Changes in Reverse Mortgages

With tightening of credit qualifications, there have been many who are trying to refinance and finding it difficult to qualify..especially Seniors on fixed incomes. Remember with a reverse mortgage, a borrower doesn't have to worry about income, credit, or health qualifications. By using a Reverse Mortgage, you can purchase a new home, an investment property, or even assist a family member to buy their first home.
We have seen some big changes for the FHA Reverse Mortgage, which are very helpful during these tough economic times.
1. HECM for Purchase- This new option allows home owners to use a reverse mortgage for the purchase of a new home. This is ideal for those who may be looking at downsizing, relocating closer to families, or planning to move into a 55+ community...without selling their original home.
2.Increase in the Maximum Lending Limits- The new Stimulus Package signed by President Obama in February brought us a new limit of $625,500 for the FHA HECM, really helpful in our high-priced area.

When Clients Move

Whether my home sellers move early so that we can stage their houses, or if they move when the houses are sold, my clients are faced with many challenges. Now more than ever they are looking for ways to cut costs, cut down necessities, and still have everything that they want. Below are some tips from the Move Advocates that can cut down the cost of their moves and at the same time get them the service they need:
De-Clutter – Now is the time to clean out closets and get rid of anything that you don't need...that old heavy desk in the corner not being used and the treadmill that doubles as a clothes hanger. Having a garage sale or giving things to charity will help reduce the weight and cost of a move.
Get a ‘Binding Not-to-exceed’ estimate – One of the costs contributing to a move is the weight of the shipment. With this estimate, if your actual weight is more than the written estimate, you still pay for only the amount of the estimate. But if your actual weight is less than the estimate then your costs can go down.
Get full replacement ‘valuation’ coverage – When you move, things can get damaged. This coverage is what will protect your goods in the event of any damage.
Do you need furniture assembly & reassembly? – If you have a large desk, entertainment center, or table that has to be taken apart and put back together, do it yourself to cut down on costs. If that is not possible then make sure the company you use offers these services.
Get a reputable mover – It is important to use a mover that is going to provide the level of service promised to you. Check out the better business bureau website to make sure they are what they say they are.
The Move Advocate is a no cost service that helps people when moving. They provide a dedicated coach to coordinate all aspects of the move, from getting estimates to settling into their new home.

Some Good Housing News

I heard someone earlier this week say that the housing market has gone from a slow crawl to a brisk walk. That is the perfect metaphor to explain the recent changes in the real estate market. The market is coming back. It’s not roaring, but it’s coming back.
This week, according to Reuters.com, U.S. mortgage applications jumped as record low interest rates spurred a surge in demand for home refinancing loans. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2 percent for the week ended March 20. Refinancing accounted for 78.5 percent of all applications.
The Mercury News headline this morning was "Mortgage Rates Drop to a Record Low."
Meanwhile, according to Realty Times, housing starts took a surprise jump of 22 percent in February over January's depressed levels.
Existing home sales are also seeing some good trends, and the West is leading much of the nation’s recovery, with California leading the charge. Our median listing price is beginning to rise for the first time in three years. Existing home sales in the West increased 2.6 percent to an annual rate of 1.2 million in February and remain 30.4 percent higher than a year ago.
After a week of positive indicators, the best advice is for buyers to get out there. There are some fantastic deals right now and as more people begin to realize it, competition will come back and begin to drive activity. You know what they say about the early bird!

'Tis the Season

Springtime....or whatever the reason, sales seem to be picking up in Santa Clara County. This morning at our Realtors' tour meeting, we were asked, "Who sold a house last week?" In past weeks, there were one or two responses, but today, a half dozen hands shot up, including mine. Also, these were not short sales or bank owned properties, and one was even a longtime listing in Los Altos Hills. Another healthy sign is that inventory numbers are not going up, in fact, the number of "distressed properties" is headed down. Our tour list remains at a consistent 30-35 new listings each week in the area combining Cupertino, Sunnyvale, and Santa Clara.

Jumbo Loans are Returning

I just received a loan information flyer for an open house I'm holding this weekend on a Sunnyvale listing priced at over $800,000. That puts most loans on the property in the "Jumbo Conforming" range...between $417,500 and $729,750. Thirty year fixed loans with a one point loan fee, run 6.5%, and with a 30% down payment, only 5%.
Kenneth Harney recently wrote in his real estate column that major banks such as
B of A will be rolling out a large new program to finance loans between $730,000 and $1.5 million, true jumbo loans) at fixed 30 year rates in the upper 5% range, also available through its Countrywide Home Loans subsidiary (soon to be renamed Bank of America Home Loans.) These mortgages require great credit and substantial reserves, but at last we are seeing an alternative to FHA, Fannie Mae and Freddie Mac....urgently needed in our area.

Sometimes Bigger IS Better

First there was the individual Brokerage. If they were willing to cooperate, we had to arrange to pick up a house key at their office, and return it. Then we had the first Multiple Listing Services. For a long time, we needed to be members of both the San Jose Board of Realtors and our local Board...in my case, Sunnyvale...in order to have any flexibility. If a master key was lost, we had to re=key the system for security. Then the local boards began combining, and now our membership in SILVAR (the Silicon Valley Association of Realtors) gives us access to electronic key safes throughout the Bay Area.
It has long been the vision of California REALTORS® to have one database to input and search all California real property, regardless of property type, location, or status. Today marks an historic day on our shared journey to a statewide Multiple Listing Service (MLS).
CALMLS announced that four local REALTOR® associations -- the Fresno Association of REALTORS®, the Lake County Association of REALTORS®, the Madera County Association of REALTORS®, and the Merced County Association of REALTORS® -- have become charter providers of calREDD™, an acronym for California Real Estate Dynamic Data. The initial REALTOR® associations will begin delivering calREDD™ to their members early this summer. We're on our way!

More on the Sunnyvale Redevelopment

I was hoping that our new downtown would not be impacted too much by the current economy. Target is "on target" (sorry, I couldn't resist) for late this year, and the opening of the project has already been delayed until late 2010. Now, Peter Pau, the developer says that he needs an additional $450,000,000 in loans to complete construction, and negotiations could take several months. In the meantime, plans for a hotel are put on hold. One more victim of the economy, but at least the numbers are not in the billions.

OK, So I'm Wrong Sometimes

A couple of days ago, I listened too carefully to "analysts" who were saying that interests rates had bottomed out in the 5-5 1/2% range.
Now it looks as though a recent announcement by the Federal Reserve is impacting mortgage rates more than we had thought. Rates on conforming loans of $417,000 or less, and even Jumbo Conforming (between $417,000 and $729,750) are already sneaking below those levels, and lenders expect to see the long awaited mid-4% rates as soon as next week.
All this is happening because the Feds announced that it would be purchasing another $750 billion in mortgage-baked securities from Fannie and Freddie...bringing the total to $1.25 trillion. It also plans to spend another $300 billion on longer term Treasury bonds over the next six months. Now we can move on to worrying about inflation!

A New Scam to Avoid

By now, most of us know that scams abound on the Internet, and are wise enough not to divulge personal information...but here's a new twist on an old scam.
The Federal Trade Commission is warning consumers that they could get stung by economic stimulus scams, perpetrated on the Web and through e-mail, enticing consumers to provide personal information or a small payment.
E-mail messages and Web sites may ask for bank account information and use it to drain consumers' accounts of money or commit identity theft. Web sites also may persuade consumers to click on links that will download malicious software or spyware that can be used to make them a victim of identity theft, or entice consumers to pay a small fee in order to capture their credit card information.
"Web sites may advertise that they can help you get money from the stimulus fund," said Eileen Harrington, acting director of the FTC's Bureau of Consumer Protection. "Many use deceptive names or images of President Obama and Vice President Biden to suggest they are legitimate. They're not."

Have Mortgage Rates Hit Bottom?

The Federal Reserve's efforts to lower mortgage rates, generally considered successful on Wall Street and in the central bank's own corridors, may have hit a wall as a surge in refinancing has discouraged lenders from lowering rates even more.
Analysts are saying that benchmark rates, which have fallen nearly 1 percent since late November to a little over 5%, according to Freddie Mac's survey of 30-year conventional mortgages, are likely to range between about 5% and 5.25% for the next several months.
That's low by historical standards, and a sharp drop from November's levels before the Fed intervened directly in the mortgage market. But it's higher than the 4.5% level that some analysts said last year was needed to ease U.S. housing woes and well above the 2% rate that is what some troubled borrowers may be able to negotiate under the government's mortgage-modification guidelines.
At the same time, rates on mortgage-backed securities -- the pooled mortgages that the Fed has been buying in an effort to drive down rates -- have continued to fall, and by a greater degree, than consumer rates on mortgages. This means home buyers, while getting a lot of the benefit of the Fed's purchases of mortgage-related securities, aren't getting it all.
Keeping mortgage rates from falling further is a jump in refinancings this year as homeowners rush to take advantage of the slide in mortgage rates.

State of the Real Estate Market--Updated

Last weekend, my open houses were busy, and I met first time buyers who were still waiting for the market to bottom out. Many have misgivings about whether or not this is the best time to buy. It is nearly impossible to time any market, especially the stock market or the real estate market.
But real estate is a long term investment. Buying now makes good business sense if you plan to stay in your home for several years. And as we all know, purchasing a home isn’t just an investment...it is where we live and raise our families. Rather than simply trying to time the market, we should be reminded of this fact and instead, focus on choosing the best home.
Although we anticipate moderate home sales in the near term, buyers are ultimately expected to respond to much improved affordability conditions as well as the $8,000 first-time home buyer tax credit. It’s just a matter of time, and the market will pick up. And when it does, it will translate into more competition, less inventory and possibly higher home prices, resulting in less purchasing power. In the long run, waiting could prove expensive.

A letter to the Editor

The Obama administration’s first budget proposal included a provision to reduce the mortgage interest and local property tax deductions for those earning more than $250,000. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the National Association of REALTORS® (NAR) are strongly opposed to this provision and are working to convince lawmakers to oppose it as well.
Although the government predicts it could save billions of dollars by reducing the deductions, it also would negatively impact the California housing market and could contribute to further price declines and diminished equity for homeowners.
In a letter to the editor in this morning's Mercury, the writer felt that home buyers were not concerned with a mortgage deduction for property taxes and interest on their home loans, and not aware of how much they would be in most cases.
He also felt that it would have no effect on our property values.
I disagree. Buyers need that much income to qualify for a large percentage of Valley homes, usually from two paychecks. I can tell you from experience that local buyers are not only aware of tax deductions for interest and property taxes on their homes...they rely on them.

FHA Loans and Condo Buyers

I wrote a little while ago about the advantages of FHA loans for borrowers who have a small down payment. They are also more flexible in qualifying scores, and offer loan amounts that are up to $729,750 in our area. The problem arises when the buyer is interested in a townhome or condo that is located in a complex that has not been previously FHA approved. Today, I met with clients interested in my townhouse listing, and preapproved by a major bank for an FHA loan. Their loan officer claims that she can do a "spot certification" if the CC&Rs do not prohibit FHA financing. I will check into this tomorrow. If FHA loans are allowed, this unit, and others in my complex will be much more salable in this market.

Update on the Sunnyvale Bike Paths

Ever since I wrote about the pedestrian bridge across 280 in Cupertino, I've been asked when it will finally open to the public. Mr Roadshow's column in this morning's Merc provided the answer to that and other questions from area bicyclists.
The 280 bridge near Mary Avenue is finally slated to open on April 30, and bridges over 101 and 237 in the Sunnyvale area will be ready sometime next month. More good news...the Moffett Boulevard bridge over Stevens Creek Trail will open at about the same time. No wonder Sunnyvale has won the League of American Bicyclists' current "Bike Friendly" designation.

Time to Arrange that Refi is Now

Before the Obama administration announced its housing plan, some members of Congress were lobbying for a government subsidy of 4 percent mortgages for homeowners who were current on their loans. But that proposal never made it into the plan. Rather, the administration has decided to focus on helping distressed borrowers more easily refinance or modify loans, with terms typically reflecting today’s market rates, now in the low 5-percent range for qualified borrowers
Stricter loan underwriting standards and declining property values could result in some homeowners becoming ineligible for the Obama administration’s “Making Home Affordable Refinance” program. As a result, many mortgage professionals are advising clients not to wait to refinance.
Refinances also are taking longer to complete. A refinance that used to take three to four weeks to process is now taking as long as six weeks.

An Easy Way to Apply for a Property Tax Reduction

I had written earlier about the automatic reductions that are taking place in many counties where properties have lost value, including our own Santa Clara County. Larry Stone, the Tax Assessor, will be lowering thousands of assessed valuations.
I also wrote an expose of the scam artists who are sending out letters, offering to help homeowners to lower their taxes for "only" $179, when this can be without charge. A simple form is now available online from the Assessor's Office. If you think you qualify, give it a try.

NO MORE COMMISSION REDUCTIONS FOR FANNIE MAE SHORT SALES

One of the most difficult transactions for a Realtor to close is a short sale. Yet lenders have frequently required the agents involved to reduce their commissions in order to close the sale.
Fannie Mae loan servicers can no longer require real estate brokers to reduce their commissions as a condition to a short sale approval. The new policy was effective March 1. According to Fannie Mae, the closing of a pre-foreclosure sale cannot be conditioned upon a reduction of the real estate commission to a level below what the listing agent and borrower negotiated. An exception applies if the total commission is more than 6 percent of the sales price.
This good news may be tempered by the difficulty in determining whether the underlying loan in a short sale transaction is a Fannie Mae loan. Often the loan servicers themselves don't know.

Some Hints from a Property Manager

A friend and fellow Realtor is concentrating her efforts on property management for her clients. Her secret of success? The common sense method of having the properties show at their best, with such inexpensive maintenance items as painting, landscaping, and minor repairs. Her years as a Realtor preparing houses to sell have been invaluable in renting these properties and keeping them rented.
She also mentioned to me that she is able to get more reasonable bids for major repairs and improvements that are needed, and contractors are more available in this economy. A house that shows at its best is able to attract better qualified tenants, and her efficient service helps to keep them in place.

A Guide to the First-Time Homebuyer Tax Credit

Even though I've already written about this credit, I'm still getting questions about the details, so here they are:

A Consumer Guide From the National Association of Realtors

FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT:
EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009

Amount of Credit
The amount of the homebuyer federal income tax credit is the lesser of 10% of the cost of the home bought or $8,000.

Eligible Property
Any single-family residence (including a condo, co-op, or townhouse) may be an eligible property under the homebuyer income tax credit, provided it will be used as the homebuyer’s principal residence.

Refundable
This homebuyer income tax credit reduces income tax liability. The $8,000 tax credit is a clean refundable credit, unlike the one that was passed last summer, which required a repayment. If you qualify as a first-time buyer (i.e., haven't been a homeowner in the past 3 years), then you can claim the $8,000 to reduce your tax burden. If the $8,000 is greater than the tax you owe, then you will get a refund check for the difference. Example: you owe $2,000 in taxes on April 15, 2010. But if you bought a home before the stimulus expiration on Dec. 1, 2009, then you will get a tax refund check for $6,000 from the IRS.*

Income Limit
In order to be eligible for the homebuyer income tax credit in full, the homebuyer can have an annual adjusted gross income of no more than $75,000 ($150,000 on a joint return). A homebuyer with an annual adjusted gross income above that level and up to $95,000 ($170,000 on a joint return) is eligible for a reduced tax credit.

First-time Homebuyer Only
The homebuyer income tax credit is designed for first-time homebuyers, which means the homebuyer (and/or the homebuyer’s spouse) can not have owned a principal residence in the 3 years prior to purchase of the eligible property.

Repayment
There is no repayment of the homebuyer income tax credit by the homebuyer.

Recapture
However, if the eligible property is resold within three years of purchase, the entire amount of homebuyer income tax credit is recaptured on the sale.

Effective Date
The First-Time Homebuyer Federal Income Tax Credit is effective for purchases on or after January 1, 2009 and before December 1, 2009. This guide reflects a modification from the First-Time Homebuyer Federal Income Tax Credit, which remains in effect for homes purchased by eligible homebuyers between April 9, 2008 and Dec. 31, 2008.

Timely Info for the Rainy Season

Brooke Coleman at JCP Geologists reminded me that with the rainy season finally upon us, and more listings sitting vacant these days, now is a good time to brush up on mold hazards. Naturally-occurring molds are virtually everywhere but typically at low levels that are not serious, but millions of Americans suffer from allergic reactions to molds and most don't even realize that fungi could be the cause of their sneezing and sniffling. As a resource for homeowners, the U.S. Environmental Protection Agency provides a handy pamphlet called, "A Brief Guide to Mold, Moisture and Your Home". This publication gives an in-depth look at some of the risks, dangers and precautions to take when dealing with mold indoors.
It is available at no cost to you from JCP's website.

Today’s Lending Climate

A panel of lenders spoke to our local Realtors last week.
Their message to REALTORS®: Right now, it’s a buyer’s market and a good time to buy a home, but make sure your clients have good credit, act fast and get pre-qualified and pre-approved for a loan, and fully complete all the required documents immediately. They advised that if we have clients waiting for some magic interest rate to appear, they may be waiting a long time. Locating financing can be very difficult right now, especially for borrowers interested in jumbo loans. Clients need to be diligent with financing because lenders are unpredictable and can change policies and requirements at short notice. They said that getting financing in place and fixing the interest rate can be an inflation hedger, as once the economy improves, we could face inflation.
FHA loans have become a useful tool, even in high-priced Silicon Valley. The FHA loan option has more requirements, could even require two appraisals, but it’s worth looking into since it allows extremely liberal gift financing (no limit on money gifts from relatives) and a lower credit score (620 is considered acceptable). But the FHA loan process can also be difficult to work with and may require extra time.
55 percent of closings in the state of California these days are FHA loans.
While it may be a difficult lending climate, there are tools available for borrowers. They advised REALTORS® to have their clients start the lending process early, get pre-approved, lock in the interest rate, have all documents in place and have legible copies of contracts. Any question will cause a delay in closing or could even result in a buyer losing the opportunity to get the loan in time.
As for buyers currently sitting on the fence, waiting for prices to hit bottom, the panel advised REALTORS® to make their clients aware that now is a good time to buy a home, while buyers are in the driver’s seat and can negotiate. And while no one can predict when prices hit bottom, once that happens, roles will change and sellers will have lots more control.

That Credit Score is More Important than Ever

Most buyers are already preapproved when they come to an Open House, but a couple of the people coming through yesterday had questions about how they could qualify for a loan.
FICO is the most widely known type of credit score developed by Fair Isaac Corporation. It is used by many mortgage lenders to determine the possibility that the borrower may default on financial obligations to the mortgage lender.
Last week, Certified Credit Specialist Julie Macc told our Realtor Association members at their Palo Alto District tour meeting, “The FICO credit score predicts the statistical chances of consumers being 90 days late or in default of a loan. The higher your score, the less the odds of having you defaulting on a loan”.
Your credit score is used by lenders in determining whether or not to extend credit to you, the interest rate and terms of the loan. The lower your score, the less likely you will be approved for loans. Even if you are approved, you may have to pay a higher interest rate if your score is not high enough. FICO credit scores range between 300 and 850. Ratings are as follows: Excellent: over 750; Very Good: 720 or more; Acceptable: 660 to 720; Uncertain: 620 to 660; and Risky: less than 620.
Your credit score is determined by the following factors: payment history (35%), revolving debt ratio (30%); length of credit history (15%); new credit and inquiries (10%); and type of credit used (10%).
Macc pointed out that “credit has no history”; a 700 credit score could go down 160 points overnight by one wrong move. Here are some tips she shared on how to improve your credit score:
1. Pay your bills on time.
2. Lower your total debt load.
It’s best to spread your debt among several credit cards than loading a single card close to its limit.
3. Keep old accounts open.
Length of credit history is another important credit score factor, so keep older accounts in good standing open, and use them sparingly, so they remain active and in good standing.
4. Open new accounts with care.
Opening new accounts can hurt you since this could show a pattern of you constantly looking for credit. Don’t open credit accounts you don’t intend to use.
She explained that right now, every point is really precious, especially in this economic climate.

Real Estate and Rainy Days

I put out my signs today in pouring rain, prepared to sit in a vacant townhouse. I had a print ad and website exposure, and hoped that a few people might brave the weather, but I made certain to have some paperwork and a good book with me, just in case they did not.
Well, if the past few hours are any indication, the market may be beginning to turn. There were more people coming through the property than there had been since the first weekend it was held open. I had nonstop traffic for those three hours, and even ran out of colored flyers. It remains to be seen if this is a beginning of a trend.