SAN DIEGO REAL ESTATE AGENT BLOG

Key Features of the New Housing Rescue Plan

Michael Carter - San Diego Real Estate Agent — Mon, 29 Mar 2010 18:06:10 +0000

The government’s newest housing rescue effort, which was announced Friday, includes these key tenets:

· As much as $14 billion of the Troubled Asset Relief Program (TARP) will be made available to pay for writing down second liens for loans whose borrowers refinance through the Federal Housing Administration.

· Lenders that facilitate refinances through the FHA will be required to write down the principal of the first mortgage by at least 10 percent so the home owner has a loan-to-value ratio no higher than 97.75 percent.

· Lenders of second liens will be offered incentives of 10 cents to 21 cents per dollar of principal they write down in connection with an FHA refinance.

· Borrowers who lose their jobs can apply to have their mortgage payments reduced for three to six months while they search for a new job.

· Borrowers with a payment still greater than 31 percent of income after they find a job will be considered for a permanent loan modification.

· To encourage more short sales and “deed in lieu” of foreclosure transactions in which the lender settles the loan for less than is owed, the government will double assistance to borrowers to $3,000 and increase incentives to subordinate lien holders and investors to $6,000.

Source: Reuters News (03/26/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Bank of America to Reduce Mortgage Balances

Michael Carter - San Diego Real Estate Agent — Thu, 25 Mar 2010 01:46:53 +0000

Bank of America said on Wednesday that it would begin forgiving some mortgage debt in an effort to keep distressed borrowers from losing their homes.

The program, while limited in scope and available by invitation only, signals a significant shift in efforts to deal with the millions of homeowners who are facing foreclosure. It comes as banks are being urged by the White House, members of Congress and community groups to do more to stem the tide.

The Obama administration is also studying whether to provide more help to people who owe more on their mortgages than their homes are worth.

Bank of America’s program may increase the pressure on other big banks to offer more help for delinquent borrowers, while potentially angering homeowners who have kept up their payments and are not getting such aid.

As the housing market shows signs of possibly entering another downturn, worries about foreclosure are growing. With the volume of sales falling, prices are sliding again. When the gap increases between the size of a mortgage and the value that the home could fetch in a sale, owners tend to give up.

Cutting the size of the debt over a period of years, however, might encourage people to stick around. That could save homes from foreclosure and stabilize neighborhoods.

“Banks are willing to take some losses now to avoid much greater losses later if the housing market continues to spiral, and that’s a sea change from where they were a year ago,” said Howard Glaser, a housing consultant in Washington and former government regulator.

The threat of a stick may be helping banks to realize that principal write-downs are in their ultimate self-interest. The Bank of America program was announced simultaneously with the news that the lender had reached a settlement with the state of Massachusetts over claims of predatory lending.

The program is aimed at borrowers who received subprime or other high-risk loans from Countrywide Financial, the biggest and one of the most aggressive lenders during the housing boom. Bank of America bought Countrywide in 2008.

Bank of America officials said the maximum reduction would be 30 percent of the value of the loan. They said the program would work this way: A borrower might owe, say, $250,000 on a house whose value has fallen to $200,000. Fifty thousand dollars of that balance would be moved into a special interest-free account.

As long as the owner continued to make payments on the $200,000, $10,000 in the special account would be forgiven each year until either the balance was zero or the housing market had recovered and the borrower once again had positive equity.

“Modifications are better than foreclosure,” Jack Schakett, a Bank of America executive, said in a media briefing. “The time has come to test this kind of program.”

That was the original notion behind the government’s own modification program, which was intended to help millions of borrowers. It has actually resulted in permanently modified loans for fewer than 200,000 homeowners.

The government program, which emphasizes reductions in interest rates but not in principal owed, was strongly criticized on Wednesday by the inspector general of the Troubled Asset Relief Program for overpromising and underdelivering.

“The program will not be a long-term success if large amounts of borrowers simply redefault and end up facing foreclosure anyway,” the inspector general, Neil M. Barofsky, wrote in his report. One possible reason is that even if they get mortgage help, many borrowers are still loaded down by other kinds of debt like credit cards.

Bank of America said its new program would initially help about 45,000 Countrywide borrowers — a fraction of the 1.2 million Bank of America homeowners who are in default. The total amount of principal reduced, it estimated, would be $3 billion.

The bank said it would reach out to delinquent borrowers whose mortgage balance was at least 20 percent greater than the value of the house. These people would then have to demonstrate a hardship like a loss of income.

These requirements will, the bank hopes, restrain any notion that it is offering easy bailouts to those who might otherwise be able to pay. “The customers who will get this offer really can’t afford their mortgage,” Mr. Schakett said.

Early reaction to the program was mixed.

“It is certainly a step in the right direction,” said Alan M. White, an assistant professor at Valparaiso University School of Law who has studied the government’s modification program.

But Steve Walsh, a mortgage broker in Scottsdale, Ariz., who said he had just abandoned his house and several rental properties, called the program “another Band-Aid. It probably would not have prevented me from walking away.”

Even before Bank of America’s announcement, reducing loan balances was growing in favor as a strategy to deal with the housing mess. The percentage of modifications that included some type of principal reduction more than quadrupled in the first nine months of last year, to 13.2 percent from 3.1 percent, according to regulators.

Few of these mortgages were owned by the government or private investors, however. Banks tended to cut principal only on mortgages they owned directly. Wells Fargo, for instance, said it had cut $2.6 billion off the amount owed on 50,000 severely troubled loans it acquired when it bought Wachovia.

Bank of America said it would be offering principal reduction for several types of exotic loans. Some of the eligible loans are held in the bank’s portfolio, but the program will also apply to some loans owned by investors for which Bank of America is merely the manager.

The bank developed the program partly because of “pressure from everyone,” Mr. Schakett said. Even the investors who owned the loans were saying “maybe we should be doing more,” he said.

Substantial pressure came from Massachusetts, which won a significant suit last year against Fremont Investment and Loan, a subprime lender. The Supreme Judicial Court ruled that some of Fremont’s loans were “presumptively unfair.” That gave the state a legal precedent to pursue Countrywide.

“We were prepared to bring suit against Bank of America if we had not been able to reach this remedy today, which we have been looking for for a long time,” said the Massachusetts attorney general, Martha Coakley.

Bank of America agreed to a settlement on Wednesday with Ms. Coakley that included a $4.1 million payment to the state.

Reducing principal is widely endorsed, in theory, as a cure for foreclosures. The trouble is, no one wants to absorb the costs.

When the administration announced a housing assistance program in the five hardest-hit states last month, officials explicitly opened the door to principal forgiveness. Despite reservations expressed by the Treasury, the White House and Housing and Urban Development officials have continued to study debt forgiveness in areas with lots of so-called underwater homes, according to two people with knowledge of the matter.

On a national scale, such a program risks a political firestorm if the banks are unable to finance all the losses themselves. Regulators like the comptroller of the currency and the Federal Reserve have been focused on maintaining the banks’ capital levels, which could be hurt by large-scale debt forgiveness.

“You have to be very careful not to design a program that would change people’s fundamental behavior across the country in a destabilizing way or would be widely perceived as unfair to people who are continuing to pay,” Michael S. Barr, an assistant secretary of the Treasury, said early this year.

Policy makers have been hoping the housing market would improve before any significant principal reduction program was needed. But with the market faltering again, those wishes seem to have been in vain.

Bank of America’s announcement came within hours of a fresh report that underscored the renewed weakness. Sales and prices are dropping, leaving even more homeowners underwater.

Sales of new homes fell in February to their lowest point since the figures were first collected in 1963, the Commerce Department said. Sales are about a quarter of what they were in 2003, before the housing boom began in earnest.

“It’s shocking,” said Brad Hunter, an analyst with the market researcher Metrostudy. “No one would ever have imagined it would go this low.”

By DAVID STREITFELD and LOUISE STORY

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Existing-home sales fall for third straight month

Michael Carter - San Diego Real Estate Agent — Tue, 23 Mar 2010 15:04:04 +0000

Sales of existing homes have thus fallen three consecutive months, a reversal after having risen steadily through the fall in response to a federal subsidy for first-time home buyers. The tax credit has been restored and expanded to repeat buyers, but there has been no increase in sales yet.

Sales are up 7% compared with a year ago, the NAR’s data showed.

Economists surveyed by MarketWatch had been expecting a larger decline in February, to about 4.93 million on an annualized basis. See our complete economic calendar and consensus forecast.

“We need to have a second surge,” said Lawrence Yun, chief economist for the real estate lobbying group. However, the jury’s still out, he said.

“Has everything in the gas tank been used up?” Yun asked. “Or is this just a pause before the next step up?”

A double-dip recession is a “possibility” if a second surge of buying doesn’t occur, he said.

The original tax break was set to expire on Nov. 30, a deadline that likely pulled forward many sales that would have taken place this year. Just before it expired, Congress extended and expanded the subsidy.

To qualify, sales must be signed by April 30, and the sale must be closed by June 30. Sales of existing homes are reported when the sale closes, not when a contract’s signed.

Inventories of sales on the market jumped during February, rising 312,000 to 3.59 million, the highest since September. Yun said the January-to-February increase in inventory was much larger than usual in February.

Inventories thus represented an 8.2-month supply at the current sales pace, the most since August. See the complete release on the NAR’s Web site.

The median sales price was $165,100, down 1.8% compared with a year earlier.

Sales were up in two of four regions. Sales rose at a seasonally adjusted annual pace of 2.8% in the Midwest and 2.4% in the Northeast, while sales dropped by 4.7% in the West and by 1.1% in the South.

Sales of single-family homes decreased 1.4% to a seasonally adjusted annual rate of 4.37 million, the lowest since June. Sales of condos rose 4.8%, reaching a seasonally adjusted annual rate of 650,000.

Rex Nutting is Washington bureau chief of MarketWatch.

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

San Diego County housing prices rebound in February

Michael Carter - San Diego Real Estate Agent — Tue, 16 Mar 2010 00:08:28 +0000

San Diego County housing prices bounced back in February to reach a median $322,000 that was in the range of prices for much of last year, MDA DataQuick reported Monday.

The median, the midpoint of all prices, was up 5.6 percent from January’s $305,000 and up 13 percent from February 2009. The January median price had fallen 7.5 percent from December’s $330,000, reflecting an active market in low-cost homes and little activity in moveup properties.

February’s numbers represented the highest year-over-year increase since March 2005, a few months before the median peaked at $517,500 and then fell to a low of $280,000 in January 2009.

But housing experts caution that January and February do not usually set the pace for sales and price trends for the year because of their traditionally low volume of activity.

Single-family resale homes had a median price of $358,500, up 3.9 percent from January’s $345,000 and just about the same as the December median; the figure was 12 percent ahead of year-ago levels. Condo resales stood at $219,500, up 8.9 percent from January’s $201,500 and nearly equal to the median price in December; it was 12.6 percent ahead of February 2009’s $195,000. The new-home median, including condo conversions, was $460,000, up 13.3 percent from January’s $406,000 and the highest since last May; it was 1.8 percent higher than in February 2009.

Sales in February stood at 2,465, up 6.2 percent from January but 8 sales lower than in February 2009. Single-family resales were below year-ago levels, down 4.2 percent, a reflection of the low inventory of homes for sale, especially low-cost distressed properties, as lenders try to modify loans rather than initiate foreclosure proceedings. Many analysts expect foreclosures to increase this year and thus lead to more sales but perhaps lower prices overall.

By Roger Showley

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Program Will Pay Homeowners to Sell at a Loss

Michael Carter - San Diego Real Estate Agent — Tue, 09 Mar 2010 15:56:09 +0000

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Hefty tax bill may hit those who lost home

Michael Carter - San Diego Real Estate Agent — Thu, 04 Mar 2010 04:02:54 +0000

San Diegans who have lost their homes through foreclosure or short-sales thought they had emerged from the dark times and could start rebuilding their lives.

Then the state tax man came calling.

With less than six weeks before taxes are due, an estimated 16,000 former homeowners statewide will owe $15 million in extra income taxes this year and $29 million through 2012.

The tax applies to what is called the “cancellation of debt” that occurs when property owners lose their homes through foreclosure or arrange a short-sale in which they sell for less than the mortgage balance. The lender sends them a form itemizing the forgiven debt, and the amount is subject to income tax.

Congress exempted most homeowners from the extra federal tax through 2012, and the state followed suit for 2007 and 2008 but did not extend the provision last year. The state Assembly may vote tomorrow on a bill to repeal the tax, but Gov. Arnold Schwarzenegger vetoed such a bill last year over unrelated provisions.

“They’re probably stuck,” San Diego tax attorney Bob Kevane said of former homeowners facing the tax. “The biggest way around it is if you’re insolvent.”

Brad Nemeth, another tax attorney, said he doubts the tax will be eliminated.

“The state of California is seriously upside down financially, and I think the governor will probably veto it again,” Nemeth said.

H.D. Palmer, a spokesman for the Department of Finance, said Schwarzenegger remains opposed to the bill in its present form but has not announced whether he will veto it again. Other versions of the tax repeal are in the hopper and could be passed next month, legislators’ analysts said.

Failure to halt the tax could cost Jack and Phyllis Roth of Fletcher Hills as much as $20,000 in state income taxes this year — they paid $781 last year — because of the home they sold short in Flinn Springs in November. They bought it in 2004 for $545,000, invested $50,000 in improvements, and then saw its value fall by one-third before they sold it for $410,000. The result was about $190,000 in net loss that was forgiven by the Roths’ lender.

Phyllis Roth, 63, a tax preparer, said she did not realize until recently that the state would treat the short-sale differently than the Internal Revenue Service would. She estimates her state taxes at $15,000 to $20,000.

“I didn’t call anybody,” she said. “I was looking online and didn’t see anything. That’s what happens when you rely on yourself.”

The state Franchise Tax Board has received an increasing number of calls from former homeowners who are discovering the giant tax bills they face, said spokeswoman Denise Azimi. Azimi said the former homeowners can work out a payment schedule, though the state charges 4 percent interest on such stretched-out payments.

If the tax is repealed eventually, the taxpayers could seek a refund, but for now, they have to pay what is due by April 15 or face a penalty.

Not all foreclosures and short-sales are subject to the tax, experts said.

In California, most home buyers get mortgages involving a “nonrecourse” loan — meaning that if the property is foreclosed, the lender has no recourse for recovering lost money except by selling the property itself. Lenders cannot go after the owners’ assets to make up the difference, and no tax is due. These rules apply to principal residences only.

However, when owners refinance or take out a second mortgage or home equity line of credit — as happened often during the housing boom — those loans are written as recourse loans and lenders can seek repayment from the owners’ other resources. Sometimes lenders agree to waive the lost amount, but under current state law, that amount is taxable for homes sold since Jan. 1, 2009.

“It’s one of those little land mines waiting to jump up on people,” Nemeth said.

Taxes also are not due if owners declare insolvency or bankruptcy, the lawyers said. For young homeowners whose main asset was their home, it’s likely they could fall under this provision. For others, the valuation of assets becomes a factor in determining solvency.

“Sometimes if they have other real estate, we try and value the stuff realistically, so that they have as little impact as possible,” Kevane said.

For the Roths, who continue to own a previous home and have other assets, their nearly $200,000 in losses does not cancel out their other holdings. The couple said they normally operate conservatively and only bought the home, which they lived in while their son continued to live in their first house, so they could sell it at a profit and pad their retirement accounts.

“If we have to pay it, we’ll pay it,” Phyllis Roth said of the taxes. “It’s less money to retire on, but it’s not the end of the world.”

Back in Sacramento, the proposal to waive the cancellation of debt tax has passed the Senate and awaits an Assembly vote. Its fate is wrapped up in a larger bill, SB8X-32, by Sen. Lois Wolk, D-Davis, which would bring other state tax provisions into compliance with federal law.

One of those, which prompted Schwarzenegger’s veto last year, relates to “erroneous reporting” of tax liability, by which some large taxpayers seek to avoid penalties for under-reporting of income by overestimating taxes due. Federal law charges a penalty for overestimating without a reasonable explanation, and the state bill would adopt similar penalties.

Wolk, who chairs the Senate Revenue and Taxation Committee, said it was appropriate to group all tax conformance measures into one bill. But if her bill is vetoed again, she indicated she would act to get the cancellation of debt tax repealed.

“We’re certainly not going to allow homeowners to have to pay significantly more tax when they’ve had to relinquish their homes through short-sales (and foreclosures),” Wolk said.

By Roger Showley

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Could the Tax Credit Be Extended Again?

Michael Carter - San Diego Real Estate Agent — Mon, 22 Feb 2010 21:52:06 +0000

The pressure is increasing on Congress to renew the homebuyer tax credits for a third time.

The first $7,500 tax credit was passed in 2008 and required first-time buyers to repay the credit over 15 years. A few months later in 2009, Congress expanded the credit to a maximum of $8,000 that didn’t have to be paid back.

At the end of last year, Congress extended the benefit again until April 30 with an extra two months on top of that to close. A new credit of $6,500 was added for move-up buyers, too.

Now representatives of the housing industry are lobbying for another extension. Some experts, including Mark Zandi, chief economist at Moody’s Economy.com, who supported the earlier credits, think the time has come to let it go.

“It’s worn out its benefit,” he says. “If you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.”

Source: The Wall Street Journal, Nick Timiraos (02/22/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Affordability of housing dips in county

Michael Carter - San Diego Real Estate Agent — Thu, 18 Feb 2010 18:26:56 +0000

San Diego County’s housing affordability has again dipped below the 50 percent level, the National Association of Home Builders said yesterday.

The 48.1 score in the Housing Opportunity Index represents the percentage of homes sold in the fourth quarter that a median-income household could afford using standard underwriting guidelines.

The new level positions San Diego as the 13th-most unaffordable market among 227 areas surveyed.

San Diego’s affordability peaked at a record 58.8 percent in the first quarter of last year. The region ranked 31st among least-affordable areas in the third quarter of 2008, its best showing in the 19 years of the survey.

The latest figures were based on a fourth-quarter median price of $319,000 for a single-family resale home, a 30-year, fixed-rate mortgage interest rate of 5.1 percent and a down payment of 10 percent. The median household income in the quarter was $74,900, and the survey assumes that a household will spend no more than 28 percent of income on housing.

Nationally, the index stood at 70.8 percent. Eleven of the 20 least-affordable markets were in California. New York ranked first at 19.7 percent and San Francisco was second at 22.3 percent.

By Roger Showley, UNION-TRIBUNE STAFF WRITER

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Property Values Fall Again

Michael Carter - San Diego Real Estate Agent — Thu, 11 Feb 2010 02:35:27 +0000

U.S. home values declined another 5 percent in the fourth quarter, compared to the previous year. This was the 12th straight quarter of year-over-year declines, reported Zillow.com.

More than 29 percent of homes sold in 2009 in the U.S. went for less than sellers originally paid for them, Zillow said, estimating that more than 20 percent of U.S. home owners owe more on their mortgages than their properties are worth.

“While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year,” Zillow Chief Economist Stan Humphries said in a statement. “Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time.”

Source: Bloomberg, Daniel Taub (02/10/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Will Rewarding Borrowers Prevent Defaults?

Michael Carter - San Diego Real Estate Agent — Wed, 10 Feb 2010 15:41:06 +0000

Will paying underwater borrowers to keep meeting their mortgage obligations prevent them from walking away?

Loan Value Group LLC says it is working with a major mortgage lender to test this theory.

Here’s the plan. The mortgage investor offers a cash reward to borrowers to keep paying. The amount varies by borrower based on income, negative equity, geography, and other risk factors. The more likely a borrower will default, the bigger the carrot.

The borrower can’t collect the payment until the mortgage is paid, although the rewards can be used to help pay off the mortgage if the property is sold.

The plan keeps lenders from having to mark properties to market and take big losses. Frank Pallotta, a founder of Loan Value Group and former executive at Morgan Stanley and Credit Suisse, says the program will pay for itself if only a few borrowers stay put and keep paying.

Source: The Wall Street Journal, Nick Timiaros (02/08/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774