SAN DIEGO REAL ESTATE AGENT BLOG » san diego short sales

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

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

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

Government Announces Short Sales Guidelines

Michael Carter - San Diego Real Estate Agent — Thu, 03 Dec 2009 02:47:23 +0000

The U.S. Treasury Department announced new guidelines this week designed to make short sales go more smoothly.

To qualify under these new guidelines:

The property must be the home owner’s principal residence.
The home owner must be delinquent on the mortgage or close to defaulting.
The loan must have been made before Jan. 1, 2009, and be for less than $729,750.
The borrowers’ total monthly mortgage payment must exceed 31 percent of their before-tax income.

Under the plan, borrowers will receive $1,500 from the government for selling homes for less than the amount of their mortgages. Mortgage-servicing companies will get $1,000 for each completed short sale. Second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgage can collect up to $1,000 from the government for allowing the payments.

Borrowers who complete a short sale under the program must be “fully released” from future liability for the debt, according to the guidelines.

Source: Associated Press, J.W. Elphinstone (11/01/2009) and The Wall Street Journal, Ruth Simon (11/01/2009)

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

Don’t be among victims of foreclosure-prevention scams

Michael Carter - San Diego Real Estate Agent — Wed, 09 Sep 2009 02:38:41 +0000

WASHINGTON – How’s this for a business plan to make money during the housing bust? You buy or rent lists of recent default filings from across the country – thousands of people who have been notified by lenders that if they don’t get their mortgage payments back on track, the next step will be foreclosure.

You send each homeowner a personalized letter with this urgent message: We know you’re having a tough time right now, but WE CAN SAVE YOUR HOME! It’s not too late! We know how to get through to your lender and work things out to save your house. Call this toll-free number immediately!

The letters generate hundreds of callbacks. Many panicked owners agree to pay a fee of $1,200 to $1,300 for the foreclosure prevention services in advance.

You can guess what happens next: Little or nothing in the way of help in most cases. The homeowners lose their houses to foreclosure, and the rescue company keeps sending out letters and pocketing fees.

Late last month, the Federal Trade Commission settled with a Florida-based company – United Home Savers – that allegedly operated like this, and victimized more than 3,100 homeowners nationwide.

The company and its officers denied any legal wrongdoing as part of the settlement, but have shut down the firm and agreed to a $4.1 million judgment and close monitoring by federal officials of their future business activities. However, most of the judgment was suspended because United Home Savers and its principals had only about $22,000 in their bank accounts when the FTC froze their assets under court order.

United could not be reached for comment.

The 3,100 victims, in other words, probably won’t see a dime in restitution.

“What really hurts,” says Harold Kirtz, the FTC lawyer who led the government’s case against United Home Savers, “is that a lot of these people not only lost money upfront, but they also fell further behind on their mortgages” during the weeks and months while they waited for United’s staff counselors to work things out with their lenders.

That, in turn, made foreclosure for the homeowners even more likely.

But United is just one of literally hundreds of alleged foreclosure rescue operations that have prospered in the toxic wasteland of the mortgage market bust. Reilly Dolan is familiar with many of them. He is the FTC’s assistant director for financial practices and the coordinator of “Operation Loan Lies,” a joint federal-state effort that has targeted 189 companies allegedly running mortgage-modification or foreclosure-prevention scams. The FTC alone has brought or settled 19 cases against firms of this type in the past 12 months, Dolan said in an interview. “And more are coming.”

“This is now one of the top priorities” at the FTC, according to Dolan, because the sheer breadth of mortgage foreclosure problems “has caused a lot of scams to come out of the woodwork.”

Kirtz, who is based at the FTC’s Atlanta office, said even well-educated, financially knowledgeable consumers can fall prey to loan-modification and foreclosure-prevention rip-offs because “they are in a very vulnerable state,” threatened with the loss of the roof over their heads. As a result, they don’t ask the questions they should, and they don’t look for the clear warning indicators of potential fraud. What telltale signs should tip off financially distressed homeowners?

No. 1: If the company claims to be able to guarantee success in preventing foreclosure, no matter what your financial situation or mortgage details, don’t listen further to the marketing pitch. Nobody can guarantee you’ll get a loan modification, and nobody can guarantee that your lender won’t pull the plug and foreclose.

No. 2: Although there is no federal law against collection of upfront fees for loan-modification assistance – unlike so-called “credit repair” operations, where fees are prohibited until services are completed – any company asking for $1,000 to $4,000 in advance should be checked out thoroughly by the homeowner before sending in any money.

“We can’t say all advance fees are illegal,” Kirtz said. But when the fees are for things like “processing” and “administration” costs, “in most case they’re probably bogus.”

Finally, mortgage-modification companies that claim to have special inside connections allowing them to make your payments directly to your lender – provided you send your monthly checks to the modification company, not to your regular servicer – is almost certainly intent on just one thing: Cashing as many of your checks as possible, pocketing the money, and leaving you unprotected on the conveyor belt heading for foreclosure.

By Kenneth Harney

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

Pending Home Sales on a Roll

Michael Carter - San Diego Real Estate Agent — Thu, 03 Sep 2009 16:46:26 +0000

Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors®.

The Pending Home Sales Index,¹ a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June, and is 12.0 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007 when it was 100.7.

Lawrence Yun, NAR chief economist, said the housing market momentum has clearly turned for the better. ”The recovery is broad-based across many parts of the country. Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit,” he said.

by Walter Molony

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

New Home Sales Surge 9.6% in July

Michael Carter - San Diego Real Estate Agent — Thu, 27 Aug 2009 02:19:38 +0000

New U.S. home sales surged 9.6 percent in July, rising for the fourth straight month
and beating expectations as the housing market shows continuing signs of rebounding from its historic downturn.

The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised
June rate of 395,000. Sales are now up 32 percent from the bottom in January, but off 69 percent from the frenzied peak four years ago.

Last month’s sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who
expected a pace of 390,000 units. The last time sales rose so dramatically was in February 2005.

The median sales price of $210,100, however, was still down 11.5 percent from $237,300 compared to the same time a year ago.
There were 271,000 new homes for sale at the end of July, down more than 3 percent from May. At the current sales
pace, that represents 7.5 months of supply, the lowest since April 2007. The decline means builders have scaled back on construction to the point where supply and demand are coming into balance.

Source: Associated Press, Alan Zibel (08/26/09)

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

REAL ESTATE STABILIZATION

Michael Carter - San Diego Real Estate Agent — Thu, 14 May 2009 00:17:51 +0000

Price Stabilization Is First Step to Recovery

Home prices must stabilize before the broader economy can turn around, a panel of housing and economic experts said yesterday at a real estate summit hosted by the NATIONAL ASSOCIATION OF REALTORS® as part of its Midyear Legislative Meetings in Washington, D.C., this week.

Although there are encouraging signs in the housing market-including a pick-up of home sales in previously hard-hit markets, record affordability, and continuing low interest rates-prices have not yet hit bottom.

That’s keeping many households on the fence and making it hard for those who do jump in to get financing in the conventional market. What’s more, it’s making it harder for troubled homeowners to refinance, leading to more distressed sales, and thus further erosion in prices.

Tax Credit Bridge Loans on the Way

To put a floor under the market, the federal government must continue to intervene, panelists said, and expanding the first-time homebuyer tax credit is a good place to start. The credit should be expanded to all households, including those with higher incomes, increased significantly in value, perhaps to $15,000 to $16,000 instead of the current $8,000.

“Then it would start move real estate,” said Robert Sibcy, president of Sibcy Cline, REALTORS®, based in Ohio.

In a positive move, the U.S. Department of Housing and Urban Development is set to roll out guidelines permitting HUD-approved lenders, public housing finance agencies, and some nonprofit organizations to make bridge loans to home buyers. The loans would be collateralized by the $8,000 tax credit, giving buyers the upfront funds for a down payment.

The inability to use the credit for the down payment has been a major stumbling block for the tax credit. NAR has been calling for HUD to use its authority to allow the bridge loans.

During the summit, HUD Secretary Shaun Donovan announced that HUD has decided to allow bridge loans, sparking a loud cheer of appreciation from more than 1,000 REALTORS® attending the session.

“We want FHA consumers to access the credit to use as a down payment,” Donovan said. “I want to thank NAR for its partnership with FHA.” More details on the guidelines will be released in a few days, he said.

Donovan said the credit is expected to stimulate 100,000 first-time homebuyer purchases and 60,000 move-up purchases this year before it expires Dec. 1.

Further Government Actions Could Help

The credit alone isn’t enough to spur sales, many panelists said. Barry Bluestone, a professor of political economy at Northwestern University, called for the federal government to step in for a defined period of time, such as 18 months, to insure buyers’ home equity.

Providing protection against price drops would remove buyers’ reluctance to get into the market now, and since the program would be of limited duration, it could lead to a critical mass of households buying in the short-term and thereby shore up prices. Bluestone said he envisions the federal government insuring up to 85 percent of an owner’s home equity.

“This could stabilize prices over the next 18 months and cost the government practically nothing,” he said. “A small, temporary program can have a huge impact. It’s an idea whose time has come.”

Foreclosure Actions

The other way to stabilize prices is to finally get a handle on foreclosures, which exert heavy downward pressure on prices. Donovan said the administration is making gains in this effort with the voluntary cooperation of 14 of the country’s largest mortgage servicers, representing 75 percent of the market.

But several panelists said the voluntary effort hasn’t proven to be effective yet, and that a new wave of foreclosures is expected this summer.

“If modifications don’t work, we need to stop waiting for voluntary compliance,” said John Taylor, CEO of the National Community Reinvestment Coalition. “The government should buy [the loans] at fair market value, take them out of the market, modify them, and end the foreclosure crisis.”

The big worry about federal intervention among several panelists is the apparent lack of an exit strategy. It tends to be far easier for the government to get involved in the market, through interventions like the giant federal bank rescue plan, than it is to get back out.

“Right now the Federal Reserve is the mortgage-backed securities market,” said Jay Brinkmann, chief economist for the Mortgage Bankers Association. “I don’t know the exit strategy and how long this can continue. It’s scaring off other investors. If the Fed stops buying, [what happens?] How do we get out of it?”

Don’t Skimp on Mortgage Modifications

Martin Feldstein, the noted deficit hawk who chaired the Council of Economic Advisors for President Ronald Reagan, said mortgage modifications are one area where the administration shouldn’t skimp, even at the cost of growing the federal deficit, so he was disappointed that the administration is balking at the cost of that.

Referring to comments made by HUD Secretary Donovan, he said, “I’m disappointed the HUD secretary said it’s too expensive for the government to deal with negative equity mortgages…. We still have not dealt with the overhang of underwater mortgages.”

Even without further federal intervention the housing market will turn around, the panelists agreed.

The unknowns are how long recovery will take, how much damage will be done to the economy, and how strong the recovery will be.

The Shape of Things to Come

When the recovery does take hold, the housing market will be very different from what it was before, panelists said. The boom years of 2002-2007 were fueled not by income growth but by debt. After what’s been learned from that debacle, any future growth will have to be based on income growth, said Sarah Rosen Wartell, executive vice president of the Center for American Progress. Such growth will likely be far more moderate, but also more sustainable.

Wartell said the Obama administration was right to focus both on short-term stimulus and investment in clean energy, education, and healthcare reform, because those are the kinds of investments that can lead to the long-term income growth.

-Robert Freedman, REALTOR® Magazine

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

San Diego Short Sales Dying

David Marasco - San Diego Real Estate Agent — Wed, 18 Feb 2009 00:09:30 +0000

Having been in the business for nearly 4 years now we have been akin to the trends of the short sale market in San Diego. San Diego Short sales have dominated in markets such as Chula Vista, La Mesa, Spring Valley, and all over Rancho San Diego for the past few years but it wasn’t up until recently where we have seen the number of short sales decline. Perhaps this is due to the Stimulus package president Obama set up to help or perhaps we are finally reaching the absorption phase of the real estate life cycle in San Diego. Whatever it is, there is no denying that short sales in San Diego in general are seeing a steady decline in its numbers.

Dynamics of a San Diego Short Sale
I have closed short sale deals in Florida, California, Nevada, Georgia, and North Carolina and have had to deal with a variety of different law structures but there is one constant. Short sales can be a huge undertaking especially if they are not handled with care. San Diego Short sales face an even greater hurdle because the prices of houses are generally more expensive here than they are in most parts of the country.

In either case, San Diego short sales pose a different but obtainable challenge because for the most part the idea remains the same. To convince the lender to sell below the principal balance on the borrower’s loan at a reasonable market value price. This dynamic poses a large challenge in some parts of San Diego mainly due to the fact that in some areas in San Diego like Chula Vista, prices have dropped much more dramatically than say Point Loma. Coupled with the time some lenders can take to process just the paperwork that upon completion the house has already declined in value and the original buyer has either found something bigger at a cheaper price or the appraisal cannot meet the value of the offer.

San Diego Real Estate Market For Short Sales
There is no denying that a house that winds up on the San Diego (Dowtown San Diego or El Cajon) courthouse steps (foreclosure) will cost the lender thousands of more dollars than if they had sold it below market value as a short sale. Sometimes the amount of money saved could be in the hundreds of thousands depending on location of size of the house. For this reason alone, more and more lenders as well as government officials have come up with different ways to help the borrower stay in their homes. Whether it be a reduction in interest rate or modification of a loan lenders are working tirelessly to avoid foreclosures.

Until these plans go into affect for San Diego Homeowners Lenders will to continue to lose millions of dollars from foreclosures. However, we are already seeing that Short sales in San Diego have slowly but surely started to decline which is a good sign but there remains a lot of work left to do.