Barry Ripp ~ East Bay Area Real Estate

We are now in the fifth year of a housing crisis in which more than 3 million Americans have lost their homes to foreclosure, with millions more still at risk.

Every initiative to stem the tide of misery has fallen short in the face of continued economic gloom.

Over the next few weeks, several initiatives aimed at reforming the foreclosure process, holding mortgage lenders and services accountable for their past abuses, and creating more effective mortgage workouts are coming to a head.

Typically, banks and other lenders retained almost no financial interest in the mortgages they originated, other than the duty to service them — collect payments and pursue delinquent borrowers, say — for which they received a fee.

Several drawbacks to that system emerged when the housing economy crashed. Because the loans weren’t going to stay on their books, the lenders hadn’t been too careful about whom they lent to and on what terms.

Perhaps the biggest problem is that although the servicers, which include huge banks such as Bank of America and Wells Fargo, are burdened with the responsibility to renegotiate mortgages to keep borrowers out of foreclosure, their authority to do so on behalf of investors is murky.

As a result, though the investor, the borrower and the economy in general benefit if a home is kept out of foreclosure, even if that means its owner makes lower payments than were required by the original mortgage, the servicing banks are leery of renegotiating too aggressively.

The most closely followed remedial effort involves the 50 state attorneys general under the leadership of Iowa Atty. Gen. Tom Miller.

Last March, the group produced propsal for foreclosure reforms that drew fire from some consumer advocates for being too lenient — its provisions include mandates that banks comply with state law in dealing with borrowers, as if that’s a novel concept — and from business interests for putting too much pressure on banks to reduce principal balances for homeowners having trouble keeping up payments on homes with values that have fallen below the mortgage balance.

Information obtained by the Calif. Asso of Realtors & the L.A. Times. For the whole story: http://articles.latimes.com/2011/aug/14/business/la-fi-hiltzik-20110814

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Short sales – a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth – continue to dominate the housing market, but these real estate transactions aren’t for everyone.

• Typically with a short sale, the homeowner is underwater and has experienced a financial hardship such as a job loss. To limit the damage to his credit rating, a homeowner may attempt to work with his lender to negotiate a short sale. Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.
• Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant – and sometimes vandalized – property, a short sale isn’t a distressed home that will sell at an extremely low price. According to data from RealtyTrac, short sales typically sold for nearly 10 percent less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35 percent.
• Home buyers wanting to purchase a short sale must have patience. In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours. With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases. It may take 30 days or longer for a buyer to receive a response from the bank.
• In a traditional real estate transaction, it is common for a home buyer who currently owns his home to make his offer contingent on selling his current home. In short sales, most banks will not approve an offer that is contingent on the buyer selling his current home, as too many things can go wrong.
• Banks also typically won’t consider short-sale offers that have inspection contingencies in them, so buyers can either do an inspection prior to making an offer or get no inspections.
• Even with the challenges associated with short sales, buyers don’t have too avoid these transactions. Being prepared ahead of the time and working with an experienced REALTOR® can help buyers avoid frustration and surprises down the line.

The Calif. Assoc. of Realtors (C.A.R.) released the results of a statewide survey on short sales and the challenges REALTORS® face in working with lenders and servicers. 

The most frequent problems REALTORS® cited in working with lenders and servicers during the short sale process include unresponsiveness, onerous procedures, and long processing delays.  The survey also found that fewer than three of five short sales close in California, illustrating the complexity and difficulty of navigating lenders’ and servicers’ short sale procedures. 

“The lack of standardization, long approval process, and lack of lender approvals are hampering what should be a 45-day short sale process,” said C.A.R. President Beth L. Peerce.  “Instead we’re hearing the typical response time for lenders is at least 60 days, and in many instances, their response time exceeds 6 months.”

It’s important to work with experienced real estate agents. So call me with your real estate questions. I’ve been helping clients since 1985.

  There’s triple trouble for the Golden State’s struggling real estate market: the usual seasonal slowdown, a weak economy and “unrealistic asking prices” by some sellers, according to a report today from the California Association of Realtors.

 Statewide, the seasonally adjusted home sales rate dropped 3.5 percent in October from the month before, the group reported. Year over year, though, sales were down 19.6 percent, although the market last fall was bolstered by federal tax credits for many homebuyers. The median price of a resale single-family house was up 2.3 percent from a year earlier to $304,220.

 ”We’re really seeing two different housing markets — one at the lower-end driven by first-time buyers and investors, which is keeping prices stable, and one with nostalgic sellers who set unrealistic asking prices,” Leslie Appleton-Young, the group’s vice president and chief economist, said in a news release today.

 ”Sellers need to consider current market conditions when pricing their home in order to facilitate a shorter time on the market,” she said.

 “The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some states is likely to have held back a number of completed sales,” Lawrence Yun, the group’s chief economist, said in a statement. “Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels.”

 ~ Barry Ripp  

information provided by Calif Assoc of Realtors with permission: www.car.org

A number of major banks recently have suspended foreclosures in 23 states due to problems with the signing of declarations in connection with judicial foreclosures — foreclosures that proceed through the court system.  Bank of America has further expanded its suspension of foreclosures to all 50 states.  In California, the vast majority of foreclosures are conducted through non-judicial foreclosure or trustee sales which do not involve a court process. 

While California foreclosures are not conducted through the court system, lenders in California must still comply with other legally required procedures for non-judicial foreclosures.  C.A.R. is supportive of lenders taking action to ensure homeowners are not improperly foreclosed on and are following state law.  We hope they are able to conduct their review expeditiously so as to minimize the impact on California’s housing market.

An update was e-mailed to all C.A.R. members detailing the most recent information available on the foreclosure situation.  The update also is posted online at http://www.car.org/tools/smart/foreclosuremoratorium/. 

 ~ Barry          www.barryripp.com      

reprinted with permission from the Calif. Asso. of REALTORS

A recent survey by Fannie Mae found that 70 percent of Americans think it is a good time to buy a house, with 47 percent of responsdents saying they believe home prices will hold steady over the next year.  However, 33 percent said they would be more likely to rent their next home if they were to move.

A majority of Americans (67 percent) continue to believe that housing is a safe investment; however, that number is down 16 percentage points from a similar survey conducted in 2003, according to Fannie Mae.  Delinquent borrowers and renters are notably more discouraged than mortgage borrowers and underwater borrowers about a home’s safety as an investment and the appeal of buying versus renting. More than 70 percent of all respondents believe it will be harder for the next generation to buy a home, an increase of three percentage points compared with the beginning of the year.

 ~ Barry Ripp            www.barryripp.com         

This information was obtained by the Calif. Association of REALTORS with permission.

Sales of homes for less than the amount of their outstanding mortgage debt have tripled since 2008, particularly in California, according to a report released last Tuesday.

Known as “short sales”, the increasingly common transactions for financially troubled homeowners are projected to balloon to 400,000 in 2010.  The number of transactions had exploded to more than 160,000 in 2009 from roughly 96,000 the year before. More than a quarter of the transactions occur in California, with another quarter split between Arizona, Texas and Florida

In an economy in which jobs are scarce and a quarter of homeowners owe more on their property than it’s worth, short sales are appealing to investors, banks and owners as a cheaper way out than foreclosure.

And with fluctuating home prices, lenders can be reluctant to approve short sales. The transactions can be a hassle to execute, especially when multiple loans on a home mean a slew of creditors are included in negotiations.

But on the bright side; Short sales could actually end up boosting the job market. Unemployed homeowners who can escape underwater mortgages have an easier time moving around, expanding their job search.

As I finish this posting, there are currently 604 houses for sale in the Fremont tri-city area. Of which 126 are short sales, that’s 20%.  Those numbers decrease sharply for the higher priced homes. Of the homes prices over $500,000 only 12% are short sales.

                                                         To comply with the stricter lending guidelines of Fannie Mae and Freddie Mac, and to avoid accusations that the loans sold to Fannie and Freddie are based on inflated appraisals, some real estate professionals have reported lenders lowering home values on appraisals submitted to them. However, effective Sept. 1, Fannie Mae is prohibiting the purchase of loans from lenders who change appraisers’ numbers.

Generally, lenders order a low-cost electronic valuation—based on publicly available statistical data—to review the accuracy of the information submitted by the appraiser. If there is a discrepancy between the electronic valuation and the appraiser’s report, the lender’s underwriters may reduce the appraisal figure.

 ~ Barry Ripp

From:  Calif. Assoc. of Realtors & LA Times

Great news for your first-time buyers: The Mortgage Protection Program has been extended through 2010.

To continue to provide first-time home buyers with peace of mind when purchasing their first home, the C.A.R. Housing Affordability Fund has extended the Mortgage Protection Program (MPP) through December 2010. To date, more than 1,700 first-time home buyers already have been approved for the program, and the numbers continue to increase.

On April 2, 2009 the Housing Affordability Fund launched a new program designed to provide peace of mind to first-time buyers who are hesitant to enter the housing market due to concerns about potential job loss, and subsequently being unable to meet their monthly mortgage obligations. Qualifying buyers can receive up to $1,500 a month for up to six months in the event of job loss, a qualified co-buyer can also receive a $750 benefit for up to six months to help pay the mortgage.

TO QUALIFY FOR THE MORTGAGE PROTECTION PROGRAM APPLICANTS MUST:
· Be a first-time home buyer – someone who has not owned property in the last three years
· Open escrow on or after April 2, 2009

· Use a California REALTOR® in the transaction
· Purchase the property in California
· Be a W-2 employee (cannot be self-employed)

This is a great opportunity for first-time homebuyers.Contact me for more information or: Click here for more information, requirements, and a downloadable application.

 ~ Barry Ripp

 Information obtained by the Calif.Assoc.of Realtors.     November  2009