Getting Safely Out Of ARMs Way

Here’s another great way to protect yourself from the current meltdown in the housing market. If you own a home and have an adjustable rate mortgage (ARM) set to adjust higher you need to:

• Know your credit score.
• Know the contents of your credit report.
• Clean up your credit report and remove inaccuracies to maximize your credit score.

With the recent changes to the housing market the lenders have made changes to underwriting guidelines. Underwriting guidelines are based on your credit. When underwriting guidelines get more stringent it is the people with the better credit that continue to qualify for good home loans.

READ MORE>>

Are We On The Rebound?

While the housing market continues to decline, there is a broad consensus among economists that a rebound will occur in 2008.

According to the ECONOMIC FOCUS, Volume 11, Issue 24 for the week of June 22nd, inorder for a rebound in 2008 the housing market must first bottom out. So, simple logic dictates that if we are a few months away from the rebound then we must be even fewer months away from the bottom.

“I still think we’re not at the bottom in terms of housing construction,” says Mark Vitner, a senior economist at Wachovia Corp. “Sales have to bottom out first. …We haven’t seen that yet. And then construction starts will probably bottom out nine months after that.”

If this holds true, a decline in new home construction should indicate that we are months closer to a bottoming out moving us closer to a recovery. Further, if there is a nine month lag in construction starts and if the industry will start its recovery in 2008 then simple math would place the bottom sometime prior to 2nd Quarter 08.

• May’s numbers were mixed, but in line with expectations, and reflected weakness in the South and West, offsetting construction gains in the Northeast and Midwest. The positive message is that numbers are mixed and not down across the board.
• Construction of single-family homes dropped 3.3 percent in May while apartment construction rose by 3.1 percent, another mixed signal. Historically, a hot housing market draws buyers from the rental rolls and causes a decline in apartment starts. This reversal indicates market corrections at the beginning of the manufacturing process, and as new home inventories shrink, demand will build in the coming months.
• Finally, interest rates remain flat. The Fed has held their rates steady for nearly a year with no indication of sharp rises in the near future. The last thing the Fed wants to do is take the remaining breath out of housing with higher mortgage rates.

Perhaps the soothsayers are correct and we are nearing the bottom and a recovery in the housing market is near.

Top 10 Markets With Highest Mortgage Risk, Summer 2007

The PMI Group has come out with their summer analysis of the metropolitan regions that have the highest risk of housing losing it’s value in the next two years. The Inland Empire region of Southern California is leading the way followed closely by Phoenix and Las Vegas. All 3 of these regions experienced huge housing gains during 2004 – 2005 so expectations of a flat or negative period are not expected.

PMI Group is one of the largest underwriters of Private Mortgage Insurance so it is in their best interest to know and understand markets and calibrate their PMI rates to counter the risk that is faced.

Top 10 Markets With Highest Mortgage Risk, Summer 2007

1. Riverside-San Bernardino-Ontario, CA (652)
2. Phoenix-Mesa-Scottsdale, AZ (646)
3. Las Vegas-Paradise, NV (614)
4. West Palm Beach-Boca Raton-Boynton Beach, FL (607)
5. Los Angeles-Long Beach-Glendale, CA (586)
6. Santa Ana-Anaheim-Irvine, CA (577)
7. Oakland-Fremont-Hayward, CA (572)
8. Orlando-Kissimee, FL (563)
9. Sacramento-Arden-Arcade-Roseville, CA (560)
10. San Diego-Carslbad-San Marcos, CA (555)

Subprime Lending Fallout Goes Upstream to Take Down Two Major Hedge Funds: What does this Mean To Real Estate Investors?

By: Michael Cook

Two major Bear Stearns Hedge Funds face foreclosure due to their significant exposure to the subprime lending market. While this does not fall under the category of real estate investor, I spent last summer working for Bear Stearns and interacting with many of their hedge funds. Based on the very limited details of the stories out now, I cannot be certain if I have worked with these two particular funds. I can be certain; however, that it would not be a good time to be in the mortgage space at Bear Stearns.

In my three months at Bear Stearns, I met some of the smartest people in the businiess. While this is not an advertisement to work at Bear Stearns, I think they are a very well run organization with smart people. This of course begs the question, how could something like this happen to such smart people? Furthermore, with all of the subprime lending issues out there, what does this mean for borrowers who are less creditworthy?

Simply put, in my humble opinion, the subprime market will be doomed for some years (at least five or more). Since I know this site is filled with a ton of very smart mortgage brokers, I will outline my reasoning.

Consider the following information:

1. Many subprime lenders have filed for bankruptcy
2. Major buyers of Mortgage Backed Securities (like Bear Stearns) are having issues with subprime mortgages
3. Despite what the National Association of Realtors says, the housing market seems to be taking a slow and steady turn for the worse
4. Major Banks have tightened their lending policies

Let’s take an example of a typical transaction before the subprime fallout. A low creditworthy borrower applies for a subprime loan. Some intermediary or mortgage broker, supplies them with the best loan for them from either a bank or a conduit lender. The bank/conduit lender then sells the loan to an investment bank (like a Bear Stearns or Goldman Sachs) to free up more money to lend and to remove the risk off their books. Finally, the investment bank packages this loan in the form of bonds that investors looking for high rates of return are eager to purchase. While this seems like a complicated cycle, it actually works quite smoothly as long as there are investors looking to buy these loans.

Now reflecting today’s market conditions, the picture has a lot more holes. When the low creditworthy borrower applies for a subprime loan, many of the intermediaries no longer exist. Even if they try to go to a mortgage broker, they will be hard pressed to find a lender. If they do find a lender, this lender will have trouble moving the loan to an investment bank. Investors, who have been burned by heavy defaults ( i.e. Bear Stearns Hedge Funds), will not be looking to buy high yield bonds backed by subprime loans. Additionally, those who are looking will expect to pay deep discounts.

To put the final nail in the coffin, consider areas like California where subprime lending was a driver of the housing market. With very few alternatives, a lot of buyers will be sucked out of the market. Additionally, these buyers will probably not be back for a while. For those buyers expecting a quick rebound, think again. Until prices get to levels buyers deem affordable (meaning they can afford the down payment), a recovery simply cannot happen. I would love to hear from others who have different opinion, but as an investor, I am looking into apartments more now then ever. If buyers cannot afford to buy, they will have to rent.

The Bond & Home Loan Markets Are In Turmoil

Is Your Financial Future Secure?

Interest rates, including those tied to home loans, soared sharply last week across several markets, alarming consumers and investors alike. Let’s examine what caused rates to increase, how it could impact you, and what you should do about it.

The sharp rise we saw last week was the result of an economic shift in the global market. Two different foreign central banks, similar to the Federal Reserve in the US, increased their short-term interest rates in an effort to fend off inflation. The first increase took place in Europe, with New Zealand following soon after. The results, while dramatic worldwide, were particularly so here in the United States, where interest rates increased across the board.

This had an immediate impact on those seeking home financing, as rates rose to the highest levels seen since last summer. While interest rates are currently under 7.00% , they may not remain there for long. As past years have demonstrated, a rapid rise in interest rates sometimes serves as merely a pre-cursor to even higher rates in the coming months.

Could we see a repeat of 1993-1994, when 30-year fixed interest rates rose from 6.69% to 8.23% in just five months? (These figures are according to HSH Associates.)

If you are considering a new home purchase or a refinance, act now. Waiting could cost you significantly. If we were to experience a similar increase on a mortgage amount of $250,000, the monthly payment would increase by over $263 a month.

While no one can predict exactly what will happen, experts in the bond arena have expressed concerns that rates will continue to increase throughout the rest of the year. Some believe that the Federal Reserve will be forced to raise interest rates prior to year end. This would increase interest rates for existing Home Equity loans, credit card loans, and potentially existing ARMs.

Please contact us as soon as possible. We will provide you with a Free, No Cost Analysis of how we can improve your financial position today and save you from a potential increase in monthly payments.

Property Tax Facts

When you buy a house, lenders allow you the option of impounding your taxes and home owners insurance by including them in your monthly payment every month or paying them separately twice a year at specified times on your own. Either option you select, you’ll still be paying the same amount in property taxes annually.

Most people don’t impound their taxes and insurance because of money. When you choose to impound you pay up to 6 months of taxes up front in your down payment, depending on what time of year it is. By doing this, the money is already there when the upcoming tax bill comes to the lender. Each subsequent bill can be paid with the cumulative money that you send every month along with your mortgage payment specifically towards your impound account. When given the choice, most don’t choose to part with the upfront money to set up an impound account.

The problem, especially for first time home buyers or buyers on a strict budget, is they don’t realize- and often experience financial difficulties when they find out- that in addition to their normal annual property tax bill, the first year they will be assessed a Supplemental Tax. That Supplemental Tax Bill can often total up to a few thousand dollars in addition to their normal tax bill. This can catch a borrower off guard and be enough to start that borrower on a downward spiral leading to late mortgage payments and worse. Some borrowers may never recover because they didn’t know to plan ahead.

The moral of this story: Experience does not cost…it pays! Work with an experienced Realtor. Ask questions. Knowledge is Power. Know the ramification of your options so you can plan ahead. We believe that if we do a good job coaching our borrowers and following up with them, they will be in better shape to handle what’s coming their way and our clients appreciate that. We want to keep our clients for life – both as their real estate and financial advisor.

Don’t Let Your Lender Run Away With Your Equity!

Say you, as the Borrower, fall behind on your Mortgage. You need to catch your delinquent mortgage amount up to ward off going into default and eventually foreclosure.

Did you know that before foreclosure occurs, a repayment plan can be proposed to your mortgage holder/lender to satisfy the amount owed?

A Loss Mitigation Specialist can propose several plans or strategies to the lender to put the loan back in good standing.

Lenders always want to avoid the foreclosure process when at all possible. It’s much more equitable if a “meeting of the minds” can occur and an agreement made on a repayment strategy in which you, the homeowner and your lender can benefit.

Loss Mitigation can prevent your home from going to foreclosure. This solution to your mortgage problem is based on your ability to pay, not your credit score.

KEEP READING>>>>

Buyer’s Best Interest . . . Rates That Is!

In researching the market, it may be a wise move for all you Buyers take a few minutes to have lenders re-qualify them. In the last few weeks we have seen mortgage rates jump as much as .75%. This can change a Buyers whole financial picture by greatly diminishing his borrowing power.

Re-qualifying is a great way to ensure you aren’t disappointed once you fine a home that you could have afforded last week; but this week’s interest rate has priced you out of the market for!

If you’re out looking to buy a home, securing a rate lock commitment from your lender is vital.

• Identify when your rate will expire
• Close timely
• Request an extension

Rates locked two weeks ago are golden in today’s market. Be sure the mortgage professional you are working with is keeping a close eye on the bond market. A bond-savvy mortgage professional can spot price changes before lenders announce them. Locking ahead of an interest rate hike can save you thousands of dollars over the life of your loan.

You Tube’s Even Taught Me Some New Tricks!

FOR SALE

5486 Pepper Tree Pl

Situated High in the Hills of Alta Loma

Enjoy Elegant Living with a Distinct Equestrian Flavor

Flip This vs. Flip That

The Prey: Uninformed everyday people trying to get rich quick.

The Bait: Infomercials and Reality Shows showing huge profits too good to be true.

The Catch: It’s easy for a flip to become a very expensive flop.

Stop letting these vultures prey on you with promises of riches. PAY ATTENTION & PASS THIS ON: REAL ESTATE INVESTING IS NOT AS EASY AS THEY MAKE IT LOOK! AS A MATTER OF FACT, MOST OF WHAT YOU SEE IS NOT EVEN REALLY WHAT IT IS!

Every where you look, someone is trying to sell a bill of goods to you about how easy it is to find a property, fix it up and get rich quick. Two popular shows come to mind. A&E’s, Flip This House program really dug into problems with contractors, negotiating prices, and time crunches. TLC’s Flip That House follows the transformation of a different house, each with its own “flipper/host” with step-by-step renovation from the initial purchase to plans for giving it the necessary “facelift” to re-sell.

Flip This was a one hour show vs. Flip That being 30 minutes — the differences between the two programs are very subtle. At the end of each of the shows episode the results of the house-flipping exercise is revealed, along with a new sales price to re-sell showing a huge profit.

These shows romanticize the act of rehabbing properties and selling them for profit. The reality of this reality is that it’s not as easy as they make it sound, even for a seasoned investor. What they don’t show is how easy a flip can become a flop!

On an episode of A&E’s popular reality series Flip This House, Sam Leccima, a self proclaimed successful Atlanta real estate investor sits in front of a run-down house and calls buying and selling real estate his passion.

Flip This House depicted him buying, refurbishing and reselling several Atlanta-area homes for profits of $77,000 and more. But Leccima, who is currently under investigation by the Georgia Secretary of State’s office for securities fraud, is nothing more than the latest scam artist caught preying on victims with promises of easy riches. His real estate license was revoked by the Georgia Real Estate Commission in 2005, citing that Leccima “does not bear a good reputation for honesty, trustworthiness, integrity, and competence.”

It appears Leccima’s true passion was a series of elaborate hoaxes and scams that included faking the home renovations shown on the cable TV show and claiming to have sold houses he never even owned.

His friends and family were presented as potential homebuyers and “SOLD” signs were slapped in front of unsold houses. The home repairs – the lynchpin of the show – were actually temporary patch jobs designed to look good on camera. One scammed Investor attended what was billed as a wrap party at one of Leccima’s homes. But when A&E Television Networks aired the party on Flip This House, it was presented as an open house at where a buyer expressed interest in buying the property. Sound familiar? How many times have we seen this on shows!

While not acknowledging his televised renovations were staged, Leccima didn’t deny it. Even though Leccima suggested that A&E and Departure Films, the production company that makes the show, knew exactly what he was doing, they got busy denying any knowledge of wrongdoing. The cable network pulled reruns of Leccima episodes off the air and wiped his mentions from its Web site when they learned of the claims against him. “We are dismayed to learn of these allegations,” read a statement issued by the network. “A&E Television Networks is not a party to any of the transactions shown in Flip This House and has not received any formal complaints about the properties or sales.”

“Ask anybody who works in television how a reality show is made and you’ll find that ours was a very typical approach,” Leccima said in a telephone interview.

Atlanta FOX 5 has this footage.