Garrick Werdmuller's Real Estate Buzzz Blog

SECURITIES FINANCING - A PERFECT ALTERNATIVE TO TRADITIONAL FINANCING!!

A Securities Loan allows investors to borrow against their securities portfolio to create liquidity while staying in the market and enjoy the benefits of dual appreciable assets at once.

•         Can borrow up to 80% or more of the value of your security

•         No HUD Guidelines

•         No geographical boundaries

•         No maximum loan amount

•         Interest Rate can be as low as 4.7%

•         Non-Recourse – no credit bureau reporting

•         Response typically within 48 hours of receipt of quarterly report, securities statement, etc.

•         Funding within 7 to 10 days from contract execution

•         May be used to purchase real estate outright, pay off a hard money loan and more…

•         Loan is NOT securitized by real estate

•         Maintain ownership of stocks and gain if your securities rise.

•         Co Broker opportunities available

For More information and scenarios email me – info@garrick.biz

Bay Area Home Values and Foreclosure Filings Rise…hmmmmm

The shift has changed almost instantaneously here in the Bay Area from a cold and quiet climate to multiple offers, overbidding, and a LOT of buyers writing offers!  According to the SF Chronicle “Bay Area home prices rose month-over-month for the third straight time as sales reached their highest level in three years in June, fueling hopes that the limping real estate market is slowly beginning to heal.”

The median price paid for an existing, single-family home across the nine-county region was $360,000 in June, down 29.4 percent from a year earlier but up nearly 7 percent from May, according to San Diego research firm MDA DataQuick. A total of 6,518 existing, single-family homes traded hands last month, up 27.8 percent from a year ago.

Transactions across the region have now increased on a year-over-year basis for the past 10 months. Just above 37 percent of the resold homes had been foreclosed upon in the last 12 months, well off the peak of 52 percent in February (and wow! 52%!).

This data clearly indicates that low interest rates and low home values are finally getting buyers off the fence and in the market, which in turn is keeping inventory in check, the two critical components of a recovery.

Being a lender I am amazed to see how many all cash offer I compete against on a weekly basis as well.  Obviously if you have a first time buyer getting in with less than 5% down on a transaction that will need 45 days to close or you have an all cash offer - $20,000 lower than ours, but will close next week, it’s pretty obvious which offer the seller will take especially in this environment. This does show however that both investors and first time buyers are out there moving the lower priced inventory.

DataQuick noted that the percentage of properties that sold for more than $417,000, the traditional “jumbo mortgage” threshold, rose to 28.8 last month, its highest level in nearly a year.  This tells me the “move ups” and higher income earning individuals are starting to take advantage of the market.  I know many of my clients who were waiting to sell and move up have finally received offers on their homes and are back in the market looking for higher priced inventory.

The other side of this story is that lenders issued 391,611 foreclosure filings to California property owners in the first half of the year, up almost 14 percent from the previous six months, RealtyTrac of Irvine reported. The filings include everything from default notices, the first stage in the foreclosure process, to the final step of bank repossessions.

I know many agents who focus all there time on listing REO’s and shortsales and many of them who would have upwards of 50 or 60 listings and currently they have three or four showing the slowdown of foreclosure proceeding however they all agree there is a lot of distressed property coming on the market soon.

It will be interesting to see if there are tidal waves of distressed inventory awaiting us what effect will that have on values? How bad could it really get after what we have already been through? 

HARP Guidelines Allow for 125% LTV.

The Home Affordable Refinance Program was designed to assist borrowers who have demonstrated an acceptable payment history on their existing Fannie Mae or Freddie Mac owned mortgage loan. Unfortunately due to rising unemployment levels and increasing foreclosure rates, demand for housing has weakened and property values have continued to decline, which has blocked many borrowers from utilizing HARP. I have been working with a few clients with very little success on these HARP programs. I am currently working with my cousin who lives in Central California. He has owned for over ten years. Did a modest debt consolidation refinance back in 2005 and his house appraised for $450K. He is now looking at a value of $185K and owes about $220K. Because vacant homes have sprouted across his neighborhood he actually pays his son to mow the lawns of these REO’s to keep people from trashing the properties and keep the neighborhood esthetic up. He has a perfect payment history but cannot refinance due to the current state of his neighborhood. I know this is not a new story and has been going on for years now but his Fannie Mae owned loan is not refinanceable under HARPs current guidelines. This is the very same program that was meant to help people like my cousin who have been great responsible borrowers lower there payment into a 30 year fixed rate. I think if the borrowers profile is good we should take the appraisal out of the equation. The expansion of Fannie Mae’s and Freddie Mac’s LTV guideline aims to expand qualified homeowner’s refinance opportunities. The underlying initiative is that lower monthly mortgage payments will raise real household incomes and therefore afford more spending power upon consumers. I don’t know if the 125% mark will make a big difference. The homes that qualified at 105% LTV back in April when the product first came out are probably looking at 125% LTV now due to declining values.

Homeownership is no Longer a Realistic Way to Build Wealth

I read an interesting article yesterday that said nearly half American adults who participated in a recent survey said they no longer believe that homeownership is a realistic way to build wealth, reported by the National Foundation for Credit Counseling. The findings, from a recent survey of about 1,000 people, run counter to the long-held perception that a home should be part of a person’s financial strategy, the NFCC said. So what was once the cornerstone of retirement and wealth building is now looked at as an unstable threat to the American Families’ livelihood? Being in the Mortgage business since 2001 I have definitely seen the good, the bad, and the ugly, and lived through it all. The whole time I have been educating my clients that real estate is a long term investment. Why? Because IT IS!. The “Mortgage Meltdown” consists of three years of bad loans. From 2005 to 2007, if you purchased then, and especially in areas that were overbuilt then you are in serious trouble if you still own your home. Many of theses areas in central California have values not seen since 1995 and that is really unfortunate. I find it hard to believe that after these three years of a tough market (OK, going on 5) nearly half of America thinks that real estate is no longer a good investment? People are funny. I am willing to bet these are the same people who couldn’t wait to get into the housing market in 2003 “before it’s too late!” and couldn’t wait to buy Yahoo stock in 1997. AH, I remember when my plumber and the guy at the video store counter new more about the stock market than Warren Buffet. And speaking of which…What is it Warren Buffet said? Something to the effect of “Be fearful what people are buying and buy what people are fearful of?” Hmmmmm – time to get pre approved! ;^D

Significant Rate Increase???? - NOOOOOOOOOOOOOOOO!!!!!!

The bubble in the mortgage markets finally and with super hyper speed, blew up today. After holding and holding, while the 10 yr note rate climbed, mortgage rates jumped today to levels not seen in many months. We have been warning the mortgage markets couldn’t hold on forever while treasury rates increased. Mortgage lenders became way too complacent with hedging risk, believing apparently that the $1.25T the Fed committed to buy would keep mortgage rates from increasing. Today, from almost the beginning mortgage markets looked very unstable; we sent several alerts suggesting deteriorating rates. Frankly, we were not looking for the kind of pounding we got this afternoon. Yields on Fannie Mae and Freddie Mac mortgage bonds rose for a fourth day, after yesterday for the first time exceeding where they stood before the Federal Reserve announced it would expand purchases to drive down loan rates. It is finally hitting home that the Fed has a serious problem; the problem is how to keep mortgage rates down, the housing markets are the key to any economic recovery and one of the keys to getting the housing sector back on track is keeping mortgage rates affordable and low. It was widely thought that buying $1.25T of MBSs would do it. Not the case; we all know about the massive supply Treasury has to sell in the debt markets, as we have noted it is unlikely that can happen (raising $200B a month along the yield curve, not including T-bills under 1 yr) without higher rates and the potential of creating inflation fears. Today may be a Waterloo for the Fed; what to do? Buy more treasuries, buy more mortgages? Markets are not going to be placated by either move; the Fed can’t keep it up and as the US debt increases foreign central banks, led by China, may make good on recent comments to stop buying US debt. Who then will fund our deficits and the Obama Administration’s aggressive fiscal budgets? The US is completely dependent on foreign investments to fund our debt and that point is beginning to take front page. Big hit in the equity markets this afternoon on the hard hits taken in the mortgage markets. Without lower mortgage rates the economy isn’t going to recover at the pace recent thoughts had developed. If housing and home prices are not stabilized there isn’t going to be much of a recovery based on the timeframe markets had been expecting. The $35B 5-yrs went at 2.310% with a 2.32 bid-to-cover and indirect take of 44.2%, the outing was solid. The results were against an average 2.13 cover over the past 16 auction since the start of 2008, and a 29.2% indirect bidder take. The market had been looking for a solid showing, and while this was less impressive than the 2-yrs, that was also expected. The market had been looking for a draw of 2.33% plus and liked the lower yield. More Treasury borrowing tomorrow; $26B of 7 yr notes will complete this week’s $101B of borrowing. Markets will have two weeks to breathe before Treasury comes back with 3 yr, 10 yr and 30 yr bond auctions on June 9, 10, and 11. Tomorrow weekly jobless claims at 8:30 expected to be up 5K; and April durable goods orders (+0.5%). At 10:00 Apr new home sales are expected to be up 1.8%. The selling today adds to the technically oversold markets. Mortgage rates cannot stand against the increase in long term treasury rates. The spread between the 10 yr note and 30 yr mortgages came back in line two weeks ago as we reported, back to about 165 basis point from a high of 270 basis point six months ago. Keep all rate locks locked and strap in for a significant increase in market volatility with mortgage prices swinging with treasuries in large daily increments. I need a drink now.

“Oh! This escrow is with the REO dept….Please Hold!”

Sound Familiar? That’s what I was told today right before I entered a seemingly endless world of run around and horrible service! When I called the escrow company someone picked up right away and everyone was quite pleasant, however, as soon as I went to the REO department it was a different world. What is going on with these title departments? Emails take at least 4 hours to return and that is at best. There is literally no one available on the phone and like this call today I was on hold for 45 minutes. I simply sat on hold and used my cell phone for out bound calls and did other work. I wanted the loan to fund….AND IT DID BTW…but I had to get a hold of the officer or ANYONE who could answer the most simple question… “Have you sent in funding conditions?”

Fannie and Freddie rolled out their DU Refi Plus this week.

Fannie and Freddie rolled out their DU Refi Plus this week.  In a nut shell, these Limited Cash Out refi’s allow a greater level of flexibility for Fannie & Freddie serviced homes.  To clarify, if the loan was original sold to Fannie or Freddie for servicing then they may be elegibile.  To determine whether they are presently serviced by Fannie or Freddie you must access their site. The links are attached and the steps are pretty self explanatory.

Fannie:    http://www.makinghomeaffordable.gov/
Freddie:   http://www.freddiemac.com/

As long as one has good credit the rates and terms are phenomenal!  One can refinance their home at 105% loan to value and get a rate in the mid 4’s! The guidelines would turn this into a very long blog so contact me for details and I can pre qual you quickly into a lower interest rate and payment.

The Reverse Mortgage Boom

I have had several requests for reverse mortgage all over the Bay Area recently.  The scenario today was a gentleman aged 70 had a retirement of 400K in 2005 which is now worth 120K. He told me he was “practicing jumping from his kitchen chair”. He said it jokingly but it made me wonder.

For him, the reverse mortgage is the perfect solution!  New guidelines value reverse mortgages up to $625,500 and NO HIGHER (up fro $417,000).  So despite his house appraising at over 1 million the property value is $625, 500 for our purposes. He wanted to get an extra $500 a month or an extra $100K credit line which he won’t have to pay back unless he moves or sells the property.

When I ran the numbers I found I could get him a $95K credit line or an additional $574 a month! Nothing has to be paid until he is no longer living there or he is no longer living anywhere.  With elderly people losing there ritirements and home equity a reverse mortgage is the perfect solution.

For more information on reverse mortgages email me at info@garrick.biz and I can send you an FAQ.