May 8, 2008
The subprime mortgage crisis continues to claim casualties, and some of them aren’t even homeowners.
In California, scores of renters are being kicked out of their homes, even when they haven’t missed a single rent payment.
Shirley and William Hayes love the house they’ve been renting in a comfortable subdivision outside San Francisco. Even so, they’re moving.
"I have been packing. I have almost all of the linen done. We’re eating out of paper plates, plastic forks, spoons and knives," Shirley Hayes says.
A Notice Pinned to the Door
After being in the home for about a year and a half, the Hayeses found a notice pinned to their door telling them the bank had foreclosed and the property was up for sale. It was a shock because they had just renewed their rental agreement, and the landlord was still collecting rent even after they saw the foreclosure notice.
"He has never told us. That’s how we found out what’s going on," Shirley says.
She has a stack of documents that she says indicate that the landlord knew he was in default when he was taking their money. Ultimately, the bank turned them over to a property management company.
"And the management company gave us 30 days to get out. We would not get a refund on our deposit. We paid our rent," she says.
And that’s how the Hayeses became part of the growing number of California renters who have gotten caught up in the foreclosure crisis.
Few Protections, Harsh Tactics
"Once a foreclosure occurs, those renters are being evicted without virtually any notice, despite the fact that they have paid their monthly rental bills every month without any interruptions whatsoever," says Paul Leonard, who heads California’s Center for Responsible Lending.
There are no precise numbers of how many renters face eviction. But in California, some estimates suggest about 20 percent of foreclosed properties were used as rentals, and in many cases, tenants have few legal protections.
"What we’re seeing is some very harsh tactics," says John Russo, the city attorney in Oakland. He says bank and property managers sometimes threaten renters with lawsuits or damaged credit reports.
"Often what they do is offer what’s called ‘cash for keys,’ " Russo says. "So, there is a schtick: ‘We’re going to throw you out, and you can fight with us or we can give you $500.’ At least here in the Bay area, $500 for moving expenses is nothing. It’s not going to help any family."
Buying Time
Russo says many renters don’t realize Oakland and several other California cities have rent-control laws that can stop evictions, even foreclosures.
Whenever his office intervenes, Russo says, the bank’s agents usually back down and agree to allow tenants more time to move out.
That’s ultimately what happened to the Hayeses. With the help of a legal aid attorney, they negotiated another month before they will have to move. Shirley says she and her husband are both elderly and not in good health, and being forced to move is difficult.
"People all over the country are in the same position, I know that. But what do you do? You can’t afford to move, and you can’t afford to stay, you know," she says.
There is a bill in Congress that would give tenants 90 days’ notice when their rental has been foreclosed on. It’s been approved by the House and awaits action in the Senate.
Posted in Things of Interest, Real Estate 
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May 7, 2008
A swath of green is covering the real estate industry. Florida, Nevada and Michigan are the states experiencing the greatest problems with mortgage foreclosures, according to a study and report by the Mortgage Asset Research Institute, LLC, for the Mortgage Bankers Association.
"The current market conditions, compounded by mortgage fraud, are having a detrimental impact on our entire national economy," said David Kittle, chairman-elect of MBA. "This report provides critical insight for those in the real estate finance industry to better understand the factors contributing to these circumstances."
The most common type of mortgage-related fraud during the past year was false information on employment history and claimed income listed on applications, the report noted. Overall, last year marked the lowest volume of mortgage loan originations since 2002 and the highest number of delinquencies and foreclosures.
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May 6, 2008
Investors who like to buy homes and multi-unit structures for rentals are finding that college towns are among the most potential markets. While most property values are declining, those in college towns are generally rising, and there is always an ample supply of renters (students and others) in these areas.
It’s more than just a large population of students that makes these areas appealing to investors. Retirees and professionals are increasingly selecting a college town for their residence due it its special lifestyle and availability of cultural activities. One study of these markets found that 17 of 25 college towns outperformed their respective states in terms of home price appreciation last year. In Palo Alto, California, home to Stanford University, median home prices increased 15 percent last year compared with the previous year, while overall real estate prices in California dropped by nine percent. In Austin, Texas, home of the University of Texas, prices increased by six percent, while values in the rest of the state remained flat.
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May 4, 2008
Many homebuyers, particularly first-time buyers, are very happy to see home prices dropping in their local market. However, they now face tougher requirements in finding mortgage financing for their newly purchased residence. Mortgage interest rates have been generally rising, with occasional downward dips as was recently experienced. But they are still very low, compared with past years. That’s the good news. But most lenders are now requiring larger down payments and higher credit scores before accepting an application. They don’t want to be burned again with more foreclosures.
During the period from July, 2006, to June, 2007, about 45 percent of first-time homebuyers opted for 100 percent financing of their new home, according to a report from the National Association of Realtors. The median percentage that first-time buyers financed was 98 percent of the home’s price. Today’s borrowers have to verify their income and their financial assets to lenders in most cases. There are very few lenders who accept no-documentation or low-doc mortgage applications, it was noted by Frank Nothaft, chief economist for Freddie Mac, a major government-sponsored buyer of mortgages.
"The FICO credit score of 660 to 680 is now the minimum most lenders will consider to prove a borrower’s creditworthiness," Nothaft said. Some industry leaders now say that a five percent downpayment on a home purchase is normally the minimum amount required in today’s market. "First-time homebuyers in many markets will soon need even more money for a downpayment - maybe a minimum of 10 percent," said Guy Cecala, publisher of Inside Mortgage Finance. "And I think before too long we’re going to see the required downpayment up to 15 to 20 percent."
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May 3, 2008
Many multimillion dollar homes don’t seem to be affected by the highly publicized housing slump. Their prices remain firm or continue to rise, and there’s an ample supply of affluent buyers ready and will to buy - many opting for an all cash purchase transaction.
One reason for that strong market niche is that the nation’s rich people are getting richer and they want to show their elevated status in the home they live in. Also, an increasing number of super luxury homes are being acquired by very rich foreigners who want a residence in the U.S. and want to take advantage of the weak dollar and relatively bargain prices.
In today’s market, the ultra-high-end market means homes above $5 million. Lower priced luxury homes, ranging from $1 through $4 million, are often more difficult to sell and are more likely to reduce their price. This is because the credit crunch is making it more difficult for buyers of these properties to qualify for mortgage financing. That makes it tough on homeowners who want to trade up to a luxury home.
Marketing an ultra-luxury home has become a very sophisticated process. Owners will often require a comprehensive marketing plan from a brokerage firm before listing the property with them. Such a plan will include advertising in strategic media - local, national and international media. Creation of a brochure, sending out direct mail, and promoting the property on Websites are musts.
Producing open house events is usually included. These are "by invitation only" events, and only persons who have the financial capability to buy are invited, or perhaps those who maintain close communication with very affluent individuals. Individual inspection tours of the property are given to people who have been checked out financially in advance.
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May 2, 2008
Mortgage interest rates are down, while sales of existing homes are up - a welcome development for consumers and real estate professionals. The long awaited increase in sales is a big and important event, carried by all major news media. At this writing, the average rate for a 30-year, fixed-rate mortgage is 5.85 percent, down from 6.13 percent just a week ago. Last year at this time, the average interest rate was 6.16 percent. Borrowers pay an average of 0.4 points (percentage of loan).
"Mortgage rates fell as various actions were taken to improve market liquidity," said Frank Nothaft, chief economist for Freddie Mac, a major government-sponsored buyer of existing mortgages. "Also, the inflation report from the Consumer Price Index reflected weaker price increases than expected. It reported no change in February, including food and energy costs. That’s the first time the CPI did not report a monthly increase since November, 2006."
The lowering of rates sparked a sharp increase in the number of mortgage applications for home purchase transactions and refinances, according to a report from the Mortgage Bankers Association. "The Federal Reserve acted to bring stability to the mortgage-backed securities market and we saw an immediate impact with a drop in mortgage rates," said Jay Brinkmann, MBA’s VP of research.
Existing home sales, including single-family homes, townhomes and condominiums, rose 2.9 percent to a seasonally adjusted annual rate of 5.03 million units in February. That’s up from 4.89 million units in January. "We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing," said Lawrence Yun, chief economist for the National Association of Realtors. "Buyers are taking advantage of higher loan limits for both FHA and conventional mortgage, thus unleashing some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year."
About half of the nation’s metro areas are now showing home price increases, with healthy gains in some markets, he added. "In some areas, a recent rapid price decline has induced buyers to come into the market, and sales are now rising. The relationship between home prices, interest rates and income has improved to the point where buyers are more serious about making offers." Sales of existing single-family homes increased 2.8 percent in February, while sales of existing condominiums rose by 3.7 percent.
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May 1, 2008
A few years ago, an Islamic home buyer would have found it almost impossible to get a mortgage compliant with Islam’s sharia law, which prevents the faithful from paying interest.
Today, sharia-compliant loans are a growing market. In a report last month, credit-rating agency Moody’s Investors Service said the global Islamic finance market has increased about 15 percent in each of the past three years and is now worth about $700 billion worldwide.
All the largest lenders, including Citigroup, HSBC, and Deutsche Bank, have affiliates devoted to Islamic finance.
An Islamic mortgage looks like a lease-to-own deal. The bank, not the borrower, buys the house. The borrower makes installment payments to the bank for a period of years, at the end of which he or she gets the title to the house.
Source: USA Today
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Loving the San Diego Coast!
