OREGON REAL ESTATE ROUND TABLE

Category: Seller Financing

  • Buy your next home WITHOUT selling your current one first!


    Many people believe the only way they can buy a new home, is by selling their existing one first.  Not necessarily true, and your dream home might just be a phone call away!

  • Should you take the lowest rate, or lower closing costs?


    Let’s clear up some common confusion … are you better off with the lowest interest rate, or should you take a slightly higher rate with much lower closing costs?  I explain in today’s video.

  • What are “normal” closing costs for home loans?


    Many people ask me how much closing costs are, to figure out what the best deal is for their home loan.  In today’s video I detail what’s normal and how to avoid paying too much!

  • Mortgage market over-correction, or a sign of things to come?


    In the past two days, mortgage rates have risen across the board by an average of 1/4%.  This is significant and affects buying power & payments.  Will this continue?  Watch today as I give my predictions!

  • America’s Credit and Housing Crisis: New State Bank Bills, Marketoracle.co.uk


    Seventeen states have now introduced bills for state-owned banks, and others are in the works.  Hawaii’s innovative state bank bill addresses the foreclosure mess.  County-owned banks are being proposed that would tackle the housing crisis by exercising the right of eminent domain on abandoned and foreclosed properties.  Arizona has a bill that would do this for homeowners who are current in their payments but underwater, allowing them to refinance at fair market value.

    The long-awaited settlement between 49 state Attorneys General and the big five robo-signing banks is proving to be a majordisappointment before it has even been signed, sealed and court approved.  Critics maintain that the bankers responsible for the housing crisis and the jobs crisis will again be buying their way out of jail, and the curtain will again drop on the scene of the crime.

    We may not be able to beat the banks, but we don’t have to play their game.  We can take our marbles and go home.  The Move Your Money campaign has already prompted more than 600,000 consumers to move their funds out of Wall Street banks into local banks, and there are much larger pools that could be pulled out in the form of state revenues.  States generally deposit their revenues and invest their capital with large Wall Street banks, which use those hefty sums to speculate, invest abroad, and buy up the local banks that service our communities and local economies.  The states receive a modest interest, and Wall Street lends the money back at much higher interest.

    Rhode Island is a case in point.  In an article titled “Where Are R.I. Revenues Being Invested? Not Locally,” Kyle Hence wrote in ecoRI Newson January 26th:

     

    According to a December Treasury report, only 10 percent of Rhode Island’s short-term investments reside in truly local in-state banks, namely Washington Trust and BankRI. Meanwhile, 40 percent of these investments were placed with foreign-owned banks, including a British-government owned bank under investigation by the European Union.

    Further, millions have been invested by Rhode Island in a fund created by a global buyout firm . . . . From 2008 to mid-2010, the fund lost 10 percent of its value — more than $2 million. . . . Three of four of Rhode Island’s representatives in Washington, D.C., count [this fund] amongst their top 25 political campaign donors . . . .

    Hence asks:

    Are Rhode Islanders and the state economy being served well here? Is it not time for the state to more fully invest directly in Rhode Island, either through local banks more deeply rooted in the community or through the creation of a new state-owned bank?

    Hence observes that state-owned banks are “[o]ne emerging solution being widely considered nationwide  . . . . Since the onset of the economic collapse about five years ago, 16 states have studied or explored creating state-owned banks, according to a recent Associated Press report.”

    2012 Additions to the Public Bank Movement

    Make that 17 states, including three joining the list of states introducing state bank bills in 2012: Idaho (a bill for a feasibility study), New Hampshire (a bill for a bank), and Vermont (introducing THREE bills—one for a state bank study, one for a state currency, and one for a state voucher/warrant system).  With North Dakota, which has had its own bank for nearly a century, that makes 18 states that have introduced bills in one form or another—36% of U.S. states.  For states and text of bills, see here.

    Other recent state bank developments were in Virginia, Hawaii, Washington State, and California, all of which have upgraded from bills to study the feasibility of a state-owned bank to bills to actually establish a bank.  The most recent, California’s new bill, was introduced on Friday, February 24th.

    All of these bills point to the Bank of North Dakota as their model.  Kyle Hence notes that North Dakota has maintained a thriving economy throughout the current recession:

    One of the reasons, some say, is the Bank of North Dakota, which was formed in 1919 and is the only state-owned or public bank in the United States. All state revenues flow into the Bank of North Dakota and back out into the state in the form of loans.

    Since 2008, while servicing student, agricultural and energy— including wind — sector loans within North Dakota, every dollar of profit by the bank, which has added up to tens of millions, flows back into state coffers and directly supports the needs of the state in ways private banks do not.

    Publicly-owned Banks and the Housing Crisis

    A novel approach is taken in the new Hawaii bill:  it proposes a program to deal with the housing crisis and the widespread problem of breaks in the chain of title due to robo-signing, faulty assignments, and MERS.  (For more on this problem, see here.)  According to a February 10th report on the bill from the Hawaii House Committees on Economic Revitalization and Business & Housing:

    The purpose of this measure is to establish the bank of the State of Hawaii in order to develop a program to acquire residential property in situations where the mortgagor is an owner-occupant who has defaulted on a mortgage or been denied a mortgage loan modification and the mortgagee is a securitized trust that cannot adequately demonstrate that it is a holder in due course.

    The bill provides that in cases of foreclosure in which the mortgagee cannot prove its right to foreclose or to collect on the mortgage, foreclosure shall be stayed and the bank of the State of Hawaii may offer to buy the property from the owner-occupant for a sum not exceeding 75% of the principal balance due on the mortgage loan.  The bank of the State of Hawaii can then rent or sell the property back to the owner-occupant at a fair price on reasonable terms.

    Arizona Senate Bill 1451, which just passed the Senate Banking Committee 6 to 0, would do something similar for homeowners who are current on their payments but whose mortgages are underwater (exceeding the property’s current fair market value).  Martin Andelman callsthe bill a “revolutionary approach to revitalizing the state’s increasingly water-logged housing market, which has left over 500,000 ofArizona’s homeowners in a hopelessly immobile state.”

    The bill would establish an Arizona Housing Finance Reform Authority to refinance the mortgages of Arizona homeowners who owe more than their homes are currently worth.  The existing mortgage would be replaced with a new mortgage from AHFRA in an amount up to 125% of the home’s current fair market value. The existing lender would get paid 101% of the home’s fair market value, and would get a non-interest-bearing note called a “loss recapture certificate” covering a portion of any underwater amounts, to be paid over time.  The capital to refinance the mortgages would come from floating revenue bonds, and payment on the bonds would come solely from monies paid by the homeowner-borrowers. An Arizona Home Insurance Fund would create a cash reserve of up to 20 percent of the bond and would be used to insure against losses. The bill would thus cost the state nothing.

    Critics of the Arizona bill maintain that it shifts losses from collapsed property values onto banks and investors, violating the law of contracts; and critics of the Hawaii bill maintain that the state bank could wind up having paid more than market value for a slew of underwater homes. An option that would avoid both of these objections is one suggested by Michael Sauvante of the Commonwealth Group, discussed earlierhere: the state or county could exercise its right of eminent domain on blighted, foreclosed and abandoned properties.  It could offer to pay fair market value to anyone who could prove title (something that with today’s defective title records normally can’t be done), then dispose of the property through a publicly-owned land bank as equity and fairness dictates.  If a bank or trust could prove title, the claimant would get fair market value, which would be no less than it would have gotten at an auction; and if it could not prove title, it legally would have no claim to the property.  Investors who could prove actual monetary damages would still have an unsecured claim in equity against the mortgagors for any sums owed.

     

    Rhode Island Next?

    As the housing crisis lingers on with little sign of relief from the Feds, innovative state and local solutions like these are gaining adherents in other states; and one of them is Rhode Island, which is in serious need of relief.  According to The Pew Center on the States, “The country’s smallest state . . . was one of the first states to fall into the recession because of the housing crisis and may be one of the last to emerge.”

    Rhode Islanders are proud of having been first in a number of more positive achievements, including being the first of the 13 original colonies to declare independence from British rule.  A state bank presentation was made to the president of the Rhode Island Senate and other key leaders earlier this month that was reportedly well received.  Proponents have ambitions of making Rhode Island the first state in this century to move its money out of Wall Street into its own state bank, one owned and operated by the people for the people.

    Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.  Her websites are http://WebofDebt.com and http://EllenBrown.com. 

    Ellen Brown is a frequent contributor to Global Research.  Global Research Articles by Ellen Brown

    © Copyright Ellen Brown 2012

    Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.

    http://www.marketoracle.co.uk/Article33365.html

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  • Financial Force Majeure


    Financial Force Majeure: The Virtual World Taylored to Our Real World

    If any of you have ever played the virtual reality game, Sim City or any similar, you will probably appreciate the point to be made more immediately than those unfamiliar. For the unfamiliar, this is a game in which you are the master of the land, tasked with taking what amounts to any empty field and building, expanding, and developing yourself a thriving metropolis.

    This entails tapping into the natural resources that are available within your splotch of land, thereby harnessing those resources to grow your community. As master of your domain, you have to the politician, the banker, the shopkeeper too, making wise decisions with your electronic currency inasmuch as budgeting and investment are concerned. You have to provide the infrastructure, exploiting what resources you have to attract more Sims (the inhabitants of your city) to further grow your town.

    You zone the land for residential, commercial, and industrial zones and providing for greenbelt, park, and recreational zones. You build schools, banks, retail and shopping centers, single-family and multi-family residential, industrial, and hospitals. As in the real world, this is done through various types of investment deals in the both the private and public sectors, involving commercial and investment banks, private investors and businesses. Your metropolis’ success depends on good investment strategies.

    Mother Nature is an ever present threat, just as in the real world, throwing a natural disaster your way now and again. Of course, disaster strikes when least expected, testing the validity of your decisions, most of all your infrastructure. It is than you discover if value engineering the levy walls was such a good idea. Should news of cutting corners for costs leaks out, it costs your city, as restitution to flood victims is yours to bear.

    Of course, the entirety is based on a designed program consisting of a language, codes, and locks. As with any program there savvy programmers, some might say hackers, having the learned knowledge to manipulate codes, language, and changing locks or even to remove locks. Purposes in hacking games might be to expand the games capabilities or to be able to be able to skip ahead to more advanced levels without having to play through the levels not desired.

    Virtual reality games are rooted in fantasy, even if based on real situations, there is no tangible result. Emotional personal satisfaction or perhaps of monetary award if in some sort of competition is the best reward one can hope for. You can’t physically walk the streets of your city, go to one of its schools, or benefit from the investment dividends in terms of attaining real dollars.

    For the developers, the tangible aspects are realized by sales which return in real dollars to the owners of the rights to the game. The developers might not necessarily be the owners either, depending on whether the developers retain rights or assigned them away to another.

    The point to take away from this little piece is more of a question. What if, with highly sophisticated programming, it was possible to design investment strategies, for instance and than somehow apply them to the real world? What if it has already been done…..What if our whole entire economy has been modeled in the virtual world, brought forth into the real world?

    Sound ridiculous? ………think again…….

     

    INFORMATION PROCESSING SYSTEM FOR SEAMLESS VIRTUAL TO REAL WORLD OPERATIONS      

    US Patent Pub. No.: US 2002/0188760 Al

     

    SECURING CONTRACTS IN A VIRTUAL WORLD    

    US Patent Pub. No.: US 2007/0117615

     

    WEB DEPENDENT CONSUMER FINANCING AND VIRTUAL RESELLING METHOD      

    US Patent Pub. No.: US 2001/0056399 A1

     

    TRANSACTIONS IN VIRTUAL PROPERTY      

    US Patent Pub. No.: US 2005/0021472 Al

     

    VIRTUAL FINANCE/INSURANCE COMPANY       

    US Patent Pub. No.: US 2003/0187768 A1

     

     

     

     

     

     

     

     

     

     

  • Prototype of Standardized Monthly Mortgage Statement is Released, by Jim Puzzanghera, Los Angeles Times


    The Consumer Financial Protection Bureau‘s proposed statement is designed to provide clear information about the loan on a single page and wouldn’t change each time your loan is sold to a new servicer.

     

     

    Reporting from Washington—

    Your monthly mortgage bill soon could get easier to understand, and it wouldn’t change each time your loan is sold to a new servicer.

    The Consumer Financial Protection Bureau has developed a proposed standardized mortgage servicer statement designed to provide clear information about the loan on a single page.

    The prototype released Monday included a breakdown of how much of the monthly payment went to principal, interest and escrow. The form also detailed the outstanding principal, maturity date, prepayment penalty and, for adjustable-rate mortgages, the time when the interest rate could change.

    “This information will help consumers stay on top of their mortgage costs and hold their mortgage servicers accountable for fixing errors that crop up,” said Richard Cordray, the agency’s director. “Given the widespread mortgage servicing problems we’ve seen over the past few years, consumers need clear disclosures they can count on.”

    Although many servicers already provide such information on their monthly statements, there are no industrywide standards, the agency said.

    Such standards are a good idea, and initial reaction from servicers to the agency’s proposal was positive, said Rod J. Alba, senior counsel in the mortgage markets division at the American Bankers Assn.

    The agency posted a working draft of the standardized statement on its website,http://www.consumerfinance.gov to solicit input from the public and industry before a version of the form formally is proposed this summer.

    Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, said simplified mortgage statements would help resolve the broad mortgage servicing problems that were at the heart of last week’s federal and state settlement with five of the nation’s largest banks over botched foreclosure paperwork.

    The consumer agency is required under the 2010 financial reform law to put new mortgage servicing rules in place to help consumers, Cordray said. The law has specific requirements for mortgage statements, including a phone number and email address for the customer to get information about the loan, as well as information about housing counselors.

    The new mortgage statement is the latest consumer financial paperwork the agency is trying to simplify.

    In May, it released two prototypes for shorter, easier-to-understand disclosure forms that lenders would have to give home buyers before they close on a mortgage. The agency has been receiving comments on the forms and tested them last month in Philadelphia.

    And in December, the agency proposed a simplified credit card agreement form to make it easier to understand interest rate terms and comparison shop.

    The agency also is developing a new disclosure rule for hybrid adjustable-rate mortgages that would require consumers to be notified months before their first interest rate increase, as well as to be provided with a good-faith estimate of the new monthly payment.

    jim.puzzanghera@latimes.com

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  • Has Housing Really Bottomed? Oftwominds.com


    Massive intervention by Federal agencies and the Federal Reserve have kept the market from discovering price and the risk premium in real estate. That sets up a “catch the falling knife” possibility for impatient real estate investors.

     

    A substantial percentage of many households’ net worth is comprised of the equity in their home. With the beating home prices have taken since 2007, existing and soon-to-be homeowners are keen to know: Are prices stabilizing? Will they begin to recover from here? Or is the “knife” still falling?

    To understand where housing prices are headed, we need to understand what drives them in the first place: policy, perception, and price discovery.

    In my December 2011 look at housing, I examined systemic factors such as employment and demographics that represent ongoing structural impediments to the much-awaited recovery in housing valuations and sales. This time around, we’re going to consider policy factors that influence the housing market.

    Yesterday while standing in line at our credit union I overheard another customer at a teller’s window request that her $100,000 Certificate of Deposit (CD) be withdrawn and placed in her checking account because, she said, “I’m not earning anything.” The woman was middle-aged and dressed for work in a professional white- collar environment — a typical member, perhaps, of the vanishing middle class.

    Sadly, she is doing exactly what Ben Bernanke’s Federal Reserve policies are intended to push people into doing: abandoning capital accumulation (savings) in favor of consumption or trying for a higher yield in risk assets such as stocks and real estate.

    It may strike younger readers as unbelievable that a few decades ago, in the low-inflation 1960s, savings accounts earned a government-stipulated minimum yield of 5.25%, regardless of where the Fed Funds Rate might be. Capital accumulation was widely understood to be the bedrock of household financial security and the source of productive lending, whether for 30-year home mortgages or loans taken on to expand an enterprise.

    How times — and the US economy — have changed.

    Now the explicit policy of the nation’s private central bank (the Federal Reserve) and the federal government’s myriad housing and mortgage agencies is to punish saving with essentially negative returns in favor of blatant speculation with borrowed money. Official inflation is around 3% and savings accounts earn less than 0.1%, leaving savers with a net loss of about 3% every year.  Even worse — if that is possible — these same agencies have extended housing lenders trillions of dollars in bailouts, backstops and guarantees, creating institutionalized moral hazard on an unprecedented scale.

    Recall that moral hazard simply means that the relationship between risk and return and has been severed, so risk can be taken in near-infinite amounts with the assurance that if that risk blows up, the gains remain in the hands of the speculator. Another way of describing this policy of government bailouts is “profits are private but losses are socialized.” That is, any profits earned from risky speculation are the speculator’s to keep, while all the losses are transferred to the public.

    While the housing bubble was most certainly based on a credit bubble enabled by lax oversight and fraudulent practices, the aftermath can be fairly summarized as institutionalizing moral hazard.

    Policy as Behavior Modification and Perception Management

    Quasi-official pronouncements by Fed Board members suggest that the Fed’s stated policy of punishing savers with a zero-interest rate policy (ZIRP) is outwardly designed to lower the cost of refinancing mortgages and buying a house. The first is supposed to free up cash that households can then spend on consumption, thereby boosting the economy. With savings earning a negative yield, consuming more becomes a tangibly attractive alternative. (How keeping the factories in Asia humming will boost the American economy is left unstated.)

    This near-complete destruction of investment income from household savings yields a rather poor return. Plausible estimates of the total gain that could be reaped by widespread refinancing hover around $40 billion a year, which is not much in a $15 trillion economy.

    There are real-world limits on this policy as well. Since the Fed can’t actually force lenders to refinance underwater mortgages, millions of homeowners are unable to take advantage of lower rates. From the point of view of lenders, declining household incomes and mortgages that exceed the home value (so-called negative equity) have lowered the creditworthiness of many homeowners.

    As a result, the stated Fed policy goal of lowering mortgage payments to boost consumer spending has met with limited success. Somewhat ironically, the mortgage industry’s well-known woes — extended time-frames for involuntary foreclosure, lenders’ hesitancy to concede to short sales (where the house is sold for less than the mortgage and the lender absorbs a loss), and strategic/voluntary defaults — may be putting an estimated $80 billion in “free cash” that once went to mortgages into defaulting consumer’s hands.

    The failure of the Fed’s policies to increase household’s surplus income via ZIRP leads us to the second implicit goal, lowering the cost of home ownership via super-low mortgage rates, which serves both as behavior modification and perception management. If low-interest rate mortgages and subsidized Federal programs that offer low down payments drop the price of home ownership below that of renting an equivalent house, then there is a substantial financial incentive to buy rather than rent.

    The implicit goal is to shape a general perception that the bottom is in, and it’s now safe to buy housing.

    First-time home buying programs and FHA (Federal Housing Authority) and VA (Veterans Administration) loans all offer very low down-payment options to qualified buyers. This extends a form of moral hazard to buyers as well as lenders: If a buyer need only scrape up $2,000 to buy a house, their losses are limited should they default to this same modest sum. Meanwhile, lenders working under the guarantee of FHA- and VA-backed loans are also insured against losses.

    The Fed’s desire to boost home sales by any means available is transparent. By boosting home sales, it hopes to stem the decline of house valuations and thus stop the hemorrhaging of bank losses from writing down impaired loan portfolios, and also stabilize remaining home equity for households, which has shrunk to a meager 38% of housing value.

    As many have noted, given that about 30% of all homes are owned free and clear, the amount of equity residing in the 70% of homes with a mortgage may well be in the single digits. (Data on actual equity remaining in mortgaged homes is not readily available, and would be subject to wide differences of opinion on actual market valuations.)

    Broadly speaking, housing as the bedrock of middle class financial security has been either destroyed (no equity) or severely impaired (limited equity).  The oversupply of homes on the market and in the “shadow inventory” of defaulted/foreclosed homes awaiting auction has also impaired the ability of homeowners to sell their property; in this sense, any remaining equity is trapped, as selling is difficult and equity extraction via HELOCs (home equity lines of credit) has, for all intents and purposes, vanished.

    The Fed’s strategy, in conjunction with the government-owned and -operated mortgage agencies that own or guarantee the majority of mortgages in the US (Fannie Mae, Freddie Mac, FHA, and the VA), is to stabilize the housing market through subsidizing the cost of mortgage borrowing by shifting hundreds of billions of dollars out of savers’ earnings with ZIRP.

    Since roughly 60% of households either already own a home or are ensnared in the default/foreclosure process, then the pool of buyers boils down to two classes: buyers who would be marginal if not for government subsidies and super-low mortgage rates, and investors seeking some sort of return above that of US Treasury bonds. The Fed has handed investors two choices to risk a return above inflation: equities (the stock market) or real estate. Given the uneven track record of stocks since the 2009 meltdown, it is not much of a surprise that investors large and small have been seeking “deals” in real estate as a way to earn a return.

    Recent data from the National Association of Realtors concludes that cash buyers (a proxy for investors) accounted for 31% of homes sold in December 2011. Even in the pricey San Francisco Bay Area, where median prices are still in the $350,000 range, investors accounted for 27% of all sales. Absentee buyers (again, a proxy for investors) paid a median price of around $225,000, substantially lower than the general median price.

    This data suggests that “bargain” properties are being snapped up for cash, either as rental properties or in hopes of “flipping” for a profit after some modest cleanup and repair.

    Price and Risk Premium Discovery

    There is one lingering problem with the Fed and the federal housing agencies’ concerted campaigns to punish capital accumulation, push investors into equities or real estate, and subsidize marginal buyers to boost sales at current valuations. The market cannot “discover” price or establish a risk premium when the government and its proxies are, in essence, the market.

    By some accounts, literally 99% of all mortgages in the U.S. are government-issued or -guaranteed. If any other sector was so completely owned by the federal government, most people would concede that it was a socialized industry. Yet we in the US maintain the fiction of a “free market” in mortgages and housing.

    To establish a truly free and transparent market for mortgages and housing, we would have to end all federal subsidies and guarantees/backstops, and restore the market as sole arbiter of interest rates — i.e., remove that control from the Federal Reserve.

    Everyone with a stake in the current market fears such a return to an open market because it is likely that prices would plummet once government subsidies, guarantees, and incentives were removed. Yet without such an open market, buyers can never be certain that price and risk have truly been discovered. Buyers in today’s market may feel that the government has removed all risk from buying, but they might find that they “caught the falling knife;” that is, bought into a false bottom in a market that has yet to reach transparent price discovery.

    So, the key question still remains for anyone who owns a home or is looking to soon own one…how close are we to the bottom in housing prices?

    In Part II: Determining the Housing Bottom for Your Local Market, we tackle that question head-on. Because local dynamics inevitably play such a large role in determining fair pricing for any given market, instead of giving a simple forecast, we instead offer a portfolio of tools and other resources for analyzing home values on a local basis. Our goal is to empower readers to calculate an informed estimate of “fair value” for their own markets — and then see how closely current local real estate prices fit (or deviate) from it.

    Click here to access Part II of this report (free executive summary, enrollment required for full access).

    This article was originally published on chrismartenson.com.

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  • Fannie, Freddie overhaul unlikely, by Vicki Needham, Thehill.com


    An overhaul of Fannie Mae and Freddie Mac is unlikely again this year despite recent Republican efforts to move the issue up the agenda.

    Congressional Republicans, along with some Democrats — and even GOP presidential candidate Newt Gingrich — are renewing calls to craft an agreement to reduce the involvement of Fannie and Freddie in the nation’s mortgage market.

    But without a broader accord, passage of any legislation this year is slim, housing experts say.

     

    Jim Tobin, senior vice president of government affairs for the National Association of Home Builders, concedes that despite a mix of Democratic and Republican proposals, including a push by the Obama administration last year, congressional leaders probably won’t get far this year on a plan for Fannie and Freddie, the government-controlled mortgage giants.

     

    Tobin said there are “good ideas out there” and while he expects the House to put some bills on the floor and possibly pass legislation, the Senate is likely to remain in oversight mode without any “broad-based legislation on housing finance.”

    “We’re bracing for a year where it’s difficult to break through on important policy issues,” he said this week.

    While the issue makes for a good talking point, especially in an presidential election year, congressional efforts are largely being stymied by the housing market’s sluggish recovery, prohibiting the hand off between the government and private sector in mortgage financing, housing experts say.

    David Crowe, chief economist with NAHB, said that the market has hit rock bottom and is now undergoing a “slow climb out of the hole.”

    The House has taken the biggest steps so far — by mid-July the Financial Services Committee had approved 14 bills intended to jump-start reform of the government-sponsored enterprises.

    “As we continue to move immediate reforms, our ultimate goal remains, to end the bailout of Fannie, Freddie and build a stronger housing finance system that no longer relies on government guarantees,” panel Chairman Spencer Bachus (R-Ala.) said last summer.

    Meanwhile, a number of GOP and bipartisan measures have emerged — Democrats and Republicans generally agree Fannie and Freddie are in need of a fix but their ideas still widely vary.

    There are a handful of bills floating around Congress, including one by Reps. John Campbell (R-Calif.) and Gary Peters (D-Mich.), and another by Reps. Gary Miller (R-Calif.) and Carolyn Maloney (D-N.Y), which would wind down Fannie and Freddie and create a new system of privately financed organizations to support the mortgage market.

    “Every one of those approaches replaces them [Fannie and Freddie] with what they think is the best alternative to having a new system going forward that would really fix the problem and would really give certainty to the marketplace and allow housing finance to come back, and therefore housing to come back, as well,” Campbell said at a markup last month.

    There’s another bill by Rep. Jeb Hensarling (R-Texas) and bills in the Senate being pushed by Sens. Bob Corker (R-Tenn.) and Johnny Isakson (R-Ga.).

    Corker, a member of the Senate Banking Committee, made the case earlier this week for unwinding government support for the GSEs while promoting his 10-year plan that would put in place the “infrastructure for the private sector to step in behind it.”

    “A big part of the problem right now is the private sector is on strike,” Corker said.

    He has argued that his bill isn’t a silver bullet, rather a conversation starter to accelerate talks.

    “So what we need to do is figure out an orderly wind-down,” Corker said in November. “And so we’ve been working on this for some time. We know that Fannie and Freddie cannot exist in the future.”

    He suggested getting the federal government this year to gradually wind down the amount of the loans it guarantees from 90 percent to 80 percent and then to 70 percent.

    “And as that drops down, we think the market will send signals as to what the difference in price is between what the government is actually guaranteeing and what they’re not,” he said.

    Even Gingrich, who has taken heat for his involvement with taking money while doing consulting work for the GSEs, called for an unwinding during a December interview.

    “I do, in fact, favor breaking both of them up,” he said on CBS’ Face the Nation. “I’ve said each of them should devolve into probably four or five companies. And they should be weaned off of the government endorsements, because it has given them both inappropriate advantages and because we now know from the history of how they evolved, that they abused that kind of responsibility.”

    In a white paper on housing last week, the Federal Reserve argued that the mortgage giants should take a more active role in boosting the housing market, although they didn’t outline suggestions for how to fix the agencies.

    The central bank did argue that “some actions that cause greater losses to be sustained by the GSEs in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery.”

    Nearly a year ago, Treasury Secretary Timothy Geithner asked Congress to approve legislation overhauling Fannie Mae and Freddie Mac within two years — that deadline appears to be in jeopardy.

    The Obama administration’s initial recommendations called for inviting private dollars to crowd out government support for home loans. The white paper released in February proposed three options for the nation’s housing market after Fannie and Freddie are wound down, with varying roles for the government to play.

    About the same time last year, Bachus made ending the “taxpayer-funded bailout of Fannie and Freddie” the panel’s first priority.

    While an overhaul remains stalled for now there is plenty of other activity on several fronts.

    In November, the Financial Services panel overwhelmingly approved a measure to stop future bonuses and suspend the current multi-million dollar compensation packages for the top executives at the agencies.

    The top executives came under fire for providing the bonuses but argued they need to do something to attract the talent necessary to oversee  $5 trillion in mortgage assets.

    Earlier this month, the Federal Housing Finance Agency announced that the head of Fannie received $5.6 million in compensation and the chief executive of Freddie received $5.4 million.

    Under the bill, the top executives of Fannie and Freddie could only have earned $218,978 this year.

    Last week, Fannie’s chief executive Michael Williams announced he would step down from his position once a successor is found. That comes only three months after Freddie’s CEO Charles Haldeman Jr. announced that he will leave his post this year.

    The government is being tasked to find replacements, not only for the two mortgage giants which have cost taxpayers more than $150 billion since their government takeover in 2008, but there is talk that the Obama administration is looking to replace FHFA acting director Edward DeMarco, the overseer of the GSEs.

    In a letter to President Obama earlier this week, more than two dozen House members said DeMarco simply hasn’t done enough to help struggling homeowners avoid foreclosure.

    The lawmakers are pushing the president to name a permanent director “immediately.”

    Also, in December, the Securities and Exchange Commission (SEC) sued six former executives at Fannie and Freddie, alleging they misled the public and investors about the amount of risky mortgages in their portfolio.

    In the claims, the SEC contends that as the housing bubble began to burst, the executives suggested to investors that the GSEs were not substantially exposed to sub-prime mortgages that were defaulting across the country.

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  • Mortgage Slang 101 – Mortgage Insurance, Brett Reichel, Brettreichel.com


    Mortgage insurance is viewed nearly universally as a bad thing, but in reality, it’s a tool to be used that is very good for home buyers, the housing market and the economy in general.

    Why do many complain about mortgage insurance?  Because it’s expensive, and sometimes difficult to get rid of when it’s no longer necassary.  If that’s the case, why do I say it’s good for buyers and the economy?  Because it’s a tool that allows people to buy a home with less than twenty percent down.

    Mortgage insurance insures the lender against the risk of the buyers default on the loan.  It does NOT insure the buyers life, like many people think.

    The single biggest hurdle for home buyers is accumulating an adequate down payment.  Lenders want buyers to put twenty percent down for two reasons.  First, a buyer with a large down payment is less likely to quit making their payments.  Second, if a buyer does default, the more the buyer put down usually means more equity in the house when the lender forecloses, which means the lender loses less money.

    But, if a buyer wants to buy a $200,000 and has to put up a twenty percent down, that will equal a $40,000 down payment!  Hard to save up, for most buyers.  BUT, with the use of mortgage insurance, that buyer might be able to put as little as $6,000 down!  A lot easier to save.

    So, mortgage insurance can be a very benficial tool.

    With that being said, don’t let your lender shoehorn you into only considering monthly mortgage insurance.  There are other options such as single premium mortgage insurance, or “split” mortgage insurance.  These programs can be more expensive up front, but sometimes much less expensive over time.  They don’t work for everyone, but they certainly should be looked into.

     

    Brett Reichel
    Brettreichel.com

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  • The Home Affordable Refinance Program (HARP): What You Need to Know, by Hayley Tsukayama, Washington Post


    On Monday, the federal government announced that it would revise the Home Affordable Refinance Program (HARP), implementing changes that The Washington Post’s Zachary A. Goldfarb reported would “allow many more struggling borrowers to refinance their mortgages at today’s ultra-low rates, reducing monthly payments for some homeowners and potentially providing a modest boost to the economy.”

    The HARP program, which was rolled out in 2009, is designed to help. Those who are “underwater” on their homes and owe more than the homes are worth. So far, The Post reported, it has reached less than one-tenth of the 5 million borrowers it was designed to help. Here’s a quick breakdown of what you need to know about the changes.

    What was announced? The enhancements will allow some homeowners who are not currently eligible to refinance to do so under HARP. The changes cut fees for borrowers who want to refinance into short-term mortgages and some other borrowers. They also eliminate a cap that prevented “underwater” borrowers who owe more than 125 percent of what their property is worth from accessing the program.

    Am I eligible? To be eligible, you must have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac, sold to those agencies on or before May 31, 2009. The current loan-to-value ratio on the mortgage must be greater than 80 percent. Having a mortgage that was previously refinanced under the program disqualifies you from the program. Borrowers cannot not have missed any mortgage payments in the past six months and cannot have had more than one missed payment in the past 12 months.

    How do I take advantage of HARP?According to the Federal Housing Finance Agency, the first step borrowers should take is to see whether their mortgages are owned by Fannie Mae or Freddie Mac. If so, borrowers should contact lenders that offer HARP refinances.

    When do the changes go into effect?The FHFA is expected to publish final changes in November. According to a fact sheet on the program, the timing will vary by lender.

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  • The Meat of the Matter – In Re: Veal Analyzed, by Phil Querin, Q-Law.com


     

    “When a note is split from a deed of trust ‘the note becomes, as a practical matter, unsecured.’ *** Additionally, if the deed of trust was assigned without the note, then the assignee, ‘having no interest in the underlying debt or obligation, has a worthless piece of paper.’” [In re Veal – United States Bankruptcy Appellate Panel of the Ninth Circuit (June 10, 2011)]

    Introduction. This case is significant for two reasons: First, it was heard and decided by a three-judge Bankruptcy Appellate Panel for the Ninth Circuit, which includes Oregon.  Second, it represents the next battleground in the continuing foreclosure wars between Big Banks and Bantam Borrowers: The effect of the Uniform Commercial Code (UCC”)on the transferability of the Promissory Note (or “Note”).

    Remember, the Trust Deed follows the Note.  If a lender is the owner of a Trust Deed, but cannot produce the actual Note which it secures, the Trust Deed is useless, since the lender is unable to prove it is owed the debt.  Conversely, if the lender owns the Note, but not the Trust Deed, it cannot foreclose the secured property. [For a poetic perspective on the peripatetic lives of a Note and Trust Deed, connect here. – PCQ]

    By now, most observers are aware that Oregon’s mandatory recording statute, ORS 86.735(1), has been a major impediment to lenders and servicers seeking trying to foreclose borrowers.  Two major Oregon cases, the first in federal bankruptcy court, In re McCoy, and the other, in federal district trial court, Hooker v. Bank of America, et. al, based their decisions to halt the banks’ foreclosures, squarely on the lenders’ failure to record all Trust Deed Assignments.  To date, however, scant mention has been made in these cases about ownership of the Promissory Note. [Presumably, this is because a clear violation of the Oregon’s recording statute is much easier to pitch to a judge, than having to explain the nuances – and there are many – of Articles 3 and 9 of the UCC.  – PCQ]

    Now we have In re: Veal, which was an appeal from the bankruptcy trial judge’s order granting Wells Fargo relief from the automatic stay provisions under federal bankruptcy law.   Such a ruling meant that Wells Fargo would be permitted to foreclose the Veals’ property.  But since this case arose in Arizona – not Oregon – our statutory law requiring the recording of all Assignments as a prerequisite to foreclosure, did not apply.  Instead, the Veals’ lawyer relied upon the banks’ failure to establish that it had any right under the UCC to enforce the Promissory Note.

    Legal Background. For reasons that do not need to be explained here, the Veals filed two contemporaneous appeals. One was against Wells Fargo Bank, which was acting as the Trustee for a REMIC, Option One Mortgage Loan Trust 2006–3, Asset–Backed Certificates Series 2006–3.  In the second appeal, the Veals challenged the bankruptcy court’s order overruling their objection to a proof of claim filed by Wells Fargo’s servicing agent, American Home Mortgage Servicing, Inc. (“AHMSI”).

    Factual Background. In August 2006, the Veals executed a Promissory Note and Mortgage in favor of GSF Mortgage Corporation (“GSF”). On June 29, 2009, they filed a Chapter 13 bankruptcy.  On July 18, 2009, AHMSI filed a proof of claim, on behalf of Wells Fargo as its servicing agent.  AHMSI included with its proof of claim the following documents:

    • A copy of the Note, showing an indorsement[1] from GSF to “Option One”[2];
    • A copy of the GSF’s Mortgage with the Veals;
    • A copy of a recorded “Assignment of Mortgage” assigning the Mortgage from GSF to Option One; and,
    • A letter dated May 15, 2008, signed by Jordan D. Dorchuck as Executive Vice President and Chief Legal Officer of AHMSI, addressed to “To Whom it May Concern”, stating that AHMSI acquired Option One’s mortgage servicing business.[3]

    The Veals argued that AHMSI [Wells’ servicing agent] lacked standing since neither AHMSI or Wells Fargo established that they were qualified holders of the Note under Arizona’s version of the UCC.

    In a belated and last ditch effort to establish its standing, Wells Fargo filed a copy of another Assignment of Mortgage, dated after it had already filed for relief from bankruptcy stay.  This Assignment purported to transfer to Wells Fargo the Mortgage held by “Sand Canyon Corporation formerly known as Option One Mortgage Corporation”.

    The 3-judge panel noted that neither of the assignments (the one from GSF to Option One and the other from Sand Canyon, Option One’s successor, to Wells) were authenticated – meaning that there were no supporting affidavits or other admissible evidence vouching for the authenticity of the documents.  In short, it again appears that none of the banks’ attorneys would swear that the copies were true and accurate reproductions of the original – or that they’d even seen the originals to compare them with.  With continuing reports of bogus and forged assignments, and robo-signed documents of questionable legal authority, it is not surprising that the bankruptcy panel viewed this so-called “evidence” with suspicion, and did not regard it as persuasive evidence.

    • As to the Assignment of Mortgage from GSF (the originating bank) to Option One, the panel noted that it purported to assign not only the Mortgage, but the Promissory Note as well.[4]
    • As to the Assignment of Mortgage from Sand Canyon [FKA Option One] to Wells Fargo[created after Wells Fargo’s motion for relied from stay], the panel said that the document did not contain language purporting to assign the Veals’ Promissory Note.  As a consequence[even had it been considered as evidence], it would not have provided any proof of the transfer of the Promissory Note to Wells Fargo. At most, it would only have been proof that the Mortgage had been assigned.

    After considerable discussion about the principles of standing versus real party in interest, the 3-judge panel focused on the latter, generally defining it as a rule protecting a defendant from being sued multiple times for the same obligation by different parties.

    Applicability of UCC Articles 3 and 9. The Veal opinion is well worth reading for a good discussion of the Uniform Commercial Code and its applicability to the transfer and enforcement of Promissory Notes.  The panel wrote that there are three ways to transfer Notes.  The most common method is for one to be the “holder” of the Note.  A person may be a “holder” if they:

    • Have possession of the Note and it has been made payable to them; or,
    • The Note is payable to the bearer [e.g. the note is left blank or payable to the “holder”.]
    • The third way to enforce the Note is by attaining the status of a “nonholder in possession of the [note] who has the rights of a holder.” To do so, “…the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the “person entitled to enforce.”

    The panel concluded that none of Wells Fargo’s exhibits showed that it, or its agent, had actual possession of the Note.  Thus, it could not establish that it was a holder of the Note, or a “person entitled to enforce” it. The judges noted that:

    “In addition, even if admissible, the final purported assignment of the Mortgage was insufficient under Article 9 to support a conclusion that Wells Fargo holds any interest, ownership or otherwise, in the Note.  Put another way, without any evidence tending to show it was a “person entitled to enforce” the Note, or that it has an interest in the Note, Wells Fargo has shown no right to enforce the Mortgage securing the Note. Without these rights, Wells Fargo cannot make the threshold showing of a colorable claim to the Property that would give it prudential standing to seek stay relief or to qualify as a real party in interest.”

    As for Wells’ servicer, AHMSI, the panel reviewed the record and found nothing to establish that AHMSI was its lawful servicing agent.  AHMSI had presented no evidence as to who possessed the original Note.  It also presented no evidence showing indorsement of the Note either in its favor or in favor of Wells Fargo.  Without establishing these elements, AHMSI could not establish that it was a “person entitled to enforce” the Note.

    Quoting from the opinion:

    “When debtors such as the Veals challenge an alleged servicer’s standing to file a proof of claim regarding a note governed by Article 3 of the UCC, that servicer must show it has an agency relationship with a “person entitled to enforce” the note that is the basis of the claim. If it does not, then the servicer has not shown that it has standing to file the proof of claim. ***”

    Conclusion. Why is the Veal case important?  Let’s start with recent history: First, we know that during the securitization heydays of 2005 – 2007, record keeping and document retention were exceedingly lax.  Many in the lending and servicing industry seemed to think that somehow, MERS would reduce the paper chase.  However, MERS was not mandatory, and in any event, it captured at best, perhaps 60% of the lending industry.  Secondly, MERS tracked only Mortgages and Trust Deeds – not Promissory Notes.  So even if a lender can establish its ownership of the Trust Deed, that alone is not enough, without the Note, to permit the foreclosure.

    As recent litigation has revealed, some large lenders, such as Countrywide, made a habit of holding on to their Promissory Notes, rather than transferring them into the REMIC trusts that were supposed to be holding them.  This cavalier attitude toward document delivery is now coming home to roost.  While it may not have been a huge issue when loans were being paid off, it did become a huge issue when loans fell into default.

    So should the Big Banks make good on their threat to start filing judicial foreclosures in Oregon, defense attorneys will likely shift their sights away from the unrecorded Trust Deed Assignments[5], and focus instead on whether the lenders and servicers actually have the legal right to enforce the underlying Promissory Notes.

    [1] The word “indorsement” is UCC-speak for “endorsement” – as in “endorsing a check” in order to cash it.

    [2] Although not perhaps as apparent in the opinion as it could have been, there were not successive indorsements of the Veals’ Promissory Note, i.e. from the originating bank to the foreclosing bank. There was only one, i.e. from GSF to Option One.  There was no evidence that the Note, or the right to enforce it, had been transferred to Wells Fargo or AHMSI.  Ultimately, there was no legal entitlement under the UCC giving either Wells or its servicer, AHMSI, the ability to enforce that Note.  The principle here is that owning a borrower’s Trust Deed or Mortgage is insufficient without also owning, or have a right to enforce, the Promissory Note that it secures.

    [3] Mr. Dorchuck did not appear to testify.  His letter, on its face, is clearly hearsay and inadmissible.  The failure to properly lay any foundation for the letter, or authenticate it “under penalty of perjury” is inexplicable – one that the bankruptcy panel criticized. This was not the only example of poor evidentiary protocol followed by the banks in this case.  However, this may not be the fault of the banks’ lawyers. It is entirely possible these were the documents they had to work with, and they declined to certify under “penalty of perjury” the authenticity of them. If that is the case, one wonders how long good attorneys will continue to work for bad banks?

    [4] This is a drafting sleight of hand.  Mortgages and Trust Deeds are transferred by “assignment” from one entity to another. But Promissory Notes must be transferred under an entirely different set of rules – the UCC. Thus, to transfer both the Note and Mortgage by a simple “Assignment” document, is facially insufficient, by itself, to transfer ownership of – or a right to enforce – the Promissory Note.

    [5] The successive recording requirement of ORS 86.735(1) only applies when the lender is seeking to foreclose non-judicially.  Judicial foreclosures do not contain that statutory requirement.  However, to judicially foreclose, lenders will still have to establish that they meet the standing and real party interest requirements of the law.  In short, they will have to deal head-on with the requirements of Articles 3 and 9 of the Uniform Commercial Code.  The Veal case is a good primer on these issues.

    Phil Querin
    Attorney at Law
    http://www.q-law.com/
    121 SW Salmon Street, Suite 1100 Portland, OR 97204 
    Tel: (503) 471- 1334

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  • Multnomahforeclosures.com: July 15th, 2011 Update.


    Multnomah County highlighted in Oregon; Portla...
    Image via Wikipedia

    Multnomahforeclosures.com was updated with the largest list of Notice Defaults to date. With Notice of Default records dating back nearly 3 years.  

    If you are planning on investing in real estate, want to learn the status of the home you are renting/leasing or about to rent or lease  you should visit Multnomahforeclosures.com.

    All listings are in PDF and Excel Spread Sheet format.

    Multnomah County Foreclosures

    Multnomah County Foreclosures
    http://multnomahforeclosures.com

     
     

    Fred Stewart 
    Broker
    Stewart Group Realty Inc.
    http://www.sgrealty.us/
    info@sgrealtyinc.com
    503-289-4970 (Phone)

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  • Oregon Real Estate Waned has just posted a new buyer: SG 16


    SG16  is an experienced  real estate investor  looking for real estate investment opportunities in the Portland metro market.   This investor is an all Cash buyer and will not need bank or lender approval to finalize any agreement made.

    For more information regarding this buyer and others.  Visit    OregonRealEstateWanted.com at  http://oregonrealestatewanted.com

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  • The Median Price Fallacy, by Brett Reichel, Brettreichel.com


    Every month or so, the news media generates articles based on the latest statistics from various multiple listing services. In those articles they relate how “Median Prices” have either fallen or increased. What’s that mean? Well, a median price is one where it’s the middle price of all the sales in an area. So, let’s say we have a small city called Brettville. In Brettville last month, there were 15 sales. One sale was at $200,000, 7 were above $200,000 and 7 were below $200,000. Then the middle price, or median price for Brettville last month was $200,000.

    Market analysts watch median prices for changes, and use them as an indicator of market price changes. However, median prices are not a good and clear indicator of an individual houses value, despite what most appraisal reports say today. In fact, when an appraiser uses changes in median prices as a justification for time adjustments to value, it is inaccurate analysis.

    What’s a time adjustment? An appraiser uses comparable sales (comps) to determine their opinion of value on the property they are appraising. The appraiser makes dollar value adjustments on these sales when they compare them to the subject property . A “comp” might be 200 square feet bigger than the subject so the appraiser would adjust for that difference. One thing appraisers do commonly in today’s market is adjust for the difference in time between when a “comp” sold and the date of the appraisal. If a market is appreciating or depreciating at 1% a month, the appraiser would make an adjustment to the value of the comp in comparison to the subject to compensate for the difference in time.

    It’s inaccurate analysis to use median price to justify this time adjustment. Why? Because median price could be affected by more cheap houses selling in an area or more expensive houses selling in a neighborhood. It could have zero to do with any change in value.

    Another factor that makes median prices not appropriate for time adjustments is that different market value ranges could have different changes in value. In some of the markets, larger, move up style homes are depreciating faster than starter homes. Why? Because there are more first time home buyers in the market than move up buyers.

    If you are not happy with your appraisal, review it, and read the comments. If the appraiser justifies the time adjustment with median prices, and not a matched pair analysis, you have a faulty appraisal, and valid grounds for a complaint. Don’t expect your lender to do this, your loan officer doesn’t understand, and the underwriter probably doesn’t either. But the appraiser knows what they are doing. They used to laugh at Realtors for doing this in an appreciating market. Now they’ve jumped on that bandwagon, too.

    For More of Brett’s writing. Go to http://brettreichel.com

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  • OregonRealEstateWanted.com A Sucess Story for Buyers, by Fred Stewart, Stewart Group Realty Inc.


    I think the success of the OregonRealEstateWanted.com site is due to the massive amount people that are involved in the Oregon Real Estate market right now. The difference between their involvement today compared to 5 years ago is there are more people looking to sell real estate than there are looking to buy. Buyers have so many opportunities to consider that it is sometimes difficult for them to settle on exactly the right property to fit within their dreams and goals. Sellers have a problem making sure their property is exposed to buyers that could be a good fit for their opportunity. There is just so much to look at that often times their buyer has chosen something else before they even had a chance to consider their property.

    The issue might be how opportunities are presented to buyers and where they come from. In some cases the best way for an opportunity to be identified is after the seller has had a chance to learn what the buyer is looking for and if they see a fit with the real estate they are selling. Only then does the seller reach out to the buyer to explore any advantage in developing a deal. In this context the buyer is looking at properties from a wide range of areas with in the market. As real estate brokers and private property owners alike may present opportunities. In some cases deals have been developed on properties that were not formally on the market.
    The next steps for OregonRealEstateWanted.com are to list people looking to lease or rent commercial and residential real estate. The plan is to start listing people that are looking for lease hold or month to month rental relationships on the site by June 1st., 2011..

    If you are looking to buy real estate fin the Oregon market to live in or as an investment. Contact Fred Stewart of Stewart Group Realty for a private one on one consultation and possible listing on the site. All information shared with Mr. Stewart is confidential and there is no charge unless the real estate you are looking for is found.

    Oregon Real Estate Wanted.com
    http://oregonrealestatewanted.com

    Fred Stewart
    Stewart Group Realty Inc.
    info@sgrealty.us
    503-289-4970

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  • Can I get Financing For A Second Home? by Jason Hillard, Homeloanninjas.com


  • OregonRealEstateWanted.com: New Buyer Posting


    New buyer (SG14) has been posted on the OregonRealEstateWanted.com web site. This buyer is an investor and they are looking for residential multifamily opprotunities under $200,000 in the Portland Metro area. Buyer is looking for seller financing opportunities only. To learn more about this buyer and others that may be looking for real estate you have for sale. Please visit OregonRealEstateWanted.com

    Oregon Real Estate Wanted
    http://oregonrealestatewanted.com

    Fred Stewart
    Stewart Group Realty Inc.
    http://www.sgrealty.us

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  • An Old Idea is New Again: Second Homes in Oregon , By Fred Stewart, Stewart Group Realty Inc.


    2011 may be the year buyers start considering second homes again. Our mountains, high desert and coastlines have long been considered legendary vacation destinations. Both urban dwelling Oregonians and people from out of state go home from visits to these places with a dream of returning as often as possible.

    Owning a second home is a good idea – one that makes family life more enjoyable. It is the dream of many to finally have that special getaway. With the retraction of home values down to levels not seen in nearly 10 years, coupled with still historically low interest rates, this dream may once again be an opportunity whose time has come.

    But of course, there is the flip side to this rosy picture: it has become increasingly difficult to obtain financing. And the barriers are even higher for second homes then they are for people seeking to finance their primary residence. Lenders and banks have taken a lot of losses over the past few years. A significant portion of these losses is due to the second home market that developed between 2003 and 2006. Because of this, expect a lot more work to get financing then what you may have experienced in the past. It is important that you work closely with a loan officer that has a lot of experience in residential lending and is working with a Mortgage Banker or Bank. However, you may have found a truly awesome deal and still be unable to prove yourself sufficiently to a lender. It is time to think about this in new ways.

    Seller financing options such as land sales contracts and lease options should not be ignored. These options will sometimes be the only options that will allow a successful transaction to occur in the present financial climate. Do not hesitate to begin by speaking with a loan officer and exploring the possibility of traditional financing. At the same time, don’t waste precious time you begin to feel as if you are not making satisfactory progress. The “miracles” that good loan officers could pull off for borrowers in the past, are simply not happening these days.

    If you have exhausted the bank loan route unsuccessfully, educate yourself about the various seller finance options. When you do reach mutually acceptable terms with your seller, be sure to draft an agreement that would last at least 3 to 5 years, if possible. It will take at least that long for lending to return to some normalcy and for you, the buyer, to develop a financial profile that would be encouraging for a lender or bank to work with them. Here your favorite loan officer can be of great assistance, and work with you during that time period to assist you in understanding and attaining eligibility for bank financing. Three to 5 years of good credit, stable employment and a healthy dedication to making the contract and mortgage payments on time will show the lender that you have the economic and character resources to deserve the credit for the loan. The three C’s (Capability, Creditworthiness and Character) will always be the basis of bank lending. What is different now is the stringency applied to each of these criteria.

    As always when looking to buy an investment property or a second home you should talk to your tax and financial advisors and get their opinion on how this will affect your tax exposure and your financial planning. A real estate purchase properly structured and managed will improve your financial standing. A second home can be a wonderful and satisfying improvement on your lifestyle.

     

    Fred Stewart
    Stewart Group Realty Inc.
    http://www.sgrealty.us
    info@sgrealty.us
    503-289-4970

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  • Would-be buyers face even more hurdles on home front, by Mary Ellen Podmolik, Chicago Tribune


    The drumbeat from the housing community was loud and clear in 2010: There was never a better time to buy a home.

    For most of the past 12 months, home prices tumbled, mortgage rates ticked downward, and the inventory of available traditional and distressed homes was plentiful.

    But would-be buyers, even if they were able to overcome job worries, found that the hurdles to obtain a loan were formidable. They remained on the sidelines, and housing analysts opined that if the broader economy improved and unemployment fell, pent-up demand would be unleashed, credit guidelines would ease and home sales would improve.

    As the new year begins, that guarded optimism has turned into uncertainty, thanks to a combination of rising mortgage rates, tighter underwriting guidelines and sweeping government regulation. As a result, it’s unlikely to get any easier and may, in fact, get much more difficult to buy a home in 2011.

    “From a credit standpoint, I tend to think we’re toward the bottom of that cycle,” said Bob Walters, chief economist for Quicken Loans Inc. “The bad news is, I don’t think it’s going to get a lot better in 2011. You’ll hear a lot more noise pressuring the industry to ease guidelines, and you’ll hear from the industry that we don’t want a redo of what’s happened.”

    Risky practices

    Looming large over the mortgage market are provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that have yet to be finalized. Among them is a requirement that mortgage lenders maintain some “skin” in the game on the mortgages they originate by holding at least 5 percent of the credit risk rather than bundling the loans and selling them off entirely.

    The goal is to discourage a repeat of risky past practices, but the legislation makes an exception to the risk-retention standard for what is labeled a “qualified residential mortgage.” It is the still-unspecified definition of what’s become the industry’s latest acronym to digest, QRM, that has lenders in an uproar.

    If a very strict definition is applied by regulators, and a final rule isn’t expected until the spring, it could become more difficult, and more costly, for homebuyers to secure mortgage financing.

    “People have some very different ideas of how to define this,” said Michael Fratantoni, vice president of research and economics at the Mortgage Bankers Association. “Some would say if it doesn’t have a 30 percent down payment, it’s not a QRM. For a first-time homebuyer, that would really be eye-opening. It definitely has the potential to turn the market upside down.

    “This could dramatically tighten underwriting much more than what the lenders have already done. It’s going to make it even tougher to work through the (housing) overhang.”

    Wells Fargo has told regulators it supports exempting mortgages with a 30 percent down payment. Community banks worry such a strict definition would curtail home mortgage lending.

    “If you have to have 30 percent down, the American dream would become the American fantasy,” said Nick Parisi, a senior vice president at Standard Bank and Trust Co. in Hickory Hills, Ill.

    Less competition

    Additional regulation on mortgage bankers will mean a thinning of their ranks, weeding out the unscrupulous players. But it also will lessen consumers’ ability to comparison-shop widely for the best home mortgage product.

    “That means less competition, and generally, less competition is not good for the consumer,” said Quicken’s Walters. “It might mean that your interest rate over time is a little higher. A less competitive industry has to work less hard.”

    Tighter lending requirements already have steered 40 percent of buyers to secure Federal Housing Administration-backed loans, which carry their own set of fees. FHA-backed loans are exempt from the Dodd-Frank provision.

    Another new wrinkle to the mortgage market is that beginning in March, Freddie Mac will raise fees for mortgages sold to Freddie that carry higher loan-to-value ratios.

    Fannie Mae in late December announced its own series of considerable loan-level price adjustments, effective April 1, for mortgages with greater than a 60 percent loan-to-value that will apply even to consumers with credit scores above 700.

    Loan fees aren’t the only item going up: So is the cost of money itself. The average rate on 30-year, fixed-rate mortgages has been below 5 percent since early May, but economists predict those days are nearing an end.

    General guidance on mortgage rates for a 30-year, fixed-rate mortgage call for them to stay under 6 percent for the year, likely falling somewhere between 4.75 percent and 5.5 percent. Still, that could be a jolt to buyers on the sidelines who watched rates drop to as low as 4.2 percent in the fall.

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