Southern California Real Estate Gossip

The HAFA Mortgage Program

2010-04-18T18:47:00.001-07:00

The HAFA Mortgage Program

HAFA - Home Affordable Foreclosure Alternatives

In light of the rising number of property foreclosures in the United States, the government has expanded the Home Affordable Modification Program (HAMP) to include provisions and incentives for servicers to allow short sales or deeds-in-lieu as positive options for eligible homeowners in default who wish to avoid foreclosure. The new program is called Home Affordable Foreclosure Alternatives (HAFA).

Participation in HAFA cannot save the homeowner from losing his or her property, but it can eliminate the effects of a foreclosure on the homeowner’s credit. Financial incentives for participation in the program include a $1,000 servicing bonus for lenders and a $1,500 relocation bonus for displaced homeowners.

HAFA is designed for homeowners who have applied to HAMP for assistance but have had no success with their loan modification program. To participate in HAFA, homeowners must still meet HAMP’s eligibility criteria (principal residence, first-lien mortgage, serious delinquency, unpaid balance under $729,750, and a mortgage payment over 31 percent of gross income).

Homeowners must be considered for HAFA within 30 days if they cannot meet HAMP’s requirements or if they specifically request consideration for HAFA. However, the homeowner only has 14 days to respond to a written notice that HAFA may be available to them, giving the lender time to meet their 30-day deadline.

As with other short sales and deeds-in-lieu, the lender or loan servicer of the primary mortgage must approve of the transaction and conduct their own independent appraisal. Under HAFA, however, they must also agree to accept the proceeds from the sale of the house as payment in full, waiving their right to collect the balance of the loan from the homeowner.

It is up to the lender or servicer of the first-lien mortgage whether they or the homeowner negotiate with any subordinate lienholders. Lenders of HELOCs and other subordinate liens may be allowed to keep a limited portion of the proceeds (up to $3,000 each) of a short sale, with the first-lien lender’s approval. These funds are part of an incentive program for subordinate lienholders to waive their right to collect the balance due on their loans. The original lender may not be held responsible if any subordinate lienholders decline to participate and decide to sue the borrower for the amount of their unpaid debt.

HAFA’s Short Sale Agreement (SSA) has certain stipulations for all parties involved. Their SSA requires that the deadline for the homeowner to find a buyer and complete the transaction be not less than 120 calendar days from the date the SSA is mailed to the homeowner. The lender has the option of extending this deadline another 245 calendar days, for a total term of 12 months. The SSA also mandates that a HAFA transaction must be ‘arms-length’, and that the end buyer must agree to hold the property for at least 90 days after closing. Finally, the SSA gives the listing real estate agent the right to an undiscounted 6 percent commission at closing.

A short sale is any sale of property, usually during the foreclosure process, in which the lender(s) agrees to accept less than the balance due on the mortgage(s) or lien(s) in order to avoid the cost of foreclosure. Per HAFA requirements, the primary lender may not pursue the homeowner, but the secondary lenders do not have to agree to that provision. Assuming that they agree to the short sale in general, they can forego the financial incentive to waive collection rights and continue to pursue the homeowner for their own balances due, in which case their recovery options are then covered by state law. The vacancy date is determined by the terms of the closing.

Unlike a short sale, a deed-in-lieu simply allows the homeowner in default to transfer the deed to the property back to the lender in exchange for partial or full payoff of the mortgage. The vacancy date must be at least 30 days after the deed-in-lieu agreement is signed.

In either case, HAFA requires that the lender agree to suspend all foreclosure sales in good faith, pending the outcome of either transaction. In the case of a short sale, the lender also must agree to pay the administrative closing costs.

The Department of the Treasury, which authorizes all programs under the Making Home Affordable umbrella, has designated Freddie Mac as its compliance agent.

The HAFA program is set to begin on April 5, 2010. Servicers may initiate a HAFA transaction earlier in 2010 under certain conditions. As of this writing, all HAFA agreements must be finalized and signed by December 31, 2012.

Please download the Treasury Department’s Supplemental Directive 09-09 for more specific details and samples of forms to be used in processing HAFA transactions.

California Statewide March Home Sales

2010-04-18T17:12:00.001-07:00

California Statewide March Home Sales

April 15, 2010

An estimated 37,295 new and resale houses and condos were sold statewide last month. That was up 32.7 percent from 28,111 in February, and up 3.0 percent from 36,215 in March 2009. California sales for the month of March have varied from a low of 24,565 in 2008 to a peak of 68,848 in 2005, while the average is 44,486. MDA DataQuick's statistics go back to 1988.

The median price paid for a home last month was $255,000, up 2.4 percent from $249,000 in February, and up 14.3 percent from $223,000 in March a year ago. The year-over-year increase was the fifth in a row, following 27 months of year-over-year declines. The median peaked at $484,000 in early 2007 and hit a post-boom low of $221,000 last April.

Of the homes that resold last month, 40.5 percent were properties that had been foreclosed on during the past year. That was down from 44.3 percent in February and down from 56.7 percent in March a year ago. The last time foreclosures resales were lower than last month was in November 2009, when they were 40.1 percent of the resale market.

The typical mortgage payment that home buyers committed themselves to paying last month was $1,091. That was up from $1,068 in February, and up from $958 in March a year ago. Adjusted for inflation, last month's mortgage payment was 49.1 percent below the spring 1989 peak of the prior real estate cycle. It was 58.7 percent below the current cycle's peak in June 2006.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

Indicators of market distress continue to move in different directions. Foreclosure activity is off its peaks reached in the past two years but remains high by historical standards. Financing with multiple mortgages is low, down payment sizes are stable, cash and non-owner occupied buying remains above average, MDA DataQuick reported.

Media calls: Andrew LePage (916)456-7157 or alepage@dqnews.com

2010-04-18T17:08:00.001-07:00

More Incremental Gains for Southland Real Estate Market

April 13, 2010

La Jolla, CA---Home sales and prices continued their steady but pokey climb up from the bottom in Southern California last month as buyers scrambled to take advantage of low prices and low mortgage interest rates. The market is still tilted toward low-cost distress sales, but not by as much as previously, a real estate information service reported.

A total of 20,476 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 33.3 percent from 15,359 in February, and up 5.0 percent from 19,506 in March 2009, according to MDA DataQuick of San Diego.

Sales always go up from February to March. Last month was the 21st in a row with a year-over-year sales increase. The March sales average is 24,936 going back to 1988, when DataQuick’s statistics begin.

“It’s a reflection of just how grim things got, that we’ve now had almost two years of sales gains and we’re still 18 percent below the sales average. The market won’t rebalance until mortgage lending patterns normalize, and that’s just not happening yet. Some of the best deals out there right now are happening when the buyer comes in with cash,” said John Walsh, MDA DataQuick president.

The median price paid for a Southland home was $285,000 last month, up 3.6 percent from $275,000 in February, and up 14.0 percent from $250,000 for March 2009.

The median peaked at $505,000 in mid 2007 and appears, so far, to have bottomed out at $247,000 in April last year. The peak-to-trough drop in the median was due to a decline in home values as well as a shift in sales toward low-cost homes, especially foreclosures.

Foreclosure resales accounted for 38.4 percent of the resale market last month, down from 42.3 percent in February, and down from 54.8 percent a year ago. The all-time high was in February 2009 at 56.7 percent.

As sales of lower-cost foreclosure properties have waned over the past year, activity has picked up from very low levels in many high-end areas. Last month sales of homes priced at $500,000 or more made up 19.4 percent of all Southland transactions, compared with 18.5 percent in February and 14.9 percent in March 2009. Over the past five years, $500,000-plus deals averaged 35 percent of monthly sales, while over the past 10 years they averaged 26 percent of all transactions.

Higher-end sales are still hampered by the troubled jumbo loan market, which has improved only modestly over the past year. Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 15.7 percent of last month’s purchase lending, up from 14.8 percent in February and from 10.5 percent in March 2009. However, before the credit crisis in the fall of 2007, jumbos accounted for 40 percent of the market.

Adjustable-rate mortgages (ARMs) haven’t come close to recovering from the credit crunch, either. While 44.6 percent of all Southland purchase mortgages since 2000 have been ARMs, last month they represented just 4.8 percent, up from 4.0 percent in February and 2.1 percent in March last year.

Meanwhile, Uncle Sam continues to prop up lending for many low-to mid-priced homes. Government-insured FHA loans, a popular choice among first-time buyers, accounted for 38.6 percent of all mortgages used to purchase Southland homes in March.

Absentee buyers – mostly investors and some second-home purchasers – bought 21.3 percent of the homes sold in March.

Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 27.1 percent of March sales. In February it was a revised 30.0 percent – an all-time high. The 22-year monthly average for Southland homes purchased with cash is 13.8 percent.

The “flipping” of homes has also trended higher the past year, though it eased a bit in March. Last month the percentage of Southland homes flipped – bought and re-sold – within a three-week to six-month period was 3.2 percent of total sales, down from 3.5 percent in February but up from 1.6 percent a year ago. Last month flipping varied from as little as 2.6 percent of total sales in Riverside County to as much as 3.9 percent in Los Angeles County.

MDA DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,220 last month, up from $1,180 for February, and up from $1,074 for March a year ago. Adjusted for inflation, current payments are 45.2 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 55.1 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average, MDA DataQuick reported.

	Sales Volume			Median Price
All homes	Mar-09	Mar-10	%Chng	Mar-09	Mar-10	%Chng
Los Angeles	5,971	6,747	13.0%	$300,000	$329,000	9.7%
Orange	2,433	2,652	9.0%	$385,000	$432,000	12.2%
Riverside	4,409	4,156	-5.7%	$187,000	$198,000	5.9%
San Bernardino	2,897	2,955	2.0%	$150,000	$152,000	1.3%
San Diego	3,020	3,227	6.9%	$285,000	$330,000	15.8%
Ventura	776	739	-4.8%	$326,000	$375,000	15.0%
SoCal	19,506	20,476	5.0%	$250,000	$285,000	14.0%

Source: DQNews.com Media calls: Andrew LePage (916) 456-7157 or John Karevoll (909) 867-9534

Buyers Survival Guide

2009-09-30T00:08:00.000-07:00

Navigating your way through the search and purchase of your next home or investment is a daunting task these days. Darren Smith and Associates are experts in finding our clients the best investment while eliminating the hassles normally encountered.
Here is the first of our Buyers Survival Guide, stay tuned for more..

1. Find the best representative possible, and communicate often. Ask questions and get informed.

2. Establish a search criterea: Where, What, When, and Establish a list of Must haves and Can't Stands.

3. A serious buyer is Pre-Approved and prepared. A letter from a major bank or direct lender works best. Have between 3.5% and 20% of the purchase price in verifiable funds.

Start with this foundation and you will be able to find a home in this market.
Call Darren Smith and Associates anytime at 951-372-9636 in Riverside County or 949-466-1944 in Orange County. Don't waste time and energy chasing dead end prospects, eliminate the endless faxes and stacks of paper, We are an environmental friendly team and can do most everything with paperless electronic communication. You will not make any deposit until you are in escrow and the home passes inspection. Happy Hunting!