Arn Cenedella

Archive for the 'Credit Information' Category

$15,000 tax credit passed by Senate

Yesterday the Senate passed a $15,000 tax credit for home buyers.

For some preliminary information, please review this MSNBC article.

Of course the details may change once the House looks at this piece of legislation.

My questions are:

credit for all home buyers? or just first-time buyers?

credit retroactive? I have seen some proposals to make credit retroactive to July 1, 2008 so buyers who bought last year may benefit.

stay tuned, let’s see what the House and Senate work out and then we can determine the final exact form of the bill.

this bill will not help cure all of the RE Market ills but it will help and especially for those first-time buyers.

Another Government Boondoogle – Loan Modifciation Program does not work.

I have written two posts about how most loan modifications programs will not work and the other. Even if they did work, they would be extremely unfair as the “help” would more likely go to people who made NO cash down payment at purchase as opposed to people who actually used their own cash to buy a house. I have been especailly critical of government efforts to get involved in loan modifications which in my opinion are best left to the borrower and the lender to work out.

Tom Royce of Real estate Bloggers indicates the federal Hope for Homeowners program has taken 312 applications – 312 – that’s like 3.5 applications a day in the entire country since the program was first instituted. Our brilliant Washington DC leaders have allocated $300 BILLION dollars for this program – are you kidding me? This is a total boondoggle. Tom contrasts this government program with a private program Hope Now that has helped 2.2 MILLION homeowners.

Does anybody in Washington pay attention?

I hope Obama comes up with a better plan but I fear the Washington DC culture is so corrupt – our elected representatives care more for looking good in front of the TVs and spreading taxpayer cash around to their cronies – that I have my doubts.

Mortgage loans are available – get ready to move early 2009!

Many of my clients have recently asked me whether mortgage are still available. They see so much in the media about how people can not get loans and how credit is not available. This is simply NOT TRUE.

A recent article in the SF Chronicle gave an accurate representation of the current mortgage market.

Loans are available, the guidelines are tougher, downpayment requirements are higher and people without W2 salary/hourly type income have a harder time qualifying.

The other issue is that Fannie Mae and Freddie Mac will go to their new permanent loan limits (in CA, it will be $625,000) down from the current $729,000 (in the Bay Area) temporary limit in January 2009. Lenders are still waiting for Fannie Mae and Freddie Mac to issue complete regulations for this new permanent loan limit.

Issues still waiting to be resolved involve refinancing properties that have first and second/home equity loans on the property. There will be a limit on how large home equity loan amounts can be refinanced through a new Freddie or Fannie loan.

So things are still somewhat in a state of flux but I expect the regulations will be in place shortly.

Due to our economic situation, interest rates are headed down at the present time. But my sense is inflation will become an issue in a few years when the US has to deal with the budget deficits brought on my all these (dang!) bailouts. So my advice is for home buyers and owners is to contact a good lender, get your paperwork ready and wait for rates to drop a little further in early 2009 and then get a new loan.

If you needs suggestions for good loan people, just let me know.

My advice, get your paperwork ready, get your ducks in a row, and be ready to refinance out of your adjustable loan debt and get into a 30 year fixed mortgage in the first half of 2009. When inflation hits and I think that is only a question of when and not if, you will be very happy with your 5.5% 30 year fixed rate loan.

Home sellers use this approach to sell your home !

Like most things in life, what was in vogue many years ago comes back into vogue after many years of being dormant. This applies to clothes, music and real estate !

For the past 6 or 7 years, interest rates have been so attractive, what used to be called “creative financing” has had little play in the recent market.

Now that the market has slowed down, some of these “creative” techniques are coming back.

Owners are now helping the buyers finance the purchase by carrying back a note as part of the purchase price. This could be a first loan or even a second loan.

There is another way, home sellers can help buyers obtain financing without the need to carry paper.

By buying down the buyers’ interest rate, the home seller can still obtain all cash for his property and keep the sales price up while bringing the buyers’ monthly payment down. It does cost a home seller money to buy down the buyers’ loan rate, but as I will show below; the cost of the interest rate buy down to the home seller is less than the price reduction required to bring to buyers’ monthly payments down to the same level.

Let’s look at a $750,000 purchase with 20% down ($150,000) for a $600,000 loan.

A typical 30 year fixed rate loan at 0 points might be 6.125%.

The loan payment would be $3,646.

If the home seller would pay 1 point towards the buyer loan, the rate would be reduced to 5.625% and the monthly payment would be $3,454.

1 point would cost the home seller 1% of $600,000 or $6,000 so effective sales price would be $744,000.

If the home seller was to just reduce the price to $744,000 and the buyer got an 80% loan with no rate buy down, his payment for 80% loan of $3,616 – which is a $30 reduction in the buyer monthly payment – whereas with the 1% buy down, the buyers’ monthly payment is reduced $192.

What price could a buyer pay for the house without a buydown and keep his monthly payment at the buy down payment of $3,454?

At 6.125%, $3,454 would borrow $568,456 and with the same $150,000 down, a buyer could buy a house for $718,456.

With this example….one can see….a home seller can pay $6,000 towards the buyers’ interest rate – generating a net sales price of $744,000 while the buyer will have a payment on a $744,000 house equivalent to a home purchase of $718,456 without the buy down.

Effectively the seller is able to obtain $25,544 ($744,000 less $718,456) more for his house while making his home more affordable for the buyer. This creates a win win situation for both the home seller and home buyer.

Please let me know if you have further questions.

You may also contact Linda Lunsman at Princeton Capital for more specifics.

Middle income people are being squeezed!

David Shafer of Uncommon Financial Wisdon  wrote an excellent guest post on Jeff Brown aka the BawldGuy’s Blog  about how the current squeeze on middle income families occuring in our country should effect one’s investment decisions. Jeff is a San Diego real estate broker who specializes in finding good investment properties outside California.

I can certainly say we see this trend in the San Francisco Bay Area market. The upper income desirable communities in San Francisco and the Peninsula are doing just fine during our current economic slowdown where the less costly more affordable lower income areas are facing numerous foreclosures and dropping property values.

I generally advise my clients to purchase in the best area they can.

One can always change the house but one can not change the location.

After 30 years selling real estate on the San Francisco Peninsula, I know the neighborhoods inside and out; I can help point you in the right direction and help you evaluate what neighborhood will be best for you.

Good information for owners considering a short sale

Even on the San Francisco Peninsula, short sales do occur.

A short sale occurs when the existing loan balance on the property is greater than the value of the home.

The property is placed on the market and an offer is obtained which is accepted by the owner subject to the lender’s approval. The lender’s approval must be obtained before the sale can proceed and close. The lender needs to agree to accept less payment of an amount of money less than the current loan balance.

For example, there is a property with a $600,000 loan on it that is currently worth $500,000. An offer is obtained at $500,000 and then the offer is sent to lender for their approval. The lender does their own appraisal of the property. If you can convince lender property is only worth $500,000 in the current market then they may agree to take $500,000 now as full payoff of the loan instead of taking 6 months to foreclose on the property and then put property on the market and then sell for only $500,000 anyway and maybe less if the property or the market continues to deteriorate.

James Wexler, a real estate in the Scottsdale/Phoenix area has written an excellent post where he goes into detail how to make the short sale process easier and less time-consuming.

Fed leaves rate unchanged – what will happen with mortgage rates?

CNN reports that the Federal Reserve Board leaves its key short-term interest rate unchanged. By a vote of 9-1, the Fed decided to leave the rate at 2%. The sole dissenting vote was from the Dallas Federal Reserve Bank President, Richard Fischer, who voted for an increase.

 

It is unclear what this decision means for real estate mortgage rates but my sense is that it may signal mortgage rates are as low as they are going to be in the near future. I believe at this point in time there is a far greater chance mortgage rates will go up rather than down.

Mortgage Update

Linda Lunsman of Princeton Capital, a real estate mortgage lender, provides the following information: 

“JUST WHEN I THOUGHT I WAS OUT…THEY PULL ME BACK IN.” Al Pacino in the 1990 film, The Godfather III And if Bonds and home loan rates thought they were out of the days of volatility…they got pulled right back in, as last week brought daily price swings of almost historic proportions. For the week overall, fixed home loan rates improved by about .25%.

Forecast for the Week

	So if you love all the excitement, drama, intrigue and crazy volatility of late…you’ll love the week ahead, as it is loaded full with market movers. We’ll get the latest readings on the health of the manufacturing and housing sectors, but the main event will take place on Tuesday when the Federal Reserve announces its latest interest rate decision and Policy Statement. The Fed is expected to cut the Fed Funds Rate by another .75%. However, as we’ve seen following every Fed rate cut in the recent cycle, chances are very good that Bond pricing will worsen following the cut…which results in higher home loan rates. This happens because Fed rate cuts help to stimulate the economy, by making it less expensive to finance personal and business purchases…and this in turn fuels inflation, the arch-enemy of fixed return assets like Bonds, which home loan rates are based on. So a word to the wise – if you or someone you know has been ready to move forward on a purchase or refinance, there’s no time like the present. Be sure to get in touch with me, so I can explain your options and help plan a great strategy for your home loan.

for more……..

Mortgage Market Update

Linda Lunsman of Princeton Capital writes about a wild crazy ride (UPWARD) for mortgage rates last week.

 ”I’M GOING OFF THE RAILS ON A CRAZY TRAIN…” OZZY OSBOURNE And speaking of going off the rails crazy…Bonds and home loan rates just experienced one of the most volatile, crazy weeks ever seen, with fixed home loan rates rising by about .375% by the time the smoke cleared.

During the first four days of last week, Bonds underwent a crazy 313 basis point sell-off – more than they sometimes move over the course of six months. Why the insane action? Uninspiring commentary from Federal Reserve officials, renewed fears of inflation…and another very interesting story playing out last Thursday. Losses from The Carlyle Capital Group and Thornburg Mortgage decreased their capital to the point where their financial backers had asked for cash back in the way of a “margin call”. What does this mean?

Imagine a home that received a loan for 50% of the value…but a provision in the loan stated that under no circumstances could the equity fall below 50%. And the home would need to be appraised every day to evaluate this. If the home lost significant value, the lender would be entitled to an immediate payment to retain the 50% equity position. So if the home did indeed decline in value, the lender would make a call for capital to make sure their 50% margin of loan-to-value remains intact…hence the name margin call. If the homeowner had the cash to meet this call – all is well. But if the homeowner did not have the cash, the only way to satisfy the lender would be a sale of the home. And that is basically what Carlyle Capital Group and Thornburg Mortgage had to do last Thursday…they didn’t have enough cash on hand to meet their margin call, so they were forced to sell home loans that they were holding. This flood of mortgage paper on the market pushed Mortgage Bond prices lower…much lower.

for more…….
 

Increase in Conforming Loan Limit may be in Doubt

Inman News reports that the conforming loan limit agreement passed in the House of Representatives may run into opposition from Sentate Republicans.

Stay tuned for up to date information on this current legislative action.