mac survey rate where it would remain for the balance of the loan term. Other modification features could be combined with an interest rate reduction, as necessary and consistent with maximizing the value of the mortgage, to achieve sustainable payments.

IndyMac Federal will only make modification offers to borrowers where doing so will achieve an improved value for IndyMac Federal or for investors in securitized or whole loans. Modification offers will be provided consistent with agreements governing servicing for loans serviced by IndyMac Federal for others. The modification program does not guarantee a modification offer for IndyMac Federal borrowers.

About Property Auctions in Los Angeles

2008-08-20T11:06:00.001-07:00

This is borrowed from Brock Harris, esteemed Silverlake broker.

Big-time Los Angeles real estate auction coming up this Saturday. I’m registered and ready to bid on 5 properties after looking at about 200 hundred.

Spending all this week researching, figuring resale value then taking 65% of that – that’s the highest bid price I’m willing to pay. Lots of paperwork. Bo-ring. I’m ready for the bidding. They say prices are now at 2004 levels. Good. I didn’t buy enough back then. Time to stock up.

First, the nittygritty:
-All sales are final.
-You need $5000 cashier’s check, and you have to write a personal check for the remainder of the 3% deposit. If you can’t close the house, you don’t get it back.
-the auctioneer tacks on 5% of the price for their commission. You pay it.
-You have 30 days to close after winning the property and can get normal loans (mostly – skip the “all cash” deals, they are effed).
-Most sales still have to go through “lender approval.” So when you win the auction, you still don’t know if you got it for two weeks. I know, stupid, right?

And here are some other things I’ve learned about auctions:
-a bunch of dudes in tuxes, hopped up on Red Bull, try to pump up the bidding. Ignore them.
-nice houses get bid up to full retail. Only takes 2-3 couples and the price shoots up.
-most properties at auction have been on the MLS and didn’t sell. There is no point going to auctions but not shopping the MLS. I’ve said it once, I will say it again – every successful real estate investor I know buys 95% of their houses off the MLS. Most buyers are better off bargain-hunting the MLS than attending auctions.
-they are still largely underattended. I attribute this to the hassle and expense of going to an auction, when there are thousands of bank-owned properties already for sale on the MLS.

When’s the bottom everyone keeps asking me. Answer: the “bottom” is not a day, or week. No one rings a bell. Bottoms last about 18 months…and I believe we just got started. In Silver Lake alone, 118 properties have sold in the last 90 days. Buying windows are historically very short, so don’t let it pass you by.

keywords: sky minor real estate, sky minor broker, los angeles foreclosure, sky realtor, sky minor mortgage, sky minor mortgage broker., Sky minor foreclosure, Indymac, Sky MInor Real Estate, sky minor, Sky mortgage, sky loan officer, sky minor loan modification

Sky Minor Mortgage

2008-07-14T23:23:00.001-07:00

Hello All, I'm having a good summer for business in mortgage land. Despite all assertations about stated income loans being dead and gone I got a non-owner occupied purchase to 80% LTV done in Palm Springs (thanks for the referral, Kathy). I love the mortgage business. When I'm making money it's a career and when I'm not, it's entertainment. I'm closing the largest purchase loan of my career for a 1.79m stunning contemporary house in the Hollywood Hills and I'm happy about that. This is also another in my line of quasi-celebrity clients who must, regrettably, remain nameless. There is alot of stability now with smaller lending institutions who don't have to sell their loans again. With Indymac collapsing (the 2nd largest financial institution to implode in history) and speculation fanning the damaging rumors of Fannie and Freddie going down presents alot of opportunity for smaller lenders to gobble up market share. The system with huge national lenders was inherently flawed to begin with. Real estate lending is a local thing and no matter what kind of professional services a bank will use to verify and know what they can about a property and an area, nothing beats local knowledge when lending money with real estate as collateral. I hope this era marks the dawn of a new era of localized lending like it used to be before the Wall Street crew had their way with the business model.

Sky Minor, the lender.

Foreclosure filings increase 48% in 2008

2008-06-13T10:05:00.000-07:00

By THE ASSOCIATED PRESS
Published: June 13, 2008
Filed at 7:36 a.m. ET

WASHINGTON (AP) -- The number of U.S. homeowners swept up in the housing crisis rose further last month, with foreclosure filings up nearly 50 percent compared with a year earlier, a foreclosure listing company said Friday.

Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48 percent from 176,137 in the same month last year and up 7 percent from April, RealtyTrac Inc. said.

One in every 483 U.S. households received a foreclosure filing in May, the highest number since RealtyTrac started the report in 2005 and the second-straight monthly record.

Foreclosure filings increased from a year earlier in all but 10 states. Nevada, California, Arizona, Florida and Michigan had the highest statewide foreclosure rates.

Metropolitan areas in California and Florida accounted for nine of the top 10 areas with the highest rate of foreclosure. That list was led by Stockton, Calif. and the Cape Coral-Fort Myers area in Florida.

Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. Nearly 74,000 properties were repossessed by lenders nationwide in May, while more than 58,000 received default notices, the company said.

In Nevada, one in every 118 households received a foreclosure-related notice last month, more than four times the national rate. In California, one in every 183 households faced foreclosure.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't get refinanced into an affordable loan.

Making matters worse, mortgage rates have been rising, reflecting increased concerns about what the Federal Reserve might do to battle inflation. Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 6.32 percent this week, the highest level in nearly eight months and up sharply from 6.09 percent last week.

Efforts by government and the mortgage industry to stem the tide of foreclosures aren't keeping up with the rising number of troubled homeowners, and critics say a Bush administration-backed mortgage industry coalition, dubbed Hope Now, is falling far short.
Rick Sharga, RealtyTrac's vice president of marketing, said foreclosures are unlikely to peak until sometime this fall, as more loans made to borrowers with poor credit records reset at higher levels. ''I don't think we've seen the high point,'' he said.

About 50 to 60 percent of borrowers who receive foreclosure filings are likely to lose their homes, Sharga said. The rest are likely to be able to sell or refinance.

A new government report released Wednesday found that among mortgages held by Bank of America, Citigroup Inc. and seven other large banks, foreclosures climbed to 1.23 percent of all loans in March from 0.9 percent in October.

As foreclosed properties pile up, they add to the inventory of homes on the market and drag down home prices. The trend is most dramatic in many parts of California, Florida, Nevada and Arizona, where prices skyrocketed during the housing boom and are now falling precipitously.

Sales of foreclosures, vacant new homes and other distressed properties now dominate some markets, causing grief for individual homeowners who need to sell for other reasons, like a job in a new city.

Nationwide, one out of every four sales between January and March was a distressed sale, and that figure jumps to more than 50 percent in the hardest-hit areas like Las Vegas, Detroit and distant suburbs of Los Angeles, according to Moody's Economy.com.

In some neighborhoods, lenders are slashing prices dramatically to rid themselves of an unprecedented number of foreclosed properties, sparking bidding wars and multiple offers.

While that's a positive for the real estate market, buyers in other parts of the country are still holding back.

''I think a lot of people are waiting to see if we really have hit the bottom,'' Sharga said.

Lehman Brothers economist Michelle Meyer said in a report Thursday that U.S. home sales are likely to hit bottom at the end of this summer, but said a recovery in sales is likely to be ''feeble.'' Home prices, she wrote, are still expected to fall another 10 percent by the end of 2009.

Alarming Statistics about under-comprehension in mortgage lending!!

2008-03-28T14:17:00.001-07:00

I Found this out in cyberspace and I found it alarming to say the least. People, if you don't understand something about your mortgage ASK!!!! This is the biggest investment in your life and you need to know what you are getting into! If you are pondering a property purchase or refinance then call me. 310 709 8283. Even if you already have a deal on the table in front of you and just want a second opinion, I will be happy to assist and give my two cents. I have done over 150 loans personally in the last five years so I know what's good and what's not-so-good. The trick here (and in all walks of life, I am learning) is to COMMUNICATE!!!

The Federal Trade Commission , in a recent study called “Improving Client Disclosures” said:

87% of borrowers could not identify their “up-front” costs.

68% were unaware of prepayment penalties.

21% could not identify their required monthly payment

And 20% could not identify their loans APR.

Thousands of adjustable loans are resetting in the next few months. For some there will be huge “sticker shock”.

I would be happy to look at your note, at no cost, and advise you as to how it’s performing.

Movie #1

2008-03-26T14:14:00.000-07:00

This is my first web movie. Exciting!!!

Los Angeles Tumbling, But Still Unaffordable Real Estate

2008-03-12T00:07:00.001-07:00

Los Angeles Real Estate prices are in a decline. Not as steeply as the rest of California but the trend is about a 5% annual drop in value. Many first time buyers that I know and am prequalifying are excited about this, but then they run the numbers on a $450000 mortgage instead of a $600000 mortgage and see it is still not makeable. Los Angeles Real Estate has always, is always, and will always continue to be very very expensive even in recessionary market conditions. A buyer emailed me today complaining about $300000 shacks in the middle of the ghetto and how they'll never be worth as much as they were last year. I disagreed with him. The reason being, inevitably all the ghetto areas become gentrified. Even if it's 40 years away literally everything in between the 10, 5 and ocean will made nice and just the land be worth millions. Look at Manhattan, London, Hong Kong price trends and density since 1960. Dr. Schumacher says in his book-"if you think real estate is expensive now, just wait until 10 years from now." And that is true when you look at real estate over the long haul. Especially in Southern California. Brian Tracy says in his book that real estate increases in value at twice the pace of population growth and three times the value of inflation and also decreases at the same amount. L.A. certainly has population growth and inflation isin't going anywhere. The net result that I've seen is about a 40-50% reduction in buyers because they were doing 95-100% financing and willing to pay $4000 a month in mortgage bills. Now I am seeing smart people with good credit and down payments getting good prices because they're the only ones able to buy. The mortgage liquidity crisis has not improved at all, but less attention is being paid to it in the media for some reason. I find this perplexing but inevitable with people's short attention spans and bury-their-head-in-the-sand mentalities. I would argue that those were the only people who should be buying houses anyway. Since when can you buy a house anytime through history with no down payment? Even with a substantial down payment-a $400000 mortgage costs a ton of money when you factor in taxes, insurance, maintence, city assessments etc. Rich Dad said "A house is an asset-it's just not your asset" and he's absolutely right.
We can whine and complain all we want but the truth is, there will always be people willing and able to pay top dollar to live in California. I am choosing to see the opportunities in the current downturn instead of the brutal reality of the cost of this market.

SEO Minor Mortgage Matters

2008-03-06T17:50:00.001-08:00

"Please help me out - are blogs effective in SEO? I made a blog http://ddwebguru.blogspot.com/ a way long back but it has not been indexed by Google. Whats the exact reason behind that? Is there any use of blogs in SEO? Is there another blog site which provides the free blogs?"

FHA Raises loan limits in CA!!

2008-03-05T20:26:00.001-08:00

The Federal Housing Administration raised the mortgage limits to a maximum of $729,750 for 14 high-cost counties in California, as the government began providing aid to homeowners required by the recently enacted economic-stimulus package. This is huge if you have a loan balance up to 729750 or are about to buy a house with that loan amount. FHA loans do not care about credit scores and they will lend up to 97% of the value of the home with a below-market interest rate. The only catch is that you have to verify your income.

The upper mortgage limits also will apply to loans purchased or guaranteed by government-sponsored mortgage companies Fannie Mae and Freddie Mac, FHA officials said.

Details for the rest of the country are due to be announced this week. California counties such as Los Angeles and Orange will be eligible for the maximum limit, which was raised from $362,790. Lower- priced regions, such as Trinity and Lassen counties, will qualify for a loan cap of $271,050, up from $200,160.

FHA officials predicted the increases in California would aid about 33,000 individuals. The new loan limits will be in effect through the end of this year. The goal is to invigorate the market for larger mortgages, which should help push down interest rates.

The FHA said there would be an appeal process through which the new loan limits could be raised higher for counties that aren't now eligible for the $729,750 maximum, but none of the limits will be lowered, said Bill Glavin, special assistant for public affairs in the FHA's Commissioner's Office. That appeals process could be announced, along with new loan limits for the rest of the country, as early as Thursday.

"From what we understand there are not going to be a lot of areas in the country except for California that are going to be at the maximum," Mr. Glavin said.

Those who have applied for an FHA loan but haven't yet closed on it will be able to take advantage of the new limits. The new ceilings also will apply to people seeking to refinance into an FHA loan.

FHA Mortgage Limits in California by County

County Name	Median Home Price	FHA Limit
Alameda County	$995,000	$729,750
Alpine County	438,000	547,500
Amador County	355,000	443,750
Butte County	320,000	400,000
Calaveras County	370,000	462,500
Colusa County	318,000	397,500
Contra Costa County	995,000	729,750
Del Norte County	249,000	311,250
El Dorado County	464,000	580,000
Fresno County	305,000	381,250
Glenn County	230,000	287,500
Humboldt County	315,000	393,750
Imperial County	260,000	325,000
Inyo County	350,000	437,500
Kern County	295,000	368,750
Kings County	260,000	325,000
Lake County	321,000	401,250
Lassen County	200,000	271,050
Los Angeles County	710,000	729,750
Madera County	340,000	425,000
Marin County	995,000	729,750
Mariposa County	330,000	412,500
Mendocino County	410,000	512,500
Merced County	378,000	472,500
Modoc County	125,000	271,050
Mono County	370,000	462,500
Monterey County	599,000	729,750
Napa County	615,000	729,750
Nevada County	450,000	562,500
Orange County	710,000	729,750
Placer County	464,000	580,000
Plumas County	328,000	410,000
Riverside County	400,000	500,000
Sacramento County	464,000	580,000
San Benito County	790,000	729,750
San Bernardino County	400,000	500,000
San Diego County	558,000	697,500
San Francisco County	995,000	729,750
San Joaquin County	391,000	488,750
San Luis Obispo County	550,000	687,500
San Mateo County	995,000	729,750
Santa Barbara County	615,000	729,750
Santa Clara County	790,000	72,9750
Santa Cruz County	719,000	729,750
Shasta County	339,000	423,750
Sierra County	228,000	285,000
Siskiyou County	235,000	293,750
Solano County	446,000	557,500
Sonoma County	530,000	662,500
Stanislaus County	339,000	423,750
Sutter County	340,000	425,000
Tehama County	250,000	312,500
Trinity County	200,000	271,050
Tulare County	260,000	325,000
Tuolumne County	350,000	437,500
Ventura County	599,000	729,750
Yolo County	464,000	580,000
Yuba County	340,000	425,000

Foreclosure bloodbath scorecard March 08. :P

2008-03-02T22:47:00.000-08:00

Privyet Comrades!! With how tough the U.S. ecomony is going into Spring 2008, we may find ourselves succumbing to communism because we're so broke and hungry. The real estate marktet continues to soften in every sector. I read an article in WSJ today that talked about commercial property devaluing with defaults climbing, due to increased vacancies symptomic of a sagging economy. With our sagging dollar AND real estate values, Now is the most prime buying opportunity for discounted U.S. Real Estate since the 1930's. And it's going to get worse before it gets any better. Contact me for an L.A. discounted properties list.

•	Detroit/Livonia/Dearborn, Mich. (4.9 percent).
•	Stockton, Calif. (4.8 percent).
•	Las Vegas/Paradise, Nev. (4.2 percent).
•	Riverside/San Bernardino, Calif. (3.8 percent).
•	Sacramento, Calif. (3.2 percent).
•	Cleveland/Lorain/Elyria/Mentor, Ohio (3 percent).

But at the bottom of the list were six smaller areas where less than 0.2 percent of the households experienced foreclosure-related activity in 2007.

6 areas with low foreclosure activity

•	Richmond, Va. (0.18 percent).
•	Allentown/Bethlehem/Easton, Pa. (0.17 percent).
•	Honolulu (0.16 percent).
•	McAllen/Edinburg/Pharr, Texas (0.13 percent).
•	Syracuse, N.Y. (0.13 percent).
•	Greenville, S.C. (0.08 percent).

L.A. take on the economic stimulus package and loan limit increase.

2008-02-21T18:29:00.000-08:00

Last week, lawmakers passed two new initiatives that will impact our personal and professional lives in Los Angeles.

On the National level, President Bush signed into law the highly promoted Economic Stimulus Package prepared by Congress that includes a provision to "increase the conforming loan limits" for a temporary period.

On the local level, the LA City Council passed a new law that requires sterilization of cats and dogs 4 months of age or older. This law is to prevent the animal shelters from overcrowding of pets.

The National law is to prevent overcrowding of foreclosures and short pay transactions that negatively impacts our industry by driving home prices down.

Although we don't know when the local law goes into affect, it's safe to say details of the Economic Stimulus Package will NOT be available until next month because:

First, Fannie Mae, Freddie Mac and FHA (the Agencies) must establish guidelines they will require mortgage lenders to follow that comply with Congress initiatives.
Second, the Agencies must negotiate their guidelines with Wall Street to assess risk, relative to the risk for existing conforming and non-conforming loans.
Third, Wall Street must quantify risk-based pricing adjustments, the method of pooling these mortgages, the delivery channel and the servicing - basically establish a third-tier market for investors.
Fourth, lenders will need to update software and disseminate guidelines as quickly thereafter in order to take new loan applications.

As of today, limited information is available because the Agencies have yet to finalize the guidelines. However, what we do know is that:

Implementation is more complex than the traditional loan limit change that we manage at the end of each year.
The increased limit is a temporary solution for "some" high-cost areas based on yet to be identified Metropolitan Statistical Area (MSA) data.
The Los Angeles MSA includes statistical data from the greater Long Beach and Glendale markets.
The maximum loan limit for a SFR may be as high as $729,750; However, this amount is NOT NATIONWIDE for all high-cost MSAs. The increases available in Los Angeles County might be based on the area median sales price similar to the HUD process where census tract numbers are used to limit loan amount.
The calculation might include taking 125% of the area median sales price in the specific census tract number the property is located, not to exceed $729,750.
The temporary loan limits will apply to transactions already closed dating back as July 1, 2007 so lenders can sell product in their portfolio to generate new capital for future loans.
The Agencies need to determine if they want lenders to use 2006 or 2007 area median sales prices or both since the temporary law goes back to mid-2007.
The deadline is December 31, 2008

Credit 101 for the small business owner!

2008-01-31T18:26:00.001-08:00

Getting a loan while you are self-employed
Getting and keeping credit is enough of a problem all by itself, but being self-employed and trying to obtain loans is a whole new ballgame. It is a good bit harder for a person who is self-employed to obtain credit for anything than it is for a person who has taxes taken out of their check every week.
As you are probably aware, all places require you to prove that you actually have income before they will lend you money, but some places require different kinds of proof than others do. Depending on whether you are dealing with a large company that runs applications through a computer or a company where you can actually speak to the person who reviews your application, you may have to have anything from tax returns to paycheck stubs or even down to just a letter from your employer.
When dealing with small companies, you may be able to get away with just a record of your income that you have kept personally for the past year or more, but when dealing with large companies that approve and reject applications by computer, you will likely need the past two years’ tax returns. If you do not have these, you are likely to have problems getting the loan you are after.
Either way, a secured personal loan is much easier to obtain than an unsecured personal loan. As a self-employed person, it is very hard to obtain an unsecured loan from a large company if you are within the first year of your business. It is often easier to go with a smaller company where you can talk to a loan officer one on one and explain your situation. If you can make the person you are dealing with care about you, they will often do the best they can to get the money you need. The most you will typically get when dealing with large companies such as Capital One or HSBC is a somewhat nameless person that likely lives in a foreign country reciting company rules and regulations with next to no room to maneuver to help you out, no matter what your situation is. Trying to make these people care about you is usually fruitless, so if you are newly self-employed and need a loan of any kind, try to deal locally with an actual person. This is the easiest way to get the funds you need, whether it is for a vehicle, equipment, or anything else you might want a loan for.

Fed Rate Cut x 2=darn good time to refi!

2008-01-30T14:30:00.000-08:00

Source: BaltimoreSun.com
If you can refinance and you can find a flat fee mortgage then you may want to strongly consider the refinance option.
Refinancing needsWith mortgage rates falling, many consumers are considering refinancing their loans. But the requirements are different in this post-credit crunch. Some things you’ll need:
• Good credit, with a minimum score in the mid-600s• No late payments on credit cards, mortgages or installment plans in the past two to three years• Home equity• Proof of income
“Rates for 30-year fixed mortgages hovered around 5.5 percent yesterday, with some dipping into the 5.25 percent range early in the day, according to area brokers. That’s just a hair above the record lows recorded in June 2003, when the housing market was flourishing.
When the Fed cut a key interest rate by three-quarters of a percentage point Tuesday, it had no direct effect on fixed mortgages. But it got consumers’ attention. That, coupled with the lower mortgage rates, which have been driven down by their connection to 10-year Treasury bonds, sent homeowners on the hunt for deals.”

Hello! Sky Minor Mortgage Blog is here!

2008-01-03T14:45:00.000-08:00

This is the new blogsite of Sky Minor, Mortgage Master and general good guy to know. You can reach him at 310-709-8283 or www.clearskylending.ws {Sky Minor Mortgage Blog}, [Sky Minor Mortgage Blog], Sky Minor Mortgage Broker, Sky Minor Mortgage Blog.