Refinancing with Obama’s Plan

Southern California
Image via Wikipedia

For most of us in Southern California, the wonderful new mortgage rates of 5% and below are unattainable dreams. The reason? You can’t refinance if you owe more than your home is worth. In fact, traditional refinances are only for those who have at least 80% equity in their homes. With home values dropping like stones around here, that’s not easy.

Obama’s recently announced Housing Stabilization Plan is changing all that. The plan, announced last week, is specifically targeting those homeowners who are making their payments and attempting to be as responsible as they can. It’s difficult, though, to continue making the $3000 a month payments on your $430000 mortgage when your home is worth only $330,000. It’s tough paying that 7% or 8% rate, looking forward to the balloon in a couple of years, when you know that 5% or 4% rates are currently available.

Details of the new plan will be announced next week, sometime after March 4th, but we do know a few parts to the initiative. It will be for owner-occupied properties. The plan specifically eliminates “speculators” or “flippers” and targets owner-occupied properties. Word is, though, that properties that were primary residences and then turned into rentals as the owner-occupant moved into a better home may be considered.

Beyond this, we know that the plan will allow up to 105% of loan to value instead of the traditional 80%. The example given in the white paper from the White House is the following: A family purchased a home for $260,000with a 30-year mortgage of $207,000 at 6.5%. Today, the family owes $200,000, but the value of the property is now $221,000. They can refi with the new plan at 5.1% and save $2300 per year.

And we know that the first mortgage is what will be used to make the determination. Rates of 3% and 4% have been mentioned. The Obama administration thinks that about 4 to 5 million homeowners might be helped with this plan.

Of course, refinancing means getting a new loan. The borrower must be current with his existing mortgage, have good credit and have the income to qualify for the new loan. Also, as with any refi, costs do accrue for appraisal, title insurance and other closing costs, most of which can be added to the balance of the loan.

Can’t qualify for a refi? Not to worry–maybe you can get a loan mod. Stay tuned. That’s for the next post.

Reblog this post [with Zemanta]

Homeowner Stability Initiative=Obama’s Housing Plan

We in these hard-hit states with many foreclosures [CA, FL, NV, AZ] have been waiting for this plan and now we have it. It’s not what we expected, at least not what I expected, but what creative ideas on how to handle the foreclosure crisis and not reward the foolhardy or the fraudulent.

The Obama Homeowner Plan has three distinct parts:

1. Help those who are CURRENT on their mortgages to refinance. They do NOT  need to show a hardship.

2. Help for those who are BEHIND on their mortgages get loan modifications. They DO  need a hardship, but that is broadly defined.

3. Help for HOME BUYERS by providing tax credits and low interest rates.

The main complaint that stable homeowners, especially those in areas, like ours, hit hard by foreclosure is that their tax payer dollars are going to “save” the imprudent, the insolvent and the extravagent. This plan tries mightily to avoid helping those kinds of borrowers. When introducing it, President Obama was very determined to point out that this does help even good payers who have never missed a payment. “Every foreclosure reduces neighboring home values around 9%,” he said, “and this will help prevent foreclosures.”

I do hope he is right. I do know that nationwide foreclosures are up 81%  over 2008 and 226% over 2006. This crisis hits about every state with the BIG FOUR, California, Nevada, Florida and Arizona, leading the plunge.  It’s also estimated that by 2012 8.1 million homes or 16% of all homes will be or have in foreclosure. That’s frightening.
foreclosure-next-exit

In sum, I don’t know whether this plan will work. I can see already that more people, even those upside down on their home value will be able to refinance as this plan makes it more palatable for the lenders. If they can’t refinance, they can get a loan mod more easily.  Failing those remedies, the plan even smooths the way for short sales which can take forever.

Republicans: Stuck in the 1950s

Lately, we’ve heard a lot of blather from Republicans about nationalization, socialism and other  formerly hot-button words.  Boy, talk about stuck in the 50s…These guys are so old they actually think these words still have power. Do they really believe that voters born in the 70s and later react with horror to the gasp, urgh “Socialism”…These kids haven’t grown up with bomb shelters or air raid drills. They don’t automatically call China, RED China,  or cringe with disgust at the mention of RUSSIA. All of that is so old-school.

From what I’m hearing  the Republicans in the US Congress, both the House and the Senate, are proud to say they didn’t vote for the Stimulus about to be signed into law by President Obama.  I’ll bet they’ve got their hands out to rake in the dough, though.

California Senate Chambers
Image by Aquafornia via Flickr

Here in California the whole state, the 10th largest economy in the world [so I’ve heard anyway, could be wrong about that–it is very big] is about to literally go down the tubes because we have to have 2/3 vote of our representatives  to pass a budget.  Our dear elected ones just can’t seem to get it together. Anyone with eyes can see we need to raise taxes–but the minority party Republicans resist. And, if their ideological stance against taxes means that taxpayers don’t get their tax refunds, construction projects get shelved and workers laid off, well, so be it…That’s just too bad. They personally don’t expect to suffer so why not stick it to those who will?  They are probably Democrats anyway.

Then, today’s N.Y.Times carried a story pointing out that Republicans in Kansas are pulling the same trick, attempting to strong arm Governor Sibelius into allocating funds to their projects which usually involve giving business more breaks and helping out the already rich.

What is it with these old goats? Why are they getting in the way of everyone else? Time has passed them by. Now they seem to want to stick it to the younger generation.

You know what is happening in California is actually sickening. Most of these obstructionist legislators are really far right-wing.  In fact, they are for the most part far to the right of their constituents. It is shocking that they can paralyze the whole state. Apparently, the few Republicans who are on the fence now realize they have power and are using it to extort more from the Democrats and the Governor who apparently has no friends in his own party.

We absolutely need to get in line with the rest of the states and pass our state  budget with a simple majority vote of our representatives. It’s time to end this charade of a budget agreement that we must go through every year. The people of California have had enough of the childish tactics of our representatives. If they can’t agree on a budget, they should all be impeached. Right now.

Reblog this post [with Zemanta]

L.A. County: December 2008 Home Values

Seal prior to 2004 lawsuit threat
Image via Wikipedia

You guessed it–home values are still going down. December home sales for L.A. County show a median home value of $320,000, down from the $340,000 of november and 36% lower than November of 2007. Of course, neighboring counties are doing worse, some by a wide margin, but that is hardly cause for joy. There’s no doubt we’re all in this together.

As always, some areas are in worse shape than others. By now, we expect to see huge price drops in North L.A. County and we surely do: Lancaster shows medians of $115,000 and $116,000 [93534,93535], representing drops of 50% and 38% respectively over last year, while 93536 shows a median of $199,000, 35% less than last year. This is grim news as it most certainly means foreclosures and short sales for many. Those that remain must somehow deal with a loss of up to 50% of their home’s value over last year. Sadder still is the story in Palmdale where one ZIP[93591] has lost a spectacular 74% of its median home value in one year to arrive at a crushing $65,000.  Other Palmdale areas show losses of 46% to a median of $116,000 [93550]and 35% to a median of $225,000 [93551].

Other areas hard hit by the home value drop include many areas in Los Angeles City, including Hawthorne, Watts and Compton along with others. In our own area, Pomona continues to lead the way down with a 50% drop in 91768 to a median of $173,000, 41% in 91766 to a median of $223,000 and 38% in 91767 to $216,000. Other large drops occurred in Baldwin Park [42% to $235,000], South El Monte [41% to $270,000], Whittier 90602 [47% to $318,000], but, for the most part, the San Gabriel Valley‘s median home values are higher than the county median and have dropped less.

San Dimas, for instance, shows a 14% drop over last year to $465,000, though that is based on very few sales, itself a poor harbinger for the future. Arcadia dropped about 24% to a median of about $750,000 across its two ZIP codes. Monrovia is down 11% to $478,000, again well about the County median.  Covina has lost around 20% to a median in the high $300,000s.  Walnut has actually gained value to a median of $634,000. Guess you’re doing something right, Walnut. Glendora is down a bit over 20% in both 91740 and 91741 to medians of $343,000 and $419,000 respectively. La Verne is down 6% to $465,000 which represents very good value. Buy in LaVerne. Claremont is down a measly 2% to a median of $525,000.

Many of these medians are based on very few sales, so we can expect them to change, possibly radically, inthe near future. South Pasadena, for instance, now is up 11% to a median of $1,200,000, but that is  based on only 3 sales for the whole month. Condo sales have been abysmal, as expected, and many median values are based on 1 or 2 sales. The median condo price in L. A. County is $290, 000, down 25% over November 207. Sales, though, are way off.

It’s clear that the pace of decline is slowing and the median for L. A. County is dragged down by horrendous numbers in some parts of the City of L. A. as well as Palmdale, Lancaster and the high desert areas  like  Littlerock [down 51% to a median of $140,000]. Established suburbs, such as those in the San Gabriel Valley, with good schools, well-managed city governments and alreay-built and paid-for infrastructure are doing much better than outlying districts. It is also true, though, that if our Current Recession deepens cities will be less able to maintain these infrastructure amenities in the face of shrinking  tax base  from closing auto malls, lost retail outlets and rising unemployment.

Statistics provided by MDA DataQuick and are printed in the L.A. Times.

Reblog this post [with Zemanta]

Buyer Stimulus

Early reports about the massive Stimulus Bill due to be passed today indicate that home buyers will get a bit of a boost.

FIRST-TIME HOME BUYER CREDIT First-time home buyers are eligible for a refundable tax credit equal to 10 percent of the purchase price of their home, up to $8,000, if they made the purchase after Jan. 1, 2009, but before Dec. 1, 2009.  A first-time home buyer is traditionally defined as someone who has not owned a home in the past 3 years, no matter how many homes owned before that date.

first-time-home-buyer

Unlike a similar credit that Congress provided last year, buyers  don’t have to pay this one back over 15 years. The new credit, however, does phase out for individuals with incomes over $75,000. Also, you forfeit the credit if you sell the house within three years.  In other words, no home flippers, please.   Of course, this credit is for owner-occupied homes only.

Coupled with the now-permanent rise in the cap rate of FHA loans to $625,000, this does propel buyers into the market.  FHA loans offer a variety of options for the home buyer, and,  prime among them is that 3.9% down payment.  Some of the savor there is reduced by the high mortgage insurance amounts necessary for these federally-backed loans, but  FHA allows  sellers  to  contribute up to 6% of the loan amount for these and other costs.

Today, mortgage rates for 30-year fixed, are hovering around 5%, among the lowest in 50 years, and home prices are still declining, albeit more slowly.

If all this doesn’t point qualified buyers in the right direction–what will? Today’s buyer, especially in Southern California, is  unlikely to get a better deal in his or her lifetime.

Reblog this post [with Zemanta]

Loan Restructuring v. Loan Modification: What’s the Difference?

Cover for the first Zombie-Loan manga volume
Image via Wikipedia

Mortgages and foreclosures, never popular topics, are dominating the news lately. Gradually, we are learning ways to halt or at least slow this onslaught of foreclosures ravaging neighborhoods and ruining lives.  One stop-loss method is loan modification. Typically, loan mods are for homeowners who are behind in their payments and are facing  foreclosure. In fact, I’ve even done a previous post about Loan Mod Myths.

Yet, loan mods do work. Here’s who will benefit from a loan mod:

Loan Modification Eligibility

  • Minimum of 12 months elapsed since loan origination date.

  • The mortgagor [homeowner]  most be delinquent (3 full payments due and unpaid) or more.

  • Default due to a verifiable loss of income or increase in living expenses.

  • The Loan Modification mortgage must remain in the first lien position.

  • Loan may not be in foreclosure when executed.

  • Owner occupant, committed to occupy property as primary residence.

  • Mortgagor has stabilized surplus income sufficient to support the Loan Modification mortgage.

  • Does not have another FHAinsured mortgage.

In some cases, the banks today will modify loans for those who are less than three months late. And, banks will modify investor-owned or non-owner occupied. Banks do require financial information, such as pay stubs and tax returns, but credit scores are not an issue.

What this all means is that you must have enough income to support the new payment. Banks will not modify your loan if you cannot show you have the income to sustain the new, lower, payment.

If you can’t show the income, then the best option for you is probably a short sale which will do less damage to your credit than a foreclosure and allow you to purchase another home within 2 years, provided, of course, you’ve paid your debts during these years and you can qualify for a loan.

What about those who are not behind in their payments?

For those current in their payments, Loan Restructuring , may be the answer. If you have not missed payments or perhaps find yourself owing more than your home is worth, you may be able to  redo your  loans without having to bear the cost of refinancing.

How is this possible?  Who is eligible for loan restructuring? Essentially, if you do not fall into any of the loan mod categories, then you may be eligible for a loan restructuring.

Loan Restructuring Criteria

  • Homeowner may be current in mortgage payments or  have missed a payment or two
  • Mortgagor does not have to reside in the property; investment property qualifies.
  • Mortgagor may receive a reduction in principal, interest and a cash refund.
  • No “Hardship” letter is required.
  • Existing income, debt, credit scores  do not matter.

A loan restructuring may enable you to reduce your principal, especially in areas where property values have fallen drastically and many owners are thinking of “walking away.” How exactly can this happen?

In seeking to restructure a loan, the homeowner re-examines the loan at the point when it was originated.  Attorneys or real estate brokers, like myself, working with attorneys search the documentation of the loan to see if it was  predatory in nature or, if not, if it  did not fully comply with federal Real Estate Settlement Procedures Act [RESPA] requirements. If a flaw is found,  the original loan is voided and restructured (not modified). This allows the homeowner or his representative  to negotiate with the lender from a position of strength. If the loan was “bad” from the beginning, why modify a loan to the advantage of the lender? Restructuring is clearly the best option for the homeowner.

If the loan is found to be predatory or in violation of RESPA, the homeowner may also be eligible for a refund of all or part of the original closing costs.


As we have all heard, banks packaged our mortgage loans into so-called “exotic” financial instruments and sold them all over the world. It’s these mortgage-backed securities and credit default swaps which are the original cause of our Current Recession. In their bottomless greed, banks sold and resold mortgages, slicing and dicing them into parts which they cannot now put back together. It is these mortgages which are great candidates for restructuring.

If you think you might qualify for a restructuring, call or email me and for a small fee we can find out. If your loan is not eligible for restructuring, the fee will be returned.

Reblog this post [with Zemanta]