New law gives added protection to short-sale hopefuls

On Friday, Gov. Jerry Brown signed Senate Bill 458 (Corbett) into law.  The new law, which contained an urgency clause and became effective upon signing, protects homeowners pursuing short sales by barring first and secondary lien holders from going after sellers for money owed after the short sales close.

Making sense of the story

• A short sale – a transaction in which the homeowner sells the property for less than is owed on the mortgage – must be approved by the lien holder or lien holders, if there is more than one.
• Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short-sale payment as full payment for the outstanding balance of the loan, but the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.
• The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) sponsored the bill and urged lawmakers to pass this much-needed legislation.
• “The signing of this bill is a victory for California homeowners who have been forced to short sell their home, only to find that the lender will pursue them after the short sale closes and demand an additional payment to subsidize the difference,” said C.A.R. President Beth L. Peerce.  “SB 458 brings closure and certainty to the short-sale process and ensures that once a lender has agreed to accept a short-sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full, and the homeowner will not be held responsible for any additional payments on the property.” 

Foreclosure myths, debunked

Although there are a number of programs available to help homeowners who have defaulted on their mortgages keep their home, the large amount of misinformation tends to result in troubled homeowners failing to contact their lender until it is too late.

Making sense of the story

• Some homeowners believe, incorrectly, that contacting their lender early in the process will draw attention to their situation and result in a quicker foreclosure.  In reality, contacting the lender or servicer is an important first step, and the sooner, the better.  Contacting the lender provides the homeowner with an opportunity to explain their situation and the steps necessary to deal with it.
• It is a common misconception that missing one mortgage payment will lead to foreclosure.  However, the foreclosure process doesn’t begin until payments are 90 days delinquent.  Lenders generally have a financial interest in keeping homeowners in their homes, so making contact as early as possible could help lenders modify terms of the mortgage or devise a repayment plan.
• Once homeowners are behind on their mortgage payments, it becomes challenging to dig out of the hole.  Some homeowners try to solve this by depleting their savings or dipping into their retirement accounts to become current on the loan.  Most financial experts advise against this.
• Delinquent homeowners may think they should stop making mortgage payments to get their lender’s attention, which often isn’t the case.  When possible, homeowners should stay current on their mortgage payments and continue to contact their lender on a regular basis.
• Homeowners who have applied for assistance or loan modification programs in the past and were turned down are advised to reapply.  Program parameters are constantly changing, so the rules might have been liberalized since the last time the borrower sought help.
• A number of free, government-sponsored housing services are available through the Dept. of Housing and Urban Development (HUD).  A list of HUD-approved agencies can be found at http://www.hud.gov. 

Remodeled Home For Sale in La Quinta w/ Mountain Views $144,900

Standard Sale!!! 12 hour turnaround to all offers. This 3 bed, 2 full bath, 1361 square foot home is located within walking distance of hiking trails, grocery stores, elementary school, Old Town La Quinta, community pool and tennis. Home has been completely remodeled and features beautiful Spanish pavers, new tile roof, new granite counter, new interior & exterior paint throughout, new carpet in all bedrooms, new doors and hardware, new stainless steel appliances, new french door, new A/C, new furnace, new block wall and more!!! Take advantage of low utilities bill's in Imperial Irrigation District... and best of all, NO HOA DUES!!!
Click on Picture to the right to see additional photos...

Confidence in value of homeownership persists through bust

Despite the decline in home prices, 81 percent of U.S. adults believe buying a home is the best long-term investment a person can make, according to a national survey by the Pew Research Center.
MAKING SENSE OF THE STORY

• Homeownership topped the list of long-term financial goals for Americans, according to the study.  Respondents rated homeownership, as well as living comfortably in retirement, as more important than sending children to college or leaving offspring an inheritance.
• “Owning a home is really a part of the American dream, and that is just part of the American psyche and something that people aspire to,” according to one of the study’s authors.
• Although the vast majority of adults surveyed are in favor of owning a home, the public’s faith in real estate has somewhat declined compared with the last time a comparable survey asked people about the wisdom of investing in real estate.  In the Pew Research Center survey, 37 percent of respondents said they “strongly agree” that homeownership is the best investment a person can make, while 44 percent said they “somewhat agree.”  The same question was asked by a CBS News/New York Times survey in 1981, and at that time, 49 percent “strongly agreed,” and 35 percent “somewhat agreed.”
• While home prices have entered a renewed decline after showing some improvements last year, many economists believe that the worst of the housing crisis is probably over, which could help explain the resiliency in Americans’ optimism.
• Homeowners in the survey were more positive about the financial wisdom of owning a home than were renters.  Among renters, the desire for homeownership remains strong.  According to the survey’s findings, 24 percent of renters surveyed said they rent out of choice and 81 percent said they would like to buy.

California home sales rose, median price fell in January

California home sales rose in January, marking three consecutive monthly increases and posting their highest level since May 2010, while the statewide median price declined to its lowest level since June 2009, according to data C.A.R. 

“With lower home prices and rates edging up from their historic lows of late last year, prospective home buyers should consider the opportunities in today’s market,” said C.A.R. President Beth L. Peerce.

California home sales rose 5.1 percent in January compared with December, to a revised pace of 520,080 units.  Sales also increased 2.5 percent in year-over-year comparisons, marking the first year-over-year sales increase since May 2010.  The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the January pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.
The statewide median price of an existing, single-family detached home sold in California was $278,900, down 8.6 percent from a revised $305,020 in December and was down 2.0 percent from the $284,600 median price recorded for January 2010.  The January 2011 median price was the lowest since June 2009, when it was $274,640.

Obama administration releases recommendations on future of GSEs

The White House recently released recommendations to phase out Fannie Mae and Freddie Mac.  C.A.R. says the elimination of government involvement would raise borrowing costs for home buyers and severely restrict a safe and affordable flow of financing, further impeding the still-fragile housing market recovery.

C.A.R., along with NAR, believes that Fannie Mae and Freddie Mac government-sponsored enterprises (GSEs) should be converted into government-chartered, non-profit corporations.  Such an entity would ensure government’s role in a stable real estate finance system, while eliminating the conflict created by the GSE’s current charter allowing for a private profit and public loss structure.  With a clear explicit guarantee by the government, these entities would continue to be able to offer low interest rate loans onto home buyers and assure investor confidence.

The White House’s proposal also recommends allowing the maximum loan limit to drop back to $625,500 in high cost areas, further hampering California’s housing recovery.  Analysis by C.A.R. shows that a reduction in the conforming loan limit to $625,500 would render a percentage of home sales ineligible. To see the analysis, and C.A.R.’s recommendations on the GSE reform and loan limits, visit http://www.car.org/newsstand/newsreleases/gsefuture/

Wells Fargo lowers credit score requirement for FHA mortgages

Wells Fargo recently announced that effective Jan. 15, 2011, it will accept FHA-insured mortgages for borrowers with credit scores as low as 500.  For borrowers with credit scores ranging from 500 to 579, a 10 percent down payment is required, and the down payment may not be a gift or be part of a down payment assistance program.  Borrowers with credit scores of 580 to 599 are required to put down 5 percent, and the down payment may not be a gift or part of a down payment assistance program. Borrowers with a credit score of 600 or higher are required to have a 3.5 percent down payment, and a gift is acceptable.  For all borrowers, seller concessions are limited to 3 percent.