Real Estate Information

Below is an article on Loan Modifications that we found on the WSJ.  It goes into some detail on Modifications and whether or not you may qualify for one...

By JAMES R. HAGERTY

(See Corrections & Amplifications item below.)

Banks and loan investors are starting to bite the bullet and lower the principal due on home mortgages for some struggling borrowers, a new report from bank regulators shows.

That's good news for some homeowners, but may portend more write-offs over the next few years for banks and other lenders now wading through hundreds of thousands of applications for loan modifications. The tradeoff for banks is that by taking the hit now they can boost their chances of being repaid.

Banks and loan servicers modify loans primarily by reducing interest rates or extending the term of the mortgage. These methods can temporarily help borrowers struggling to make payments without requiring lenders to lower the principal owed. Now, in a small but growing number of cases, banks are going further and writing off some of the loan altogether.

Part of this is due to prodding from the Obama administration, which has made saving homeowners from foreclosure a cornerstone of its economic-rescue strategy. The administration in March announced plans aimed at helping as many as nine million households struggling with mortgage debt through loan modifications or refinancings. The plans include financial incentives for mortgage-servicing firms that modify loans.

At the same time, banks now have more flexibility to modify loans because of their success in stabilizing their balance sheets and, in some cases, raising fresh capital. Banks can afford "to take the pain up front," said Kevin Fitzsimmons an analyst at Sandler O'Neill & Partners LP in New York. "If they want a legitimate chance of salvaging something out of the loans, they are better off taking the loss now."

Bloomberg News

Rows of tract houses this month in Las Vegas. The median home price in the area fell 40% to a 10-year low in August amid sales of foreclosures.

The portion of loan modifications in the second quarter that involved reducing the principal jumped to 10% from 3.1% in the first quarter, according to the report released Wednesday by the Office of the Comptroller of the Currency, or OCC, which regulates national banks.

Alejandro Estrella, a mail carrier in Riverside, Calif., said he was surprised when his lender, the Wachovia unit of Wells Fargo & Co., agreed recently to reduce the principal he owed on two mortgages on his home by 18% to about $237,000. That will lower his monthly payments to less than $1,500 from about $2,100. "I wasn't expecting it," said Mr. Estrella, who started out seeking just a reduction in his interest rate and got counseling from Springboard Nonprofit Consumer Credit Management.

Principal reductions are still the exception, though. Tom Kelly, a spokesman for J.P. Morgan Chase & Co., said the lender first tries to make loans affordable by lowering the interest rate for borrowers who qualify for modifications. If that doesn't result in a low enough payment, the bank may extend the term of the loan or defer repayments on part of the principal. That deferred principal would come due if the home is sold or refinanced.

But banks and loan servicers are recognizing that modifications don't always work if the borrowers aren't given a big enough break. Of loans modified in this year's first quarter, 28% were in default again within three months, the OCC said. Among those modified in last year's second quarter, 56% were in default again a year later.

Although the Obama administration programs for averting foreclosures got off to a slow start, they are starting to result in larger numbers of modified loans. The OCC report tallied 439,574 agreements to help troubled borrowers, including loan modifications and other repayment plans, in the second quarter. That was up 75% from a year earlier. Of that total, 142,362 of the agreements were classified as loan modifications, and 10% of those involved reducing the principal.

Beyond Housing, a nonprofit in St. Louis that counsels distressed borrowers, recently won a principal reduction for Evone Lester, a prison employee who had fallen behind on her payments and faced foreclosure. The loan was being serviced by Wells Fargo & Co. but was owned by an investor, Beyond Housing said. The investor agreed to reduce the loan balance to about $48,800 from $72,000, said Chris Krehmeyer, chief executive of Beyond Housing. That helped cut the monthly payment to $761 from $1,039.

In spite of these efforts, foreclosures continue to rise. In a report last week, Amherst Securities Group, a New York research firm, estimated that about seven million homes -- representing 12% of U.S. homes with mortgages -- will end up changing hands in foreclosures or related transactions over the next few years. The company said it doesn't expect that loan-modification efforts will ease the problem significantly, largely because so many people default again.

The OCC's report, which covers about 64% of all U.S. home mortgages outstanding, found that 11.4% of those mortgage loans were at least 30 days overdue or in foreclosure at the end of the second quarter, up from 10.2% three months earlier and 7.4% a year before.

The OCC isn't requiring banks to reduce principal, said Joseph Evers, a deputy controller at the regulatory agency. But, he said, the OCC has told banks they need to make sure modifications are "more sustainable," giving borrowers a real chance to keep up with the new payments.

Separately, the Federal Reserve Board Wednesday released a report on mortgage data from more than 8,000 lenders under the Home Mortgage Disclosure Act, known as HMDA. The report showed that blacks and Hispanic whites were far more likely to be denied last year for refinancing conventional mortgages, those that aren't insured by the federal government.

The denial rate for blacks was 61%, compared with 51% for Hispanic whites and 32% for non-Hispanic whites. That may partly reflect the larger proportion of minority borrowers who got subprime loans during the housing boom and ended up in homes whose values have crashed.

—Dan Fitzpatrick contributed to this article.

LPL Financial Ranked # 2 in J.D. Power and Associates 2009 U.S. Full Service Investor Satisfaction Study; Receives Highest Score Among All Study Participants in Financial Advisor Satisfaction

-          Financial Advisor Satisfaction Deemed Most Important of All Factors Measured in Study This Year –

-          Results Demonstrate Client Commitment of LPL Financial Advisors -

Boston, MA – [date] – LPL Financial Corporation (“LPL Financial”), the nation’s largest independent broker-dealer, is proud to announce its number two ranking out of 14 leading financial services companies in the J.D. Power and Associates 2009 U.S. Full Service Investor Satisfaction Study.  The J.D. Power and Associates U.S. Full Service Investor Satisfaction Study measures investor satisfaction with full service investment firms across the country, and is released on an annual basis by J.D. Power and Associates, a global marketing and information company that represents the voice of the customer.

LPL Financial also announced its receipt of the highest scores among all the study’s participants in the area of Financial Advisor Satisfaction.  Financial advisor satisfaction was the most important of six factors on which investor satisfaction was measured, including, in order of importance:  Financial advisor, convenience, investment performance, account offerings, account statements and fees. 

Additionally, LPL Financial achieved scores ranging from “Among the Best” to “Better than Most” – the two highest scores possible – across all of the categories of the study, as shown in the Power Circle ratings on jdpower.com.

Bill Dwyer, president of National Sales and Marketing at LPL Financial, said, “We are delighted with the receipt of the highest scores of all study participants in the area of Financial Advisor Satisfaction, deemed the most important of all factors measured this year by this critical industry study of investor satisfaction.  It is particularly noteworthy that this recognition comes at a time when high-quality, comprehensive support from independent financial advisors is in greater demand by the investing public than ever before.  As such, this positive distinction is entirely due to the efforts of the independent financial advisors we serve, and we congratulate them. 

“In our view, the study results demonstrate the outstanding work of our advisors on behalf of their clients, and serve as a testament to the ongoing strong commitment LPL Financial advisors have to providing unbiased, conflict-free financial advice and solutions to households across their local communities.  We salute the efforts of LPL Financial advisors throughout the country, and we are proud to be partnered closely with them.”

About LPL Financial

LPL Financial is one of the nation’s leading financial services companies and largest independent broker/dealer (based on total revenues as reported in Financial Planning magazine, June 1996-2009). Headquartered in Boston, Charlotte, and San Diego, LPL Financial and its affiliates offer industry-leading technology, training, service, and unbiased research to 12,294

financial advisors, 780 financial institutions, and over 4,000 institutional clearing and technology subscribers. As of year-end 2008, LPL Financial had $233.9 billion in brokerage and advisory assets and revenues of $3.1 billion. LPL Financial and its approximately 2,450 employees serve financial advisors through Independent Advisor Services, supporting financial advisors at all career stages; Institution Services, focusing on the needs of advisors and program managers in banks and credit unions; and Custom Clearing Services, working with broker/dealers at leading financial services companies. For additional information about LPL Financial, visit www.lpl.com.

Below is an article we found on the US Dept of Treasury that gives some progress on the program that the government is trying to implement to help homeowners stay in their home. 

August 4, 2009
TG-252

Making Home Affordable Program on Pace to Offer Help to Millions of Homeowners
Public Release of Data Provides Transparency on Servicer Performance

WASHINGTON – Today, the Obama Administration released its first monthly Servicer Performance Report detailing the progress to date of the Making Home Affordable (MHA) loan modification program.  The purpose of the report is to document the number of struggling homeowners already helped under the program, provide information on servicer performance and expand transparency around the initiative.

On February 18, the Obama Administration announced its comprehensive plan to stabilize the U.S. housing market.  Two weeks later on March 4, the Administration published detailed program guidelines and authorized servicers to begin modifications immediately.  MHA provides $75 billion for sustainable mortgage modifications through the Home Affordable Modification Program (HAMP). 

MHA has made rapid progress in a few short months.  Servicers covering more than 85 percent of loans in the country are already modifying loans under the program. More than 400,000 modification offers have been extended and more than 230,000 trial modifications have begun.  This pace of modifications puts the program on track to offer assistance to up to 3 to 4 million homeowners over the next three years, our target on February 18.  

Today's report discloses performance on a servicer-by-servicer basis in order to increase transparency for participating institutions.  The data show that servicer performance has been uneven.  The Administration has asked servicers to ramp up implementation to a cumulative 500,000 trial modifications started by November 1, 2009. This would more than double in three months the number of trial modifications started in the first five months of the program.    

The Administration is taking additional steps to improve performance.  On July 9, Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan wrote the CEOs of participating servicers calling upon them to redouble their efforts to increase staffing, improve borrower response times and streamline the application process.  Senior Administration officials discussed the importance of these steps in a face-to-face meeting with servicer executives on July 28.  The Administration will develop more exacting metrics to measure the quality of borrower experience, such as average borrower wait time for inbound inquiries, completeness and accuracy of information provided applicants, and response time for completed applications.  As an additional protection for borrowers, the Administration has asked the program compliance agent, Freddie Mac, to develop a "second look" process to audit MHA modification applications that have been declined on an ongoing basis.

1.      Program On Pace to Help up to 3-4 Million Homeowners Over the Next Three Years

• More Than 230,000 Trial Modifications Started

No program has previously attempted to modify so many mortgages at such affordable terms for borrowers.  The Administration is seeing real results – modifications that provide long-term solutions for borrowers.

o    In 2008, 42 percent of modifications by the largest servicers lowered monthly payments.  Under the MHA modification program, 100 percent of borrowers starting trial modifications have had their payments reduced.

• More Than 85 Percent of Mortgage Market Covered by Participating Servicers

o Thirty-eight servicers have signed Servicer Participation Agreements (SPAs) to participate in the program.  These 38 servicers service many types of loans, including Fannie Mae and Freddie Mac loans, private label loans and loans in portfolio.

o Approximately 2300 servicers that service Fannie Mae and Freddie Mac loans are automatically participating in HAMP. 

2.      Performance Metrics Aimed at Improving Consistency of Servicer Performance

• Description of Metrics Used to Measure Servicer Performance

The Administration has established a servicer-by-servicer performance metric to enhance overall program performance.

•  
  •  
    • The report includes the absolute number of trial modifications begun by each servicer. 
    • The report also includes a simple performance metric which measures each servicer's performance relative to an estimate of the servicer's HAMP eligible loans.
      • The performance metric used in the report is trial modification starts as a share of estimated HAMP eligible loans. 
      • Many loans are eligible for HAMP that are not included in the estimated HAMP eligible loans in the public report, including current borrowers in imminent default.
      • This measure of estimated HAMP eligible loans was developed solely to provide a common denominator across which to compare performance of servicers. 

•  
  • Servicer Performance Metrics Show Uneven Progress in Implementation

The metric measuring comparative servicer performance shows uneven ramp-up, and substantial variation in the pace of modifications.  To improve performance, the Administration has asked servicers to commit to starting 500,000 trial modifications by November 1, 2009 and to establishing exacting metrics to monitor servicer specific program performance.

3.      Public Report Increases HAMP Program Transparency

Today's report will provide transparency into program results on a servicer specific basis. 

•  
  • Reports Will Be Issued on a Monthly Basis

The Administration expects to issue reports detailing the progress of modifications under the HAMP program each month. This report will be updated to include additional metrics and results as the program progresses and more data becomes available.

We just returned from a very special real estate conference that we attend every year as part of our continuing education in real estate.  One of the sessions really caught our attention because it was on short sales and how the bank may be able to pursue deficiency judgments against home owners that are in the unfortunate circumstance of losing their homes. 

 Our primary market area comprises of Downey, Whittier, Pico Rivera, South Gate, and a few other cities bordering these areas.  There are many homeowners in these areas that have pursued modifications on their homes to lower their payments and stay in their homes but the majority of the time the offer that the bank proposes to the homeowner is still significantly higher than what the homeowner is able to pay.  It’s at that point that sellers have 2 options.  They can either go into foreclosure, or they can contact an experienced realtor to sell their property in what is called a short sale. 

The short sale is always the better alternative to going into foreclosure because it can save the owners credit rating.  Rather than have a foreclosure on your credit rating for the next 7-10 years, the short sale saves the owner from having that on their credit rating. 

Now the other MAJOR benefit of a short sale, especially here in California is that the homeowner’s lender is unable to pursue a deficiency judgment against the home owner.  California is 1 of 6 states that prevents banks from pursuing these deficiency judgments against the home owners.  This is HUGE for homeowners here in California because that means that a bank CANNOT come after the homeowner in the future demanding payment on the portion of the loss that the bank took. 

We recently closed a short sale in Pico Rivera.  The house sold for $261,000 and the owner owed over $400,000 on the loan.  The bank took a loss of $139,000.  If we were in another state that allowed for banks to pursue a deficiency judgment than the seller could POTENTIALLY/THEORETICALLY be liable to the bank for the deficiency.

We hope this helps you in understanding what short sales and deficiency judgments are.   Once again, California is 1 of 6 states that does not allow banks to pursue these judgments against homeowners which is a HUGE plus for homeowners struggling to keep their homes because it will allow them to bounce back a lot sooner.

If you know of anyone that is in need of our assistance, please send them our way.  We’ll make sure that they are well informed about the process and do our very best to help them through this difficult time. 

We’re learning new things every day in this real estate world with all the policy changes that are taking place with the different lending institutions.  We recently had a foreclosure emergency on one of our Listings in Huntington Beach harbor.  It’s an amazing town home with a 30 foot boat slip and located in an amazing community.  Unfortunately the seller was in a situation where he had received an N.O.T. (Notice of Trustee Sale) in the mail and the date for the foreclosure sale was set. 

The seller was ineligible for a loan modification so his only option to escape foreclosure was to short sale the property to keep his credit clean from the stains of foreclosure.  We had received a cash offer and it was submitted and in review with Indy Mac bank.  Typically when you have an offer submitted to a bank it takes anywhere from 30-90 days to receive an approval.  With most banks a foreclosure on the property can be postponed when an offer has already been submitted, even though an approval hasn’t been received, officially accepting the buyers offer.  In the case with our listing in Huntington Beach Harbor, the seller didn’t hire us soon enough to get the short sale process started, and  there wasn’t enough time for us to receive a short sale approval from Indy Mac Bank.

Indy Mac’s new policy is slightly different from other banks.  Their policy now sates that in order to postpone a foreclosure date, there must already be a short sale approval on the property.  If that approval has not been furnished to the seller yet, than unfortunately the property will proceed with the foreclosure date state on the “Notice of Trustee Sale” letter.  In most instances we are successful at postponing the foreclosure date so that the seller can sell the property and not go into foreclosure but Indy Mac Bank is going to make that very difficult now for some sellers with this new policy of theirs. 

We’re not sure if other banks are going to follow suite with this new policy.  When we questioned Indy Mac on why they are no longer postponing foreclosures when there is an offer in review, they replied saying that it was because many false offers were being submitted just so that the foreclosure would be delayed and not because they were real offers. 

We highly recommend that if you are in a situation where foreclosure is imminent, please call us immediately so we can structure a plan for you to avoid foreclosure.           

Don't convert your home unless you get PERMITS!

We have been running into road blocks with a couple of the sales that we currently have going on and  we thought it would be a good idea to inform our readers about what’s currently going on with homes that are illegally converted. 

We have a pending sale in a nice area of La Mirada.  Everything was going smoothly up until we got a call from a city inspector telling us that the converted garage and the laundry room must be demolished and put back to its original state before the close of escrow.  This has created a very difficult situation for a few reasons

1.       Time – this property is a short sale and the home owner’s bank has given us less than a 30 day window to close the transaction.  If we do not close within the window that has been given to us, the property will go into foreclosure and tarnish the credit of the home owner for the next 7 years. 

2.       Money – Someone is going to have to pay for the cost of the demo work.  The seller definitely doesn’t want to pay because they most likely have no money.  The entire reason they are having to short sale the property is because they are in financial hardship and can no longer afford the property.  In addition to that, they are not netting anything on the sale of their home because they are upside down with negative equity.  The buyer doesn’t want to pay for the work, they already have closing costs to pay for the purchase of the home, so of courses they are not going to offer to pay for the demolition.  The real estate agent can pay for the work with the commission that is supposed to be earned from the deal, but commissions to agents are very minimal since home values have gone down and no one wants to work for free. 

3.       The Buyers Lender – Many buyers are getting the money they need to buy a home through FHA financing.  FHA financing is appealing to buyers because all they need to put as a down payment to purchase a home is 3.5% of the purchase price.  The problem with FHA financing is that in cases where there are conversions on properties, FHA will only lend the buyer money if all those conversions are corrected, so that the property is back to its original state.  In some cases correcting the conversion may be as simple as removing a wall.  In other cases correcting the conversion may entail removing electrical work, sinks, entire bathrooms, kitchens, the list can go on.  Once everything is returned to its original state the buyers lending institution will require the appraiser to go back out to the property to take pictures of the corrected work, verifying that everything has been brought back to its original state. 

The same is true for another home we currently have in escrow in the city of Pico Rivera.  The property was not even converted by the current owners but by the previous owners.  In this case the city has not required the home to be returned to its original state but the Buyers lender has.  Before they would lend the money needed for the buyer to purchase the home, they presented a large list of corrections that needed to be done on the property. 

It has only been recently that we have seen this change in guidelines.  Back when subprime loans were dominating the market, these issues never presented a problem.  Many time these illegal conversion were overlooked.  But now many home owners would be very wise not to illegally create or destroy bedrooms, bathrooms, and kitchens. 

Pico Rivera, and La Mirada are only 2 of the many cities that we work in the Los Angeles area.  Many of the rules that apply to these 2 cities also apply to the many surrounding cities as well.

If you or anyone that you know is planning to do any kind of work on your property, please consult us first so we can advise you on whether or not it would be a good move regarding the investment apect of your home.   

Ridding your Home of Pests

Folowing the rainy season, warmer wether favors an increase in population of mosquitoes, rodents, and bees.  Downey residents may contact the following agencies for information of assistance with infestations of these unwanted pets. 

Bees:  There are no govenment agencies that provide bee control services on private property in the city of Downey.  Residents should refer to local yellow pages under "Pest Control" to find a licnesed pest control company.  If a bee swarm or hive is located on the street, side walk, or other public property, please notify the city of Downey maintenance services division at 562-904-7194.  For more information about bees please contact the agicultural commissioner/weights and measures office at 11012 S. Garfield Ave, South Gate at 562-940-8916, or visit their website at http://acwm.co.la.ca.us/.

Mosquitoes:  Downey residents are advised to maintain pools and spa's, avoid overwatering flowerbeds and lawns, and eliminate sources of standing water on their properties.  For information and assistance with mosquitoe control, contact the greater Los Angeles county vector control district, located at 12545 Florence Ave, in Santa Fe Springs, at 562-944-9656, or visit their website at www.glacvcd.org. 

Rodents:  The city of Downey no longer provides free rodent control products.  home owners may pick up a bag containing 6 packets of redent poison from the Los Angeles county department of health services, environmental health division, located at 12440 Imperial Hwy, suite 515 in Norwalk.  Home owners will be allowed 1 bag every 6 months and may be required to show valid picture ID.  Please call 562-345-6830 for more information.  Home owners may also request a free rodent survey/inspection of their property by vector management inspectors by calling the administrative headcorters in Baldwin Park at 626-430-5450.  For more information please visit their website at http://publichealth.LaCounty.gov/eh/pets.htm.

Time is running out for California residents wanting to take advantage of a $10,000 tax credit. The state set aside $100 million to help home buyers purchasing newly built homes, hoping to jump start the moribund residential-construction market. But only about 20% of the pot is left.

"We're less than four months into it, and all the tax credits authorized are gone, or practically gone," said Tim Coyle, a senior VP with the California Building Industry Association (CBIA).

The program launched in March and by June 3 nearly $24 million in tax credit certificates had already been issued, according to the state's Franchise Tax Board.

That leaves nearly $76 million in credit available - but there are already numerous claims on that money. In fact, if all the submitted applications are approved, only $17.5 million will be left in the fund. And it has a run rate of about $10 million per week.

"The program is working better than intended," said Coyle. "It's really pushing people off the fence."

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