Arn Cenedella

Archive for the 'Pending Legislation' Category

EPAToday interview with Henrietta June 2008 – Housing Market Update

Here is a clip of an interview I did at EPA Today with Henrietta on the housing market in June 2008.

I will be doing another market update this Thursday February 9.

Representatives from EPA Can Do will also be on the panel and the topic will be the real estate market and what can be done to keep more people in thier homes and out of foreclosure.

EPA Can Do is a non-profit organization that offers legal assistance to East Palo Alto residents.

Homeowners in trouble with their mortgage (Part 1)

If you are having trouble making mortgage payments or if you owe more than your home is worth, there is help available for you. Do not just put your head in the sand and hope something good will happen.

Generally a homeowner in distress has 5 options:
Loan workout or modifcation
Deed in lieu of foreclosure
Short sale
Bankruptcy
Foreclosure

Each of these options have serious legal, credit, and taxation ramifications. Before choosing any option be sure to consult with competent legal and tax advisors. Real Estate agents can help guide you through the process but are not qualified to answer specific legal and tax questions.

Here is a list of useful links to government and community based nonprofit organization
websites which include information on foreclosure prevention, loan modification, no cost HUD approved counseling services and other important information.

U.S. Department of Housing and Urban Development
http://www.hud.gov

U.S. Department of Housing and Urban Development
Guide to Avoiding Foreclosure
http://www.hud.gov/foreclosure/index.cfm
*Talk to a counselor

Federal Housing Administration
http://www.fha.gov

Hope Now
http://www.hopenow.gov

Internal Revenue Service
http://www.irs.gov

Search for: Mortgage Debt Relief Bill
Click on: Home Foreclosure Debt Cancellation

Click here for a list of NO COST HUD counselors

So get help if you need it. Try to make the best of a bad situation.

Get a team together to help you – attorney, CPA, and knowledgeable real estate agent.

They can help you conisder all your options and assist you in making the best decision.

Good news for Investors – Fannie Mae rule change

Until today, Fannie Mae had a rule that they would not buy mortgages from borrowers who had five or more real estate loans – or perhaps more accurately stated – mortgages from borrows that had loans on five or more properties.

Fannie Mae changed this rule today:

Per Fannie Mae announcement 09-02:

Multiple Mortgages to the Same Borrower
To support prudent lending for housing investment, Fannie Mae is changing our current limit of four financed properties per borrower. We will allow five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70-75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.

I have recently written several posts stating my belief this is a great market for first-time buyers or for first-time investors.

This Fannie Mae rule change will make it easier for investors to make additional real estate investments.

Due to price decreases and interest rate decreases, invesotrs can now buy property in certain areas of the San Francisco Peninsula with 20% down and have a break-even cash flow. This was impossible two years ago.

In more expensive areas, the numbers are also better than they were two years ago but will require 30% to 35% down.

I have contacts with real estate brokers throughout the country – Dallas, Raleigh, Austin, Phoenix, Indianapolis, Sacramento, San Diego, and the Bid Island. If you are looking for wloer downpayments with greater cash flow, these areas are worth a look.

And do not forget, you can use 401(K) and IRA funds to purchase real estate so if you are tired of stock market gyrations, this is an option to consider.

Property Tax Reduction

Both San Mateo County and Santa Clara County allow property owners to reduce there property tax amounts if the current market value of the property is below the current assessed value.

So if you have purchased your home within the past few years, you may qualify.

To be clear, property owners do not qualify for a property tax reduction just because their property value has dropped.

For example, if you bought a home 10 years ago for $500,000 and the market value one year ago was $1,000,000 and now it is $900,000; you can’t get your property taxes reduced since your current assessment is probably around $550,000 BELOW current market value.

The forms for both counties are listed below:

San Mateo County Tax Reduction Form

Santa Clara County Tax Reduction Form

You can file these forms via email, fax or snail mail.

Let me know if you need any help with these forms.

Any homeowner mortgage bail-out will not be fair and will not work!!!

I imagine we will hear quite a bit from Obama and McCain tonight about their plans to bail out homeowners who are “under water” – i.e. owe more on their mortgages than the property is worth – and those who can not afford to make the monthly payments required on these mortgages.

While I sympathize with homeowners who are under water and/or who can not make their payments, it is my belief that there is no plan that will actually solve the problem and that will be fair to ALL homeowners INCLUDING the large majority of Americans who are on time with their mortgage payments.

Let’s look at homeowner A and homeowner B. Both A & B purchased their home for $500,000 say 2 years ago. Homeowner A put $200,000 of their hard earned cash into a downpayment and took out a $300,000 loan. Homeowner B put ZERO money down and took out a loan for $500,000. Both bought the same house in the same development at the same time.

The market value of these homes is now $350,000.

Buyer A has actually lost $150,000 in equity – lost $150,000 of their hard earned $200,000 cash they put in to buy the property. But they are NOT under water – they now owe $300,000 on a house worth $350,000 AND they can still make payments on their $300,000 mortgage.

I am not aware of any plan that has been proposed to help homeowners like buyer A who have actually lost THEIR OWN MONEY as a result of their home purchase.

Let’s contrast this with buyer B.

Buyer B did not put ANY CASH of their own into the property so they have NOT LOST any of their money but this is the homeowner the US government is going to bail out assuming any homeowner bailout plan is passed. Of course, the overwhelming majority of Americans who pay their mortgages on time will pay for this bail out. Is that fair?

So let me understand this.

Buyer A who has actually lost money on the purchase get NO RELIEF while buyer B who puts no money into the purchase gets relief in the form of some sort of mortgage reduction to $350,000.

Does that seem fair?

My sense is to just let the market take care of it.

The lenders will foreclose, people will lose their homes (in most cases, they will not have lost any cash - most of these owners put zero money into the purchase or in other cases, many these buyers did put cash into to buy their homes years ago but since that time have taken out their equity in the form of a home equity loan), the lenders will foreclose and then sell the property at a loss. The lenders or the investors who bought these loans will suffer a loss – which is just the way it goes – they obtained very high interest rates on these loans because everyone knew they were risky loans and now their investments have gone south – so be it – that is the way it is – they took a risk in search of high profits and lost!

The buyers who purchased with no money down WILL NOT LOSE any of their own money and actually they will have just paid rent to live in their house for a few years.

Without a bailout, the US taxpyer will not be on the hook to bail out some homeowners and not others.

The other fact that most of these Washington DC politicians do not seem to get is that most of these homeowners in trouble could not afford the payments even if their mortgage balance was cut in HALF.

I imagine many my find me cold-hearted but honestly, I do not see any bailout that will work and that will be fair to ALL. Any bailout will only cost the US taxpayers lots of money and in the end, it is my belief that the bailout will actually help few if any borrowers.

Fannie Mae Freddie Mac loan limits have been increased !

Matt Carter of Inman News reports that both houses of Congress have passed an economic stimulus package which includes raising the conforming loan limit substantially. It is believed the new limit in California will be $729,750.

I think we will need a few weeks to let the “dust settle” before it becomes clear exactly how the Fannie Mae, Freddie Mac and the actual real estate lenders will handle this increase in the conforming loan limit.

It is clear that this increase will lower interest rates on mortgages up to the new limit which will benefit both home buyers and existing home owners who wish to refinance to obtain a lower interest rate or perhaps to get out of a loan that will adjust upward.

Bottom line this is good news for both buyers and sellers.

What do you think about agents taking listings off market and then putting them back on as new listings?

The FrontSteps a San Francisco Real Estate Blog reports the ABC Nightline may do a story on the the practice of some seller agents taking a listing that has not sold off the market and then putting the property back on the market so it shows like it is a new listing.

Many believe this practice is unfair to the buying public.
This issue seems to surface every few months.
In my mind, it is not as big an issue as many think.
If a potential buyer is working with a knowledgeable professional agent who knows the local market, that agent will know whether the property was on the market 1 month ago or 3 months ago or 6 months ago.
When I represent buyers interested in purchasing a house in a particular neighborhood, I make sure I send them ALL the market data for similar properties in that neighborhood typically back at least 6 months but often 12 months. I send them active listings, pending listings, sold properties and expired or withdrawn listings. So my buyer clients have the information they need to make an informed decision. So in my mind if seller agents want to play games with days on market, let them. These games will not fool knowledgeable buyers working with experienced professional agents. That being said, many mls services like REInfolink on the San Francisco Peninsula now have CDOM and DOM – cumulative days on market and days on market – so the data is readily available.

Julie Joyce a realtor in the Montclair Piedmont area has similar thoughts stating that buyers in the Bay Area are sophisticated knowledgeable consumers who throughly research market data before making a decision.

Marian Bennett a realtor in the Half Moon Bay area on the San Mateo Coastside gives several specific examples on how days on market can vary and what days on market really means.

Potential Change in Fannie Mae Freddie Mac loan limits

The House of Representatives has just passed a bill raising the Fannie Mae Freddie Mac loan limit from $417,000 to $625,000. The bill is on its way to the Senate and President Bush has indicated that he will sign the bill should the Senate pass it.

This is a potentially promising development for home buyers and home owners in high cost areas like the San Francisco Bay Area.

At the current time, conforming loans (i.e. those currently under $417,000) carry interest rates about 1% below jumbo loans (i.e. those currently over $417,000).

If this bill passes, it will be a big benefit to buyers who wish to borrow up to $625,000 or current homeowners who have existing mortgages up to $625,000 who wish to refinance.

Let’s take a look at what this may mean from a dollars and cents point of view.

Let’s take a $600,000 loan.

At 7%, the monthly payment for a 30 year fixed rate loan is $3,991.81.

At 6%, the monthly payment for the same loan would be $3,597.30 or $394.51 less per month.

In terms of qualifying for a loan, this $394.51 reduction in payment will reduce the income needed to qualify for this $600,000 loan by nearly $1,200 per month.

Smart Money provides further details on this exciting news. In addition, the bill passed by the House includes a provision for a 1 year increase in the limit to $729,750.

David Blockhous a long-time Los Altos resident and real estate agent with Coldwell Banker correctly points out that even if the increase in loan limit is passed it will not have a large effect on the Los Altos Palo Alto Menlo Park market since average prices are over $1.5M so even a $625,000 loan is well under 50% of the normal house price. Of course, the Los Altos Palo Alto Menlo Park real estate market is doing just fine. It is the lower price range that needs help. In the $600,000 to $800,000 price range, the proposed increase will help home buyers.

Marian Bennett living on the San Mateo Coastside and working as a Half Moon Bay real estate agent wonders whether these proposed changes will be a long term benefit to our economy. Marian also wonders how much of this activity is politically motivated. Per the RE Guru: Yes Marian it is ALL politically motivated – just about everything that goes on in Washington is. Most if not all of those Washington politicos sit around and yak yak yak – sit around and do nothing – and then when a problem hits – look for someone to blame – look to profit from it politically – and then try to get on TV and talk about how they feel the pain of the common man and woman while being driven in their limo to a five start restaurant which we the taxpayers pay for. So typical……….

 OTHER SOURCES OF INFORMATION ABOUT THIS ISSUE:

The Office of Federal Housing Enterprise Oversight indicates that nearly 50% of jumbo mortgages are originated in California. This office appears to be against passage of the new bill.