San Diego Short Sale and Foreclosed Homes

 
 
By Nick Timiraos

Friday is the last day to get a mortgage backed by the Federal Housing Administration before insurance premiums rise.

Mortgage insurance premiums on FHA-backed loans will increase to 2.25% of the total loan amount on Monday, from 1.75%. That amounts to an additional $500 for every $100,000 in borrowing. On a $300,000 loan, a borrower will pay $6,750 upfront in insurance costs, compared to $5,250 at current levels. Those insurance premiums can be rolled into the new loan.

Earlier this year, the FHA announced that it would take this step, and several others, to boost its reserves, which are dropping as it takes on big losses from loans it has backed over the past three years. The FHA has been under pressure to take even more dramatic steps, particularly to raise minimum down payments from their current level of 3.5%, but instead opted for a package of tweaks that officials say will be less costly to the housing market.

The insurance premium increase takes effect for completed applications on or after Monday. In the summer, the FHA will also reduce the amount of cash that sellers can kick in for closing costs to 3% of the purchase price, from the current level of 6%.

The changes come one month before the $8,000 tax credit for first-time home buyers expires. During the April-to-June period last year, the FHA accounted for nearly half of all mortgages to first-time buyers, and the FHA and other government-backed loans accounted for 47% of all mortgage applications last week, according to the Mortgage Bankers Association.

In addition to the upfront insurance premium, borrowers with 30-year fixed-rate loans must also pay mortgage insurance annually, which is currently set at .5% of the loan amount for loans with loan-to-value ratios up to 95%, and .55% of the loan amount for loans above that. Borrowers with 15-year loans pay .25% annually on loans with a 90% loan-to-value ratio or higher, and no annual insurance premium with loan-to-value ratios below 90%.

The FHA has asked Congress for authority to raise those levels to .85% and .90%, respectively. If that happens, the agency says it will reduce the upfront insurance premium to 1%. For a $300,000 loan with a minimum 3.5% down payment, a borrower would pay $137.50 a month for the insurance today, versus $225 a month once the new changes go into effect.

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By Nick Timiraos

Mortgage rates rose slightly to 5.04% last week, from 5.01% the previous week, during the last full week that featured the Federal Reserve as a buyer of mortgage-backed securities. The Fed’s $1.25 trillion in mortgage purchases is set to end today, and though analysts remain split over how much rates may rise in the coming weeks, many say that the Fed’s withdrawal could introduce more volatility into mortgage markets.

Also, keep an eye on this: the Mortgage Bankers Association’s weekly survey recorded a 6.8% jump in purchase applications. Applications for new mortgages are now back where they were at the end of last October, when home buyers were rushing to get loans to take advantage of the first-time home buyer tax credit, which had been set to expire.

“We may be seeing a similar pattern now,” says Michael Fratantoni, the MBA’s vice president of research and economics. The current home buyer tax credit is set to expire on April 30.

A possible uptick in demand from first-time buyers would explain that large share of mortgage applications for government-backed loans such as those from the Federal Housing Administration. The government share of purchase applications reached 47.2% last week, also the highest level since last October.

Meanwhile, in Wednesday’s WSJ we take a look today at new efforts to help unlock the market for securities backed by mortgages that don’t have any government backing. Redwood Trust Inc., a Mill Valley, Calif., mortgage-investment manager could launch as soon as next week a private-label securities offering that, if successful, would be the first such sale in more than two years.

The market for private-label mortgage securities—those without backing from a government-related entity—evaporated in August 2007 when rising defaults sapped investor demand. The Redwood securities would be backed by jumbo mortgages that are too big for government backing and could mark a small but important step towards healing the broken private-label securities market. Jumbo volume has fallen sharply as banks have to make those loans and keep them on their books.

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The word “as-is” can indeed be one scary phrase. Especially when buying a home in today’s market where foreclosures and short sales that need fix-up work are plentiful.

But a little-known Federal Housing Administration (FHA) loan program that’s been around since 1978 can help take the sting out of “as-is.” Only 219 borrowers took advantage of the FHA’s 203k program in 2009. Not that many lending and real estate professionals are aware of the program, say observers.

Last year, Tom Meyer found a classic Oakland, Calif., home built in 1925 near Mills College he liked a lot. As a short sale it was priced right and about half the original asking price. Trouble was, the place needed some fix-up work—foundation improvements, dry rot work, a new roof over the garage and other improvements.

With the help of the FHA’s 203k renovation financing loan program, Meyer folded about $100,000 worth of repairs and improvements into his $422,000 mortgage. He had bought the home for $320,000. “I would not be able to pay a contractor $100,000 and buy a house at the same time,” said Meyer, who works in corporate media at Shaklee’s Pleasanton headquarters. “It had been essentially allowed to start falling apart over the last 20 years.”

He had rented in San Francisco for 25 years before moving into his new digs last September with his girlfriend, Cathy Keating. “We like old houses, and a great benefit of this program is that it helped us keep a beautiful but deteriorating house from deteriorating further. With the work we did, we expect it to still be standing and beautiful 80 years from now,” he said.

Renovation financing through the 203k program allows the costs of needed repairs and improvements to be included in the FHA federally-insured loan amount instead of having the buyer come up with cash or a separate loan to do the work.

“This is a perfect loan for an as-is situation,” said Kristine Marr, a loan officer with Prospect Mortgage in Lafayette, Calif. “It’s not a new loan program, although I think it’s going to have a lot more use today because we have so many foreclosures and bank-owned properties. You go into lots of homes and see people have yanked out stoves and ovens and fixtures and sinks.”

The work has to be done within six months after escrow closes. Borrowers have the option of putting up to six months of mortgage payments on the end of the loan if they don’t want to live in the house while the work is being done.

“Renovation financing is a program that allows you to not only finance the purchase of a home but finance any repairs and/or improvements. It provides buyers with a responsible way to purchase a fixer-upper property,” said Luis C. Munoz, who helped Meyer with the loan and is a renovation loan specialist with the Oakland branch of Mason-McDuffie Mortgage Corp. Munoz also gives presentations about the program at monthly home ownership workshops sponsored by the Unity Council, an Oakland-based nonprofit.

At a time when equity loans are hard to get, the program can also be used as a refinancing vehicle for borrowers who want to do repairs and improvements, provided the value of the home is greater than the value of the loan. “At the same time as you refinance, you pop in the extra dollars you need for whatever you want to do,” Marr said.

FHA home loans require certain health and safety standards be met and that needed repairs identified during the inspection process be completed before escrow closes. However, minor repairs and improvements costing between $5,000 and $15,000 can be done after escrow closes for borrowers who opt for a streamlined repair program.

A 203k loan can help buyers finance both minor and major repairs and improvements. It can also help buyers compete with investors when bidding for short sales and foreclosures, said Sheri Powers, director of the Homeownership Center at Unity Council.

The loans can also be used to pay for improvements such as new appliances, second-story additions, remodeled kitchens and bathrooms, and skylights, just to name a few examples. “Property repairs cost money and they want to make sure people using their loan program are going to be in the home in long run and not just the short run,” Powers said.

The loans have become more popular since home prices started falling and FHA lending limits were raised a couple years ago but are still a tiny sliver of overall FHA loan volume. Last year, 203k loans accounted for 219 mortgages in the Bay Area, compared to 35 in 2008, one in 2007 and none in 2005 and 2006, according to Department of Housing and Urban Development statistics. “It’s making a comeback,” said Powers.

Marr said that 203k financing is not for everyone. A buyer will have to work with contractors and may have to wait several months before moving in, she said. And there is no guarantee they won’t be outbid by an investor for the property. “A lot of listing agents are preferring the investors, because the investors tend to be all cash or 50% cash. That’s always hard to compete with,” she said.

(c) 2010, Contra Costa Times (Walnut Creek, Calif.).

Distributed by McClatchy-Tribune Information Services.

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RISMEDIA, March 4, 2009-(MCT)-What a difference nine months make. In the not-long-ago credit-card binge days, one of the “in” things was to own a TV the size of a bus. Today, it’s to have six months of living expenses saved in case you get laid off.

Until recently, buying was the social norm-”having stuff, having name brand stuff, having the new, the bigger, the more,” said George Barany, director of financial education for America Saves, a Washington-based educational nonprofit. Today, he said, wearing last season’s clothes or holding onto a car longer is more acceptable among consumers.

Tough times have also altered one financial planning basic-that consumers with considerable credit card debt should divert money away from savings to those balances. Today, experts say, if you don’t have six to 12 months of living expenses saved, pay the minimum on card balances and grow that kitty. Experts say interest will add up, but if you do not get laid off, you can use some of the fund to help pay down debt once the economy picks up.

People talk about saving for a rainy day, but “it’s raining right now,” said Jon Gaskell, co-founder and head of business development for SmartyPig.com, a virtual piggy bank that combines a savings program with social networking so users identify savings goals and set up automatic deductions from checking accounts.

How to save

You can’t beat the autopilot approach, experts say. Assuming it’s an option, ask your employer to automatically deduct a certain amount each week and deposit it in a savings account, preferably one to which you don’t have too easy access, said John Tweedy, a Floral Park certified financial planner. Some employers also allow you to earmark all or a portion of future raises to savings.

In these tough times, don’t neglect the off-the-radar-screen approach says Ethan Ewing, president of money portal Bills.com. That’s regularly socking away a small, almost unnoticeable, amount, such as stuffing a dollar bill every day into a jar or piggy bank or regularly dropping your small change into a coin jar.

While many people wait until the end of the month to see how much is left to save, Galia Gichon, a financial expert in Manhattan, suggests you work in the opposite direction. Plan ahead for weekly out-of-pocket expenses, take out enough cash, commit to living within those confines, and save the rest, Gichon said.

How much?

As a rule of thumb, money experts suggest putting 10% of take-home pay toward long and short-term savings/investing. But that depends on individual circumstances.

What’s most important, said Barany, is to start saving on a regular basis-whatever the amount. You don’t have to “go from zero to 100 in one step,” said Barany, who added that it’s crucial for singles and families alike to maintain a minimum of $500, preferably closer to $2,000, to cover unexpected expenses.

Paying with cash can often save you money. If you have the cash to buy new tires for, say, $300, you can say to the merchant, who has to pay a service charge on credit card transactions, “I have the cash right here. Can you give me a discount?”

Roberta Schroder, chairwoman of the economics and finance department at Nassau Community College, said she suggests students have a safety cushion of three months’ living expenses. They often feel that just one month will do as, “my mother will pay for it.” But these days, Schroder reminds students that mom may have her own financial headaches.

Where to put emergency money

For money you may need to access quickly, Tweedy suggests researching online money market accounts that pay the highest interest rates, ones that are insured by the Federal Deposit Insurance Corp. Check rates at Bankrate.com.

Ann Diamond, a chartered financial consultant in Manhattan, who also coordinates financial literacy programs, suggests the following: Those with emergency funds of nine to 12 months of expenses, invest:

- Three months in an online money market fund — recently Bankrate showed a high rate of 2.53%
- Three months in a slightly higher-yielding short-term CD, with a recent six-month CD rate of 2.57%
- Three more months in a longer-term slightly higher paying CD, with a recent nine-month CD at 2.71%, and so on.

Cut back on 401(k)?

Experts say don’t do it unless it is temporary and to build up ready cash. If your employer matches your contributions, the “plan is the best deal in the world. It’s free extra money, nontaxable, and if you do the math, you’ll see why,” said Michael Kresh a certified financial planner in Islandia, NY. That’s even if, like so many, you’ve seen your balance plummet. This year employees can put in up to $16,500, with those age 50 and up allowed a further $5,500 as a catch-up.

“Think of your retirement savings as a forest,” he said. “After the wildfire passes through, when it seems like there’s nothing left, the forest returns, slowly and steadily … a retirement portfolio can recover if you continue to fund it.” Even if your employer stops matching your contribution, as many have, “you should still be saving as much as you possibly can,” he said.

Investing

“First, do not let fear overtake you,” Kresh said.

When it comes to stocks, look for companies that don’t have a lot of debt and do have cash flow at the end of the day.

Also, “people still need to buy food and household goods. The future of this country depends upon infrastructure and an expanding green technology and energy sources,” Kresh said. “Fear is driving down the prices of companies that will be very successful in the next three to five years. Let those who sell in fear give us bargains now.”

Copyright © 2009, Newsday, Melville, N.Y.
Distributed by McClatchy-Tribune Information Services.

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RISMEDIA, July 15, 2009-The weekly average rate borrowers were quoted on Zillow Mortgage Marketplace for 30-year fixed mortgages decreased last week to 5.26 percent, down from 5.40 percent the week prior, according to the Zillow Mortgage Rate Monitor, compiled by leading real estate Web site Zillow.com . Meanwhile, rates for 15-year fixed mortgages fell to 4.65 percent from 4.79 percent, and 5-1 adjustable rate mortgages also fell to 4.30 percent, down from 4.49 the week prior.

On Monday, rates for 30-year fixed purchase mortgages dropped further, with the average rate on Zillow Mortgage Marketplace at 5.19 percent. For current, up-to-the-minute rates, visit www.zillow.com/Mortgage_Rates/.

Thirty-year fixed mortgage rates varied by state. California mortgage rates, Georgia mortgage rates and Pennsylvania mortgage rates decreased the most, from 5.39 percent to 5.21 percent in California, from 5.32 percent to 5.16 percent in Georgia and from 5.42 percent to 5.26 percent in Pennsylvania. Ohio mortgage rates (5.39%), Illinois mortgage rates (5.36%) and Massachusetts mortgage rates (5.36%) were the highest in the country, while Georgia mortgage rates (5.16%) were the lowest.

The Zillow Mortgage Rate Monitor is compiled each week using thousands of mortgage rates for conforming loans quoted on Zillow Mortgage Marketplace by mortgage lenders to borrowers who have submitted loan requests. State-level data is gathered for the top 20 states with the highest quote volume on Zillow. Learn more about our rates.

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RISMEDIA, July 13, 2009-Freddie Mac recently posted a new video on youtube.com that shows late-paying borrowers how gathering a few financial documents before calling a mortgage servicer can cut the time needed to determine their eligibility and process their application for a loan modification under President Obama’s Making Home Affordable program or Freddie Mac’s other workout initiatives.

Available in English and Spanish versions, the new Freddie Mac video, “Stop Foreclosure: Documents Your Lender Needs to Help You,” can be seen at Freddie Mac’s channel on YouTube(TM) at http://www.youtube.com/FreddieMacWeb.

The two-minute video shows step-by-step which documents borrowers should have on hand when they call their servicer to discuss loan modifications. These documents can cut the time a servicer will need to understand the borrower’s situation, determine his or her eligibility for a workout, and process the application.

According to the video, the key documents borrowers should have when they call their servicer include:

- Most recent monthly mortgage statement;
- Pay stubs or other documents showing their household’s monthly pre-tax income;
- Most recent tax return;
- Second loan or home equity line of credit statements;
- Account balances and minimum monthly payments on credit cards, car loans, student loans or other debt;
- A short, concise description of the financial hardship that is causing – or leading to – a mortgage delinquency.

“America’s servicers are handling an extraordinary volume of calls from distressed borrowers seeking an Home Affordable Modification under the President’s program,” said Ingrid Beckles, senior vice president of default asset management at Freddie Mac.

“By taking a few moments to gather these documents borrowers can help their servicer understand their financial situation and reduce the need for repeat calls.”

For more information on President Obama’s Making Home Affordable program, visithttp://www.makinghomeaffordable.gov or www.makinghomeaffordable.gov/spanish.

Borrowers with questions about Making Home Affordable should call 888-995-HOPE.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six home buyers and more than five million renters.

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RISMEDIA, July 11, 2009-Forty-two percent of U.S. consumers have credit scores between 550 and 699. As a result, these consumers typically don’t qualify for preferred interest rates and, depending on their overall credit profile, they may not even qualify for certain loans and credit cards. The primary challenge is that most consumers don’t understand what impacts their credit profile and, more importantly, don’t know what actions they can take to help improve it. This short quiz will help test how much you know about your credit profile and how it works.

1. To have the best credit profile impact, what is the maximum amount of your monthly credit line you should use?
a) 70%
b) 30%
c) 50%

2. What is the top contributing factor to what makes a good credit score?
a) Length of credit history
b) Amounts you owe
c) Payment history

3. If you pay 2% each month on your credit card (typical minimum payment), when will you pay off a $3,000 balance at 10% interest?
a) 18 years
b) 6 years
c) 3 years

4. After paying off a high-interest credit card, you should:
a) Continue using it occasionally
b) Close the account
c) Use the full amount of available credit every month

5. Applying for credit cards in order to just receive a free sign-up gift (t-shirts, mugs, etc.) has no impact on my credit profile?
True or False

6. Rewards points on credit cards are a good deal when:
a) I get cash back
b) I get free airline tickets
c) I carry no balance each month

7. To have a credit score, I must have at least one creditor reporting activity on my credit report for:
a) 12 months
b) 8 months
c) 6 months

8. Credit bureaus that manage your personal credit report data and credit scores are a:
a) Government entity
b) Non-profit agency
c) Regular business corporation

9. Banks and credit card companies think you are credit-worthy by how many credit offers you receive by mail?
True or False

10. Credit scores are used by lenders mainly to:
a) Tell how I compare to other consumers
b) Tell if I make my payments on time
c) Predict the likeliness that I will repay my loan on time

Answers: 1 – c, 2 – c, 3 – a, 4 – a, 5 – False, 6 – c, 7 – c, 8 – c, 9 – False, 10 – c

If you find you answered more than half of these questions wrong, you’re not alone. In a survey, we found that the majority of consumers do not know the answers to these and similar types of questions. On average, U.S. consumers have a total of 13 credit obligations on their credit report. These include installment loans (auto loans, mortgage loans, student loans, etc.) and credit cards (such as department store charge cards, gas cards, or bank cards). As a result of the numerous outstanding credit obligations, combined with the lack of proper knowledge and guidance about what impacts their credit profile, the average U.S. consumer ends up spending thousands of dollars on unnecessary interest expenses.

The good news is that it’s not too late. With a good understanding and proper guidance of how credit works, consumers can learn how to effectively manage their personal credit profile. Improvements can be obtained fairly rapidly with credit coaching services and the proper changes (no more trial-and-error stuff). Our survey group of customers who participated in a credit optimization and coaching service saw their credit scores increase by an average of 30 points in just four months as a result of more effectively managing their credit. More than ever, every responsible consumer should proactively evaluate, optimize and protect their credit before they have a required credit need or an issue arises.

Jeff Mandel is president and Marlin Brandt is COO of ApprovalGUARD.

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