Saturday, February 28, 2009

The housing bailout: Do you qualify?

In recent weeks, the government, both on a federal and state level, have announced new tax credits for home buyers, housing stabilizations plans, and the like. Due to the various requirements for each program, some home buyers and/or homeowners may be confused about whether or not they qualify.


  • The goal of the “Homeowner Affordability and Stability Plan” is to help homeowners remain in their homes. For a loan to qualify for modifications, lenders would need to bring the monthly mortgage payment down to 38 percent of a borrower’s monthly income. The government would then match further reductions until the debt-to-income ratio is 31 percent. The deductions could come in the form of a lower interest rate or reduced principal. For homeowners who pay their mortgage on time, the write down could be as much as $1,000 of the loan each year, for five years.

  • The government will help homeowners who owe between 80 percent and 105 percent of their home’s value, and have been unable to qualify for refinancing because their home has negative equity. This could help as many as 14.8 million homeowners. However, only mortgages owned by Fannie Mae or Freddie Mac are eligible, which excludes many homes in high-cost areas, such as California.

  • As with all refinances, it is important that homeowners have their mortgage paperwork, proof of current income, and assets readily available. A representative with the Mortgage Bankers’ Association advises homeowners to wait until March 4 to contact their mortgage lender or servicer, when more details and guidelines are due.

  • The recently signed “American Recovery and Reinvestment Act of 2009” increases the first-time home-buyer credit from $7,500 to $8,000, and removes the requirement that the credit be paid back if the buyer stays in the home for at least three years. It also extends the expiration date for the credit from July 1 to Dec. 1, 2009. Home buyers must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009, to be eligible for the $8,000 credit.

Saturday, February 21, 2009

How to Fix your Credit (Part II)

Consumers see the ads in the newspaper and read the signs nailed to telephone poles: "Credit problems? We erase bad debt." It sounds so easy. Just call the phone number and pay a fee, and your credit woes will disappear.

The reality is that bad credit does not vanish by paying someone to remove it. Are there legitimate credit repair organizations out there? Sure, and they can help remove inaccurate information from credit reports. But even they can't get rid of correct information, however damaging it may be.

When it comes to outright mistakes on their credit report, though, it's imperative that consumers have them fixed—whether they hire an agency or do it themselves.

The first step in fixing credit report errors is to identify what's wrong. Consumers have to obtain a copy of their credit report (everyone is entitled to one free report per year from each of the three credit bureaus: Experian, Equifax, and TransUnion) and review it for accuracy. Look for:

  • Late payments. There should be no late payments over seven years old on the report. This is important, as approximately 35 percent of a credit score is based on timely payments.

  • Collections. The report shouldn't show any collections or charge-offs more than seven years old. It's a good idea for consumers to save copies of their credit report for seven years so they have proof of when an item was added.

  • Payment records. All paid-in-full installment loans and all collections that have been paid in full or settled for less than the amount due should show a zero balance. Sometimes collections are not updated after they've been paid or settled.

  • Mysterious accounts. Consumers should be able to recognize all accounts listed on the report. Incorrect accounts do sometimes appear, either by mistaken identity or by identity theft. Consumers should contact the creditor immediately to compare their name and Social Security number with the one shown for the incorrect amount. In the case of an incorrect collection, consumers may have to request a "validation of debt," or what is sometimes called a "media packet," which provides details on the account holder. If the account is a case of identity theft, the consumer should request a fraud affidavit from the creditor. It's also a smart idea to file a police report.

  • Original dates. Length of credit history is 15 percent of a credit score, so consumers should be sure the original dates they opened their accounts are accurate. Original account dates could be reported inaccurately if a credit card company is acquired or merged, or if a credit card is reported lost or stolen.

  • Available credit. Credit limits on the credit report should match up with credit card statements. It's best to keep balances under 50 percent of the available limit; less than 30 percent is even better. Debt accounts for 30 percent of your score.

  • Types of accounts. Sometimes accounts are not categorized correctly. A home equity line of credit should be listed as a second mortgage, not just a line of credit. If the account type is not reflected properly, consumers should contact the creditor.

  • Reason codes. Consumers should read what the credit bureau has to say about why their score is what it is. These so-called "reason codes" appear in the credit report to explain what factors played into the credit score and what actions can be taken to improve the score over time. One caveat: If a consumer already has a good credit score, ignore the reason codes, as making changes could actually result in a lower score.

One last word of advice for consumers: Think twice before closing that credit card, which shrinks the available credit listed on your report and hurts the credit utilization ratio.

The key to good credit is being proactive in reviewing credit reports regularly. If consumers find their credit score is a respectable 680 or higher, removing minor dings may not be worth the effort. Otherwise, finding and eliminating errors is one way to get the high credit rating they deserve.

Source:, Patrick Richie (02/01/09)

What's In the Foreclosure Prevention Plan

The Obama administration Thursday released its long-awaited plan to stem foreclosures. It's organized into three categories:

1.) Help for home owners making their payments but at risk of default and foreclosure.

Home owners with a Fannie Mae or Freddie Mac loan would be eligible to refinance as long as their mortgage doesn't exceed 105 percent of the home's current market value. Currently owners need to have at least 20 percent equity. Potential impact: 4-5 million households.

2.) Help for home owners already in default and in need of loan modification.

For lenders that voluntarily agree to lower a borrower's payment so that it makes up no more than 38 percent of the borrower's income, the government would share the cost of lowering the mortgage burden to 31 percent of income. Incentives to lenders to participate include a $1,000 payment.

Borrowers can receive up to $1,000 as an incentive to stay current on their new mortgage. Still in the works is a proposed provision that would allow bankruptcy judges to require loan modification (known as a cramdown) as part of a household's restructuring. That provision requires legislation by Congress. Estimated potential impact: 3-4 million households.

3.) Doubled resources to Fannie Mae and Freddie Mac.

To encourage investors to buy the secondary market companies' mortgage-backed securities, the government explicitly backstops them to up to $400 billion, twice the current amount.

The plan does not provide help to investors or to home owners who are in trouble with a second home, nor does it apply to homeowners whose mortgage is part of a private-label mortgage security that is not backed by Fannie Mae or Freddie Mac.

"The administration's proposed plan, combined with provisions like the $8,000 first-time home buyer tax credit in the just-enacted American Recovery and Reinvestment Act, will help minimize foreclosures, shrink housing inventory, stabilize home values, and move the country closer to an economic recovery," says NAR President Charles McMillan.

Source: REALTOR® Magazine Online

Saturday, February 14, 2009

How to Fix your Credit (Part I)

Bad credit can ruin a deal.

Bad credit translates into financing rejections, prohibitively high loan rates, and failed deals. That's why real estate professionals need to educate themselves about the credit system and show prospective buyers the value of repairing their credit, if necessary, in order to qualify for a mortgage.

Unfortunately for borrowers, most credit reports contain inaccurate information. A June 2004 study performed by the U.S. Public Interest Research Group, a consumer advocacy group, showed that 23 percent of consumers had mistakes on their credit reports serious enough to result in the denial of credit. All told, an amazing 79 percent of consumers had some mistake.

Fortunately, consumers' rights are protected under the Fair Credit Reporting Act. The FCRA gives consumers the ability to correct, update, amend, and take action regarding the contents of a credit report. It also guarantees consumers accuracy, fairness, and privacy in their credit reports.

The Act protects consumers only if they take action, however. Credit bureaus report the information they are given by creditors; they don't verify it. If an error occurs, the burden of discovering and correcting it rests on the consumer. Here's what your customers should do before they apply for a mortgage to make sure their credit reports are accurate.

  • Find out what's in their file. Every U.S. consumer is now entitled to one free credit report annually from each of the three credit bureaus: Experian, Equifax, and TransUnion. The easiest (and free) way to get a copy of your report is to go to the government-mandated Web site Also note that if consumers are denied a mortgage or other credit, the lender must tell them whether information in their credit report played a role in the denial.

  • Dispute inaccurate information. If your customer determines that something is incorrect on a credit report, the next step is to correct the inaccuracy. If consumers obtained their credit reports at, they can dispute errors online. Another option is to write a letter to all three credit bureaus detailing the dispute. (Some states require one agency to notify the other two, but why risk it?) The letter should include documentation such as a cancelled check showing payment, a discharge from bankruptcy, or the like. Remember, banks typically use the middle of the three credit scores when assessing a loan application. If one report showing a high score is correct but the other two are not, the buyers may still be denied credit or forced into less-favorable terms.

  • Dispute inaccurate items at the source. Consumers will also want to contact the credit card company or other source of the inaccurate information. For example, if a payment is credited incorrectly, it may be easier to resolve the error by contacting the credit company than a collection agency.

  • Excise outdated information. By law, credit bureaus are supposed to remove information pertaining to the credit score—such as a late payment or collection—that is more than seven years old. Neutral information such as employment history does not have to be removed since it does not affect credit scores. Consumers should ensure that the credit bureau removes older information since it can still negatively affect a credit score.

  • Protect credit identity. The Fair Credit Reporting Act makes it a federal crime to knowingly and willfully obtain a person's credit report without consent or under false pretenses. If consumers feel that their credit has been compromised, they can request that a credit agency put a “fraud alert” on their account. Consumers can take an even more aggressive step to protect their credit from identity thieves by paying credit bureaus to put a security freeze on their credit. Consumers can temporarily lift the freeze when they apply for a mortgage.

Helping your customers ensure that their credit is intact before they begin the homebuying process will make it easier for them—and you.

Source:, Patrick Richie (02/01/09)

When Will Prices Bottom Out?

Housing prices will hit bottom in the fourth quarter of 2009, predicts Moody’s in a new report.

"Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view," the report says.

On average, home prices will decline 36 percent from the peak in the first quarter of 2006, the report says.

By the end of the housing downturn, nearly 62 percent of the nation's 381 metropolitan areas will have experienced double-digit-percent declines in house prices, peak-to-trough, says the report.

The declines will exceed 20 percent in about 100 metro areas, according to the report, scheduled to be discussed in a Webcast on Thursday.

The recovery will be “lackluster,” the report continues.

"A number of uncertainties in both the housing and economic outlooks remain, and the risks tilt to the downside," says Moody’s Chief Economist, Mark Zandi.

Source: The Wall Street Journal, James R. Hagerty (02/06/09)

Tuesday, February 10, 2009

Water Saving Tips #2

Landlord Tips: Prohibit car washing at your rental.

Mortgage Rates Rise, Despite Fed's Efforts

Despite the Federal Reserve's campaign to lower mortgage rates, Freddie Mac reports a jump in the 30-year fixed rate to 5.25 percent in the week ended Feb. 5 from 5.10 percent the prior week.

Experts say home-loan interest is on the rise because long-term Treasury bond yields have climbed and because mortgage lenders are upping rates to ease the flood of refinancing applications.

Source: The Los Angeles Times, Tom Petruno (02/06/09)

Fannie Loosens Refinancing Rules

Fannie Mae plans to eliminate some credit-score requirements, scale back income-documentation standards, and waive the need for appraisals in some cases, starting on April 4.

The mortgage finance company believes the changes will allow more home owners to refinance into new home loans at near-record low interest rates.

Analysts say the relaxed rules for loans that Fannie Mae owns or guarantees are unlikely to have a significant impact on mortgage-bond investors and mortgage insurers.

Source: The Washington Post, Jody Shenn (02/06/09)

Best Places to Live and Raise a Family

Progressive Farmer has again ranked the best rural places to live and raise a family based on an analysis by OnBoard Informatics, a real estate research firm.

Progressive Farmer considers home and land prices, crime rates, environment, education access to health care and economic factors. Counties are first ranked based on these statistics, then the final decisions are made after the magazine staff travels to the selected counties.

Here are Progressive Farmers’ top 10 choices:

  1. Hamilton County, Neb.
  2. Chippewa County, Minn.
  3. Ida County, Iowa
  4. Harvey County, Kan.
  5. Clinton, Iowa
  6. Fayette County, Texas
  7. Oconee County, Ga.
  8. McPherson County, Kan.
  9. Obion County, Tenn.
  10. Madison County, Va.

Source: Progressive Farmer (02/02/09)

Wednesday, February 4, 2009

Los Angeles County Property Tax Reduction Scam Alert


Various private companies are sending mailings to property owners offering their services to pursue a reduction in their property taxes. These companies may charge hundreds of dollars to file for a reduction in value on behalf of the property owner. Some companies are even imposing late fees if the application is received after an arbitrary deadline. Be aware that solicitations from private companies offering to pursue a reduction in property taxes must clearly indicate that they are NOT a government agency and that their services are NOT approved or endorsed by any government agency. Failure to provide such notice is a violation of California law. If you or someone you know receives an illegal solicitation, please contact the Los Angeles County Department of Consumer Affairs by phone at (800) 973-3370 or visit their website.

Property owners receiving legal solicitations from private companies that properly identify themselves as not being a governmental agency, should be aware that their property may be included in a review the Assessor’s Office will be doing in 2009. Over 500,000 single family houses and condos that were purchased between July 2003 and June 2008 will be
reviewed. In some areas, earlier purchases will be looked at. There is no reason to pay for a review that will be done for free.

All 500,000 owners whose homes are reviewed will receive a letter by the end of June notifying them of the results. Owners who disagree with the results of the review or were not included in the review, may file an application through December 31. The Decline-In-Value form is simple to complete and readily available
online or at one of the Assessor's District Offices. We will review the application and if a reduction is warranted, the taxable value will be reduced. Please note that there is no charge for a review. Owners are urged to wait until July to decide whether to file an application.

View Videos:

  1. Please click here to see Rick Auerbach’s interview with KNBC Channel 4.

  2. Please click here to see Rick Auerbach’s interview with Fox Channel 11.

  3. Please click here to read Rick Auerbach’s Op-Ed article in the Daily News.
Source: Los Angeles County Assessor Website

Tuesday, February 3, 2009

Sunday, February 1, 2009

IRS to Expedite Tax Lien Relief for Homeowners

The Internal Revenue Service (IRS) recently announced it will expedite its process of providing relief from federal tax liens for distressed homeowners. With more than one million current federal tax liens against real and personal property, the IRS announcement should help REALTORS® and their clients resolve federal tax lien issues in their sale and loan transactions.

As background, a homeowner seeking to sell or refinance a property must generally pay off an existing federal tax lien. However, during the current economic downturn, many homeowners don't have the cash or equity to do so. Hence, for a refinance, the homeowner may request that the IRS makes its tax lien subordinate, or secondary, to the lien of the refinancing lender. For a sale, the homeowner may, under certain circumstances, request that the IRS discharge its claim. The IRS's processing time for subordination or discharge requests has been about 30 days. The IRS currently is working to expedite that time frame to help distressed homeowners. For IRS instructions on requesting relief from federal tax liens, go to IRS Publication 783 for discharges and Publication 784 for subordinations at

2008 Foreclosure Activity up 81 Percent

A total of 3,157,806 foreclosure filings, including default notices, auction sale notices and bank repossessions, were reported on 2,330,483 U.S. properties during the year, an 81 percent increase in total properties from 2007 and a 225 percent increase in total properties from 2006, according to RealtyTrac®'s 2008 U.S. Foreclosure Market Report™. According to the report, 1.84 percent of all U.S. housing units (one in 54) received at least one foreclosure filing during the year, up from 1.03 percent in 2007.

Foreclosure filings were reported on 303,410 U.S. properties in December, up 17 percent from the previous month and up nearly 41 percent from December 2007, according to the report. Despite the spike in December, foreclosure activity for the fourth quarter was down nearly 4 percent from the previous quarter but still up nearly 40 percent from the fourth quarter of 2007.

More than 7 percent of Nevada housing units (one in 14) received at least one foreclosure notice in 2008, giving it the nation's highest state foreclosure rate for the year, the report said. Florida registered the nation's second highest state foreclosure rate in 2008, with 4.52 percent of its housing units (one in 22) receiving at least one foreclosure filing during the year. Arizona registered the nation's third highest state foreclosure rate, with 4.49 percent of its housing units (one in 22) receiving at least one foreclosure filing during the year. Other states with Top 10 foreclosure rates for 2008 were California, Colorado, Michigan, Ohio, Georgia, Illinois and New Jersey, according to the report.

A total of 523,624 California properties received a foreclosure filing in 2008, the nation's highest state total. Foreclosure activity in the state increased nearly 110 percent from 2007 and nearly 498 percent from 2006. Florida had the second highest state total, followed by Arizona.

With 9.46 percent of its housing units (one in 11) receiving a foreclosure filing during the year, Stockton, Calif., registered the highest foreclosure rate among the nation's 100 largest metropolitan areas in 2008, according to the report. Other California cities in the top 10 were Riverside-San Bernardino at No. 3 (8.02 percent, or one in 12 housing units); Bakersfield ats No. 4 (6.17 percent, or one in 16 housing units); and Sacramento at No. 9 (5.20 percent, or one in 19 housing units), the report said.

Source: RealtyTrac (01/15/2009)

Water Saving Tips

Replace shower heads with 2-gallon-per-minute shower heads, especially if you pay the water bill.

What if Uncle Sam takes over your bank?

Could your bank turn into the Bank of the U.S.A.?

The latest wave of banking problems has investors worried that the government will nationalize deeply wounded institutions, such as Bank of America Corp. and Citigroup Inc.

Such a dramatic step could make it easier for some bank customers to get a loan. And customers with deposits will still be protected by federal insurance, just as they are today. Still, consumers could see more branch closings, more standardization across bank products and a deterioration in customer service. Common and preferred shareholders, meanwhile, will likely get wiped out in a bank nationalization.

With all of the problems that banks are now facing, here is a primer on bank collapses and the impact of possible bank nationalization.

What does "bank nationalization" mean?

A nationalized bank is owned and run by the government. The shocks of the credit crisis last fall spurred lawmakers to seminationalize the banking sector; nearly 314 institutions have already signed over some of their shares and other securities to the Treasury in return for $350 billion in government TARP funds. The government could now go a step further by taking complete ownership of certain troubled banks.

Why nationalize banks?

It makes sense only if banks are in danger of failing. In Western countries, nationalization is largely used as an emergency method to prop up banks during tough times. It is typically used to lend to small and medium-sized businesses and restructure burdensome loans to consumers.

Has nationalization ever worked before?

It has a mixed record. Sweden took over its banks, restored them to health and privatized them again. France nationalized its banking sector, privatized it again by selling it into private hands and now may be in the process of another wave of nationalization. In the U.S., the government took over hundreds of institutions during the savings-and-loan crisis a couple of decades ago. It aggressively sold off bad assets, and the experiment is now regarded as a success.

What will happen to my account if my bank is nationalized?

There should be very little change to consumers' bank accounts and insurance-protection levels if their bank is nationalized. The Federal Deposit Insurance Corp., which insures deposits for up to $250,000, will continue to cover all FDIC-insured institutions, regardless of who the owner is.

And even though an increasing number of banks are failing, the FDIC -- which is backed by the full faith and credit of the U.S. government -- can't run out of money because of its ability to borrow from the Treasury.

Will I be able to get a loan?

Nationalized banks are more likely to loosen the lending spigots. Banks would start making loans that they wouldn't otherwise make today, such as to borrowers with less-than-stellar credit. There would be more pressure to make loans to achieve social objectives.

Homeowners at nationalized banks should also benefit since the government is likely to halt any foreclosure proceedings, says Greg McBride, senior financial analyst at "Uncle Sam is not going to want to put anybody out of their house," he says.

Government-owned banks could offer basic credit cards with low rates that would appeal to less-creditworthy customers who regularly use cards to borrow. But such cards are less likely to come with costly rewards programs, such as those that earn frequent-flier miles, says Dave Kaytes, managing director at Novantas.

How will private-banking and brokerage-account customers be affected?

That depends on whether the government takes a short- or long-term view. If it intends to be a long-term owner, then it will probably sell off the brokerage, investment-banking and other auxiliary operations as nonessential to the core banking business. If, however, the government sees its step as a short-term fix to shore up the system temporarily, then it may hang on to such operations.

What other products and services might be affected?

If the government takes over a bank, management will be under even more pressure to cut costs. Expect more branch closings and poorer customer service. "Think of the bank as the DMV of the future, run by government employees who have little upward mobility," says Mr. Kaytes.

"I think we can expect that over time, the nationalized banks will be less open to innovation and new product development, more conservative in their approaches, and more constrained in their actions and subject to tighter scrutiny," says Jim Eckenrode, banking and payments research executive at TowerGroup.

What are the disadvantages of bank nationalization?

In the U.S., the biggest problem for the government would be the sheer impracticality and expense of taking over all 8,000 banks -- or even the 314 institutions that described themselves as "banks" in order to receive government aid.

The U.S. government would have, at most, the ability to take over only a handful of the most important institutions. As a result, nationalization would not solve the pressing problem of potential bank failures, particularly among small banks. Consumers who have deposits in such banks would still be dependent on the FDIC to return their money during a failure, and such a process could be lengthy and involve a lot of red tape.

Source: The Wall Street Journal (01/22/2009)

New Home Sales Hit Record Low

Sales of new homes fell 14.7 percent in December to a seasonally adjusted annual rate of 331,000 from 388,000 in November, the Commerce Department reported Wednesday.

That sales pace is the lowest recorded in the last 46 years.

Builders sold 482,000 homes in 2008, the fewest since 1982, when 412,000 were sold, the Commerce Department said. Also, the median sales price fell about 7 percent to $230,600, from $247,900 in 2007.

Sales in December were off 15 percent from the previous month and prices were 9.3 percent lower than a year earlier, slowed by the financial crisis, which made it hard for buyers to get mortgages.

Source: The Associated Press (01/29/2009)

4 Tips to Getting a Loan

These days one of the biggest impediments to closing a real estate sale can be the buyer’s ability to get a mortgage.

Here are some tips for anyone who hopes to land a loan:
  • Turn to the government. The biggest source of loans these days is the Federal Housing Administration (FHA) and the Veterans Administration (VA). These programs accept borrowers with lower credit scores and allow them to put down as little as 3.5 percent of the purchase price.

  • Document, document, document. Borrowers will need bank statements, brokerage statements, W-2 forms and tax returns.

  • Boost credit scores. Borrowers should avoid having more than one-third of their maximum borrowing capacity outstanding on one credit card. If necessary, rotate the debt among several cards.

  • Work your connections. Comparison shopping is easy online, but if your customer has an established relationship with a local bank, suggest they try that lender first.

Source:, Christopher Palmeri (01/23/09)

REOs Expected to Flood Market

Mortgage lenders are likely to put their growing supply of repossessed homes up for sale in the months to come.

According to the Mortgage Bankers Association, 10 percent of home loans was either delinquent or in the foreclosure process at the end of September. Plus, Fannie Mae and Freddie Mac saw repossessions grow nearly 25 percent to 15,196 homes from the second quarter to the third quarter of 2008.

Lenders may have to reduce the principal balance on loans to do more than slow down the foreclosure process for many borrowers.

Source: Inman News, Matt Carter (01/26/09)

Top Places in the World to Live

For the fourth year, France has earned International Living magazine’s top spot as best places to live in the world.

The retirement and relocation publication compared about 200 countries in nine categories including, cost of living, culture, economy, environment, freedom, health, infrastructure, safety and risk, and climate. Information was combined from official government sources, the World Health Organization, and The Economist. Then editors asked for opinions from knowledgeable people around the world.

France scored its high marks across the board, but its main appeal is the quality of its culture and leisure activities, says Managing Editor Laura Sheridan.

France is a buyer’s market for Americans who wish to buy property, Sheridan says. “Today, a euro is worth $1.31. Six months ago, a 100,000-euro house for sale in France would have cost you $159,000. Today, the same house would cost you $132,000. That’s a 17 percent drop in six months.”

Here’s International Living’s top 10 best places in the world to live and their overall scores out of a possible 100:

  1. France, 80
  2. Switzerland, 79
  3. United States, 78
  4. Luxembourg, 77
  5. Australia, 76
  6. Belgium, 75
  7. Italy, 74
  8. Germany, 73
  9. New Zealand, 72
  10. Denmark, 71

    Source: International Living (01/15/09)