SAN DIEGO MORTGAGE AND REAL ESTATE

Jumbo Mortgage Rates Report--July 11, 2011

Jumbo mortgage rates gave returned to the end of June levels as the mortgage bond market reacted to a weak employment report and more fear about bloated PIIGS (European government default risk).  I talked about this in my Jumbo Mortgage Rates report for July 5, 2011.  

I digress but I'd be remiss if I didn't tell you that today is Free Slurpee Day.  Slurpees can cause Brain-Freeze.   I would love to freeze today's mortgage rates for a week or so but I'm not so sure the markets will accomodate.  Last week, I suggested you could hold out for lower rates; that happened.  Today, I think it makes complete sense to lock-in your mortgage rate at application.  While rates could trend lower, the risk of them rising another .25%...quickly, far outweighs the reward of them improving by .125%.  As always, my advice may not be perfect for you so it's best to speak with your loan originator.

Jumbo Mortgage Rate Indications, as of July 11,, 2011:

• 5/1 ARM----------4.000%/4.210% APR
• 7/1 ARM----------4.375%/4.571%APR
• 10/1 ARM---------4.625%/4.807%APR
• 30 Yr Fix----------5.125%?5.557%APR
• 30 Y FNMJmbo-4.500%/4.724%APR
• 30 Y FNMA-- ----4.375%/4.615%APR

Jumbo mortgage rates quoted are for loan amounts from $700,000 to $2,000,000.  Credit, down payment, and income restrictions apply.  Not all will qualify.  Equal Opportunity Lender.  NMLS ID 339261

Jumbo Mortgage Rates Report- July 5, 2011

Why do La Jolla, CA home buyers keep watching the riots in Greece?

Once again Greece threatened default on its soveriegn deb.  This sent shockwaves through the world financial markets.  This time around, the European Union was offering less solidarity and more austerity to its little peninsular cousin.  Capital fled European markets and into American treasury bonds during the middle of June.  This drove bond yields down which caused jumbo mortgage rates to decline to their lowest levels since 2004.

Last Monday, we locked a $500,000 loan, at 4.75% (30 year fixed), with no fees or discount points.  We locked a $1.1 million loan at 5.125% (30 year fixed), with no fees or discount points.  Today, those same loans would be more expensive by a discount point (1% of the loan amount).  This means that the first buyer would have to bring an extra $5,000 to closing today, and the second buyer would have to bring $11,000 to closing today , just to get the same rates.

Why are jumbo mortgage loans so much more expensive today than they were last Monday?  Greece struck a deal with the European Union to get emergency loans.  That action reassured golbal financial markets that a Greece default would be stayed.  Money flowed into equities and out of the safe haven of US Government securities.  Mortgage bond investors demanded higher yields from mortgage originators which was passed onto the retial borrower.

In which direction will jumbo mortgage rates head this summer?  I believe rates will be stable through Labor Day with some erratic movements upwards.  The federal Reserve bank has halted its quantitative easing plan.  While this should pressure jumbo mortgage rates higher, Greece is but the first of many sovereign default crises bubbling beneath the surface of a calm Mediterranean Sea.  I expect those threats of crises will hold the upwards pressure in check. 

If you can, lock a jumbo mortgage rate under 5%.  If higher than 5% is offered, you might pause to read what's happening in Europe.  Anothe ron of these crises could afford you that rate under 5%.

Low-Income Housing Proposed for Solana Beach. Junior Lifeguard Program Could Be Affected

The Solana Beach Junior Lifeguard program may not be assembling in the S. Sierra Ave parking lot in the future.  A low-income housing project is being proposed for the current drop-off site for the Junior Lifeguard program:

The three-level building would have a 1,300 square-foot market on the ground floor, and 10 housing rental units above. The site is now a parking lot with 31 spots, used heavily for beach access and for the junior lifeguard program. A lot with some underground parking with 54 spots is proposed.

"The Pearl" will be a mixed-use development, with a small market and ten housing units which can house up to 44 people.  Ginger Hitzke is the Temecula-based developer.  Her work history includes various "public/private developments", as a Vice President with the Affirmed Housing Group and now, as a lead developer with Community Collective.  From her website:

We started our careers working on the most challenging, politically charged rental projects for the lowest income familes (emboldened by the author).

Solana Beach really doesn't have a choice in the issue; the City has to do something becuase this wealth-redistributiuon scheme was mandated by the State of California.  The projects are politically charged because this is a classic use of Rotarian Socialism (or crony capitalism).  In this case, the State mandates that cities build low-income housing, funded by taxpayers, and politically-favored individuals get the contracts to build that housing stock.  Financing is easy for such projects because the rents are usually guaranteed (by the taxpayers) under Section 8 Housing rules.  Approvals will be fast-tracked through the Coastal Commission and City zoning because of the State mandate.

While free-market developers, wait for years for project approvals, risk their own capital, and pray that developer financing becomes available from banks, those "politically charged" competitors feed at the public trough with projects which are essentialy arbitrage plays, not entrepreneurship.

Solana Beach Councilman Dave Roberts sees this as an excellent opportunity to add some union card holders (his base) to the Solana beach voter roster:

He said the city has been sued in the past for not offering enough affordable housing, and a project like this would save taxpayers hundreds of thousands of dollars in avoided legal fees and allow the city to continue providing services for residents. Roberts said the housing would be an opportunity for police officers and teachers to live in Solana Beach, an area they otherwise could not afford. (emboldened by the author)

Roberts' statement shows his ivory-tower thinking.   Cops and teachers usually make more than the income limits of low-income housng rentals unless...

...the fix is already in.

Alternative ideas for this project (since we are mandated to this wealth-redistribution scheme by the State) might include:

1. Give Solana Beach  residents first right-of-refusal to invest in the project.  This project, like all Rotariian Socialist schemes, is a guaranteed profit machine. I'd much prefer that my neighbors make that guaranteed profit so that it is reinvested in Solana Beach businesses and churches.  You know...Shop Solana First.
2. Search for a Solana Beach developer to build the project rather than a politically-connected outsider.  There are a lot of talented builders and developers, in Solana Beach, with better track records, than the Riverside County developer.
3. Address the problem presented by the State mandate once.  Solana Beach is mandated to build 150 low-income housing units, over the next ten years; this project only addresses 7% of that mandate.  You have to ask yourself if this is really the highest and best use of this land and if we can meet the State edict by developing a larger project elsewhere in the City.
4. Consider offering preference to disabled veterans.  The three wars, our country pursued over the past ten years, has given us a substantially large number of disabled veterans, many of them in San Diego County.  What better statement could be made, to the County which houses the largest number of military veterans, than to say that Solana Beach will be the leader of "Operation Home"?  Solana Beach should be known as the epicenter for helping our veterans' transition to civilian life.

The wealth distribution scheme, that is low-income housing. is a violation of ownership of private property, as is secured by our Founding Documents.  The State of California has seen fit to violate that principle and socially game the system to politcally-favored people.  As distasteful as this unconstitutional mandate is, we're stuck with it.  We might as well make the best of it, for the benefit of our residents and veterans, rather than feeding the wealth-eating machine.

FOLLOW UP THOUGHTS:

Why Build “The Pearl” in Solana Beach When Buying Existing Resale Housing Would Save Taxpayers Money?

Excerpt:  The City of Solana Beach could make a public announcement that it intends to purchase ten homes for less than $550,000, offer a 4% co-brokerage fee, and suggest that it will give preference to short sales or foreclosure situations,  My guess is it would be flooded with offers to sell.

Government-Sponsored, Sub Prime Mortgages Coming Soon

Just in case you missed how horrendous the results of centralized, government planned, sub-prime, mortgage industry were, the Kommisars have decided to....

  ...create a sub-prime mortgage industry?  From the Boston Herald:

But some of the other requirements that federal agencies and the Obama administration are proposing in the same plan have gotten much less attention yet could prove just as troublesome for consumers:

•Strict mandatory debt-to-income limits. Under the proposal, to get the best mortgage rates, you would need to spend no more than 28% of your gross monthly income on housing-related expenses, and you couldn't have total monthly household debt that exceeds 36% of your income.

There would be no flexibility to go beyond these ceilings, unlike in today's marketplace, in which Fannie Mae and Freddie Mac consider debt-to-income ratios along with other factors through their electronic underwriting systems. Freddie Mac, for example, has an overall debt-ratio limit of 45% of an applicant's stable monthly income.

•To refinance your existing mortgage and replace it with one carrying the best interest rate, you'd need no less than a 25% equity stake in your house to qualify. If you sought to take any additional cash out through a refi, you would need 30% equity. Today's typical requirements for a conventional refi are nowhere near as strict.

•Pristine credit standards. For example, if you were 60 days late on any credit account during the previous 24 months, you would be ineligible for a mortgage at the best terms.

These are all core features of what may be the most sweeping and controversial set of changes in decades for the housing and mortgage markets. The so-called "qualified residential mortgage," or QRM, proposals were released at the end of March by banking, securities and housing regulators, along with the Department of Housing and Urban Development. The agencies were required by the 2010 financial reform legislation to come up with new standards for low-risk conventional mortgages.

Of course, this isn't being sold as a creation of a new sub-prime mortgage industry but simply rewarding those who have the money, credit history, and income to qualify for the best mortgage terms.  Wait a minute!  Isn't that what banks are supposed to do?  Aren't bank underwriting departments supposed to analyze risk, assess a commensurate return required for that risk, and offer loan terms?

This is MORE centrailized planning and it won't work because it never does.  Scream if you want but there is nothing you can do about it.  This Administration rules with an iron fist and Wall Street, and the banking cartel are being guaranteed profits by eliminating any competitiion.  These proposed rules will stifle any form of innovation in residential real estate finance.  This is Rotarian Socialism at it's finest and, as Greg Swann says, "It's evil dressed up in a Brooks Brothers suit"

The only way to save the mortgage industry is to break up the big banks, deregulate completely, which means abolishing the FDIC depositor insurance, and letting the free market determine interest rates, risk analysis, and loan terms.  If you want a robust economic recovery, get rid of this adolescent President, his Soviet-style Adminsitration, and demand an abolishment or (at the very least) completely transparent central bank (the Fed).

Can you imagine if the Kommisars regulated green beans the way they regulate your money? 

Oh wait...never mind. 

Picture credit icanhascheeseburger.com

Broken Windows in California: Why The First-Time Home Buyer Credit Failed

This just in, about February sales, from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). 

The statewide median price of an existing, single-family detached home sold in California was $271,320, down 2.8 percent from a revised $279,140 in January and was down 2.5 percent from the $278,190 median price recorded for February 2010.  The February 2011 median price was the lowest since May 2009, when it was $263,440.

Why are prices declining? 

Perhaps the shadow inventory is being released.  It is widely believed that most buyers will be looking to move in the summer which means the best time to list a property would be April, May or June.  Expect more of this slow decline for the next 3-4 months.  After that, it's a crap shoot,  If the California unemployment rate stays north of 12%, this might be a tepid summer for real estate.  Until Jerry Brown's tax hike is defeated, expect the unemployment rate to remain over 12%.

Here are other highlights of C.A.R.’s resale housing report for February 2011:

• The Unsold Inventory Index for existing, single-family detached homes was 7.3 months in February, up from 6.7 months in January 2011.  The index was 6.0 months in February 2010.  The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate. 
  
  
• Thirty-year fixed-mortgage interest rates averaged 4.95 percent during February 2011, compared with 4.99 percent in February 2010, according to Freddie Mac. Adjustable-mortgage interest rates averaged 3.35 percent in February 2011, compared with 4.23 percent in February 2010.
  
  
• The median number of days it took to sell a single-family home was 64.4 days in February 2011, compared with 39.2 days for the same period a year ago.

So mortgage rates are similar to what they were a year ago but inventory is rising and staying on the market longer?  How can that be?  Perhaps the first-time home buyer tax credit was really just another failed stimulus plan, stalling a meaningful recovery.  The result is a bunch of wasted money; $600 stolen from nine neighbors so that one neighbor could sell his home at a higher price.

This is a perfect illustration of the broken window fallacy.  We still have a lot of broken windows in California.  My California real estate weather prediction?  Cloudy with a chance of rain.

Documents Required For A Short Sale in San Diego

 
Yalda Alawi, the San Diego Real Estate Lady, offers a free book about short sales, at the end of this article:

The documentation required to process a short sale is commonly referred to as a “Short Sale Package” and is usually submitted by the agent representing the seller or the seller of the property themselves if they are attempting to do the short sale on their own. Here’s a sample short sale package:

Note that items may vary depending upon the lender.

• Cover Letter.
• Authorization to Release Information (pgs. 11)
• Sellers Hardship Letter (pgs. 12-15).
• 2 years W-2′s.
• 2 months pay stubs.
• 2 months bank statements.
• Supporting Hardship Info – HOA liens, medical/disability statements etc.
• Repair Estimate for the property (when necessary).
• Comparable area sales (see BPO on pg. 23).
• Listing & Purchase Contract(s).
• Net Sheet (provided by agent).
• First mortgage holder may ask for a payoff amount from the 2nd (obtain pay-off statement from lender).
• Second mortgage holder may ask for a payoff amount from the 1st (obtain pay-off statement from lender).
• Lender may ask for an Initial Title Report.
• FHA and VA may have their own forms and special requirements as well.

If you plan to work with a real estate professional and can have your last two years tax returns as well as past two months bank statements and pay stubs together with your hard ship letter and authorization to release information statement for them at your initial meeting you’ll give them a running head start and they will love you!

This is ONE Page from the 40 Page Book “The Homeowner’s Guide to Real Estate Short Sales”

Request your FREE copy today: http://www.BreakForeclosures.com

Call Yalda at 858.863.3860 or, do what I do and stalk her on Facebook.

FHA Monthly Premiums Likely To Rise April 1, 2011

Remember when the FHA monthly mortgage insurance premiums rose from .5%(annual) to .9%(annual) ?  The NAR kicked and screamed about housing affordability but the move was made to shore up the ailing HUD reserves.  What many folks missed was that HR 5981 allowed for an increase for an annual premium of 1.55%:

The bill has already passed the house. The bill (H.R. 5981) allows FHA to raise its annual premium to 1.55% from 0.55%. Approved by unanimous consent, the legislation now goes to the White House for the president’s signature.

I haven’t decided that this is a good thing to happen to mortgage lending or a bad thing. One of the determining factors for me will be how much of the authorized increase FHA determines they will actually take. If they take the full 1.55%, it will literally take about 25% of the buyers out of the market.

According to the National Mortgage News, “With this new authority, FHA will lower its 2.25% upfront premium to 1%, but then raise the current 55 basis point annual premium, basing the hikes on loan-to-value ratios. FHA wants to raise the annual premium to 85 bps for loans with LTVs of up to, and including 95%, and to 90 bps for loans with LTVs above 95%.”

Well, it looks like HUD Secretary Shaun Donovan has decided to raise the FHA premium again:

Higher FHA Insurance. "As Fannie Mae and Freddie Mac's presence in the market shrinks, we will encourage program changes at FHA to ensure that the private sector – not FHA – picks up this new market share," states the Treasury plan. In addition to the change in loan limits, the Administration will put in place a 25 basis point increase in the price of FHA's annual mortgage insurance premium, which is paid in 12 monthly installments. FHA just increased the annual MIP payment to .85 percent last October. The new rate will be 1.10 percent. FHA currently accounts for 30 to 40 percent of all new purchase mortgages, and more than half of all mortgages taken out by first-time buyers.

What does that mean to the average FHA borrower, taking out a $300,000 loan in San Diego County?

• Six months ago, the FHA mortgage insurance premium would have been $125.00.
• As of October 1, 2010(and currently), that FHA monthly premium would be $225.00
• After April 1, 2011, expect that FHA monthly insurance premium to be $287.50.

It's more than doubled.  Can you blame HUD though?  As Greg Swann writes, while the Obama Adminsitration says they want to wind down the government's role in housing finance, it appears they just want to shift the responsibility to a growing agency.  That's not helpful for a sustainable recovery in mortgage financing.  Until the government completely withdrawals from housing finance, private lenders have no incentive to come up with a solution.

 

Saving Money Through a Mortgage Refinance on Black Friday

Mortgage rates are the lowest they've been since Ike was President.  Today (Black Friday), Americans will wake up at 2AM, stand in line for hours, and purchase things they really don't want or need, because they are sold at such a steep discount. Why aren't those shoppers looking for a mortgage refinance rather than shopping in the malls?

Crazier still is the tilted, Black Friday opportunity costs scale; professionals spend ten hours in malls today, to save $200, when their time is worth at least twice that.  It would make more sense for those Americans to work a half-day today, and pay full retail price, rather than subject themselves to the frenzied crowds of Black Friday shopping.  At least they could "create" 4-5 extra hours of leisure.

I'm no enemy to bargain shopping.  I rarely pay full retail price for big ticket items.  Still, don't we shake our heads at our neighbor who drives 20 miles to save $.10/gallon on a fill-up? 

If you're sitting at home, contemplating the hundreds of dollars you can save in the malls today, consider this:

• mortgage rates are below 4.5%; the lowest they've been in over 50 years.
• if you can reduce the rate .5%, on a $500,000 mortgage, you'll save over $200...every month

Boast about that Black Friday savings to your friends.  You don't have to go to the mall either.  Simply apply for a refinance online or call me today at 858-777-9751.

 

Forbearance An Option For Active Duty Service Members

Fannie Mae announced its Wounded Warriors Forbearance Program:

At an event today at the Pentagon, Fannie Mae (FNMA/OTC) and the U.S. Army announced new initiatives to help service members who are struggling with their mortgage payments avoid foreclosure. The effort includes a mortgage payment forbearance of up to six months where the death or injury of a service member on active duty causes a hardship for impacted military families with a mortgage obligation.

One positive feature is that Fannie Mae will suspend credit reporting during the forbearance period:

Service members or surviving spouses who may be eligible for the special forbearance are to contact their mortgage company. The mortgage company may grant forbearance of up to six months under Fannie Mae's "Unique Hardships" guidelines with Fannie Mae's approval. Under forbearance, the mortgage company may reduce or suspend the borrower's monthly payments for the specified period. Credit bureau reporting will be suspended during the forbearance to minimize any derogatory impact.

It is important to note that the program is NOT sponsored by the Veterans Administration.  The VA offers similar options for wounded service members through its partner lenders.  The VA encourages wounded veterans or surviving spouses to contact the lender if they are unable to make payments as well as notify the regional VA lending center.  While the lenders often offer forbearance agreements, they usually report the delinquencies to the credit bureaus.

Veterans facing financial difficulty might think these programs are complimentary when in fact, they are exclusive.  The first step is to always contact the loan servicer (the company to whom you make payments).  Always ask the loan servicer which entitiy "owns" the loan (investor or guarantor).

 

 

 

Buy American? How About Build American First?

Lorena Gonzalez encourages San Diegans to become "economic patriots" and redirect their spending towards domestic products only.  She demonizes the financial sector yet fails to see the problem:

The last year has proved to us that the revered financial sector and our undying allegiance to Wall Street have failed our country

The protectionist meddling into the financial services sector has rendered Wall Street and banking a ward of the State.  Winners and losers are picked by political processes rather than economic viability.  Any reasonable person knows that banks aren't doing what they should be doing; lending money.  Banks won't lend money as long as the economic incentive is protectionism and subsidies.

Mrs. Gonzalez' argument for protectionist purchases is a classic  tu quoque fallacy.  Rather than to support a failed system, we should focus first on the principle of serving customers best.  Unions, or organized labor, are exactly like the cabal on Wall Street.  Rather than restrict access to capital for economic gain, organized labor restricts access to employment for political gain.  Both systems are dysfunctional and symptomatic of the disease that afflicts our economy; protectionism.

Free markets are the best way to prosperity.  When bad banks are bailed out, or favorable labor contracts are granted unions, those restrictions of capital and labor distort the market and lead to higher prices.  You, as a consumer, might "feel better" by keeping your money in an American bank, or buying products made by Americans, but in reality, you are enabling a dysfunctional system (besides penalizing your family).

American labor and American capital needs to get competitive in this global economy.  Fortunately, this country has a lot of both.  Entrepreneurship has always been a byproduct of a free people and creates economic opportunities for all members of our society.  Economic prosperity always starts with the question "Can I make it better, cheaper or faster?"

If you really want to be an "economic patriot" this Labor Day, find a way to compete with those foreign producers.  "Build American" by starting a business to compete with them.  Your solution will most likely include free workers rather than organized ones.  Mrs Gonzalez won't like that because it erodes her political power but...

..it's the RIGHT thing to do.