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Short Sales Are A Waste of Time For San Diego Home Buyers

I wrote this two years ago but it's appropriate today:

 Mario Villagrain asks: Short Sales - Why are banks so difficult to negotiate with?

The answer?

Because they're not banks. 

The mortgage markets exploded in the past 15 years through a technique called securitization.  This means that the loans are packaged up into pools and sold to Wall Street investors.  In the late 80s/early 90s, most loans were made by S&Ls.  These savings and loan associations made wild-ass loans due to deregulation of the industry. In short, they were almost rewarded for gambling with depositors money because the money was insured by the government.  EXCEPT...

They had to mark the bad loans to the market.  This means that they had to increase their reserve requirements to account for the loan losses.  In short, they had to "set aside" money for those losses.  It was more convenient for them to sell the property AT ANY PRICE and take the loss rather than to ride it out.

That's not necessary today.  Investors in whole loans have these loans buried in pools.  Investors are insurance companies, pensions, etc.  They are longer-term investors than the S&Ls and are not required to "write off the bad loan" or increase thier liquidity.  the investors of today don't have the same pressures of the S&Ls of yesteryear.

They have the staying power to ride this thing out and hold out for higher prices.  Not forever, mind you, but they do have staying power.

Documentation Needed For A Mortgage

Lenders will require the following information after you make a loan application:

1. most recent two pay stubs
2. last two years W-2 forms
3. If you're self-employed or a comissioned sales person, lenders will want to see the last two years 1040 tax returns with ALL accompanying schedules.  Sign all copies where you would normally sign the original
4. most recent two months bank statements (all pages), documenting the down payment *
5. most recent two month securities accounts statements.  Lenders will only "credit" 70% of the value of that account
6. most recent account statement for an IRA or 401-k account.  Lenders will only credit 60% of the value of that account.
7. copy of the dicorce decree if you are divorced
8. copy of your driver's license, passport, or social security card (two out of three)

* If you plan to use a gift, from a family member, for the down payment, the documentation needs to be REALLY complete.  We need a gift letter, signed by both the donor and recipient, a copy of the cancelled check (from the gift), and two months bank statements from the donor, documenting that they owned those funds for 60 days, prior to the gift.

PS: If you plan on using a VA home loan benefit, a copy of your Certificate of Eligibility and/or DD-214 will be required

Mortgage & Real Estate News: August 25, 2009

HR 2801: Will Home Ownership Move the Economy ?

The original tax credit was basically a fifteen year, interest free loan.  That was replaced by the current $8,000 bribe for first-time home buyers (set to expire at the end of November).

HR 2801 is a doozy.  Income limitations would be removed and ANY homebuyer could claim the $7,500/a year for two years credit.  It could very well go down as the “Cash for Fixers”  bribe this market wants.  Call it an upper-middle class neighborhood stabilization plan.

Median Home Price To Increase 8% In 2010

The CCUL expects the median home price to increase by 8% in early 2010 throughout Los Angeles and Orange County.  Home sale increases will likely begin with the coastal regions of the state.  They expect the state of California as a whole to have a 5% increase in their median price by 2010. 

Borrowers Lie for Better Loan Mods, Real Estate Players Say

In his 25 years as a real estate agent, Jim Klinge has seen plenty of borrowers try to work the system, especially in subprime-scourged North San Diego, where he works and lives. Like many in his industry, he says the Obama administration's $75 billion loan modification plan is giving rise to another bout of fraudulent mortgage activity. "With all certainty, it's being gamed," he says.

Economist sees rebound for San Diego real estate market

Lawrence Yun, chief economist for the National Association of Realtors, said the local market is buoyed by a tight housing inventory and federal tax incentives.

Yun was speaking at a lunch event hosted by the San Diego Association of Realtors on Tuesday. Some 700 people attended the event held at the DoubleTree Hotel in Mission Valley. San Diego Mayor Jerry Sanders, as well as representatives of various politicians in town, also attended the event

 

 

 

26 Miles Across The Sea. Santa Catalina Is Waiting For me

I"ll be on a short vacation until Monday.  Please call Sean Purcell at (619)-993-9888 with questions about loan programs or loans-in-process.

August 12, 2009 Mortgage Rates Report

Mortgage rates have remained stable this week with a conventional loan (under $417,000) offered at 5.25%, a jumbo conventional loan offered at 5.5%, FHA/VA loans (under $417,000) offered at 5.5% and jumbo VA/FHA loans offered at 5.75%.  All mortgage rate indications include a 1% origination fee.

I changed to a long-term floating bias, earlier this month, which means I generally believe there is not a reason to lock loans at application.  Each situation is unique.  My pipeline for August closings is locked today; I'm floating for closings beyond 21 days because I believe mortgage rates will trade in a "range".

If you're a mathemetician, you'll appreciate this analysis using the Fibonacci sequence:

“The bond market rout may not be over, but it looks like it might pause for awhile,” said Rupkey, who is based in New York for the unit of Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank. He sent his comments in an e-mail.

Ten-year yields climbed 37 basis points last week, the most since July 2003. They were as high as 3.89 percent on Aug. 10, the most in two months. The 3.125 percent security due May 2019 was little changed at 95 17/32 as of 11:32 a.m. today in Tokyo.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

Rupkey’s analysis is based on a sequence of numbers identified in the 13th century by Italian mathematician Leonardo da Pisa, known as Fibonacci. Yields need to move past one step in the series for the trend will carry over to the next.

Fibonacci was considered the greatest mathemetician in the middle ages and his discoveries are often evident in nature.  How might Fibonacci sequences apply to the near-term future of mortgage rates?  Rupkey believes, based on the Fibonacci sequence that the bond market sell-off raced ahead of the lock-step ascend the Fibonacci sequence supports.  His analysis suggests a "pause" in bond sales which portends stable to lower mortgage rates for the near term.

I rely more on fundamental analysis than technical analysis of markets.  This means I'm more interested on the underlying economic forces' influence rather than trying to identify patterns in market trading when deciding to lock or float rates.  I would never solely rely on the Fibonacci sequence because of the "black swan" phenomena.

It is interesting, though.

First-Time Home Buyer Credit Expires Soon

The $8,000 first-time home buyer credit expires on November 30, 2009.  Normally, I'd suggest that a home should be in escrow by November 1, 2009 to guarantee that the escrow closes in a timely fashion but the lending industry operates on a skeleton staff today.  I'm recommending buyers, hoping to claim this tax credit, secure properties for purchase by the end of September. 

The mortgage industry was heavily backlogged, last year when the Nehemiah Down Payment Assistance PProgram was repealed by HUD regulations.  Sadly, procrastinating buyers lost the opportunity to get a no down payment FHA loan when the escrow didn't close by the expiration date.

Don't let this happen to you. 

Apply online now.  It's really simple and should take about 20 minutes.

Downtown San Diego Condo Loans: VA and FHA Approved Complexes

If you want to purchase a property within one of Downtown San Diego condominium developments, you might choose to use an FHA loan because of the low down payment requirement (3.5%).  Prior to last week, FHA condominium approvals could be issued on a "spot approval basis", meaning a HUD-approved lender could approve a loan regardless of the FHA complex approval. That practice has been discontinued.

Veterans choose to use a VA home loan because there is no down payment requirement.  Like FHA's amended policy, VA home loans can't be approved if the complex isn't.  VA, however, accepts the FHA approval and grants reciprocity.  FHA-approved condo complexes in Mission Valley will have explicit reciprocity by the VA. 

The following Downtown San Diego condo complexes are approved for both FHA and VA loans (as of 8/6/2009):

• Aperture
• Aria
• Atria
• Park View
• The Park at Tenth Avenue
• Terrace Village
• Park Row
• Park Terrace East Village
• Solara Lofts
• Union Square at Broadway
  

This information is not guaranteed for accuracy.  FHA condominium approvals can be searched at the HUD portal and VA condominium approvals can be searched at the VA portal.  It is advised to search at the portal before visiting the complex.

Mission Valley Condo Approvals For FHA and VA Mortgage Loans

In Mission Valley, there are 39 condominium projects.  If you want to purchase a property within one of those Mission Valley condominium developments, you might choose to use an FHA loan because of the low down payment requirement (3.5%).  Prior to last week, FHA condominium approvals could be issued on a "spot approval basis", meaning a HUD-approved lender could approve a loan regardless of the FHA complex approval. That practice has been discontinued.

Veterans choose to use a VA home loan because there is no down payment requirement.  Like FHA's amended policy, VA home loans can't be approved if the complex isn't.  VA, however, accepts the FHA approval and grants reciprocity.  FHA-approved condo complexes in Mission Valley will have explicit reciprocity by the VA. 

The following Mission Valley condo complexes are approved for both FHA and VA loans:

Friar's Pointe
Friar's Hollow
Friar's Mission
Creekwood at River Run
The Franciscan
Friar Gardens
Union Square
River Scene
Mission Gate
Mission Greens
Mission Heights
Mission Playmor
Mission Plaza
Mission Village
Mission Ridge
Mission Verde
Park Villas North
Rancho Mission Villas
River Colony

As of today (August 6, 2009), the following Mission Valley condo projects do not have FHA or VA approval:

Presidio Place
The Courtyards
Mission Bellwood
Woodspring
Rio Vista
Park Place Estates
The Bluffs
Mission Valley Terraces
City Scene
Fashion Hills
The Vistas at Fashion Heights
Hye Park
The Mission at Rio Vista
The Lido
Escala (Bridges, Bungalows, Courtyards, Terraces, Verandas, Villas)
Rio del Oro

This information is not guaranteed for accuracy.  FHA condominium approvals can be searched at the HUD portal and VA condominium approvals can be searched at the VA portal.  It is advised to search at the portal before visiting the complex.

August, 2009 Mortgage Rates Report and Outlook

August, 2009 mortgage rates started out on an upward trajectory.  Last week, a VA home loan rate was 5.0% with a 1% origination fee.  Today, that 5.0 % VA home loan rate would cost a full point more. Each "point" equals 1% of the loan amount.  Essentially, it would cost a veteran borrower $4,000 more to get that 5.0% rate today than it did last Friday. 

I think volatility is going to be present throughout August with mortgage rates trending lower in the middle to end of the month.  I expect that mortgage rates will respond to economic data, which isn't that great.  We've had a great run in the stock market; the Dow Jones Industrial Average is up 15% in the past 30 days.  That bull run is due to overoptimisim about an economic recovery.  Money that flowed into stocks flowed away from mortgage-backed securities and that's bad for mortgage rates.

Still, the mortgage rate spike hasn't been that bad.  Mortgage rates have vascillated between 5.0% and 5.5% these past 30 days.  There hasn't been a clear trend upwards and I think that's because the economy isn't on a sure path to recovery.  Unemployment numbers are still ticking up.  Retailing companies are experiencing a paradigm shift towards discounters (Wal-Mart and Target) and away from brand stores ( Gap, Abercromie and Fitch).  That's not a silver lining in the cloud. 

Oil prices don't seem to be rising and that's symptomatic of a weak economy.  Rising oil supplies suggest that demand for oil is dropping.

Housing is LOOKING healthy because of the first-time homebuyers activity.  The low end of the market has stablized as prices, combined with low mortgage rates, make renting more expensive than home ownership.  This is exactly what we said would happen ten months ago.  A low-end recovery does not a broad-based housing recovery make.  The mid-priced homes are weak and we expect the next round of forcelosures to be in the $400,000 to $1,000,000 market in Southern California.  The Federal Reserve Bank is still a major buyer of mortgage-backed securities and that is holding rates below the 5.5% mark.

What's all of this mean to the August mortgage shopper?  If you're buying a home, and closing in the first part of the month, you should have been locked at 5.0-5.25% already.  If you're floating, lock the rate in today.  If you're closing towards the end of August, there is a substantial opportunity for rates to dip to 5.0% in the next three weeks.  I wouldn't rush to lock-in until you get close to that mark.

Yet again, I'm changing my long-term bias- floating instead of locking.  Earlier this year, I felt that there was reward in holding out for sub-5% rates.  Back in June, I felt there was substantial risk in that strategy and changed my long-term bias towards locking.  I felt inflation could accelerate towards the end of the year.  I was wrong.  Neither the economic recovery not commodities-push inflation have gained ground.  I think it's safe to expect that mortgage rates will stay under 6.0% for the next 12-18 months now.

Apply online now.  It's really simple and should take about 20 minutes.