"The term mortgage meltdown has become so common -- on television, in headlines and even casual conversations -- that you might assume that this is a tough time to get a mortgage."

"But the reality is different: Mortgage money is plentiful, most mortgage products remain unaffected by troubles in the subprime segment, and interest rates for 30-year fixed-rate loans remain in the low 6 percent range for people with reasonably good credit. Even interest rates on loans of more than $417,000 have fallen after spiking during the summer." - Kenneth Harney, Nation's Housing

The main change during the past several months, said Ted Grose, president of 1st Mortgage Advisors in Los Angeles, is that "the products that allowed people to buy houses they couldn't afford have disappeared."

"Larger mortgages, which always have carried higher rates than loans eligible for purchase by Fannie Mae and Freddie Mac, have recently been in the low 7 percent range, down from the 8 percent and higher levels of a couple of months ago."

"Nonetheless, say lenders and brokers, there is a widespread and persistant belief by consumers that the entire mortgage market is in crisis."

"Other than subprime and high LTV (loan-to-value) stated-income" programs, Jim Brown, chief executive officer of Veteran Mortgage said, "we've got pretty much everything now that we did before. We've got a lot of outlets."

"Most lenders and investors are quick to note that while mortgage money is plentiful, underwriting standards are stricter than they were a year ago."

"Similarly, FICO score standards generally are higher than a year ago, stated-income mortgages with no verifications are hard to find, and major investors are on the prowl for anything hinting at fraud."

"Lenders are especially wary of excessive "layering of risk" - combining low down payments with marginal FICO scores and high-to-income ratios - in markets where prices are falling."

"A major legislative development under way on Capitol Hill could expand consumers' range of good mortgage choices even further."

Read the entire Article HERE.

Labels: Bay Area Real Estate, Fico Score, Interest Rate, Jumbo Loans, Mortgage Lenders, San Francisco Chronicle, Subprime Loans

Money's tight these days, so for the first time in many tears, seller financing is making a comeback. To get deals done, people are turning their backs and doing "the old end around." - Marni Leff Kottle, San Francisco Chronicle.

"Seller financing is simple in theory: The buyer and seller settle on a price and then the seller agrees to extend some amount of credit back to the buyer. The loan is secured by the property. Typically, the seller provides financing in the form of a second mortgage after a buyer has obtained a first mortgage from a bank."

"Sellers are still able to push their price points, and buyers are getting interest rates that are lower than the retail market." Heidi Rickerd-Rizzo, Branch Manager for Pacific Union-GMAC in St Helena.

Read the entire article HERE.

Doing the deal
If you're thinking of using or offering seller financing, here are some tips from real estate experts for buyers and sellers:

Buyers
-- Agree on a price with the seller and secure a first mortgage, if applicable.

-- Your agent can serve as the arranger of credit.

-- Terms are typically outlined in a standard three-page form provided by the California Association of Realtors, so you can often complete such a transaction without a lawyer.

Sellers
-- Make sure the buyer is creditworthy.

-- In a typical transaction, you're entitled to review a buyer's credit report, financial statements and other information.

-- You may want to consult with an attorney or accountant to understand the tax implications.

Source: California Association of Realtors, Pacific Union.

Labels: Bay Area Real Estate, CAR, Interest Rate, Mortgage Lenders, Seller Finance

We've been bombarded by the news; housing inventory glut, price reductions, foreclosures, mortgage crunch, sub-prime lending woes. Some areas are worse than others. As with any real estate cycle, they have their peaks and valleys. This downward trend took it's roots in 2005, moving from one of the strongest seller's markets in history into a strong buyer's market for most areas. Interestingly enough, not all areas. There always seem to be a few areas that do well despite the existing market woes, (some parts of the Berkeley Hills, Albany, Kensington and the El cerrito Hills for example in the San Francisco East Bay Area). It always comes down to numbers, supply and demand.

Have prices hit bottom, or do they have further to go? How long will the housing recession last?

These real estate cycles typically last from two to five years. Most forcasters are pointing towards this winter to be the valley or low point of this down cycle with some relief coming sometime in 2008 or as late as 2009 depending on which source you listen to.

Lawrence Yun, NAR senior economist, said he isn’t looking for any notable changes in sales activity. "Mortgage disruptions will hold back sales over the short term, but long-term fundamentals are favorable. A modest upturn is projected for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008."

"More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year. Serious buyers today have a long-term view of housing as an investment – speculators have left the market."

View the U S Economic Outlook - August, 2007, from NAR, HERE.

"This isn't going to get better until this unsold inventory gets absorbed," said Standard Pacific's Delva, "And this isn't going to happen until the financing issues are resolved; the smart money has the slump ending in the latter half of next year or some time in 2009." Story by Robert Hollis, San Francisco Chronicle. View the full story Here.

Delva and other builders say a key turning point will be when potential buyers return to the market, convinced that the value of what they're buying won't continue to decline.

When that happens, "There's going to be a slew of buyers coming out of the woodwork," said KB Home's Burnstein.

Will this winter be one of the best buying opportunities that we've seen in years?

Interest rates, although much harder to obtain, are still at their lowest levels in decades. Rates on 30 year mortgages sank last week to their lowest point in two months, a dose of good news for people thinking about buying a home. "30-year rates lowest since the end of May.

"As of last week, the market for conforming mortgages was still operating smoothly, and if you qualify for one, you shouldn't have trouble getting a mortgage at a reasonable price." - Kathleen Pender also of the Chronicle.

So far, borrowers with decent credit histories and the ability to document their income - "the majority of the home-buying public" - aren't being shut out from getting a loan. - CNN, "Six Questions Consumers Are Asking About The Mortgage Market," By Amy Hoak

"Sellers can no longer be reluctant to accept offers or reduce prices. Tightening credit and diminishing mortgage products will continue to reduce the pool of qualified buyers. This, along with the increase in national housing inventories, means now is not the time to hold out for the best price possible." - Alexandra Saunders, BGS Financial.

The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.

Should I wait or buy now?

Alexandra goes onto say; "Potential borrowers cannot wait any longer. For those who are considering buying a home, be aware that the volatile credit market can change overnight, leaving fewer options available to borrowers attempting to qualify for a mortgage. With decreases in home values and fewer available mortgage instruments, delaying any longer could get significantly more expensive."

This isn't fully realized until you weigh in the effect of waiting for prices to drop while interest rates continue to increase. So, you have to ask yourself, in the coming months, do I expect interest rates to increase? If so, how much more must home prices drop to counter the effect of rising interest rates?

The buying season typically slows after the summer months with a drammatic drop-off by mid October. With so much inventory and uncertainty in the mortgage & real estate markets, there should be plenty of "bargains" this winter.

"The key theme is that while it may be a different mortgage landscape, it still can be a good market in which to buy - as long as people are buying for the right reasons and are paired with loans that ensure they will be able to keep the home in the future." - CNN

Labels: Bay Area Real Estate, CNN, Housing Inventory, Housing Market, Interest Rate, Real Estate Cycles, San Francisco Chronicle

Money Supply Drying Up - jumbo loan rates soar, even for buyers with excellent credit.

"Need a mortgage this month? It's going to be harder - and more expensive - to get one. In the past week, turmoil in the mortgage markets has caused increasing problems for home buyers in the Bay Area and around the nation." Read the Full Story, by Carolyn Said & Kelly Zito, in today's San Francisco Chronicle.

Fannie Mae's Berson said the tightening mortgage situation is likely to hurt the already troubled housing market.

"There are people who could have qualified for a mortgage a month ago who can no longer get that mortgage," he said. "That means there will be fewer home sales or else people will have to buy less expensive homes. The practical impact is that some people will choose not to buy now. This is an additional negative factor on housing demand. It means home sales are likely to be weaker than we thought they would be just a few months ago."

Labels: Bay Area Real Estate, Interest Rate, Jumbo Loans, Ken Rosen, Mortgage Lenders, Real Estate Cycles, San Francisco Chronicle, Subprime Loans

"By rushing into the mortgage business big-time, homebuilders helped fuel the housing crisis. Now they're hurting—and so is Wall Street." by Mara Der Hovanesian, BusinessWeek. Go to the Story.

"Traditional mortgage companies and banks unleashed a barrage of loans, many to borrowers with iffy credit histories who didn't bother to read the fine print about upwardly mobile interest rates. Wall Street egged on the often-reckless underwriting by buying vast quantities of home loans for repackaging as securities. Now that the boom has fizzled and foreclosure rates are rising, the important role of large homebuilders as lenders is also coming into sharper focus."

"Even as the housing supply began to exceed demand last year, builders kept sales brisk by pushing adjustable-rate, interest-only, and other risky loans."

STEALING FROM THE FUTURE
Now it's payback time. It is likely to take two to three years, by various estimates, for the excess supply to be soaked up. The boom stole sales from the future as people bought houses earlier than they might have a few years ago. From the same issue of BusinessWeek, by Peter Coy. Go to the Full Story.

Labels: Bay Area Real Estate, BusinessWeek, Foreclosure, Home Builders, Interest Rate, Mortgage Lenders, Real Estate Cycles, Subprime Loans, Wall Street

Subprime problems mean 100% financing harder to get, by Eve Mitchell, Median Staff.

Thinking about refinancing a mortgage or getting a no-money-down loan to buy a home? Something that was relatively easy to do several months ago may be a lot harder in today's stricter lending environment.

In recent months, many lenders have tightened underwriting standards for no-money-down loans, also known as 100 percent financing, in response to the subprime mortgage mess that has seen foreclosure activity soar this year.

The upshot is that today many borrowers are finding it harder to get a loan than a few months ago even though interest rates are at the same level as last year. To qualify, borrowers may find that they will need to document their income, bolster their savings or find a co-signer.

Those who are getting hit hardest by the tightening loan standards are those with low credit scores, subprime borrowers and people who are unable or unwilling to document their income, mortgage experts say.

So what do people need to get a loan if they are having a hard time in today's lending environment? The Full Story and Tips can be viewed HERE.

A related story from U S News; "Lenders Crack Down After Subprime Collapse."

And from BusineeWeek; "The Subprime Mess, Let the Blame Begin."

Labels: Bay Area Real Estate, BusinessWeek, Contra Costa Times, Interest Rate, Real Estate Cycles, Subprime Loans

"As soon as a lender raises the red flag, scammers descend. Here's how they wind up holding the deed."

This is an article by Dean Foust & Brian Burnsed of BusinessWeek.

MILLIONS OF TARGETS
In most states, it's not illegal for one person to persuade another to sign his or her home over. And proving it was done through deceptive means can be tricky if the promises to help the owner were made verbally, as is often the case. So many victims have little recourse except through civil proceedings. But with the number of foreclosures estimated to soar to more than 2 million over the next couple of years, more and more policymakers are scrambling to keep the situation from turning into an epidemic by enacting tougher penalties for such practices.

View the entire article HERE.

California Foreclosure Activity Jumps Again. DataQuick

Foreclosures Hit 37-Year High. Realtor Magazine Online

“Legal Guide to Foreclosure-related Transactions" C.A.R.

The Foreclosure Report from Mike at Patagonia Finance

Labels: Bay Area Real Estate, BusinessWeek, CAR, DataQuick, Interest Rate, Real Estate Cycles, Realtor Magazine

"Implosion hitting would-be homeowners, desperate sellers hard, but some see a reflection of safe practices."

"It's essentially eliminating 15 (percent) to 20 percent of the market," said Ed Leamer, director of the UCLA Anderson Forecast. "What drove the California marketplace wasn't foreign borrowers but entry-level buyers helped into the market by exotic loans." as quoted in an article By Barbara E. Hernandez of the CONTRA COSTA TIMES. Read the entire article HERE.

"Problems in mortgage lending go "well beyond subprime," and the tightening of loan underwriting standards now underway is likely to push demand for homes down 15 percent and depress prices by 5 percent this year. Quoted from Inman's Matt Carter, Here for the rest of the article."

That's the rather gloomy forecast by analysts who follow the stocks of major home builders for Banc of America Securities LLC.

"In a report issued Tuesday, "Dissecting the Mortgage Distress," BAS analysts said there's already an excess supply of 800,000 existing homes on the market, and another 300,000 will soon be added to inventories through foreclosure."

But the biggest problem facing housing markets may be the tightening of credit that's taking place as lenders put the brakes on risky loans including low-documentation and zero-down-payment mortgages, the report said.

"We expect loans with a combination of low FICO scores and high (loan-to-value ratios) will end or tighten with many buyers choosing to remain as renters," wrote BAS analyst Daniel Oppenheim. BAS is a subsidiary of Bank of America Corp.

"BAS expects home prices to fall by 5 percent in 2007. Coming on the heels of a 2 percent price decline in 2006, the 7 percent cumulative price drop would be the largest decline in home prices since the early 1980s."

"Falling prices are likely to cause even more defaults and foreclosures, BAS analysts said."

"We do not anticipate that the mortgage credit issues are solely a result of the loan underwriting from '06," the report noted. "Rather, our view is that a primary driver of the problem is the decline in home prices, which leaves some households owing more on their mortgage than their home is worth."

"A First American CoreLogic Inc. study released Monday contained a similar finding, predicting that each 1 percent reduction in home prices will result in an additional 70,000 foreclosures." - Subprime lending meltdown seen as threat to economy

"The meltdown in subprime lending could have broader impacts on the economy, as mortgage lenders tighten restrictions on a broad spectrum of loans including those made to small businesses, said Christian E. Weller, senior economist at the Center for American Progress."

"With subprime lenders pulling back, it means fewer people can enter the market, because people looking to sell their homes have a harder time doing so, or must lower their price," Weller said. "Prices stagnate, there are fewer home sales, home construction and home equity cash outs."

Top subprime lenders: Where are they now?

2006 subprime loan performance will be worst in a decade

"Traps of Easy Credit" Reckless lending to blame for mortgage woes - James Grant

Exotic loans become commonplace

"Lenders began offering nontraditional loans that allowed borrowers to purchase homes they might not otherwise have been able to afford, especially in markets where home prices had seen annual increases at double-digit rates."

"These nontraditional or "exotic" loan types, such as payment-option ARM and interest-only loans, allowed borrowers to start out making monthly payments that in some cases didn't even cover all of the interest owed on a loan, let alone the payback on any of a loan's principal."

"If the loans that fueled the boom become unavailable, first-time home buyers who are ready to make the plunge may be unable to obtain loans that suit their needs. Even homeowners with sensible loans could get hurt in the fallout, because of the ripple effect that would take place if sellers who are ready to move up to pricier digs aren't able to sell their starter homes to first-time buyers."

Labels: Bay Area Real Estate, BusinessWeek, Fico Score, Inman News, Interest Rate, Real Estate Cycles, Subprime Loans, UCLA Anderson Forecast

So this is the much-feared "housing bust"? Bust Lite is more like it. Existing-home prices are as high as they were a year ago, while sales have receded only to 2003 levels. The only extreme decline is in construction: Builders are trying to get rid of the houses they've already built before they put up more. The overhang of unsold homes could be back to normal by around midyear.

Read the full article written by Peter Coy from BusinessWeek, HERE.

Low rates are a major factor

There's a related article in the same February 19, 2007 issue of BusinessWeek, entitled, "It's a Low, Low, Low, Low-Rate World," written by Michael Mandel and David Henry, that support "the surprise that low rates are still keeping the floor under housing."

Money is cheap. And some experts say it could stay that way for years. That's creating opportunity—and brand new risks

Labels: Bay Area Real Estate, BusinessWeek, Housing Bust, Interest Rate, Low Rate, Real Estate Cycles