This Expert says " the feds are out of bullets" so far as having more things to do to help the economy. It appears to her that there will be a major correction sometime early next year. As you watch this video draw your own conclusions.
A lot of her facts and conclusions are hard to refute. The points about the big state and their troubles(debts)that will contribute to more job losses, is scary. After watching this you cannot help but feel that maybe the administration is headed in the wrong direction. Like James Carvel, during the Clinton election, said " It's the economy stupid". Well it is for certain and the folks know that for sure.
Well, when the consumer fails to spend for fear of bad times ahead, then I can only say that it a Leadership issue or rather a lack of leadership( from our President). If confidence is lacking with the American people...well the "buck stops"(and starts) with the President.
Tuesday, December 8, 2009
Sunday, December 6, 2009
Tom, "Your Great Home" deal guy find some super Chico deals
Northern California real estate deals are showing up on a regular basis. More and more high end homes are now in trouble, as a new wave of non sub-prime loans home owners are underwater. This is bad news for the owners but a great chance for investors/home buyers to buy premium properties at very low prices. Investor and home buyer are finding some of the best buys in Chico, California. These homes in Canyon Oaks are a small sample of whats out there.
ck this video out --
Fast sales in this gated community with a beautiful Golf course and club house have shown that even in a down market buyers are willing to pull out their check books for a good deal.
If you are intrested you should move fast as these homes tend to sell rather quickly. New homes are showng up every day on the market as owners bail to save their credit taking the short sale route to save something, so contact me if you'ed like to take a look see.
ck this video out --
Fast sales in this gated community with a beautiful Golf course and club house have shown that even in a down market buyers are willing to pull out their check books for a good deal.
If you are intrested you should move fast as these homes tend to sell rather quickly. New homes are showng up every day on the market as owners bail to save their credit taking the short sale route to save something, so contact me if you'ed like to take a look see.
Saturday, December 5, 2009
Moody's: Option Arms show "Dismal Performance!"
The total count of Option ARMs outstanding are highly concentrated among a few states. California, having a large[er] number of troubled home(TARP) loans, would make you think that more distressed "homes for sale", will soon be in your local MLS. The upper priced homes in Chico will surly be in play ,if this trend hold any longer... Contact you realtor for "Good deals".
[The Option ARM] sector shows “dismal” performance, with more than 40% of borrowers 60 or more days past due on payments. And many of these loans have yet to experience a recast event, when initial minimum monthly payments jump as much as 60%, according to sources interviewed by HousingWire for an upcoming issue.
“Even though borrowers with Option ARM loans have the option to make monthly payments typically lower than the accruing interest on the loan, many borrowers are choosing a different option–not making any payment at all.”
...
Negative equity is a key driver of weak performance — as well as a more predictive measure of default than unemployment — particularly among Option ARMs.
...
Negative equity is a key driver of weak performance — as well as a more predictive measure of default than unemployment — particularly among Option ARMs.
“There is little hope that most of these [delinquent] borrowers will start making payments again if no principal is forgiven,” Moody’s said. “Forbearance does not eliminate the obligation to repay the loan principal, it only delays it. And many delinquent borrowers are potentially so far underwater that it would take close to a decade for them to attain any positive equity in their home.”
For their borrowers, modifications that lower the interest or extend the term, just delay the inevitable - and really makes the borrowers into renters.
[The Option ARM] sector shows “dismal” performance, with more than 40% of borrowers 60 or more days past due on payments. And many of these loans have yet to experience a recast event, when initial minimum monthly payments jump as much as 60%, according to sources interviewed by HousingWire for an upcoming issue.
“Even though borrowers with Option ARM loans have the option to make monthly payments typically lower than the accruing interest on the loan, many borrowers are choosing a different option–not making any payment at all.”
...
Negative equity is a key driver of weak performance — as well as a more predictive measure of default than unemployment — particularly among Option ARMs.
...
Negative equity is a key driver of weak performance — as well as a more predictive measure of default than unemployment — particularly among Option ARMs.
“There is little hope that most of these [delinquent] borrowers will start making payments again if no principal is forgiven,” Moody’s said. “Forbearance does not eliminate the obligation to repay the loan principal, it only delays it. And many delinquent borrowers are potentially so far underwater that it would take close to a decade for them to attain any positive equity in their home.”
For their borrowers, modifications that lower the interest or extend the term, just delay the inevitable - and really makes the borrowers into renters.
Friday, December 4, 2009
Northern California Home owners grab new Loan Modification
Many North state Chico Home owners in an effort to modify mortgages are heading into overdrive in a bid to make sure that having received trial loan modifications can have that workout made “permanent.” Very few , if any, to date have been able to qualify for a permanent loan modification.
So far, most criticism on the Home Affordable Mortgage Program, i.e., HAMP, has centered on why so few borrowers with trial modifications are converting into permanent modifications. The common refrain from loan servicers is that they haven’t been able to get paperwork from borrowers to help finalize the loan modification — important because servicers get paid for each mod, and need to prove that borrowers actually face hardship.
But at ForeclosureRadar’s blog, Sean O’Toole raises a different, potentially more problematic issue: “Permanent” loan modifications last for only five years. He posits that reason for the low uptake of the loan modification program:
Maybe borrowers have figured out that this program is really only another exotic mortgage like one they fell prey to when they bought or refinanced the house that resulted in their current predicament. HAMP and the administration’s newly announced campaign isn’t digging borrowers out of a hole. It’s only digging them a new one, and delaying the inevitable.
To be sure, the five-year period tries to give borrowers a lifeline—a chance to get their life back on track. In five years, the thinking behind the plan goes, more borrowers may be financially whole again, able to make their mortgage payments, or, if housing prices have stabilized, some may be able to refinance or sell their homes.
But what about those borrowers who have loans modified who aren’t ever going to be able to afford their higher payments, which is what they’ll have to pay after the five-year modification expires? Are loan mods just creating a new batch of loan resets and delaying the inevitable foreclosure for borrowers who bought too much home, or who were sold a loan that they didn’t understand and couldn’t afford? Mr. O’Toole is blunt in his criticism:
The new hole offered by HAMP is all the downside with none of the upside.
The downside: exotic re-financing, by which they make payments affordable today, but leave homeowners in the same boat down the road when payments ratchet back up after 5 years.
The bonus downside: there is no reasonable expectation that home values will appreciate anywhere near enough to get these loans above water before the 5 years is up, or before the homeowner runs into a real life event like job loss, divorce or job relocation — leaving them stuck in an upside down prison of debt.
The column in today’s NYT by Floyd Norris raises the same prospect, while offering a little more leeway to the administration. While he writes that it’s “conceivable that this process is doing more to drag out the foreclosure crisis than to alleviate it,” he adds:
“[P]erhaps we should not be too critical of anybody involved in the modification effort, either the administration or those trying to arrange modifications. The mess was made years ago, when bad loans were made and the ready availability of credit was driving house values to unsustainable levels. Cleaning it up is not going to be a pleasant experience for anyone.”
So far, most criticism on the Home Affordable Mortgage Program, i.e., HAMP, has centered on why so few borrowers with trial modifications are converting into permanent modifications. The common refrain from loan servicers is that they haven’t been able to get paperwork from borrowers to help finalize the loan modification — important because servicers get paid for each mod, and need to prove that borrowers actually face hardship.
But at ForeclosureRadar’s blog, Sean O’Toole raises a different, potentially more problematic issue: “Permanent” loan modifications last for only five years. He posits that reason for the low uptake of the loan modification program:
Maybe borrowers have figured out that this program is really only another exotic mortgage like one they fell prey to when they bought or refinanced the house that resulted in their current predicament. HAMP and the administration’s newly announced campaign isn’t digging borrowers out of a hole. It’s only digging them a new one, and delaying the inevitable.
To be sure, the five-year period tries to give borrowers a lifeline—a chance to get their life back on track. In five years, the thinking behind the plan goes, more borrowers may be financially whole again, able to make their mortgage payments, or, if housing prices have stabilized, some may be able to refinance or sell their homes.
But what about those borrowers who have loans modified who aren’t ever going to be able to afford their higher payments, which is what they’ll have to pay after the five-year modification expires? Are loan mods just creating a new batch of loan resets and delaying the inevitable foreclosure for borrowers who bought too much home, or who were sold a loan that they didn’t understand and couldn’t afford? Mr. O’Toole is blunt in his criticism:
The new hole offered by HAMP is all the downside with none of the upside.
The downside: exotic re-financing, by which they make payments affordable today, but leave homeowners in the same boat down the road when payments ratchet back up after 5 years.
The bonus downside: there is no reasonable expectation that home values will appreciate anywhere near enough to get these loans above water before the 5 years is up, or before the homeowner runs into a real life event like job loss, divorce or job relocation — leaving them stuck in an upside down prison of debt.
The column in today’s NYT by Floyd Norris raises the same prospect, while offering a little more leeway to the administration. While he writes that it’s “conceivable that this process is doing more to drag out the foreclosure crisis than to alleviate it,” he adds:
“[P]erhaps we should not be too critical of anybody involved in the modification effort, either the administration or those trying to arrange modifications. The mess was made years ago, when bad loans were made and the ready availability of credit was driving house values to unsustainable levels. Cleaning it up is not going to be a pleasant experience for anyone.”
Chico Homes for Sale: Creating A Business Model from the Current Distressed Asset Marketplace
Many savey North State investors are buying/Investing at unbleavable bargin prices in one of Northern California best Real estate market. One of the hottest cities is, Chico California,home of CSU and Enloe hospital. However, as my dad use to say there is more than one way to skin the cat.
This following interview provides a great(Business model)way for investors to make the most of this market:
Mosca: As you know, every downturn and recovery offers opportunities for investors to adapt and respond to the economic conditions. Investing in distressed assets presents what is perhaps the best investment strategy in most of our lifetimes. Do you agree?
Walker: The opportunity to purchase property is greater than it has ever been. The opportunity for an increase in values is there. The opportunity to buy low and hold the properties for a period of time and see a increase is better than it has ever been at least in the last 20 years or so.
Verhaaren: I agree with Blaine that there is a market window now that probably hasn’t been seen for 20 years. Last time there was something comparable was when the Savings and Loan crisis happened and the Federal Government set up the RTC, Resolution Trust Corporation, to liquidate assets from the failed Savings and Loans Institutions. Today, there are a lot of similarities with the banking community. We all know of the bailouts that have taken place over the last year with the Federal Government and the large banks, but there are a lot of community banks, over 100 at last count, that have failed, too. Once these banks fail, the FDIC ends up like the RTC with the assets and have to do something with them. The FDIC has several channels that they have been using to liquidate these assets. We’ve spent the last 12 months acquiring assets through these channels. The FDIC is hoping that by bringing in professional management to take an interest in these pools that ultimately the recovery for the FDIC and the taxpayer will be higher. We have participated in all of those channels.
Mosca: When you talk about professional management, you are talking about gentlemen like yourselves who have access to the assets and are getting them to institutional and entrepreneurial investors. Investors from across the globe can get their hands on investments like this, right?
Verhaaren: That’s correct. To bid on the structured sales you have to go through a qualification process. We and others have done that. Once you become qualified, you can bid and participate in these structured sales in what I have referred to as these managers. Once you are qualified, you are qualified to be a manager of these large pools. You then as a qualified manager bid at auction and the pools go to the highest bidder at that point but you have to participate through a qualified manager. We have bid on 3 separate pools and we use funds from investors that we have aggregated as the source of capital to acquire the assets.
Mosca: If I can, Blaine, is the bottom line here that if you are not in a position like Rob’s company and yours to get direct access, you can now -- because of this show -- have access to these investments because we are introducing our audience to companies like yourself that are now in the disposition process of these assets?
Walker: We are involved in a pool that was originally about $1.1 billion on the retail side for the total value of the loans. We’ve taken all of those loans and put them on a virtual deal room site [click on the ‘Best of Times’ picture at IncomePropertyInvestmntTalk.com]. So far we have liquidated about $125 million in loans on a wholesale basis. There is an opportunity for an investor to come on the virtual deal room and bid on individual assets or bid on multiple assets, at least on the notes themselves. We are also in the process of reducing a lot of those notes to REOs and we have over 300 of them currently in REO process or being modified so that we can also sell them in an auction type situation.
Mosca: Scott, you have extensive experience in dealing with REOs. What is your take on today’s marketplace? Some argue that all investments today are distressed. What is your take on the market?
Griffith: There is certainly pressure on community banks. At this stage as they are trying to write down their loans to match up with their capital requirements and getting tremendous pressure from the FDIC to protect them, there are great opportunities as properties go into distress either before or after the bank takes possession. We formed a company called Rescue, LLC that goes in and consults with banks and helps them reposition their assets prior to taking them over. The banks decide whether or not they should take them over or find another way to outlet them at a remarkable price compared to the rest of the open market because they don't want to take them on their books. They don't want to hold reserves to match up with them. We are finding that over the last two years prices continue to go down because essentially they are creating oversupply in the marketplace and with the other pressures such as jobs it’s just opening up the market to tremendous opportunities for the investor to get in at great prices.
Mosca: I wrote in a recent blog that just because a deal is labeled a ‘deal’ doesn’t make it so. Do you agree?
Griffith: Exactly. The market has changed. This is not the time to be watching. It is using an old paradigm to try to decide on your investment now. You need to look at in today's market conditions and looking toward the future, not toward the past.
Walker: Scott makes a good comment when he said you have to look to the future. You can still use good investment philosophy and look at a property that’s currently performing and look at those properties to make sure that all of the fundamentals are in place. The thing that has changed drastically is the old cap rates that dropped down into the five to six percent range have now come back into the 8, 9, 10, and 12 percent cap range. The market has changed drastically because of the tremendous increase we saw for three or four years but it has now settled back down so you have to go back to the fundamentals in the housing market. As an example, you have to look at what the income levels are, the affordability index, what can people really afford to buy, and we got away from that with a lot of the financing mechanisms that were put in place and allowed for people who didn't have the income ratios, didn't have the job history to get into houses that they probably shouldn’t have been in.
Griffith: As the bank’s realize that their mortgage worth is under stress, they are starting to have to look at the value of the traditional model of going out and having an appraisal in the file and relying on it since the market is trending down with pricing. The banks are forced to reevaluate; they are calling up brokerages for help. This is a great opportunity for the investor because many of these properties are in a stage where they are in transition, being dissolved, possibly turning over, or maturing. The opportunity exists for an investor to go in and actually partner with the bank or attempt to work with the bank to help get it off their books before they actually have to take it on their books. There are some great opportunities to try and get in between the transaction early in the process and keep the bank from having to take title.
Mosca: Rob, Scott offered many different, powerful ways to take advantage of these opportunities. From your perspective, in terms of valuating and pricing, is there more to it than just price alone?
Verhaaren: One thing I hear spoken about all the time is, “I bought this for “x” cents on the dollar.” That’s not necessarily the way to look at it. It’s interesting and it makes it for a good story but is that from the peak of the market, is that from what the owner paid for it, or is that from what the bank lent on it? What’s important now is what it is worth now. To get to that is a time consuming process. My partner likes to say we are in the information business, not really in the real estate business. The more you know, the more data you have, the more information you have on the market and the surrounding area the better off you are going to be in terms of having the information you need to make a good buy. It is not always obvious. It’s very difficult to understand multiple markets in multiple areas. It’s important to focus on a particular area, gain as much market information as you can, and that will put you in a position to better understand value.
Walker: As start looking at any of these assets you need to be aware that real estate is unique. You need to focus on the type of property. Location and type of property are critical. You may buy a house for $5,000 to find out that you paid $20,000 too much because the house has to be torn down, it’s in an area where you have to maintain it and pay the taxes on it, you have to do the clean up, etc. As an investor you need to decide what type of property you want to be investing in. An investor has to be wise in what they are doing. It’s a great market out there but you have to take into consideration the type of investment you want to be in, the market you want be in, and the location in that market so that you are buying wise. The fundamentals in investing haven’t changed. You still need to buy a good property in a good location, you have to make sure it is priced right, if it is an income property you have to make sure that the income stream is good, the renter base is a good, the quality of the tenant, quality meaning credit worthiness, time and business,
Mosca: We live in a DIY society today, but can, or should, investors do all of this leg work by themselves?
Griffith: It’s a time you need to go and find an expert to help you do this. I look at the people trying to seize the opportunities at these auctions and realize that an amazing number of them are not spending the time or not hiring someone to spend the time, and paying more then the market should bear or that they should pay for it given the economy we are in and the situation of the work that may be required to make it an income stream or to make it able to sell to someone else. A lot of education is necessary. It’s just like when you build a home; you don’t expect to save all the money that a builder would make on the project because they built many homes. The same is true if you don’t do your homework and go into one of these transactions and try to buy them. You are going to have to learn your lessons in the hard knocks.
Walker: My basic philosophy is you make your money when you purchase the property and what Scott said is you seek out expert help. Even as we look at properties, when we want to bid on these FDIC packages, we use experts in the various areas where the property is located, real estate licensees, realtors within the area that are experts in that area to help us evaluate the property values.
Mosca: Are BANK REO transactions any longer than the typical transaction or is timing and negotiation similar to your standard real estate transaction?
Griffith: It is going to depend a whole lot on the sophistication and the preparation the bank has done for the getting rid of the property. Many of the banks have what they call special ‘asset groups’ but the truth be known, they are learning their way through the process. They haven’t had the opportunity in many cases even to write the asset down to where the value should be so they are faced with the dilemma of being in a position of negotiating on what probably is the fair price and they should be getting rid of it and getting it off their books and dealing with the consequences of having to go back to the bank and explain to federal regulators why they took a loss from where they carried it on their books. That has a huge impact upon the timing. If they have it on their books at the correct pricing for where you are, it should look like every other transaction you do. If they have to go back and play some politics internally, it’s going to stretch out the process
This following interview provides a great(Business model)way for investors to make the most of this market:
Mosca: As you know, every downturn and recovery offers opportunities for investors to adapt and respond to the economic conditions. Investing in distressed assets presents what is perhaps the best investment strategy in most of our lifetimes. Do you agree?
Walker: The opportunity to purchase property is greater than it has ever been. The opportunity for an increase in values is there. The opportunity to buy low and hold the properties for a period of time and see a increase is better than it has ever been at least in the last 20 years or so.
Verhaaren: I agree with Blaine that there is a market window now that probably hasn’t been seen for 20 years. Last time there was something comparable was when the Savings and Loan crisis happened and the Federal Government set up the RTC, Resolution Trust Corporation, to liquidate assets from the failed Savings and Loans Institutions. Today, there are a lot of similarities with the banking community. We all know of the bailouts that have taken place over the last year with the Federal Government and the large banks, but there are a lot of community banks, over 100 at last count, that have failed, too. Once these banks fail, the FDIC ends up like the RTC with the assets and have to do something with them. The FDIC has several channels that they have been using to liquidate these assets. We’ve spent the last 12 months acquiring assets through these channels. The FDIC is hoping that by bringing in professional management to take an interest in these pools that ultimately the recovery for the FDIC and the taxpayer will be higher. We have participated in all of those channels.
Mosca: When you talk about professional management, you are talking about gentlemen like yourselves who have access to the assets and are getting them to institutional and entrepreneurial investors. Investors from across the globe can get their hands on investments like this, right?
Verhaaren: That’s correct. To bid on the structured sales you have to go through a qualification process. We and others have done that. Once you become qualified, you can bid and participate in these structured sales in what I have referred to as these managers. Once you are qualified, you are qualified to be a manager of these large pools. You then as a qualified manager bid at auction and the pools go to the highest bidder at that point but you have to participate through a qualified manager. We have bid on 3 separate pools and we use funds from investors that we have aggregated as the source of capital to acquire the assets.
Mosca: If I can, Blaine, is the bottom line here that if you are not in a position like Rob’s company and yours to get direct access, you can now -- because of this show -- have access to these investments because we are introducing our audience to companies like yourself that are now in the disposition process of these assets?
Walker: We are involved in a pool that was originally about $1.1 billion on the retail side for the total value of the loans. We’ve taken all of those loans and put them on a virtual deal room site [click on the ‘Best of Times’ picture at IncomePropertyInvestmntTalk.com]. So far we have liquidated about $125 million in loans on a wholesale basis. There is an opportunity for an investor to come on the virtual deal room and bid on individual assets or bid on multiple assets, at least on the notes themselves. We are also in the process of reducing a lot of those notes to REOs and we have over 300 of them currently in REO process or being modified so that we can also sell them in an auction type situation.
Mosca: Scott, you have extensive experience in dealing with REOs. What is your take on today’s marketplace? Some argue that all investments today are distressed. What is your take on the market?
Griffith: There is certainly pressure on community banks. At this stage as they are trying to write down their loans to match up with their capital requirements and getting tremendous pressure from the FDIC to protect them, there are great opportunities as properties go into distress either before or after the bank takes possession. We formed a company called Rescue, LLC that goes in and consults with banks and helps them reposition their assets prior to taking them over. The banks decide whether or not they should take them over or find another way to outlet them at a remarkable price compared to the rest of the open market because they don't want to take them on their books. They don't want to hold reserves to match up with them. We are finding that over the last two years prices continue to go down because essentially they are creating oversupply in the marketplace and with the other pressures such as jobs it’s just opening up the market to tremendous opportunities for the investor to get in at great prices.
Mosca: I wrote in a recent blog that just because a deal is labeled a ‘deal’ doesn’t make it so. Do you agree?
Griffith: Exactly. The market has changed. This is not the time to be watching. It is using an old paradigm to try to decide on your investment now. You need to look at in today's market conditions and looking toward the future, not toward the past.
Walker: Scott makes a good comment when he said you have to look to the future. You can still use good investment philosophy and look at a property that’s currently performing and look at those properties to make sure that all of the fundamentals are in place. The thing that has changed drastically is the old cap rates that dropped down into the five to six percent range have now come back into the 8, 9, 10, and 12 percent cap range. The market has changed drastically because of the tremendous increase we saw for three or four years but it has now settled back down so you have to go back to the fundamentals in the housing market. As an example, you have to look at what the income levels are, the affordability index, what can people really afford to buy, and we got away from that with a lot of the financing mechanisms that were put in place and allowed for people who didn't have the income ratios, didn't have the job history to get into houses that they probably shouldn’t have been in.
Griffith: As the bank’s realize that their mortgage worth is under stress, they are starting to have to look at the value of the traditional model of going out and having an appraisal in the file and relying on it since the market is trending down with pricing. The banks are forced to reevaluate; they are calling up brokerages for help. This is a great opportunity for the investor because many of these properties are in a stage where they are in transition, being dissolved, possibly turning over, or maturing. The opportunity exists for an investor to go in and actually partner with the bank or attempt to work with the bank to help get it off their books before they actually have to take it on their books. There are some great opportunities to try and get in between the transaction early in the process and keep the bank from having to take title.
Mosca: Rob, Scott offered many different, powerful ways to take advantage of these opportunities. From your perspective, in terms of valuating and pricing, is there more to it than just price alone?
Verhaaren: One thing I hear spoken about all the time is, “I bought this for “x” cents on the dollar.” That’s not necessarily the way to look at it. It’s interesting and it makes it for a good story but is that from the peak of the market, is that from what the owner paid for it, or is that from what the bank lent on it? What’s important now is what it is worth now. To get to that is a time consuming process. My partner likes to say we are in the information business, not really in the real estate business. The more you know, the more data you have, the more information you have on the market and the surrounding area the better off you are going to be in terms of having the information you need to make a good buy. It is not always obvious. It’s very difficult to understand multiple markets in multiple areas. It’s important to focus on a particular area, gain as much market information as you can, and that will put you in a position to better understand value.
Walker: As start looking at any of these assets you need to be aware that real estate is unique. You need to focus on the type of property. Location and type of property are critical. You may buy a house for $5,000 to find out that you paid $20,000 too much because the house has to be torn down, it’s in an area where you have to maintain it and pay the taxes on it, you have to do the clean up, etc. As an investor you need to decide what type of property you want to be investing in. An investor has to be wise in what they are doing. It’s a great market out there but you have to take into consideration the type of investment you want to be in, the market you want be in, and the location in that market so that you are buying wise. The fundamentals in investing haven’t changed. You still need to buy a good property in a good location, you have to make sure it is priced right, if it is an income property you have to make sure that the income stream is good, the renter base is a good, the quality of the tenant, quality meaning credit worthiness, time and business,
Mosca: We live in a DIY society today, but can, or should, investors do all of this leg work by themselves?
Griffith: It’s a time you need to go and find an expert to help you do this. I look at the people trying to seize the opportunities at these auctions and realize that an amazing number of them are not spending the time or not hiring someone to spend the time, and paying more then the market should bear or that they should pay for it given the economy we are in and the situation of the work that may be required to make it an income stream or to make it able to sell to someone else. A lot of education is necessary. It’s just like when you build a home; you don’t expect to save all the money that a builder would make on the project because they built many homes. The same is true if you don’t do your homework and go into one of these transactions and try to buy them. You are going to have to learn your lessons in the hard knocks.
Walker: My basic philosophy is you make your money when you purchase the property and what Scott said is you seek out expert help. Even as we look at properties, when we want to bid on these FDIC packages, we use experts in the various areas where the property is located, real estate licensees, realtors within the area that are experts in that area to help us evaluate the property values.
Mosca: Are BANK REO transactions any longer than the typical transaction or is timing and negotiation similar to your standard real estate transaction?
Griffith: It is going to depend a whole lot on the sophistication and the preparation the bank has done for the getting rid of the property. Many of the banks have what they call special ‘asset groups’ but the truth be known, they are learning their way through the process. They haven’t had the opportunity in many cases even to write the asset down to where the value should be so they are faced with the dilemma of being in a position of negotiating on what probably is the fair price and they should be getting rid of it and getting it off their books and dealing with the consequences of having to go back to the bank and explain to federal regulators why they took a loss from where they carried it on their books. That has a huge impact upon the timing. If they have it on their books at the correct pricing for where you are, it should look like every other transaction you do. If they have to go back and play some politics internally, it’s going to stretch out the process
Wednesday, November 25, 2009
Great Chico Values out there in flipping properties
Many savy California Investors are buying California and now Chico short and REO properties and making a fast profit, as this video by Jim the Realtor show: "Interviews a Real Estate Flipper"
by CalculatedRisk on 11/25/2009 07:08:00 PM
Jim shows a property and interviews the investor. The investor recently bought the property for $590,000 on the court house steps, and sold it fairly quickly for $685,000.
by CalculatedRisk on 11/25/2009 07:08:00 PM
Jim shows a property and interviews the investor. The investor recently bought the property for $590,000 on the court house steps, and sold it fairly quickly for $685,000.
Saturday, November 21, 2009
Buying or Selling ... there are Great Values out there in Chico Trustee sales!
Super daels are popping up out ther for the Investor/home buyer. This one in San Diego is but one example:
If your in the market for a geat deal contact me to see whats out there. Chico California short sales, REOs and Trustee sales are yours if you are willing to take advantage of all the new listing now in the MLS. We also cover Paradise, Oroville as well as all of Butte county.
If your in the market for a geat deal contact me to see whats out there. Chico California short sales, REOs and Trustee sales are yours if you are willing to take advantage of all the new listing now in the MLS. We also cover Paradise, Oroville as well as all of Butte county.
Friday, November 20, 2009
Velocity(money M 1 leaving the bank),People are not helping(making new loans) as liquity is now at record highs
On Negative T Bills
by CalculatedRisk on 11/19/2009 09:30:00 PM
There was some buzz earlier today about short term T bill rates turning slightly negative. This happened last year too, but for different reasons ...
From the Financial Times: Short-term US interest rates turn negative
Short-term US interest rates turned negative on Thursday as banks frantically stockpiled government securities in order to polish their balance sheets for the end of the year.
...
The scramble has been exacerbated by the fact that all leading US banks ... will this year close their books at the same time – at the end of December.
excerpted with permission
John Jansen at Across the Curve explains:
I do not speak to[o] often of the T bill market but yields in that market continue to collapse. In one recent conversation a market participant noted that bill yields are negative out to February. There are a couple of factors at work here. There is a massive wall of liquidity, a pile of cash which needs a home. That is driving yields lower.
Typically as the year end approaches clients tend to unwind profitable trades and reduce balance sheet. I think that some of that deleveraging process has created new piles of cash and that money needs a place to park.
Others are preparing to beautify their balance sheet by having some pristine government paper on the books over year end. Some of that trade has begun as investors purchase paper which will carry them into 2010.
And more from John: More on Negative T Bills
In my closing post I noted that T bill rates are in negative territory and gave some reasons for that. Here is an excerpt from David Ader of CRT on that same topic;
“We instead take our cue from activity in the financing markets, where year end is playing its hand – Jan bills are trading negative. The story here is not a new one as we saw bills negative at the end of the last quarter, but exacerbated by a more intense year end. We say that because 1) it’s clearly the talking point on funding desks, 2) EVERYONE has a Dec 31 year end as we have no investment banks any longer, and 3) as bank holding companies there’s a likelihood that former IBs, too, need to show cash in something other than a mattress.”
Another analyst whom I read suggested that an exacerbating factor was the maturity of some cash management bills which were not replaced.
Whatever the case, I am certain that the present circumstance is not an indicator of financial stress as plunging bill rates have been in the past.
by CalculatedRisk on 11/19/2009 09:30:00 PM
There was some buzz earlier today about short term T bill rates turning slightly negative. This happened last year too, but for different reasons ...
From the Financial Times: Short-term US interest rates turn negative
Short-term US interest rates turned negative on Thursday as banks frantically stockpiled government securities in order to polish their balance sheets for the end of the year.
...
The scramble has been exacerbated by the fact that all leading US banks ... will this year close their books at the same time – at the end of December.
excerpted with permission
John Jansen at Across the Curve explains:
I do not speak to[o] often of the T bill market but yields in that market continue to collapse. In one recent conversation a market participant noted that bill yields are negative out to February. There are a couple of factors at work here. There is a massive wall of liquidity, a pile of cash which needs a home. That is driving yields lower.
Typically as the year end approaches clients tend to unwind profitable trades and reduce balance sheet. I think that some of that deleveraging process has created new piles of cash and that money needs a place to park.
Others are preparing to beautify their balance sheet by having some pristine government paper on the books over year end. Some of that trade has begun as investors purchase paper which will carry them into 2010.
And more from John: More on Negative T Bills
In my closing post I noted that T bill rates are in negative territory and gave some reasons for that. Here is an excerpt from David Ader of CRT on that same topic;
“We instead take our cue from activity in the financing markets, where year end is playing its hand – Jan bills are trading negative. The story here is not a new one as we saw bills negative at the end of the last quarter, but exacerbated by a more intense year end. We say that because 1) it’s clearly the talking point on funding desks, 2) EVERYONE has a Dec 31 year end as we have no investment banks any longer, and 3) as bank holding companies there’s a likelihood that former IBs, too, need to show cash in something other than a mattress.”
Another analyst whom I read suggested that an exacerbating factor was the maturity of some cash management bills which were not replaced.
Whatever the case, I am certain that the present circumstance is not an indicator of financial stress as plunging bill rates have been in the past.
Wednesday, November 18, 2009
Some Chico California Home owners are giving up on their Homes and letting the Banks take over
For the Young, Giving the House ‘Back to the Bank’ Is No Biggie
The housing crash has come to this: With so many Americans owing more than their homes than they’re worth - in some cases hundreds of thousands of dollars - more are debating walking away, or halting payments they can afford and waiting for foreclosure.
Statistics don’t exist because no one declares their reasons for walking away, but a handful of papers have suggested that there’s something to the anecdotal reports about borrowers “strategically” defaulting on their mortgages.
A top industry consultant suggested today during a meeting with Developments that such defaults may be more common with the younger set (under 30) that didn’t grow up with the pay-your-mortgage-before-everything-else mentality. This generation is more likely to view owning simply as an investment, says John Burns, president of John Burns Real Estate Consulting. Culturally, “it’s more acceptable than it was” during previous downturns, he says.
Indeed. A few months ago in Las Vegas, I met a 26-year-old man who said that in 2007, he put no money down for a $250,000 loan that got him a 1,400-square-foot, four-bedroom home in Northwest Las Vegas. When he spotted a nearby home with the same floor plan-but with a pool and guesthouse - for $100,000, he moved out in January and gave it “back to the bank.”
“Why would I keep paying on a $250,000 loan?” he asked. “I would not ever buy a house again.” (We tried to follow up with this guy, but his number had been disconnected.)
Think about it: If you’re young and unattached, relocating into a rental isn’t that big of a deal. And it may be another seven years before you’re ready to buy again–by then the black-mark is off your credit score. But families have to think about children in local schools, and community ties are more important. For them, a monthly mortgage similar to rent might make staying put - and not having to move an entire household - more logical.
But, should housing prices continue to fall, things could change. Last month, we told you about a professor who argues it’s OK to walk away.
“Homeowners should be walking away in droves,” Brent T. White, an associate professor of law at the University of Arizona, wrote in a discussion paper. “The real mystery is not—as media coverage has suggested—why large numbers of homeowners are walking away, but why, given the percentage of underwater mortgages, more homeowners are not.”
The housing crash has come to this: With so many Americans owing more than their homes than they’re worth - in some cases hundreds of thousands of dollars - more are debating walking away, or halting payments they can afford and waiting for foreclosure.
Statistics don’t exist because no one declares their reasons for walking away, but a handful of papers have suggested that there’s something to the anecdotal reports about borrowers “strategically” defaulting on their mortgages.
A top industry consultant suggested today during a meeting with Developments that such defaults may be more common with the younger set (under 30) that didn’t grow up with the pay-your-mortgage-before-everything-else mentality. This generation is more likely to view owning simply as an investment, says John Burns, president of John Burns Real Estate Consulting. Culturally, “it’s more acceptable than it was” during previous downturns, he says.
Indeed. A few months ago in Las Vegas, I met a 26-year-old man who said that in 2007, he put no money down for a $250,000 loan that got him a 1,400-square-foot, four-bedroom home in Northwest Las Vegas. When he spotted a nearby home with the same floor plan-but with a pool and guesthouse - for $100,000, he moved out in January and gave it “back to the bank.”
“Why would I keep paying on a $250,000 loan?” he asked. “I would not ever buy a house again.” (We tried to follow up with this guy, but his number had been disconnected.)
Think about it: If you’re young and unattached, relocating into a rental isn’t that big of a deal. And it may be another seven years before you’re ready to buy again–by then the black-mark is off your credit score. But families have to think about children in local schools, and community ties are more important. For them, a monthly mortgage similar to rent might make staying put - and not having to move an entire household - more logical.
But, should housing prices continue to fall, things could change. Last month, we told you about a professor who argues it’s OK to walk away.
“Homeowners should be walking away in droves,” Brent T. White, an associate professor of law at the University of Arizona, wrote in a discussion paper. “The real mystery is not—as media coverage has suggested—why large numbers of homeowners are walking away, but why, given the percentage of underwater mortgages, more homeowners are not.”
Tuesday, November 17, 2009
Tips for buyers when buying a Home
7 Things All Buyers Ought to Know
"Ignorance is bliss" was never said about real estate purchases for 7 good reasons:
1. "Knowledge is bliss" may not make it as a buyer's slogan either, because you don't have to know it all—just what's relevant to success as you define it. Different sets of knowledge are important in different buying situations, so the "bliss" generalization may not be specific enough to be useful. "If it is to be, it's up to me" could be an excellent mantra since determination will drive buyers, both to discover what they don't know and then, to fill that knowledge gap. This combined effort will assure a buyer is well equipped to make confident buying decisions.
2. Generalizations are self-defeating when evaluating properties since it is how each is unique that addresses specific value to a specific buyer—if you'll excuse the generalization. All first-time buyers should not seek the same type of real estate solution just because they have never owned real estate before. Each of these buyers, whether they purchase alone, as a couple or with several friends or family members, has a different set of needs, weaknesses and advantages. When generalities are stressed, real estate solutions often concentrate on weaknesses like low down payments. Customized solutions, based on real estate knowledge, should focus on strengths which would counterbalance apparent weaknesses. For instance, first-time buyers may have more creative determination, which can allow them to tolerate living with boarders or tenants. These contributors to mortgage payments create a number of financial benefits and can turn an otherwise financially-out-of-reach property into a great investment solution. (See Pur-Plexing for more on this topic.)
3. Assumptions cost money and waste time. Assume nothing, including that you know what you don't know. Experienced real estate professionals have a wealth of practical knowledge available to fill your knowledge gaps, but you have to be receptive to gain the full benefit. For instance, do you ask questions and listen to the answers? Find out what you're assuming when you view properties, evaluate value and prepare an offer to purchase. The conscious effort and deliberate intent of this clarification means money in your pocket. Determination will enable you to put your advantages into action and use the real estate professional's knowledge to overcome weaknesses. Remember the parsing of "assume" ( make an "ass-[out of]-u-[and]-me" ) if you find yourself thinking or saying, "But I assumed…" and get back in control.
4. Fear has driven too many buyers to act in haste and repent in "if only I'd…" whining that can go on for years. Fear of missing out in a down market or in an up market, or in a variety of other "losing out" scenarios, can cause buyers to dive into a buying or not buying decision which may not be in their best interest. That's why working with a buyer agent, who places your interests first, can be a great strategy for ensuring you have all the knowledge necessary to protect yourself and gain financial advantage at the same time.
5. The impossible may just take a little longer in real estate, but the impossible can happen. Your dream property can be within reach wherever you start financially, but you'll need a solid set of strategies to get you there, not just dreams. Serious about owning your own horse ranch or waterfront castle? Talk to an experienced real estate professional who works in your ideal location to chart a reverse-engineered, long-term course toward that goal. With each property you buy along this clear path, you'll move closer to your high-value goal. It may take two or more real estate purchases and some clever investing, but if will be an interesting progression. If you're determined and build the right team—real estate professional, lawyer, mortgage broker, home inspector…—what's impossible?
6. The unexpected must be expected when buying a home, cottage or investment property. Worst case scenarios, contingency strategies and "Plan B" alternatives are creative tools in preparing to achieve financial gains and desired priorities. These approaches help you react favourably to the unexpected, but hopefully not unanticipated, and take advantage of the opportunities that lie there. Experienced professionals can predict the types of expected and unexpected happenings relevant to your situation. It could be taking advantage of the timing for new listings or the types of lenders beyond banks that hold financing choices for you. Negotiations are all about the unexpected. Most buyers are so focused on purchase price they forget that closing date, number of conditions, what's included in the purchase and other factors can weigh in to reduce the final sale price—that's where professional negotiators come in.
7. Cashflow is king. Beyond the purchase price, cash is necessary to pay for lawyer fees, title insurance or a survey, reimbursing sellers who paid the whole year's property taxes, and on the list of closing costs goes. The professionals involved will provide you with details on possible expenses. While you may have enough cash to close, do you have enough cashflow for owning? Over the first year, unexpected expenses can crop up, so create a projected ownership budget at the same time you go over purchasing costs. This foresight should keep you out of the "house rich—cash poor" category.
With real estate, the best goal is not "buying," but "owning and enjoying" for a lot of great reasons.
"Ignorance is bliss" was never said about real estate purchases for 7 good reasons:
1. "Knowledge is bliss" may not make it as a buyer's slogan either, because you don't have to know it all—just what's relevant to success as you define it. Different sets of knowledge are important in different buying situations, so the "bliss" generalization may not be specific enough to be useful. "If it is to be, it's up to me" could be an excellent mantra since determination will drive buyers, both to discover what they don't know and then, to fill that knowledge gap. This combined effort will assure a buyer is well equipped to make confident buying decisions.
2. Generalizations are self-defeating when evaluating properties since it is how each is unique that addresses specific value to a specific buyer—if you'll excuse the generalization. All first-time buyers should not seek the same type of real estate solution just because they have never owned real estate before. Each of these buyers, whether they purchase alone, as a couple or with several friends or family members, has a different set of needs, weaknesses and advantages. When generalities are stressed, real estate solutions often concentrate on weaknesses like low down payments. Customized solutions, based on real estate knowledge, should focus on strengths which would counterbalance apparent weaknesses. For instance, first-time buyers may have more creative determination, which can allow them to tolerate living with boarders or tenants. These contributors to mortgage payments create a number of financial benefits and can turn an otherwise financially-out-of-reach property into a great investment solution. (See Pur-Plexing for more on this topic.)
3. Assumptions cost money and waste time. Assume nothing, including that you know what you don't know. Experienced real estate professionals have a wealth of practical knowledge available to fill your knowledge gaps, but you have to be receptive to gain the full benefit. For instance, do you ask questions and listen to the answers? Find out what you're assuming when you view properties, evaluate value and prepare an offer to purchase. The conscious effort and deliberate intent of this clarification means money in your pocket. Determination will enable you to put your advantages into action and use the real estate professional's knowledge to overcome weaknesses. Remember the parsing of "assume" ( make an "ass-[out of]-u-[and]-me" ) if you find yourself thinking or saying, "But I assumed…" and get back in control.
4. Fear has driven too many buyers to act in haste and repent in "if only I'd…" whining that can go on for years. Fear of missing out in a down market or in an up market, or in a variety of other "losing out" scenarios, can cause buyers to dive into a buying or not buying decision which may not be in their best interest. That's why working with a buyer agent, who places your interests first, can be a great strategy for ensuring you have all the knowledge necessary to protect yourself and gain financial advantage at the same time.
5. The impossible may just take a little longer in real estate, but the impossible can happen. Your dream property can be within reach wherever you start financially, but you'll need a solid set of strategies to get you there, not just dreams. Serious about owning your own horse ranch or waterfront castle? Talk to an experienced real estate professional who works in your ideal location to chart a reverse-engineered, long-term course toward that goal. With each property you buy along this clear path, you'll move closer to your high-value goal. It may take two or more real estate purchases and some clever investing, but if will be an interesting progression. If you're determined and build the right team—real estate professional, lawyer, mortgage broker, home inspector…—what's impossible?
6. The unexpected must be expected when buying a home, cottage or investment property. Worst case scenarios, contingency strategies and "Plan B" alternatives are creative tools in preparing to achieve financial gains and desired priorities. These approaches help you react favourably to the unexpected, but hopefully not unanticipated, and take advantage of the opportunities that lie there. Experienced professionals can predict the types of expected and unexpected happenings relevant to your situation. It could be taking advantage of the timing for new listings or the types of lenders beyond banks that hold financing choices for you. Negotiations are all about the unexpected. Most buyers are so focused on purchase price they forget that closing date, number of conditions, what's included in the purchase and other factors can weigh in to reduce the final sale price—that's where professional negotiators come in.
7. Cashflow is king. Beyond the purchase price, cash is necessary to pay for lawyer fees, title insurance or a survey, reimbursing sellers who paid the whole year's property taxes, and on the list of closing costs goes. The professionals involved will provide you with details on possible expenses. While you may have enough cash to close, do you have enough cashflow for owning? Over the first year, unexpected expenses can crop up, so create a projected ownership budget at the same time you go over purchasing costs. This foresight should keep you out of the "house rich—cash poor" category.
With real estate, the best goal is not "buying," but "owning and enjoying" for a lot of great reasons.
Monday, November 16, 2009
Stress test for FHA are now in the works
FHA Undergoes Stress Tests
It's about time some one stepped up and called for a look see at the rate (velocity) and maybe also the type of loans being made by the people who gave us the crash. FHA loans with little or no down have been a major contributor in the holding up of current home values. However, a little Déjà Vue might be in order as it pretty easy to understand that high loan to value loans were a major player in giving us this subprime mess
This year’s independent review of the Federal Housing Administration’s reserves makes one thing clear: the agency is burning through its cash reserves at a rate that leaves little room for error.
The annual actuarial review, which was released last week, estimates how much cash the FHA will have on hand after paying for expected losses over the next 30 years. The agency currently has around $31 billion in cash, but the latest review projects that under the baseline scenario, the FHA will need to pay $27 billion in claims on loans it has insured, leaving just $3.6 billion in its reserve account, or around 0.5% of all the outstanding loans it has insured.
This year, the FHA also asked the statisticians to conduct two “stress test” scenarios that look at how the agency’s reserves would hold up if the economy tanks again. “There’s a significant chance that housing recovery we’ve seen doesn’t continue,” Shaun Donovan, secretary for Housing and Urban Development, said. “And I think we need to continue to be prepared for a range of different scenarios.”
Under a “second severe recession” scenario, which assumes 11% unemployment and a 34% peak-to-trough decline in home prices (down from the 21% that’s included in the baseline scenario), the agency would see almost all of its capital depleted by 2013.
The most severe scenario, they call it a “depression,” which assumes 12.5% unemployment and a 50% peak-to-trough decline in the Case-Shiller 10-city home price index, would exhaust the agency’s reserves by 2011, and the agency wouldn’t return to positive territory for several years.
The FHA won’t pay out all of its $27 billion in projected losses at once because that estimate looks at potential losses for the next 30 years. Next year, for example, projects that the FHA will have to pay out $13.5 billion, bringing its reserves down to $18 billion. The FHA predicts it will make money on loans insured in the 2010 fiscal year, which began Oct. 1, but the annual review doesn’t account for the profitability (or losses) of future years.
A separate audit of the agency’s financial statements, also completed last week, asks whether the current modeling is the best way of measuring the agency’s health, and notes that the annual review “may be optimistic due to an inherent design assumption, may not fully reflect the potential impact of recent events, and is extremely sensitive to changes in house price forecasts.”
It's about time some one stepped up and called for a look see at the rate (velocity) and maybe also the type of loans being made by the people who gave us the crash. FHA loans with little or no down have been a major contributor in the holding up of current home values. However, a little Déjà Vue might be in order as it pretty easy to understand that high loan to value loans were a major player in giving us this subprime mess
This year’s independent review of the Federal Housing Administration’s reserves makes one thing clear: the agency is burning through its cash reserves at a rate that leaves little room for error.
The annual actuarial review, which was released last week, estimates how much cash the FHA will have on hand after paying for expected losses over the next 30 years. The agency currently has around $31 billion in cash, but the latest review projects that under the baseline scenario, the FHA will need to pay $27 billion in claims on loans it has insured, leaving just $3.6 billion in its reserve account, or around 0.5% of all the outstanding loans it has insured.
This year, the FHA also asked the statisticians to conduct two “stress test” scenarios that look at how the agency’s reserves would hold up if the economy tanks again. “There’s a significant chance that housing recovery we’ve seen doesn’t continue,” Shaun Donovan, secretary for Housing and Urban Development, said. “And I think we need to continue to be prepared for a range of different scenarios.”
Under a “second severe recession” scenario, which assumes 11% unemployment and a 34% peak-to-trough decline in home prices (down from the 21% that’s included in the baseline scenario), the agency would see almost all of its capital depleted by 2013.
The most severe scenario, they call it a “depression,” which assumes 12.5% unemployment and a 50% peak-to-trough decline in the Case-Shiller 10-city home price index, would exhaust the agency’s reserves by 2011, and the agency wouldn’t return to positive territory for several years.
The FHA won’t pay out all of its $27 billion in projected losses at once because that estimate looks at potential losses for the next 30 years. Next year, for example, projects that the FHA will have to pay out $13.5 billion, bringing its reserves down to $18 billion. The FHA predicts it will make money on loans insured in the 2010 fiscal year, which began Oct. 1, but the annual review doesn’t account for the profitability (or losses) of future years.
A separate audit of the agency’s financial statements, also completed last week, asks whether the current modeling is the best way of measuring the agency’s health, and notes that the annual review “may be optimistic due to an inherent design assumption, may not fully reflect the potential impact of recent events, and is extremely sensitive to changes in house price forecasts.”
Sunday, November 15, 2009
New Chico California energy retro-fits when selling your home
Energy efficiency: Chico looking at changing housing sale regulations
By LAURA URSENY and TONI SCOTT - Staff Writers
This toilet tank bank is one of several water saving items being given away to Cal Water...«123»CHICO -- Since 1990, Chico has been working on the energy efficiency of its housing supply with regulations that kick in when a house is sold or transferred.
Now, the city's Sustainability Task Force wants to revamp those regulations, making them stricter and formalizing them.
Some argue the regulations in place currently aren't really enforced, meaning these new regulations could be a surprise.
Previously, when a house or multi-family dwelling built before 1983 was sold, sellers had to deal with upgrading insulation, putting in low-flow toilets and showerheads and other household changes before handing over the house. A total cost of $500 for the improvements was set as a ceiling.
With those recommendations almost 20 years old, Mayor Ann Schwab, the task force chairwoman, said the group thought it was necessary to revisit the measures and offer potential revisions.
After forming a committee to research the costs and benefits of specific conservation measures and reviewing potential revisions at four separate meetings, the committee decided on a number of recommendations that may soon be required of home sellers.
The recommendations call for newer houses and multi-family dwellings — built before 1991 — to fall under these regulations. Sellers would have an $800 maximum cost under the proposed regulations.
Houses will be required to have an energy conservation audit every 10 years rather than every 20 years.
The task force, whiwill send these recommendations to the City Council probably next year, also prioritized what conservation measures need to be taken.
Ceiling insulation and easy installations such as weather stripping and caulking are high on the list, followed by low-flow toilets, showerheads and faucets. More expensive or complicated changes are lower.
Schwab said the committee was very mindful of the need to keep the costs associated with improvements "low or no cost," noting more cost-prohibitive measures, such as requiring duct insulation in homes, were scrapped.
There are exemptions to the regulations, including foreclosures or short sales on single-family homes or an estate sale or through an inheritance. The regulations also don't apply to mobile or manufactured homes.
We all felt these were really reasonable adjustments that would improve the comfort of someone's home and increase energy efficiency," Schwab said. "A lot of these things people are doing already." Several cities are also already taking the steps the task force is suggesting, with Schwab saying Berkeley, San Francisco, Santa Cruz, San Diego, San Luis Obispo and Austin, Texas, have similar standards on their books.
She highlighted that San Francisco's cost ceiling is $1,300, $500 more than what the task force is suggesting for Chico residents.
Still, pointing to the sensitivity of the housing market, which has not bounced back in sales volume, local housing industry representatives say this is not a good time to be adding to a seller's burden.
Included among the proposed revisions is the requirement of sellers to prove to the city changes have occurred.
Currently, the homeowner and real estate agent are responsible for getting a private inspector to verify the changes. When a house is in compliance, the city issues a certificate that goes into the house's file at the city offices.
The task force recommendations include a new provision requiring the title company involved in the sale to assure the city that the conservation measures are in place.
These changes, and the higher ceiling for improvements, will add costs and time to the sale, said Peggy Mead, executive director for the Chico Association of Realtors.
"We would like to see this put on hold until the market improves," said Mead.
Mead pointed out some sales may be the consequence of a homeowner's financial hardship, and this process takes money out of their pockets, both to do the work as well as certify it.
Mead said her board nevertheless recognizes the significance of the proposed changes and wanted to be a part of the city discussion.
She wasn't aware of what triggered the discussion now. Meetings on this topic took place at the Sustainability Task Force before the association was invited to participate.
We appreciated that invitation," said Mead, who said association members haven't really liked the existing regulations, but realize the necessity.
The recommendations represent some compromise after the current ordinance was re-evaluated during several committee meetings involving local housing professionals, she said. The committee also included Realtor Scott Wolf.
Mead said the task force seemed sympathetic to home sellers during the discussion and were willing to talk about compromises.
Some of those compromises included removing some of the more expensive improvements from the list of requirements — such as requiring underflooring — with Mead and Schwab both acknowledging the task force's sensitivity toward finances. Mead said the housing industry doesn't recommend hinging regulations to a sales transaction."We think it's better to educate the current homeowner about tax benefits and programs while they're in the home rather than at the point of sale," he said. Mead pointed out the seller may choose the cheapest alternatives and may install items the buyer wouldn't want.
If there was a better time for sellers to deal with this, Mead said it would be in two to three years, when the market has settled down.
Local homebuilder Chris Giampaoli thinks it could be five or more years before something like this should be discussed. Homebuilders are concerned, he said, because those who buy a new home are generally trying to sell an existing home. Giampaoli, who also sits on the task force, says he'd rather see an education program aimed at homeowners and rental property owners.
An educational program is planned to inform homeowners about energy efficient measures, Schwab said, adding that the task force is currently applying for a grant through Pacific Gas and Electric to fund the program.
Should the city receive the grant, Schwab said a large part of the outreach will be focused on informing home owners about the new conservation requirements — changes she said were simple and cost-saving in the end. "I think people will find their homes more comfortable and their energy bills a lot less with relatively easy changes," Schwab said.
The city said it would like more feedback from the Chico Association of Realtors and possibly North Valley Property Owners Association before passing the recommendations to the City Council.
.
By LAURA URSENY and TONI SCOTT - Staff Writers
This toilet tank bank is one of several water saving items being given away to Cal Water...«123»CHICO -- Since 1990, Chico has been working on the energy efficiency of its housing supply with regulations that kick in when a house is sold or transferred.
Now, the city's Sustainability Task Force wants to revamp those regulations, making them stricter and formalizing them.
Some argue the regulations in place currently aren't really enforced, meaning these new regulations could be a surprise.
Previously, when a house or multi-family dwelling built before 1983 was sold, sellers had to deal with upgrading insulation, putting in low-flow toilets and showerheads and other household changes before handing over the house. A total cost of $500 for the improvements was set as a ceiling.
With those recommendations almost 20 years old, Mayor Ann Schwab, the task force chairwoman, said the group thought it was necessary to revisit the measures and offer potential revisions.
After forming a committee to research the costs and benefits of specific conservation measures and reviewing potential revisions at four separate meetings, the committee decided on a number of recommendations that may soon be required of home sellers.
The recommendations call for newer houses and multi-family dwellings — built before 1991 — to fall under these regulations. Sellers would have an $800 maximum cost under the proposed regulations.
Houses will be required to have an energy conservation audit every 10 years rather than every 20 years.
The task force, whiwill send these recommendations to the City Council probably next year, also prioritized what conservation measures need to be taken.
Ceiling insulation and easy installations such as weather stripping and caulking are high on the list, followed by low-flow toilets, showerheads and faucets. More expensive or complicated changes are lower.
Schwab said the committee was very mindful of the need to keep the costs associated with improvements "low or no cost," noting more cost-prohibitive measures, such as requiring duct insulation in homes, were scrapped.
There are exemptions to the regulations, including foreclosures or short sales on single-family homes or an estate sale or through an inheritance. The regulations also don't apply to mobile or manufactured homes.
We all felt these were really reasonable adjustments that would improve the comfort of someone's home and increase energy efficiency," Schwab said. "A lot of these things people are doing already." Several cities are also already taking the steps the task force is suggesting, with Schwab saying Berkeley, San Francisco, Santa Cruz, San Diego, San Luis Obispo and Austin, Texas, have similar standards on their books.
She highlighted that San Francisco's cost ceiling is $1,300, $500 more than what the task force is suggesting for Chico residents.
Still, pointing to the sensitivity of the housing market, which has not bounced back in sales volume, local housing industry representatives say this is not a good time to be adding to a seller's burden.
Included among the proposed revisions is the requirement of sellers to prove to the city changes have occurred.
Currently, the homeowner and real estate agent are responsible for getting a private inspector to verify the changes. When a house is in compliance, the city issues a certificate that goes into the house's file at the city offices.
The task force recommendations include a new provision requiring the title company involved in the sale to assure the city that the conservation measures are in place.
These changes, and the higher ceiling for improvements, will add costs and time to the sale, said Peggy Mead, executive director for the Chico Association of Realtors.
"We would like to see this put on hold until the market improves," said Mead.
Mead pointed out some sales may be the consequence of a homeowner's financial hardship, and this process takes money out of their pockets, both to do the work as well as certify it.
Mead said her board nevertheless recognizes the significance of the proposed changes and wanted to be a part of the city discussion.
She wasn't aware of what triggered the discussion now. Meetings on this topic took place at the Sustainability Task Force before the association was invited to participate.
We appreciated that invitation," said Mead, who said association members haven't really liked the existing regulations, but realize the necessity.
The recommendations represent some compromise after the current ordinance was re-evaluated during several committee meetings involving local housing professionals, she said. The committee also included Realtor Scott Wolf.
Mead said the task force seemed sympathetic to home sellers during the discussion and were willing to talk about compromises.
Some of those compromises included removing some of the more expensive improvements from the list of requirements — such as requiring underflooring — with Mead and Schwab both acknowledging the task force's sensitivity toward finances. Mead said the housing industry doesn't recommend hinging regulations to a sales transaction."We think it's better to educate the current homeowner about tax benefits and programs while they're in the home rather than at the point of sale," he said. Mead pointed out the seller may choose the cheapest alternatives and may install items the buyer wouldn't want.
If there was a better time for sellers to deal with this, Mead said it would be in two to three years, when the market has settled down.
Local homebuilder Chris Giampaoli thinks it could be five or more years before something like this should be discussed. Homebuilders are concerned, he said, because those who buy a new home are generally trying to sell an existing home. Giampaoli, who also sits on the task force, says he'd rather see an education program aimed at homeowners and rental property owners.
An educational program is planned to inform homeowners about energy efficient measures, Schwab said, adding that the task force is currently applying for a grant through Pacific Gas and Electric to fund the program.
Should the city receive the grant, Schwab said a large part of the outreach will be focused on informing home owners about the new conservation requirements — changes she said were simple and cost-saving in the end. "I think people will find their homes more comfortable and their energy bills a lot less with relatively easy changes," Schwab said.
The city said it would like more feedback from the Chico Association of Realtors and possibly North Valley Property Owners Association before passing the recommendations to the City Council.
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Saturday, November 14, 2009
Mortgage rate news continues to be Good News: Buy now if your in the market!
Attention home buyers: Mortgage rates remain low, good news as housing heads into its typically slow winter season. This, combined with the recent extension and expansion of the federal tax credit for buyers, could lure some indecisive shoppers to the dotted line.
Long-term rates fell to the lowest level in five weeks, Freddie Mac reports. Rates for a 30-year fixed loan averaged 4.91% with an average .7 point for the week ending Nov. 12, down from last week’s 4.98%. A year ago, the 30-year rate averaged 6.14%.
In its weekly survey, the Mortgage Bankers Association reports that the average 30-year fixed rate dipped to 4.9%, from 4.97%, with points increasing slightly to 1.03 from 1.01. It’s the lowest rate since the week ending May 15th.
These lower numbers continue to fuel refinancing: The refinancing share of mortgage activity increased to 71.5% of total applications, from 66.1% the previous week. This is the highest refinance share since May.
Long-term rates fell to the lowest level in five weeks, Freddie Mac reports. Rates for a 30-year fixed loan averaged 4.91% with an average .7 point for the week ending Nov. 12, down from last week’s 4.98%. A year ago, the 30-year rate averaged 6.14%.
In its weekly survey, the Mortgage Bankers Association reports that the average 30-year fixed rate dipped to 4.9%, from 4.97%, with points increasing slightly to 1.03 from 1.01. It’s the lowest rate since the week ending May 15th.
These lower numbers continue to fuel refinancing: The refinancing share of mortgage activity increased to 71.5% of total applications, from 66.1% the previous week. This is the highest refinance share since May.
Friday, November 13, 2009
Clouds loom over future FHA bad loans!
By Nick Timiraos
Seller-funded down payment “gifts” appear to be of the sort that keep on giving.
It was a little over a year ago that FHA finally prevailed in a years-long effort to rid itself of gift programs that allowed home sellers to fund 3% down payments for borrowers who took out FHA-backed home loans. But the recently released independent audit for the FHA, which shows that the agency’s reserves for unexpected losses have fallen to razor thin levels, shows that seller-funded down payments continue to account for an outsized share of losses.
From 2002-2008, these gift programs essentially allowed folks to buy homes with no money down. Nonprofit agencies provided the required down payments to home buyers, and the sellers typically made a donation to the nonprofits. (See any one of three Page One stories that the Journal did over the years: U.S. Backed Mortgage Program Fuels Risks, Scrutiny of Down-Payment Gifts Threatens Charitable Movement, and Home Buyers’ Down Payments Are Now Paid by Some Builders.)
The problem with the loans, of course, is that buyers who have no skin-in-the-game are more likely to default on their mortgage. “Those facilities created too many homeowners in the FHA portfolio that were not equipped for the financial responsibilities of homeownership,” the agency said in its report to Congress.
The FHA said on Thursday that it’s now badly depleted reserves would be more than $10 billion higher without them—enough to put the agency’s capital reserve ratio at the minimum 2% required by law.
There’s been a lot of criticism of the FHA coming from Congress in recent weeks, as it appears taxpayers may now have to foot the bill. But some folks have short memories: Seller-funded down payment assistance programs existed because they had big support from both parties, including from Rep. Maxine Waters (D., Calif.), Rep. Gary Miller (R., Calif.) and Texas Democrat Al Green, who earlier this year introduced a bill to bring back seller-funded down payments.
Recall that in 2004, the Republican Party platform called the down payment “the most significant barrier to homeownership” and supported various “efforts to reduce that barrier.” As recently as early 2008, Congress was prepared to lower the minimum down payments for FHA-backed loans to 1.5%, down from 3%, and some were pushing to eliminate down payments from the FHA altogether.
Rep. Scott Garrett (R., N.J.) introduced a bill last month to raise minimum down payments to 5%. That may sound like a small step, but consider: the FHA’s annual report showed that nearly seven in eight loans made for home purchases in 2009 had loan to value ratios of 96% or higher, meaning buyers had 4% or less equity in the house. That makes housing officials—and the real-estate industry—leery of taking any such measures that might limit too many home sales.
Seller-funded down payment “gifts” appear to be of the sort that keep on giving.
It was a little over a year ago that FHA finally prevailed in a years-long effort to rid itself of gift programs that allowed home sellers to fund 3% down payments for borrowers who took out FHA-backed home loans. But the recently released independent audit for the FHA, which shows that the agency’s reserves for unexpected losses have fallen to razor thin levels, shows that seller-funded down payments continue to account for an outsized share of losses.
From 2002-2008, these gift programs essentially allowed folks to buy homes with no money down. Nonprofit agencies provided the required down payments to home buyers, and the sellers typically made a donation to the nonprofits. (See any one of three Page One stories that the Journal did over the years: U.S. Backed Mortgage Program Fuels Risks, Scrutiny of Down-Payment Gifts Threatens Charitable Movement, and Home Buyers’ Down Payments Are Now Paid by Some Builders.)
The problem with the loans, of course, is that buyers who have no skin-in-the-game are more likely to default on their mortgage. “Those facilities created too many homeowners in the FHA portfolio that were not equipped for the financial responsibilities of homeownership,” the agency said in its report to Congress.
The FHA said on Thursday that it’s now badly depleted reserves would be more than $10 billion higher without them—enough to put the agency’s capital reserve ratio at the minimum 2% required by law.
There’s been a lot of criticism of the FHA coming from Congress in recent weeks, as it appears taxpayers may now have to foot the bill. But some folks have short memories: Seller-funded down payment assistance programs existed because they had big support from both parties, including from Rep. Maxine Waters (D., Calif.), Rep. Gary Miller (R., Calif.) and Texas Democrat Al Green, who earlier this year introduced a bill to bring back seller-funded down payments.
Recall that in 2004, the Republican Party platform called the down payment “the most significant barrier to homeownership” and supported various “efforts to reduce that barrier.” As recently as early 2008, Congress was prepared to lower the minimum down payments for FHA-backed loans to 1.5%, down from 3%, and some were pushing to eliminate down payments from the FHA altogether.
Rep. Scott Garrett (R., N.J.) introduced a bill last month to raise minimum down payments to 5%. That may sound like a small step, but consider: the FHA’s annual report showed that nearly seven in eight loans made for home purchases in 2009 had loan to value ratios of 96% or higher, meaning buyers had 4% or less equity in the house. That makes housing officials—and the real-estate industry—leery of taking any such measures that might limit too many home sales.
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