18. February 2009 by Burbank Real Estate.

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President Obama unveiled the Homeowner Affordability and Stability Plan today.  It’s safe to say that we don’t have all the details yet, but here’s what I know:

• As many as 9 million homeowners could be helped by this plan, the idea is to help prevent foreclosures and help families and in turn, communities.

• The plan contains three main components, and is limited to primary residences, which means speculators will get no help.
• The loans referenced in the plan cannot exceed Freddie Mac/Fannie Mae conforming loan limits.

• The first part helps homeowners who are suffering from falling housing prices who still have equity in their homes, but don’t have the 20 percent equity needed to refinance.  Under the plan, homeowners who have conforming loans owned or guaranteed by Freddie Mac and Fannie Mae will be allowed to refinance their homes, even if they do not have 20 percent equity left in the house. The U.S. Treasury Dept. estimates that about 5 million homeowners will be helped by this portion of the program.

• The second part, known as the Homeowner Stability Initiative, is designed to assist homeowners who are “underwater” on their mortgages. The $75 billion initiative will bring together lenders, servicers, and the government so that all stakeholders share in the cost of the modification.  Primary mortgages would be reduced to monthly payments that do not exceed a 38 percent debt-to-income ratio, with the lender assuming the costs. The government and lender then would split the costs of further reducing the monthly payments until they were at a 31 percent debt-to income ratio.
• Homeowners do not have to be delinquent to participate.

• The Homeowner Stability Initiative will create incentives for servicers, mortgage holders, and homeowners. Servicers would receive an up-front fee of $1,000 for every eligible modification meeting the initiative’s guidelines. Guidelines are scheduled to be released by March 4. Mortgage holders will receive an incentive payment of $1,500, and servicers $500, for modifications made on loans that are current but at risk of imminent default.

• Creating clear and consistent guidelines for loan modifications is one of the goals. The Obama Administration plans to work with federal agencies, banking and credit union regulators, and the private sector in order to develop loan modification guidelines that can be implemented across the entire mortgage market. While adoption of the guidelines will be voluntary for the private sector, all financial institutions receiving Financial Stability Plan assistance going forward will be required to implement the loan modification guidelines.

• The government estimates that between 3 and 4 million homeowners will benefit from the Homeowner Stability Initiative component of the plan.

• The third part of The Homeowner Affordability and Stability Plan is supporting low mortgage rates by strengthening Fannie Mae and Freddie Mac.  The Treasury Dept. plans to increase their Preferred Stock Purchase Agreements with both Fannie Mae and Freddie Mac from its current $100 billion in both entities to $200 billion in each. The Treasury Dept. also will continue to purchase Fannie Mae and Freddie Mac mortgage-back securities in order to help promote stability and liquidity in the marketplace.  Additionally, the Treasury Dept. will increase Fannie Mae and Freddie Mac’s portfolios by $50 billion, for a total of $900 billion. The Obama Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving home buyers, such as CalHFA. Funding for this will not come from TARP money but from the Housing and Economic Recovery Act.

There are many skeptics out there but I have to say, this appears to be a good start to solving a very complex problem.

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15. February 2009 by Burbank Real Estate.

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1) the loan limits on mortgages will be raised to $727,000 in high cost areas

2) the tax credit will be raised to $8,000 with NO payback….this is huge!

3) interest rates shoud react favorably to the package(see below)

4) the bill has over $50 billion in it for foreclosure mitigation, with Treasury Secretary Geithner’s Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES’s thereby freeing them up to do the same with new mortgages.  Additionally Fannie Mae has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.  Talk to your CPA for the full details on this.

Mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects) has remained intact.

The “big and bold” stimulus package will really impact the real estate market as long as the banks can follow through on the lending side.   Keep in mind that modifying mortgages is not an easy exercise due to all the different parties involved.

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13. February 2009 by Burbank Real Estate.

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• Calif. median home price - December 08: $281,100(Source: C.A.R.)
• Calif. highest median home price by C.A.R. region December 08: Santa Barbara So. Coast $875,000 (Source: C.A.R.)
• Calif. lowest median home price by C.A.R. region December 08: High Desert $137,560(Source: C.A.R.)
• Calif. First-time Buyer Affordability Index - Third Quarter 08: 53 percent (Source: C.A.R.)
• Mortgage rates - week ending 2/5/09 30-yr. fixed: 5.25% Fees/points: 0.8% 15-yr. fixed: 4.92% Fees/points: 0.8% 1-yr. adjustable: 4.92% Fees/points: 0.5% (Source: Freddie Mac)

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11. February 2009 by Burbank Real Estate.

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Monthly Activity Report Burbank-January 2009

Month to month average home sale price in Burbank from December 2008 to January 2009 is down $38,507, or 7%.

Average days on market, are up 3 days.

Most notably number of sold properties is down almost 58 % from December 2008.

Reasons for this trend is that towards the end of last year we saw some significant price reductions, banks wanting to clear out inventory before the end of the year and buyers wanting to take advantage of low interest rates and low prices.

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10. February 2009 by Burbank Real Estate.

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When a listing is listed as a short sale it does not necessarily mean it’s a short sale.  What this tells you is that the listing agent and seller hope that the bank will accept an offer on the property.  When it says that the bank has approved a short sale at a particular price, then you know at least part of the hurdle has been cleared.  But banks reject offers all the time.

The main reason that banks reject short sale offers has to do with the following scenarios:

• Short sale offer price is too low or below what the bank has agreed to accept.  Remember that, by definition, a short sale is when a bank agrees to accept less than the amount owed to the bank.  Make sure you include a CMA(comparative market analysis) to justify your price.  The bank will look at several appraisals, so if it feels it can do better it will reject your offer.

• Offer package is incomplete.  Make sure you get a list from the bank of all expected documentation.  Don’t be surprised if you agent ends up having to fax the documents several times as the banks are notorious for losing or misplacing paperwork. It will help if everypage is referencing the property address.

• Buyer does not qualify for the loan.  This is standard practice nowadays, but make sure you are pre-approved for a loan before you make any offers.

• Bank sold the loan.  It’s not uncommon for the bank to sell the loan during the short sale negotiations.  Sometimes the bank does not realize it sold the loan until well into the process.

Remember that, on average, it takes anywhere from 6-12 months for a short sale property to sell, sometimes much longer.  I have seen offers get accepted 4-5 months after submission due to the backlog at the bank.

Buying a short sale property is not for the weak, but you can pick up some good deals if you know your area pricing.

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