Zorell's Industry Updates

This week should be an active week in mortgage rates (What's new?).  We will be digesting six economic reports and a couple of Treasury auctions that may strongly influence mortgage rates this week. The data that came out today (July 26^th) from the Commerce Dept. said that sales of newly constructed homes rose last month but unfortunately it was one of the least important reports of the week.  There is no really relevant data being posted until Thursday and that's when things will start to move around.

The Consumer Confidence Index (CCI) report for July will be coming out late tomorrow morning and will measure consumer sentiment, giving us an idea of what consumers are willing to spend. If consumers are confident in their own financial situations, they are more apt to make large purchases in the near future.  This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reads weaker than expected, that means consumers were less confident than originally thought. 

Be on the lookout for bond prices to rise and mortgage rates drop Tuesday. Current forecasts are calling for a reading of 51.0, which would be a lower reading than June's and indicate consumers are becoming less comfortable with their finances (not so much of a shocker).  The most important report of the week is Friday's preliminary GDP reading, making it one of the most important days of the week.  Go figure, the most important report is saved for Friday but I doubt we will see a drastic change in rates - if I had a longer term loan or purchase out there, I'd still be floating!! 

Should I Wait For The “Double-Dip”??

Let's be real people - how long can this actually last?  We are currently witnessing the best interest rates the nation has seen in over 50 years.  For the first time in a long time - the average W-2'd consumer has the advantage.  With the price of homes at or near it's low and interest rates that are definitely at theirs, it's seems like the Real Estate Perfect Storm has finally struck for the consumer.  When you look at the numbers it all makes sense.  

You are a first time homebuyer and you are a deal shopper.  You want to buy but only at the absolute perfect time (The Bottom).  Sound familiar?  You're not alone. 

Here's a scenario you might find yourself in.  You have found the perfect house but it's a little bit out of your price range.  Let's say about $50,000 higher than you originally wanted.  Today you could get a loan around 4.625% today.  For numerical sake – let’s examine a loan amount of $450,000.  Principal and Interest payment @ 4.625% on $450,000 = $2,313.63. 

But wait, that’s TODAY’S pricing!!!  If you were to patiently wait for the price of homes to drop or to “double dip” you are taking a big gamble – you are hedging your bet that interest rates will remain this low forever…And they wont!!  Don’t forget that rates (especially in this market) have been known to change from .75 to 1 point overnight!! 

You may be the biggest saver on your block – by waiting around and getting that same house for $400,000 instead of $450,000 but what you didn’t notice is what shocks most people.  In the time that you waited for the price to adjust down – you also let the rates adjust back up.  For argument sake, let’s say the rates went back up to 5.625% in the time you waited for the “double-dip”.  If this were the case, your new payment P&I on your new price of $400,000 would be $2,302.63 saving you a whopping $11 per month. 

Now you tell me… does it still make sense to wait around for the double-dip?? 

RATES HIT 50 YEAR LOW - 4.625 NO POINTS / NO FEE's

Quick Reference Guidelines

Best Price – Stated Jumbo’s

Assets

10x’s Stated Income

Or 24 months of Assets – Yes, 24 Months PITI

$100k deposit into Savings/Checking/CD/IRA, etc.

·        ($100k Deposit = Premiere Banking Client)

·        Benefits: if rates drop by .50% or more, bank will modify note to present day rates

Income/Employment

Self-Employed Only

2 years minimum

45% DTI (Back-End)

Property

SFR’s, Owner Occupied & 2^nd Homes

All 50 States

Loan Amount

Max $1,500,000

Max Cash Out: $500,000

Minimum Loan Amt $418,000

LTV

60% LTV

65% on exception only

Borrower

720+ Fico

Foreign Nationals Allowed

Analysts have been worried that the various stimulus programs and money-printing around the world will cause devaluation and price rises, and some European officials have suggested that all stimulus measures be pulled out at once to prevent that.

The Fed has an exit strategy, which it will apply when needed, Plosser said.

"Our exit strategy is really quite simple: we have to begin to pull back from our extraordinary programs, we have to begin to shrink our balance sheet, otherwise we will feel inflation in the months and years ahead," he said.

For the next few quarters inflation is not a problem but it may become so later unless the Fed orchestrates its exit carefully, according to Plosser.

"We have the tools to do that, the question is will we be able to discern the appropriate time and the timing of that to do it in a way that will head off any future inflation," he said. "And that may mean raising interest rates very rapidly, at least as aggressively as we cut interest rates, if the time is right."

Asked whether rate rises are likely in 2009, Plosser said "probably not." About the possibility of hikes next year, he said "we'll have to wait and see how the recovery evolves."

The US economy is in transition from a period of very sharp contraction to an expansion and it will be helped by improved growth overseas, which will boost exports, as well as by renewal of depleted inventories, which will boost factories' output, Plosser predicted.

"Gradually over the course of the next few months I expect the good news to become more dominant and I'm looking for some growth in the second part of this year," he added.

The commercial real estate sector, where lowering valuations can end up affecting the banks, and unemployment, which is a lagging indicator, are the biggest clouds overshadowing the recovery, according to Plosser.

Zorell will keep you up to speed as this evolves - call or e-mail us with any questions..

***ATTENTION FIRST TIME HOMEBUYERS***

Zorell Is Proud To Offer The C.A.R. Mortgage Protection Program

To help provide first-time home buyers with peace of mind when purchasing a home, the CALIFORNIA ASSOCIATION OF REALTORS® Housing Affordability Fund (C.A.R.H.A.F.) is offering a mortgage protection program to first-time home buyers.

Through the C.A.R. Housing Affordability Fund’s Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month, for six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months to help pay the mortgage.

To qualify for the Mortgage Protection Program, Applicants must:

1.       Be a first-time home buyer – someone who has not owned property in the last three years (includes co-buyer).

2.       Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009 (purchase agreement cannot be dated before April 2, 2009)

3.       Use a California REALTOR® in the transaction

4.       Purchase the property in California

5.       Be a W-2 employee (cannot be self-employed)

Click Here for C.A.R. Application

For additional Mortgage Protection Coverage – Click Here

On August 17, 2009, the US Securities and Exchange Commission (SEC) issued a release (the "New Proposal")¹ announcing that it had (i) re-opened the comment period on its prior release proposing alternative means for potentially regulating short sale price tests (the "Prior Proposal")² and (ii) proposed an additional price test for commenters' consideration (an "alternative uptick rule"). The comment period for both the New Proposal and the Prior Proposal will end 30 days after the New Proposal is published in the Federal Register.

Unlike the price tests of the Prior Proposal, which limited the ability of a short-seller to sell short based on the current bid or sale price in relation to previous bid or sale prices, the newly proposed alternative uptick rule would require that all short sales be made at an increment higher than the current national best bid for the security.³ In the New Proposal, the SEC acknowledged that this requirement would place a higher burden on short selling than the previously proposed alternatives but indicated that it might be simpler and less costly to implement. The SEC held open the possibility of implementing the alternative tick test either as a market-wide price test or as a circuit breaker; the SEC also noted that it might call for a "policies and procedures" approach or a flat prohibition.

The issuance of the New Proposal and the SEC's upcoming roundtable scheduled for September 30, 2009, suggest that short sale regulation will remain in flux in the United States for at least the near term. News and links provided by www.mayerbrown.com. 

Contact us with any short sale questions! 

-Zorell

Here are some quick stats on our state foreclosure and NOD activity.  Are we at bottom?  You make the call... 

While most first quarter 2009 foreclosure activity was still concentrated in affordable inland communities, there were signs that the foreclosure problem was intensifying in more expensive areas. The state's most affordable sub-markets, which represent 25 percent of the state's housing stock, accounted for more than 52.0 percent of all default activity in 2008. In first quarter 2009 it fell to 47.5 percent, and last quarter it dipped to 45.0 percent.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $12,911 on a median $345,000 mortgage.

On home equity loans and lines of credit, borrowers owed a median $4,152 on a median $65,700 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 124,555 default notices were filed last quarter, they involved 122,829 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.

Mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties -- the historical norm. The probability was highest in Merced, Riverside, and Madera counties.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 45,667 during the second quarter. That's up 4.7 percent from 43,620 for the prior quarter, and down 27.9 percent from 63,316 for second-quarter 2008. They reached a record 79,511 during last year's third quarter before dropping because of a new state law that slowed the entire foreclosure process and lenders' temporary policy changes (e.g. a temporary foreclosure moratorium).

In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The state's all-time low was 637 in the second quarter of 2005, MDA DataQuick reported.

There are 8.5 million houses and condos in the state.

Foreclosure resales declined slightly as a market factor, accounting for 50.1 percent of all California resale activity last quarter. It was 57.8 percent the prior quarter, a year ago it was 40.1 percent. Foreclosure resales varied significantly by area, from 6.3 percent in Marin County to 78.3 percent in Merced County.

Notices of Default (first step in foreclosure process)
houses and condos

* includes additional counties

A boon for new homebuyers, scheduled to last through next March, will be out of money long before that.

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

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

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

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

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

How it works

The credit is available on a first-come first-served basis and was supposed to last through March 2010. Almost any newly built home qualifies, as long as it's an owner-occupied, principal residence on which property tax is paid. It could be a single-family home, a condo, a coop, a manufactured home or mobile home -- even a houseboat. Only owner-built housing does not qualify. There is no cap on the home price or buyer's income.

The credit reduces taxes dollar-for-dollar up to $3,333 a year for three years, or 5% of the purchase price of a home, whatever is less. Unlike the federalfirst-time homebuyers tax credit, which is $8,000 or 10% of the home price, whichever is less, the California credit is not refundable. That means the credit will only wipe out taxes up to the full amount paid or owed but no more.

For example, if the buyer's tax bill came to $2,000 for the year, a buyer claiming the full $3,333 would owe nothing but couldn't claim the extra $1,333 back from the state.

First-time, new-home buyers in California can claim both the federal credit and the state if they qualify. That could reduce taxes by $11,333 for the first year of ownership.

Bottom line: Take advantage while it's still available!! 

Zorell Investments strongly supports the HVCC petition. 

Who is effected?  Everyone. 

Please watch this video for some brief education and the SIGN IT!!

Providing you with up-to-date information and unparrelled service -Zorellinc.com is your source for Real Estate finance.

May 29, 2009

Borrowers still need 3.5% of own funds

The U.S. Department of Housing and Urban Development has clarified how tax credits under recently passed legislation can be monetized in home purchase transactions.

HUD Secretary Shaun Donovan today told a group of directors for the National Association of Home Builders that the $8,000 first-time homebuyer tax credit created under H.R. 1, the American Recovery and Reinvestment Act of 2009, can be applied toward the purchase of properties securing loans insured by the Federal Housing Administration, a news release said.

Donovan originally announced the monetization of the tax credit earlier this month.

The recovery bill became law in February.

The tax credit is not available until the borrower files a U.S. income tax return. But with today's action, HUD will allow FHA borrowers to obtain secondary financing up front from state Housing Finance Agencies and certain non-profits.

"Today's action will help stabilize the nation's housing market by stimulating home sales across the country," the statement said.

However, the funds cannot be applied toward the 3.5 percent down payment required from the borrower. But the funds can be applied toward "their down payment in excess of 3.5 percent of appraised value or their closing costs." Funds used for discount points can help reduce interest rates.

In addition to the borrower's own cash investment, the 3.5 percent can be contributed by parents, employers and other governmental entities.

Donovan noted that today's actions differ from seller-funded downpayments -- which were "a vehicle for abuse."