First Time Home Buyer Tips

First Time Buyers

Congratulations! You are first time buyer. Welcome to your home buying guide. Here are a few things to bear in mind when considering this important step in your life:

• Deposit: The first thing to be aware of is that most lenders will look favorably on you having a cash deposit to put down on a property. This deposit can range from 5-15% of the purchase price. If you were buying a property for $300,000, an expected deposit would range from $15,000-$35,000. In certain cases, a lower or higher down payment may be necessary.
• Find a REALTOR®: Don’t buy a home without one. Besides helping you find the home of your dreams, a REALTOR® assists you with every aspect of your homebuying experience. From appraisals to inspections, contracts to disclosures, questions and concerns, our sales professional are experts in the industry and are eager to help you every step of the way.
• Credit Score: As a first time buyer, your credit score will be used to determine your loan and interest rate options. Credit scores range from 340 to 820. The higher your credit score, the better your loan and interest rate options will be. Guarantee Pacific Mortgage, our in-house lender, specializes in helping first time buyers and can provide you with financial assistance you’ll need to purchase your first home.
• Mortgage Payments: Make sure you know what your interest rate is. Many first time buyers go for a fixed rate so they know exactly how much their total mortgage each month.
• Bills: Buying and maintaining a property is not just about keeping up with the mortgage payments; it is also about paying your bills. Besides your mortgage payment, you will be responsible for gas, electric, water, and sewage bills, not to mention other household amenities (i.e. telephone, television and internet bills). Plan in advance for these costs to make sure you can afford to pay them each month.
• The Rewards: Once you have bought your first home, you can enjoy the benefits of freedom and independence. You will soon discover that it is the best thing you ever did, not just in terms of doing as you please, but also that financially you have made a start in paying back the biggest investment of your life. With property prices seen to be rising higher in the coming years make no mistake that your home will become your most valuable possession. Congratulations and enjoy your new (home!

Search for homes at www.CentralValleyHomes.com

CAROL PERDEW
Your Real Estate Professional
Prudential California Realty
(209) 239-7979
www.CentralValleyHomes.com

 

 

LOCAL FORECLOSURE SEMINAR

Here is a greet opportunity to get loan modification counseling at the upcoming Foreclosure Seminar.  There is a local meeting with Freddie Mac’s representative. Check below for more information.

Foreclosure help coming Feb. 27
Freddie Mac outreach specialist holding seminar

 

By Rose Albano-Risso
Manteca Bulletin City Editor

 

LATHROP – A representative of Freddie Mac will be at the University of Phoenix in Lathrop Friday, Feb. 27, to give financially distressed South County homeowners advice on how to avoid foreclosure.

Jacqui Cosgrove, consumer outreach specialist with Freddie Mac which is the nickname for the Federal Home Loan Mortgage Corporation, will be available to personally meet with the property owners and answer their questions from 2 to 7 p.m. that day, said Freddie Mac public relations director Patti Boerger.

“This seminar will combine hourly sessions to address the process of loss mitigation from a homeowner’s best-practices perspective. It will also give borrowers the opportunity to meet with their lenders, face to face, in order to work toward a solution to avoid foreclosure,” Cosgrove said.

There will be nonprofit counseling available as well at this event “for those who have other debts or obligations to address in order to prioritize the home,” added Cosgrove.

One advantage of this seminar over just doing research on the Internet or elsewhere is that at this event, representatives of various organizations who can help individuals with hardships will be there in person to help you, she said.

“They can help you determine your options and get the process started. In certain situations, borrowers have been able to exit an event with their workout option approved that day,” Cosgrove explained.

To get approved that same day, one will need to bring the following requirements ready for the processing: proof of financial hardships which could be loss of employment or reduction of work hours, major illness or injury, divorce or separation, and death of a spouse; and statements showing income and expenses.

Cosgrove said loan modifications and other relief options are available to those who are honest and demonstrate a hardship. She defined hardship as “an involuntary inability to make your mortgage payment.”

Not being realistic is one of the mistakes commonly made by homeowners when it comes to seeking help from their mortgage companies.

“Adjustments to the original loan terms will not be made for homeowners just because they don’t want to give up their lavish lifestyle and expensive car payment, or are renting an investment property to family members for below market rent,” Cosgrove said.

Ironically, there are always those who take advantage of a sad situation to make a buck out of unsuspecting people who are already having difficulties making ends meet. Advertisements are everywhere – on television, radio and the printed media – offering services and promising results and relief from mortgage debts to vulnerable and unsuspecting consumers but at  a cost. This is a case of caveat emptor or buyer beware, Cosgrove warns consumers.

“Don’t pay organizations to help you. There are thousands of companies that are charging borrowers and telling them ‘we’ll work with your lender.’ Steer clear of anyone who charges. Instead, call one of the federally approved nonprofit counseling agencies whose services are free,” she said.

Advice for frustrated homeowners

Cosgrove’s advice to homeowners who are getting increasingly frustrated because they can’t get the attention or any answer or cooperation from their mortgage companies:

• Keep calling and make sure you’re talking to the right person.

• Demand to talk with loss mitigation area, not collections. As a consumer, you have the right to request to speak with a supervisor.

• Be sure to keep a log of each person you speak with and contact as you make an effort to work with your servicer. Oftentimes, if a borrower establishes a relationship with a HUD-certified counselor, the counselor will have access to specialized phone portals in order to help facilitate the collection of your financial data and completion of your loss mitigation request.

Added Cosgrove, “Borrowers with loans owned by Freddie Mac and others may qualify for special loan modification programs, including permanent rate reductions, mortgage term extensions or forbearance. Just remember these three rules: be prepared, be honest, and be realistic about possible outcomes.”

Freddie Mac does not have a disclosable breakout of foreclosure figures by state, said Cosgrove. However, she said that nationally, about 200,000 of Freddie Mac’s 12 million loans are either 90 days late or in some stage of foreclosure.

“We’re also approving an estimated 14,000 workouts a month through our mortgage services, which means about 3 out of 5 seriously delinquent borrowers with Freddie Mac loans avoid foreclosures. Our REO (Real Estate Owned-homes we own due to foreclosures, etc.) inventory is about 29,000 homes nationwide. In context, Freddie Mac loans account for just 7 percent of the nation’s seriously delinquent mortgages, Cosgrove said.

Five tips to make the most of your call to your mortgage servicer from Freddie Mac:

• Open your mail. Notices are sent before foreclosure proceedings begin so be sure to open your mail for loan modification offers and advice from your mortgage services. Freddie Mac advises distressed borrowers not to stand by and wait.

• Be prepared before you call. Ask to speak to someone in the loss mitigation area (not the collection area) and make sure you can quickly and concisely state your financial hardship. Workout programs are only available for borrowers with true financial hardships. Harships include: loss of employment or reduction of hours, major illness or injury, divorce or separation, and death of a spouse.

• Be able to document your income and provide details about your mortgage loan and other financial obligations so have the following documents on hand:

a. Your mortgage loan number, name of mortgage services and recent mortgage statement,

b. Your most current pay stubs,

c. Your bank statements, with account balances and account numbers, and

d. Information on other expenses and debts, such as student loans, car leases, and credit card debt.

• Be honest about your income, expenses and debt. A credit report will be pulled and income such as child support and other debts will show up.

• Be realistic. Loan modifications won’t be made for homeowners just because they don’t want to give up their lavish lifestyle and expensive car payment or are renting an investment property to family members for below market rent. If that’s the case, start reducing expenses and saving money by paring down to bare necessities.

The University of Phoenix in Lathrop is located in the Lathrop Business Park on South Harlan Road east of Interstate 5,  just south of Louise Avenue.

Thanks,
CAROL PERDEW
(209) 239-7979
wwwCentralValleyHomes.com     

 

Home Sale Pace Rises

Sales pace of California resales rises 85%

Real estate brief

By Inman News, January 28,2009

 
The sales pace of single-family, detached resale homes soared 84.9 percent in December 2008 compared to the same month in 2007, with the median sales price diving 41.5 percent, the California Association of Realtors reported this week.

The seasonally adjusted annual rate of home sales in the state was 544,580 in December — this rate is a projection of a monthly sales total over a 12-month period, adjusted to account for typical seasonal fluctuations in sales activity. That compares to a pace of 294,520 sales in December 2007.

Sales for the entire year in 2008 were up an estimated 27 percent compared to the prior year, the association also reported, with the median price falling 38 percent in 2008.

The trade group’s Unsold Inventory Index for single-family, detached resale homes in December 2008 was 5.6 months, which compares to 13.4 months in December 2007. This index gauges the length of time it would take to sell off the total for-sale inventory, based on that month’s sales pace.

A separate monthly report by the Realtor group and DataQuick Information Systems, which measures prices and price changes for new and resale single-family homes and condos, found that five of 338 cities and communities tracked had year-over-year increases in median home prices.

SEARCH FOR HOMES AT Central Valley Homes.com

CAROL PERDEW
Prudential California Realty
(209) 239-7979
wwwCentralValleyHomes.com

Help for Homeowners in Refinancing and Selling

IRS to help homeowners refinance or sell homes
Presented by Yahoo Finance

WASHINGTON – The Internal Revenue Service said Tuesday it will try to make it easier for homeowners in financial straits to refinance or sell their homes.

The plan announced by IRS Commissioner Doug Shulman would speed up a process where financially distressed homeowners may request that a federal tax lien be made secondary to liens by the lending institution that is refinancing or restructuring a loan.

Taxpayers will also be able to ask the IRS to discharge, or remove, its claim to a property in certain circumstances where the property is being sold for less than the amount of the mortgage lien.

“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said, stressing that “we don’t want the IRS to be a barrier to people saving or selling their homes.”

He said the program will focus on those people who ordinarily pay their taxes in full but “because of these extraordinary times are getting behind in their tax payments.”

A tax lien occurs when the government makes a legal claim to property as security or payment for a tax debt. The government thus notifies other creditors that it has a claim on the property.

The IRS can rule that its lien will be secondary to another lien, such as that of a lending institution, if it determines that taking a subordinate position will ultimately help with the collection of the tax debt. Taxpayers or their representatives may apply for a “subordination” of a tax lien if they are refinancing or restructuring their mortgage.

Lending institutions generally want their lien to have priority on the home being used as collateral.

Taxpayers may also request a certificate of discharge if they are giving up ownership of the property at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien. A discharge does not relieve a person of the tax that is owed, but it does remove the lien on a particular property such as a home. The IRS would still maintain its lien on other possessions of the taxpayer.

Normally it takes about 30 days to rule on a request for a discharge or subordination of a tax lien, but Shulman said the IRS will work to speed up that process so there would be no delays for people trying to obtain new mortgage loans. The IRS urged people to contact the agency’s Collection Advisory Group early in the home sale or refinancing process.

The agency said it issues more than 600,000 federal tax lien notices annually and that currently there are more than 1 million outstanding tax liens tied to both real and personal property.

FOR REAL ESTATE INFO GO TO www.CentralValleyHomes.com

CAROL PERDEW
Prudential California Realty
(209) 239-7979
wwwCentralValleyHomes.com 

 

 

New Guidelines Help Consumers Compare Loan Programs

HUD: Consumers will shop for loans

Rule changes could cut into industry profits

BY MATT CARTER, INMAN NEWS

Consumers will be less likely to accept overpriced loans, title insurance and other services — including those offered by businesses affiliated with real estate brokerages and builders — once new loan disclosure forms and settlement procedures are fully in place at the end of next year.

That’s according to a lengthy review by the Department of Housing and Urban Development of its proposed rule changes governing enforcement of the Real Estate Settlement Procedures Act.

In publishing a final rule in Monday’s Federal Register, HUD detailed numerous “significant” changes to its proposed overhaul of RESPA in response to feedback from industry and consumer groups.

When they announced the new rule last week, HUD officials emphasized concessions they made to the real estate industry trade groups, who were highly critical of the rule changes as first proposed in March. Industry critics said HUD has overestimated the extent to which consumers will comparison shop, and underestimated the unintended consequences of the rule change, such as consolidation.

HUD’s response to the criticism included dropping a requirement that consumers be read a lengthy script at the closing table, and shortening the standardized good faith estimate (GFE) from four pages to three.

More crucially, perhaps, HUD toned down but did not abandon measures intended to encourage consumers to shop for the best deal and create more competition between lenders and settlement services providers. The measures still in place could have a dramatic impact on the way those products are marketed and sold to consumers.

The overall goal of the new, standardized GFE is helping consumers compare different loan packages, HUD said. The new disclosures and procedures will empower consumers to compare not only the rates and terms of different mortgage offers, but the price services required by most lenders, such as title insurance.

Slack on tolerances

HUD said one way it is helping consumers comparison shop is by imposing tolerances on how much prices and fees quoted in the GFE can change before borrowers reach the closing table. Loan origination fees can’t change at all, and fees for required services won’t be permitted to change by more than 10 percent when they are provided by a company selected by the lender.

Trade groups representing lenders and settlement service providers were generally opposed to tolerances when they were proposed by HUD in March. In order to minimize the risk of violating the tolerances, some said, big lenders would have to contract with large settlement service providers, driving small companies out of business and reducing competition.

HUD said accurate estimates are crucial to empowering consumers to shop for the best deal, protecting them from “low-ball” offers that change at the last minute. But HUD said it did not intend to punish loan originators for unforeseen changes in a borrower’s circumstances or other factors beyond their control, such as government recording charges.

HUD says the final rule provides some additional leeway for fees to change due to unforeseen circumstances. If there are changes in the tax rate or the price of the property after the good faith estimate is provided, for example, originators can provide a revised estimate.

While transfer taxes will still subject to a “zero tolerance,” HUD acknowledged that government recording charges may not be be known until closing, and will instead be categorized with other settlement services that can change by 10 percent overall.

HUD will cut lenders some additional slack by giving them up to a month after a closing to correct any failure to achieve the tolerances. The final rule would give loan originators 30 days to “cure” violations by reimbursing the borrower by the amount the tolerances were exceeded.

If that sounds like a slap on the wrist that won’t deter loan originators from engaging in bait-and-switch tactics, HUD says that until Congress grants it additional power to enforce RESPA, it can’t legally impose fines for such violations.

But lenders won’t be able to break the rules with impunity, HUD says, because federal and state banking regulators can punish the companies they license for RESPA violations. In addition, aggrieved borrowers can bring civil suits under RESPA seeking redress, and lenders who sell loans on the secondary market can also be held liable by the investors who buy them if they break rules governing mortgage originations.

In its handling of tolerances, HUD says the final RESPA rule “seeks to balance the borrower’s interest in receiving an accurate GFE early in the application process … with the lender’s interest in maintaining flexibility to address the many issues that can arise in a complex process such as loan origination.”

Presented by
CAROL PERDEW
(209) 239-7979
wwwCentralValleyHomes.com

Homeowners Are Getting Help By HOPE NOW Program

Despite difficulties, homeowners finding relief with HOPE NOW program

By Jack Guttentag,
Inman News|

Editor’s note: A previous version of this story erroneously stated that the HOPE NOW Alliance of loan servicers charges borrowers for consultations. The consultations are free.

Q: “I have been giving my clients an article you wrote about a year ago advising borrowers having payment problems how to request a modification in their loan contract … Could you bring it up to date?”

A: A lot has happened since that article was written. Very shortly thereafter, the HOPE NOW program promoted by Treasury Secretary Henry Paulson began as an effort by housing counseling agencies and mortgage servicers to modify loans on a strictly voluntary basis. Since then, the first recourse of borrowers in trouble has been to call them at 1-888-995-HOPE. I have sent many people to HOPE NOW, with mixed feedback.

House prices have declined further in the last year, turning more borrowers “upside down” where they owe more on their mortgage than their house is worth. This induces some borrowers to stop making payments, which increases foreclosures. But price declines also reduce the amounts that investors recover from sale of the house following a foreclosure, which should increase the attractiveness of loan modifications as an alternative.

In addition, a full-fledged financial crisis has erupted, forcing the Federal Reserve to act as the lender of last resort to a series of weakened financial firms unable to meet their cash needs. The coverage of deposit insurance has been broadened and money market funds are now insured. In the works, furthermore, are plans to purchase mortgage assets from investors, to make direct equity investments in banks, and even to insure payment of principal and interest on mortgages and other assets.

An excellent study by Alan M. White provides some indications of what has happened to modifications during this tumultuous period. In a sample of subprime loans he examined, the mortgage payment was reduced in only about half the modifications, and the balance was reduced in very few cases. In many cases, the modification consisted of adding the amounts past due (“arrearages”) to the balance, which raises the payment. It is no wonder that during the annual period he examined, the number of foreclosures swamped the number of modifications.

Borrowers having payment trouble have choices. The rational choices are either to seek help immediately, or to take immediate action themselves. Those who put their heads in the sand will lose their home in a foreclosure.

I suggest that those who elect to seek help go to HOPE NOW first, and if that does not work out, to try a HUD-approved counselor. Before seeing a counselor, prepare yourself by pulling together all the data that the counselor will need; the form at Genworth Financial can be used for this purpose.

Responding to a solicitation from one of the many modification consultants who have emerged over the last year is extremely risky. They charge $1,000 and up, usually payable in advance. Some may do a good job, but many are hustlers looking to garner upfront fees.

If you elect to handle the matter yourself, you must get to the servicer’s loss mitigation department, which may take some persistence. The burden of proof is on you to demonstrate and document that, for the reasons you lay out, you can no longer make the required payment. You must also demonstrate and document that you can make a smaller payment that you specify.

Under the new FHA program called H4H (“Hope for Homeowners”), FHA will refinance loans of borrowers having payment problems if the existing investor will write down the loan balance to 90 percent of current market value. HUD publishes a list of lenders participating in this program. I am not sure whether there is any benefit to a borrower contacting one of them before the firm servicing their existing loan has agreed to pay down the balance. But it can’t hurt to get that lender on your side.

Aside from the possible increased risk exposure under FHA, the federal government has not channeled any crisis money directly to borrowers. The new programs referred to earlier will direct $700 billion or more to financial institutions, but none to households. A strong case can be made that this is unbalanced.

The root cause of the crisis is the decline in home prices, which will continue so long as the foreclosure problem isn’t solved. Arguably, dealing directly with this problem is more effective than dealing with it indirectly. The Treasury recently put out a request for proposals on a mortgage payment insurance plan, which could be the perfect vehicle for providing direct assistance to borrowers. Stay tuned.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

Presented by
CAROL PERDEW
Prudential California Realty
(209) 239-7979
wwwCentralValleyHomes.com

Thoughts to Help Homeowners Overcome Mortgage Fright

Mortgage Fright and Moral Quandaries

by Jack M. Guttentag
Featured on Yahoo Finance

The mortgage world has suddenly become very frightening to many people who have no real reason to be frightened. Their mortgages are in good standing, they are not having any trouble meeting their payments, yet they are in distress — in large part because so many around them are in distress. Fear is contagious. The only antidote I know to fear is good information.

One important thing that people suffering from mortgage fright often forget is that a mortgage loan is a contract between two parties, and it cannot be violated by either without the permission of the other. If the loan is sold, the purchaser replaces the originating lender as the contracting party and is subject to the contract in the same way. If the servicing of the loan is sold, the servicer as the agent of the owner is required to abide by the terms of the contract, and the same holds if the loan is placed in a pool as collateral for a mortgage-backed security.

The two letters below are from borrowers who do not have a problem with their current mortgages but are distressed about what might happen in the future.

“Crazy “Can whoever owns my mortgage demand immediate repayment of the balance? I know it doesn’t make sense, but crazy things seem to be happening…”

Mortgage contracts do not give the lender the right to demand immediate repayment. Balloon loans require repayment at the end of the balloon period, but that is stated in the contract. Fortunately, there are not too many balloon loans around.

Even if lenders had the legal right to demand immediate repayment, they wouldn’t do it because it would only generate more foreclosures. For the same reason, borrowers with balloon loans in good standing who are unable to refinance anywhere else will find that their existing lender will prefer to refinance them than to foreclose.

Things Are Happening”

A Rate Is Adjustable — Not the Index

“When the rate on my ARM (adjustable-rate mortgage) adjusts next year, the new rate should be the one-year Treasury rate at the time, plus a margin of 2.5 percent. Last year, however, my lender replaced the Treasury rate on new loans with Libor. Because of the crisis, Libor is now 2.5 percent higher than Treasury. Can my lender switch my ARM to Libor when my rate is adjusted?”

No way. The rate is adjustable but not the index used to calculate it. Your ARM contract stipulates the index and its source, and the only circumstance in which a different index can be substituted is in the event the specified index is no longer available. The different Treasury indexes used by ARMs are compiled by the Federal Reserve and there is zero likelihood that they will disappear.

When a Borrower Is Upside Down

I wish I could answer the next letter with the same degree of certainty.

“We bought our house just last year with 100 percent financing; now it is worth $40,000 less than we owe. I don’t know what to do. Do we keep making mortgage payments or do we stop? A friend has advised us to lock the door and send the key to the lender, but that doesn’t sit very well with me. We’ve always met our obligations and have good credit. What do you advise?”

This letter is typical of many I have received from borrowers who are “upside down” in owing more than their houses are worth. I have a lot of trouble dealing with it because in good part it is a moral issue.

My right-handed side says that when you borrow money, you should pay it back if you can. During the many years when house prices were rising, he never once heard of a mortgage borrower offering to share the capital gain with the lender. There is no justification in forcing the lender to share the capital loss.

My left-handed side rejoins that very few of the people who are upside down today enjoyed a capital gain on previous homes that they owned. Further, the borrower’s major obligation is to his family, not to his lender. If the financial gain from letting the house go to foreclosure more than offsets the pain of having their credit trashed and having to find a new place to live, then that is what the borrower should do.

There is an economic dimension to this quandary. If those who are upside down could be assured that house prices had hit bottom and within a year or two they will be right side up, there is little doubt that most would elect to stay the course. Unfortunately, no economist in good conscience can provide such assurance today.

Finally, there is a policy dimension. Upside down borrowers would be encouraged to stay the course if they had some reason to believe that the government will help them get right side up. Right now, the prospects for this are extremely murky. But don’t write the possibility off just yet.

CAROL PERDEW
(209) 239-7979
wwwCentralValleyHomes.com

Homeowners May Be Locked In Homes With Negative Equity

Upside-down borrowers locked into homes
Study find More May Be Stuck Than Displaced

By Matt Carter, Inman News

A new study suggests buyer psychology and tighter credit aren’t the only factors keeping would-be home buyers on the fence — homeowners with negative equity are often “locked in” to their existing homes and are nearly 50 percent less likely to move in order to take a new job, cut their commute time or move to a neighborhood with better schools.

The study, Housing Busts and Household Mobility, found that while becoming “upside down” forces many homeowners to move from their homes because of foreclosure, an even greater number have historically ended up stuck in their homes.

That’s because until housing prices rebound, a sale of their existing home won’t pay off their existing mortgage — let alone generate the proceeds needed for a down payment on their next home.

The study’s authors — housing experts at the University of Pennsylvania Wharton School of Business and the Federal Reserve Bank of New York — warned that the repercussions of “lock in” include less efficient job markets and reduced incentives for homeowners to keep up and make improvements to their homes.

Some families will not be able to move to access better jobs in alternative labor markets, the study concluded, while others who would like to move to access better schools or a different-size home will be unable to do so, the study said.

The study looked at two decades of housing data, covering the period from 1985 to 2005, and found that negative equity reduces homeowner mobility more than previously believed. All in all, having negative equity reduced the percentage of homeowners moving within a two-year period by 5.6 percentage points, a reduction of 47 percent from the baseline mobility rate of 12 percent.

“That the net impact of negative equity … has been to reduce, not raise, mobility may surprise some given the high number of defaults and foreclosures in the current environment,” the study noted.

The study looked at a period when subprime lending was not nearly as prevalent, and included only owner-occupied homes — not those purchased as investments or second homes. Only time will tell whether the number of people locked into their homes during the current downturn outnumbers those forced to move because of foreclosure, the authors concede.

Even if the study’s analysis of the past can’t simply be extrapolated into the future, “policymakers should begin to consider the consequences of lock-in and reduced household mobility because they are quite different from those associated with default and higher mobility,” the authors said.

More research is “urgently needed” on issues surrounding the “financial frictions” associated with potential mortgage lock-in, the study said.

According to Worldwide ERC — formerly the Employee Relocation Council — about 794,000 households relocate a year because they are transferred to a new job within the U.S. About 54 percent are homeowners, while the rest are renters.

Worldwide ERC reports that most companies offer to purchase at least some employees’ homes if they can’t sell, while 20 percent reimburse employees’ selling expenses. The group, which represents organizations that manage relocation programs, estimates $32 billion a year is spent on U.S. corporate relocations.

The new study provided an overview of past research demonstrating that falling home prices or rising interest rates can lock borrowers into their homes. Households without access to enough cash or credit may find their options constrained even if home equity does not turn negative.

Another factor that can trigger the “lock-in effect” is the original loan-to-value (LTV) ratio. The smaller the down payment provided by the home purchaser, the more quickly they end up “upside down” in the event of price declines.

The study noted that in the San Francisco Bay Area, LTV ratios were typically around 80 percent until the end of 2002, and then increased sharply to 90 percent in 2004.

“Essentially, the typical new home buyer in the Bay Area bought a house for $800,000 in 2006 using a $720,000 mortgage,” the study concluded. “If prices really do decline by 25 percent from their peak, the underlying house value will be around $600,000, which is much lower than the typical mortgage balance taken out that year.”

In the late 1990s, barely 10 percent of Bay Area borrowers had LTVs above 95 percent. By 2006, about 35 percent of buyers had LTVs exceeding 95 percent, and more than half exceeded 85 percent.

The study’s authors — Fernando Ferreira, Joseph Gyourko and Joseph Tracy — also shed light on how demographics affect mobility. While being married does not affect mobility, divorce does make homeowners more likely to move.

So does race, sex and education. Households headed by a person with some college have two-year mobility rates that are 4.2 percentage points higher than those without a high school degree. Whites are more likely to move than non-whites, and female-headed households are more likely to move than those headed by males, the study found.

CAROL PERDEW
Prudential California Realty
(209) 239-7979
wwwCentralValleyHomes.com

Experts Disappointed with Local Homeowner Tax Assistance

Did area get shortchanged by HUD?
Leaders, real estate experts not happy with share of foreclosure pie help

Dennis Wyatt

Managing Editor
Manteca Bulletin

Stockton-Manteca has been at the epicenter of the foreclosure meltdown during 2008.

But when it came to the Housing and Urban Development divvying up $3.92 billion this past week of the federal taxpayer funded Neighborhood Stabilization Program, a number of people ranging from both U.S, Senators Dianne Feinstein and Barbara Boxer down to Manteca Mayor Willie Weatherford and real estate professionals such as Tom Wilson believe the region got the short end of the stick.

Weatherford said it reflected Congress’ pervasive ABC – “Anyplace But California” -attitude when it comes to distributing tax assistance.

“It doesn’t say much about our Congressional influence,” added Wilson.

Boxer and Feinstein issued a joint statement that noted, “Frankly, it is beyond us how California – which has nearly twice the amount of foreclosure filings than Florida (561,223 compared to 287,210) – could receive less assistance. This makes no sense, and is totally unacceptable.”

California overall is receiving $529 million, less than the $541 million that Florida is receiving. The money is being made available to allow jurisdictions to buy foreclosed homes and turn it into affordable housing stock.

Northern San Joaquin County – which spent much of the year on top of the list of hardest hit areas by foreclosures in the nation – received the following amounts:

• Stockton, $12,146,038.

• San Joaquin County, $9,030,385.

• Modesto, $8,109.274.

• Stanislaus County, $9,744,482.

Cities such as Manteca and Tracy were either unable to apply or chose not to apply due to the complexity and short time frame. Merced, though, did, and got nothing.

Stockton still rates high on the national foreclosure list with one in every 15 homes in distress.

Manteca, a month ago, had 1,200 homes in various forms of distress whether it was an actual foreclosure or a homeowner in danger of defaulting on their loans. Home sales, though, have been picking off foreclosures at a rate somewhat faster than new foreclosures have come on the market.

That is where the rub comes in according to information released by the HUD in the methodology they used to determine what cities and states got assistance with foreclosures.

The Housing and Economic Recovery Act of 2008 calls for allocating funds to states and local governments with the greatest need as determined by the number and percentage of homes:

• in foreclosure in each jurisdiction.

• financed by subprime mortgages in each jurisdiction.

• in default or delinquency in each jurisdiction.

HUD used U.S. Postal Service data to determine areas where abandonment of homes were more likely, unemployment rates, relative home price declines, and other data to determine how likely it is that foreclosed homes will remain for extended periods of time unsold and uninhabited. 

 

View Homes for Sale at  CentralValleyHomes.com

 

CAROL PERDEW
Prudential California Realty
(209) 239-7979
wwwCentralValleyHomes.com