The end of January’s Fed announcement was very favorable for mortgage rates. This week’s mixed economic data, Treasury auctions, and news from Europe had little influence. As a result, mortgage rates ended the week lower.

The forecasts from Fed officials for the fed funds rate contained some major surprises for investors. Fed officials now expect that economic conditions will allow the fed funds rate to remain at exceptionally low levels until at least “late 2014″.Prior statements extended the expected time frame only to mid-2013. In addition, comments from Fed Chief Bernanke suggested that Fed officials would like to see stronger economic growth, and they are open to the possibility of additional Fed easing. Many investors think it is likely that the Fed will announce additional MBS purchases at a later meeting. The expectation for a low fed funds rate and the possibility of additional Fed purchases of mortgage-backed securities (MBS) increased demand for MBS, which resulted in higher MBS prices and lower mortgage rates.

The most recent release of Gross Domestic Product (GDP) showed an increase at a 2.8% annual rate during the fourth quarter of 2011, which was a little below the consensus forecast, but up from 1.8% during the third quarter. Early estimates for the first quarter of this year are for a slower growth rate. The long-run average growth rate for the economy is generally considered to be around 3.0%, and the economy usually grows at a faster than average rate following a recession. Given that the economy is growing below its potential and that inflation remains tame, the Fed’s expectation that monetary policy will remain very stimulative for a long time is understandable.

CALL PAM PARTON 760-580-1615     OR                     JOANNA WOOLLEY 760-580-1630

We would love  to help you with your home sale or purchase in North County San Diego, give us  a call at any time so we can help you get the process started!

Content Courtesy of John Yeager, Summit Mortagage

GOOD NEWS…THE ANSWER IS YES!

  This is such an important question to ask yourself if you are going through a Short Sale.
So many people feel that they will never recover from this type of hardship.  Not to worry, there is hope!

FHA Guideline:

• If the borrower/homeowner has a short sale and they are current on their payments prior to the short sale then they are still eligible for FHA financing subject to underwriter discretion.
• If they are in default at the time of the short sale, then they must wait 3 years, exceptions can be made for extenuating circumstances.  These only apply to FHA and VA loans, when it comes to the rules for an exception.  Extenuationg circumstances are nonrecurring events that are beyond the borrowers control that resutl in a sudden, significant, and prolonged reduction in inclome or a catastrophic increase in financial obligations.
• After 3 yrs: Max LTV 96.5%

Conventional:

•  If the borrower / homeowner had a short sale they must wait a minimum of 2 years to repurchase
• After 2 years: max LTV 80%
• After 4 years: max LTV 90%
• After 7 years: max LTV is based on product

VA

• If the borrower / homeowner had a short sale they must wait a minimum of 2 years to repurchase
• After 3 years: max LTV 100% upon VA eligibility

If you or any one you know is in need of more information regarding Short Sales, please contact us right away.  We are certified SFR, Short Sale Foreclosure Resource and have had 100% success helping our clients navigate through the short sale process.  We can help you too.

Pam Parton & Joanna Woolley
760-580-1615 or 760-580-1630

USDA Rural Housing Loan Program Available For Hidden Meadows

Peaceful Golf Course Views

Now it can be easier than ever to purchase this charming Golf Course home located in the coveted Hidden Meadows Community. 

There is a little known  government loan program called USDA Rural Housing loan program that helps eligible home buyers purchase homes in rural areas with

• NO MONEY DOWN
• NO PRIVATE MORTGAGE INSURANCE REQUIRED
• SELLER CAN PAY UP TO 6% IN CLOSING COSTS

We have recently discovered that this property at 10973 Meadow Glen Way in Hidden Meadows, qualifies for this USDA Rural Housing Loan program.

For more information and to see if you or someone you know might qualify for this very special loan program click here

 If you know of anyone that has thinking about buying a home, but thought that they were not quite ready yet, give us a call, lets talk to see if this would work for them.

Pam Parton & Joanna Woolley
760-580-1615 or 760-580-1630

SOME affluent homeowners have been walking away from a second home or investment property that is worth less than what is owed on the mortgage, even though they can still afford to make the payments.

But dumping that beach condo or country cottage, or even a home bought for an adult child — a practice known in the industry as a “strategic default” — is not the same as discarding a poorly performing stock or bond. Among the lingering effects is wrecked credit that can prevent the homeowner from getting another loan of any kind for 7 to 10 years.

In July, a study by researchers from the European University Institute, Northwestern University and the University of Chicago concluded that the strategic default trend was “large and rising” among homeowners with an equity shortfall of $100,000. As of last March, it said, strategic defaults accounted for 35.6 percent of all foreclosures, compared with 23.6 percent a year earlier.

“I’m increasingly seeing people who are middle class or higher on the pay scale coming to the conclusion that ‘I may be able to carry it, but should I?,’ ” said David Shaev, a bankruptcy lawyer in New York who assists homeowners in distress.

“But the question is, can the bank come after you, and if so, what is your position? What is your liability?”

The answer depends largely on where the property is.

In “recourse” states, a lender can come after you, and usually other assets like a primary residence, for the full mortgage amount. In “nonrecourse” states, a lender agrees to accept whatever the property fetches at a short sale, foreclosure sale, or a deed-in-lieu, in which the property is taken back but not formally foreclosed on, and generally can’t sue for the full loan amount. Florida, Connecticut and Arizona are among the nonrecourse states, while Colorado, Maine, New Jersey and Hawaii are recourse states.

There is a third category of state, called “single-action” or “one-action,” which allows the lender either to foreclose on the owner or file a civil lawsuit for the full loan amount. New York, California and Idaho are in that category.

Even in a nonrecourse state, however, those homeowners who opt for a strategic default on a previously refinanced property may not be protected from lenders, because the mortgage in such a case was not accorded for a first purchase, said Philip Faranda, a mortgage broker for J. Philip Real Estate, in Briarcliff Manor, N.Y.

When home-equity loans are involved, he added, it gets more complicated. In nonrecourse states like Florida and Connecticut, the lender cannot sue to collect any home-equity loan taken out on the property. But in nonrecourse states like Arizona and California, the lender can still sue for repayment of a second mortgage or line of credit.

Filing Chapter 13 bankruptcy protection, in which the homeowner arranges to pay off debts at lowered amounts over a maximum of five years, is typically the only way to avoid being on the hook for the second loan, mortgage experts say. Affluent homeowners who strategically default on a second home often don’t qualify for Chapter 7 bankruptcy, which leads to liquidation but limits eligibility to those earning no more than state median income levels.

Though not illegal, strategic defaults are controversial, because they are viewed in some circles as unethical. The practice is common among property developers.

For homeowners under water, experts say, it can make economic sense. “It’s a business cash-flow decision,” Mr. Faranda said, “but the risk is that you’re rolling dice with your future credit.”

A foreclosure from default stays on a homeowner’s credit report for 7 years, while filing for bankruptcy stays on the report for 7 to 10 years, he said. A default can lower a credit score by 85 to 160 points, according to FICO, the company that created the scoring method.

With that said, there are still hundreds of homeowners that are legitimately under water and are struggling or unable to make their mortgage payments each month.  For these homeowners there are solutions, and that is where we come in.

We have committed to helping 100 homeowners save their homes from foreclosure this year.  Whether they want to keep their home or need to sell their home we have solutions!  The best part is, there is no charge to the homeowner for our help.

Who might you know that is facing a financial hardship and maybe struggling to keep their home?  Send them this information and have them give us a call right away to determine which solution will be best for them.

Pam Parton and Joanna Woolley
Windermere Exclusive Properties
760-580-1615 or 760-580-1630

Lynnley Brown of New York Times
Contributed to this article

Most people know they need to look their best when trying to get approved for a mortgage. Like brushing our teeth and combing our hair for a family portrait, we know that our credit scores, job history and general financial health are important.  (To see how to avoid common pitfalls after you have been approved for a loan, see my recent post Your Loan is Approved! Now Avoid These Four Pitfalls That Can Really Ruin Your Day).

However, did you know that the type of property you choose may also have a major impact on your loan approval?  If not, dear reader, then Press On!

Let’s say you start out thinking you’re looking for a cute house with a white picket fence.  But then you begin to see different options.  Let’s see how those choices may change, limit or even eliminate your financing options:

A Planned Unit Development, or PUD
A what?  They look like a regular house, but are part of a large, master-planned community.  Most homes built in recent years by major builders are PUDs.  This property choice invariably comes with a required membership in a Home Owners Association (HOA).  The monthly HOA dues can commonly run into the $200 to $400 range, especially in Southern California.  This will reduce the amount of financing you qualify for because it will be included as part of your debt-to-income ratio.

Condominiums

• Non-Warrantable Condo Projects – This is a condominium that does not have official Fannie Mae or FHA approval (required to get financing from these agencies)
• Condo Conversions – These are condos that started life as apartments and then were converted to condominium building codes.  Most are OK, but a few may be little more than cosmetically-enhanced apartments.  Again, look for that all-important Fannie Mae or FHA approval on the project
• High-rise Condos – commonly defined as a condo above 4-stories tall.  Some lenders won’t do mortgages on them
• Those ubiquitous HOA dues will change your qualifying debt/income ratio

Manufactured and Modular Homes
This can be a tricky area with regard to financing.  These types of homes are partially built and assembled in a factory and then moved to the property site where they are permanently affixed to the land.  Such homes manufactured in recent years can look like a traditionally-constructed or site-built home except to the most discerning eye (like an appraiser).  However, lenders definitely make the distinction and the types of loans available to purchase or refinance this type of property are quite limited, especially in the current financial markets.  Where available, a mortgage on this type of property will likely require a greater down payment.  Options such as interest-only payments will be almost impossible to find.  While this type of housing can be ideal for the right Buyer, be aware that it will limit the financing options for you now, and most likely for the next person looking to purchase it (from you)

Large or Unusual Properties
This one can catch you by surprise.  A common example might be a home built on 18 acres of land.  Regardless of how big or nice the house is, a large tract of land may actually dominate the total value of the property.  Conventional mortgages are intended to finance residential property, not land.  As a result, some lenders will limit the maximum size of the property they will finance; 5 acres is not uncommon.  Other lenders will allow larger acreage but will require the appraisal to consider the value of the improvements (house) and limit land value to 5 acres.  Another issue can arise if the property includes improvements other than what is common to residential property.  Examples might be a home on 4 acres that includes 300 avocado trees, or a duplex where 1 of the 2 units actually houses a business such as a barber shop.  These properties may be viewed as commercial or mixed-use in nature, rather than residential.

Multi-Family Property (Duplex, Triplex etc.)
Conventional financing is still widely available for 2 to 4 family properties.  However, recent changes in the mortgage markets have tightened a number of requirements to qualify for financing on these property types.  Examples include larger down payments, higher credit scores, higher interest rates and more conservative debt-to-income ratios.

The important point to draw here is that one size does not fit all when obtaining financing. It’s best to have a reasonably clear idea of the type of property you are seeking to purchase before you obtain loan approval.  And if that idea changes, be sure to let your mortgage professional know as soon as possible.  That will avoid unpleasant surprises and assure that your approved financing will work for the home of your dreams!

For questions about matching your loan to your home, call Paul Gonzales, Countywide Mortgage Lending at (760) 746-7388 or email me at paulforloans@aol.com

Foreclosed properties and “short sales” are certainly in the news today.  We are all aware that they exist in every community right now including our own neighborhoods.  Properties that have been taken back by a bank or lender and held on their books are known as “real estate owned” or REOs.  For both regulatory and business reasons they must work to sell them as soon as they can and get the REOs off their ledgers.  So-called short sales are where the private owner and the lender agree to sell the property for less than what is owed.  In our current markets, this need to liquidate properties often forces the lender to sell at a loss.  As seen in recent sales figures for many areas, this practice has at least the potential to drive market prices lower in some areas.

OK – So how can the sale of a nearby foreclosure or short-sale affect me?

Any individual home sale in the area is only one statistic, not the entire local market.  In fact, a common misperception is that the lowest recent home sale “sets the price” for similar properties around it.  Not so.  Understanding just a couple of basics about how a professional appraiser determines value can illustrate the impact that recent nearby sales have on your home’s value.

Appraisers are required to identify recent sales of properties that are similar and near in proximity to the home being appraised; these other sales are called comparable sales, or “comps“.  There are extensive rules and formulas that they use to accomplish all that but those are the general criteria that they seek.  After adjusting the sales prices for considerations such as age, size, amenities, quality and condition (among many other issues) the appraiser then has a finely-tuned range of prices that he or she will use to determine the value of the subject property being appraised.  While not impossible, it is rare that the final value ascertained will be equal to the lowest comparable sales price (REO, short-sale or otherwise).  Most commonly, the final value will be somewhere within the range of prices analyzed.

Which brings us back to the topic of the sale of a nearby REO or “short“.  If the lowest sales price in the pool of comps used by the appraiser is an REO and is also significantly lower than the rest of the comps in the pool, the appraiser has the latitude to comment on that aspect.  Depending upon how solid the remaining sales comps are, the REO or short-sale could have only a minimal impact on the value of the subject property.  It may thus represent only the low end of the value range for that particular market.  On the other hand, if the majority of recent comps happen to consist of REOs and/or short sales, then they may well define that local market and collectively have a significant impact on the value of the subject property.

In the final analysis, the value of your property is determined by your local market and is usually defined by recent multiple sales.  Regardless of whether comparable sales are private sales, short sales or REOs, the market “is what it is” at that point in time.  What’s most important to remember is that for the vast majority of markets, value is not defined by any one single sales transaction!

for more information contact Paul Gonzales, Countywide Mortgage Lending (760) 746-7388 or paulforloans@aol.com

Guys – the statistics are out and they speak for themselves; women out-purchase us in the real estate market two-to-one!  National data for the year ending last June reveals that single women accounted for 21% of all home purchases, to 10% of purchases for single men. That may just be an eye-opener for many of us in the business.   Such a significant demographic group deserves to be both recognized and well-served by the real estate and financing industries.  Click on the link below to read an excellent article on this subject posted by Marilyn Kennedy Malia on Bankrate.com:

“4 Tips for Single, Female Homebuyers”

Paul Gonzales, Sales Manager, Countywide Mortgage (760) 746-7388 or paulforloans@aol.com

For all of you Homebuyers and Homeowners out there who intend to get your home mortgage financing this year. The latest updates from the mortgage world are that interest fixed rates are expected to increase fairly soon.

At the present time Interest Rates have been kept artificially low and will soon begin their upward climb to around 6.5%. as the Feds return the mortgage market to private investors. This will reduce the loan amounts available.

So  Homebuyers don’t loose out on the great interest rates we have at the moment – give us a call today and we will help you find the home of your dreams!

PAM PARTON: 760-580-1615                    JOANNA WOOLLEY: 760-580-1630

This is the fourth and final post in a series that deals with important aspects of FHA financing.

• The first post provided an overview of the program.
• The second post detailed FHA credit requirements
• The third post discussed the income and employment requirements.
• This post will discuss the down payment and asset requirements necessary to obtain an FHA home loan.

Minimum Down Payment
In today’s challenging market, this is probably the most attractive feature of the FHA home loan – the minimal down payment requirement.  The minimum allowable down payment is 3.5% of the purchase price.  This benefit is enhanced further by the flexibility allowed for the source of those down payment funds, as discussed below:

Reserve Requirements
Reserves are funds that a buyer has “left over” after purchasing the home.  Most conventional home loans require enough reserve funds to cover at least two months of mortgage payments including property taxes, insurance, mortgage insurance and home owner’s association (HOA) dues if required.

FHA financing does not have a reserve requirement if purchasing a 1 or 2 family property (a 3 or 4 family property requires at least three months of reserve funds).

Acceptable Sources of Funds

• Borrower’s depository funds – Funds owned by the Borrower in bank accounts, stocks and bonds, Certificates of deposit, retirement accounts such as 401k plans
• Gift funds – Can come from a wide variety of sources, including family members, a close friend with established close ties to the borrower, an employer or labor union, charitable or non-profit organization, government agency or a public entity such as a city through a homebuyer’s assistance program. A couple important caveats: the gift funds must be thoroughly documented and provide a clear paper-trail. Depending upon the source of the gift funds, such documentation will include a detailed “gift letter”, copies of cancelled checks and bank withdrawal slips or evidence of bank wire transfer. There must be reasonable evidence that the qualified donor has the financial ability to give the gift. As of October 1st, 2008, funds from certain non-profit organizations which are matched by donations from the home seller can no longer be gifted to the buyer
• Sale of existing home – proceeds from the sale of an existing home may be used to purchase a new home with FHA financing
• Sale of personal property – the sale of a car or other personal property is acceptable as long as the funds can be paper-trailed to the sale
• Cash or “mattress money” – this requires a written explanation describing the source of the cash, how it was accumulated and how long it took to accumulate. Such cash accumulation must make sense for the borrower, such as not having a checking or savings account or credit accounts.
• Commission from sale of property – acceptable if the borrower/buyer is a licensed real estate agent and entitled to a commission from the sale

Mortgage Insurance
A lesser appreciated, but very vital benefit of FHA financing, has to do with mortgage insurance, or MI. Until recently, it was generally easy to avoid having to pay for mortgage insurance when purchasing a home with less than 20% down payment. This was accomplished by getting a second mortgage to “piggy back” with an 80% first mortgage. Thus a qualified buyer could buy a home with little or no money down by obtaining two mortgages. In the reality of today’s markets such second mortgages are all but non-existant or exorbitantly priced.

The only remaining option for a homebuyer with less than 20% for a down payment is to pay for mortgage insurance. In certain areas such as California and Florida, most companies that provide such insurance have limited the maximum coverage to 90% (or less) of the purchase price. In addition, they have tightened their underwriting guidelines and it is indeed more difficult to actually qualify for the insurance.

Enter the FHA home loan. It is generally considered easier to qualify for MI under the FHA and it will go to 96.5% of the purchase price. In short there is a significant portion of the home-buying population who have no other option than FHA financing just for these two reasons alone.

In a Nutshell…
FHA financing may not necessarily be the best fit for everyone in the home-buying market. However, these hallmark features of the FHA home loan – minimal down payment and reserve requirements, flexible sources of funds and availability of mortgage insurance – are far and away the primary reasons that many home buyers, particularly younger first-time home buyers, seek FHA financing. It’s clear to see why.

For more information contact Paul Gonzales, Manager, Countywide Mortgage Inc (760) 746-7388 or paulforloans@aol.com

New Rules For Home Loan Modifications

Those seeking to ease their mortgage terms must now document their finances before a trial modification will be approved. Loan servicers must adopt the policy by June 1st 2010.

Taking borrowers at their word for how much they earn was a major cause of the mortgage meltdown. That practice may also be why an Obama administration program has struggled to convert temporary home loan modifications into permanent ones.

The government said last week that it would overhaul the program by requiring homeowners to document their incomes before trial modifications are granted. Borrowers previously could have their interest rates lowered and the terms of their loans extended on a trial basis without providing pay stubs or other financial documents.

Banks and other mortgage service providers were supposed to collect those documents during a three-month trial period, with the home loan modification becoming permanent if the home borrower made three reduced monthly payments and submitted the required paperwork. But the program yielded few permanent home loan modifications.

Last year, servicers extended nearly 1.2 million offers of trial modifications — but just 66,465 troubled home loans were modified permanently.

Loan servicers said large numbers of homeowners failed to turn in the proper documents, and homeowners complained that the banks were unreasonable and lost paperwork.

The new procedure, to be adopted by servicers by June 1, would require three documents upfront: a formal application including a description of the hardship created by the home mortgage; proof of income, which would mean at least two pay stubs or the most recent profit and loss statement for self-employed borrowers; and a form authorizing the Internal Revenue Service to release tax data to the servicer.

Under the plan, servicers will be required to respond within 10 days to an initial request for a modification. Once documents are provided, the servicer will have one month to tell homeowners whether they qualify for a trial modification.

If a homeowner makes three payments at the modified rate, the modification will automatically be made permanent.

In an attempt to address a large backlog of incomplete modifications, the Treasury Department said it would allow servicers some discretion in making loans permanent if only minor paperwork was missing.

Phyllis Caldwell, chief of the department’s Homeownership Preservation Office, said in a statement that the shift in policy “represents our commitment to more efficiently move qualified homeowners into permanent modifications.”

Some lending groups and banks praised the changes, which they said would reduce the high volume of attempted modifications that end in disappointment for borrowers.

The changes should help borrowers better understand the process and their chance of getting a loan modified, said Kevin Waetke, a spokesman for Wells Fargo & Co., the second-largest loan servicer. Wells Fargo will adopt the new procedures March 1, he said.

John Taylor, president of the National Community Reinvestment Coalition, called the changes mere “tweaks” and said lenders should cut loan balances to avoid losing even more money on foreclosures. The government, Taylor said, should use its control of Fannie Mae and Freddie Mac to start writing down the principal on mortgages owned or insured by them “and demand that the private sector do the same.”

The program, launched last spring, was designed to provide billions of dollars in subsidies to encourage lenders to forestall foreclosures by reducing mortgage payments to 31% of the borrowers’ household income. The goal was to offer modifications to 3 million to 4 million Americans.

To obtain the subsidies, servicers must take a series of steps to reach an affordable payment: reduce the interest rate, extend the loan’s term to 40 years and suspend payments on part of the amount owed. A permanent reduction of the loan balance is optional.

But the servicers also must calculate whether the lender or current owner of the loan will come out ahead by doing the modification or by foreclosing. If the loan owner comes out ahead with a modification, the servicer is required to make it. By documenting the borrowers’ financial situation before offering a trial modification, servicers can make this calculation upfront and inform borrowers whether they qualify.

“Increasing the number of borrowers receiving permanent modifications . . . is critical to our efforts to preserve affordable and sustainable homeownership,” said William Apgar, a Harvard University housing expert on leave to help the Department of Housing and Urban Development deal with the foreclosure crisis.

Courtesy of the New York Times