Price Solves Inventory Problem:Dalton Sells Out

Maybe it was the tax break or maybe it was just the heady rush of shouting a number higher than the guy next to you, but that auction really worked out for the Dalton this past weekend. All 34 condos on the block sold (one of the units at the site was already in escrow). Debi Roks, a project manager for auction company Kennedy-Wilson, tells us the event was standing room only. She couldn't share specific prices, but everything went for under the latest asking prices (unshockingly), which were between $349,000 for a 684 square feet loft with one bath and $779,000 for a 1,721 square feet two bedroom, two and a half bathroom condo with a rooftop deck. Starting bids ranged from $165,000 to $395,000. For the inside scoop on Pasadena Real Estate and Pasadena Foreclosures visit our friends at www.rivasestates.com

Just Stop Waiting for the Perfect Rate

We speak to dozens of folks that are some way or the other waiting for rates to get lower than the 5% 5Y or 5.75% 30Y Fixed 2 million dollar jumbo they were quoted. Of course, who doesn't want a lower cost on something. Especially a budget item that represents roughly 20-30% of household income. But several factors could make waiting a disaster.

1. Home values continue to fall and your equity is diminished thus resulting in cash required to close. Primarily because loan to value levels in general within the jumbo mortgage market require at least 20% or more equity. Depends on the loan amount and the city/state.



2. The dollar and US based interest rates start to move higher because of a global view that the US is a riskier place to invest/lend. This has started to happen in the last few weeks. The US Dollar vs a global basket of other curriences has started to fall:

The value of the dollar rose nicely after the currency was viewed as a safe haven in Jan till March. Then the full breadth and scope of the recession(newpression?) plus the enormous costs of the bailouts investors(our creditors) began to move away from holding dollars and investing funds in US invesments.

3. The third largest risk is that all the government borrowing by countries around the world crowd out and soak up funds that normally would be put to work in the mortgage market. Here is the chart for what the US Treasury 10Y is currently going for:

Now, this isn't a disaster yet but today the US Government is having to pay 3.35% for ten year money vs about 2.50% range less than eight weeks ago. The enormous stimulus that congress passed has to be paid for right? The US goverment doesn't have any money. We basically have a line of credit with the rest of the world sitting at 11-12 TRILLION dollars owed now. This works out to about 37k for every man, woman and child in this country. See more here.

If investors/lenders decide that the US is a big credit risk then regular mortgage borrowers could be painted with the same brush and see much higher mortgage rates in the future. If you don't believe me and you want someone with some weight how about the manager of the largest bond group in the world? They manage about $750 billion.

If you don't want to play the jumbo mortgage rate casino game anymore with your house, Contact our office or another mortgage professional and get something done. It is better to lock and be wrong than to ride the interest rate rollercoaster in the coming years and regret it.

Bailout Line Gets Longer

The endless bailout line gets longer -- and why we're going about this the wrong way

The seemingly endless line of companies looking for taxpayer-funded bailouts just keeps getting longer, and the folks in Washington show no sign of forcing anyone out of it. This morning, we've learned that life insurance firms will receive aid from the TARP.

From the Wall Street Journal:

"The Treasury Department has decided to extend bailout funds to a number of struggling life-insurance companies, helping an industry that is a lynch pin of the U.S. financial system, people familiar with the matter said.

"The department is expected to announce the expansion of the Troubled Asset Relief Program to aid the ailing industry within the next several days, these people said.

"The news will come as a relief to a number of iconic American companies that have suffered big losses made worse by generous promises to buyers of some investment products. Shares of life insurers have fallen more than 40% this year. Their troubles led to a string of rating-agency downgrades that, in a vicious cycle, made it more difficult for some insurers to raise funds.

"The life-insurance industry is an important piece of the U.S. financial system. Millions of Americans have entrusted their families' financial safety to these companies, so keeping them on solid footing is crucial to maintaining confidence. If massive numbers of customers sought to redeem their policies, it could cause a cash crunch for some companies. And because insurers invest the premiums they receive from customers into bonds, real estate and other investments, they are major holders of securities. If they needed to sell off holdings to raise cash, it could cause markets to tumble.

"The decision by the Treasury Department adds a third industry to the banks and auto companies that have already received bailouts from the government. While American International Group Inc. is a major insurer and is the biggest recipient of government money, its problems weren't caused by its life-insurance operations, but derivative bets that went bad."

You know what my biggest problem with all these bailouts is? No one seems to be denied! Money is given to almost anyone and everyone. What we SHOULD be doing is what nurses and doctors do in the ER -- triage. Figure out which institutions are too weak to survive and euthanize them. Deny them bailout money. Let them fail. Then let their stronger competitors pick over their carcasses. Bolster those stronger companies with aid if need be.

Washington isn't doing that, though. Take the banking industry "stress test." Policymakers have already said that if any institution fails the test, they'll get time to raise money or will be injected with government capital. Huh? What's the sense in that? Why aren't we weeding out the weak, allowing them to fail and parcelling up their businesses to their stronger, surviving brethren?

It's like having two people showing up to get their driver's license -- one of whom gets a 100% on the computer-based test and passes the driving portion with flying colors ... and another who shows up drunk, crashes into the curb twice, and spends the rest of the time hitting on his instructor. Should both people really be given a license? Wouldn't it make more sense to pass the good guy and fail the other -- or send him off to jail? I just don't get this attitude where every institution is above average (or treated that way). By the way,(cue:shameless promo music) the line to get a jumbo mortgage is long but folks are locking in low 5% on 5Y and 7Y ARMS and mid 5% 30Y Fixed jumbo mortgage rates. Have a great weekend.

How High-Income Clients Can Prepare For Lending's Next Big Wave

Four times annually, the Federal Reserve surveys 84 banks around the country regarding their general lending standards.

One of the survey questions asks about current mortgage lending standards and whether it's getting harder, or easier, to get approved for a home loan.

In the most recent survey, 75 percent of the banks said they're making it harder for "prime" borrowers to get a home loan.

That means you, Mr. Lawyer. And, Dr.Doctor.

A six-figure income with A-plus credit won't get you carte blanche with the bank anymore. Lenders stopped fighting over the right to collect your interest payments months ago.

Today, they're more worried about you defaulting. Something about 250k bank and finance jobs toasted in the last year and the deep recession makes investors a little worried. No ONE is immune from the big waves sweeping over the credit markets.

The first wave of lender tightening eased into the books earlier this year. Most changes were focused on the borrower's individual credit characteristics including income, assets, and credit score.

The second wave of tightened, however, has been completely out of the mortgage applicant's hands. It's collateral -- the fancy bank term for "what your home is worth". Banks are very concerned about collateral.

Mortgage lenders read the papers, too, and they know that home values are falling or are flat in most neighborhoods. There's a recovery underway, but it's not going to be immediate.

Therefore, many banks assume that the 80 percent home loan made today will be a 85 percent home loan sometime in 2009 and having less than 20% equity in a home is not where the banks want you to be -- especially with joblessness on the rise and a loads of unanswered questions about the economy.

For homeowners with jumbo or super-jumbo mortgages, this loan-to-value change will resonate deeply. Just this morning, for example, one of the country's largest niche lenders dramatically lowered its maximum LTV ratios for prime borrowers.

Look at how it changes the borrowing landscape for a condo buyer in Chicago with strong income and excellent credit:

• Yesterday: 20% downpayment required, second mortgage permissable for 5%


• Today : 25-30% downpayment required, no second mortgage permissable
• Sure we have investors willing to gamble a little and do 10-15% down but who really wants a 8% mortgage!? BTW, these are the same guys you see playing 50k a hand blackjack at the Venitian.

In other markets, where home values are more dubious, like California, downpayment requirements can be even higher.

Now, this isn't to say that prime borrowers won't get approved for home loans -- it's just meant to tell the street-level story of what's going on. There are a lot of people in cities like Chicago or Cincinnati that were first-time home buyers between 2002-2006. For those homeowners, the only mortgage approval system of which they know is one that's based on them -- their FICO, income and ability to fog a mirror.

Today, it's The Triangle + Rock Solid Appraised Value.

This is why prime borrowers are finding it harder to get a mortgage -- it doesn't matter what you look like on paper, it's what you and your home look like on paper.

The market will likely to tighten further in the near-term so the best way to prepare for is to ask good questions in advance of your actual needs. A proactive plan always works better than a reactive one.

If buying a home or refinancing one is in your plans for December 2008, or January-March 2009, reach out to your loan officer to find out how changing guidelines for prime borrowers can impact you. Especially if you're a jumbo or super-jumbo borrower. Also, we are very excited to have added a niche portfolio lender that can do a 30Y Fixed Jumbo throughout the country in the low 6% range for the solid "money good" credit client. Contact our office to check out our jumbo mortgage rates for your home purchase or refinance. As always, no pressue and no obligation beyond a short chat.

BUY FORECLOSURES, PASADENA REO'S

Pasadena Foreclosures

Did you know that you can buy Pasadena foreclosed homes for almost a 100% financed? There are great loans such as FHA, VA, and CALHFA loans (designed for people in education). All of which only require 3% down payments.


There has never been a better time than right now to live the American Dream of owning a home. This is definately a buyer's market, and many banks are unloading foreclosed homes for below market value plus paying the buyer's closing costs.

Search Pasadena foreclosures.

Q: Is there any "Risk" in purchasing foreclosures?

A: Yes, but lets see the reward...

Reward by taking a "Risk"

Purchasing a bank owned home may be an As-Is purchase, but you have the same rights as in purchasing any other home. By hiring a professional inspection company, you can know in detail what faults the home may have. Many times the items will be quick fix-it items. Therefore, make sure you have an "Inspection Contingency Period" and if the home is not what you thought it was, then cancel the deal.

Just think about all those shows like: HGTV's Designed to Sell, Armando Montelongo's Flip This House, and other home improvement shows. I bet you thought.... "Wow, I could have done that!" Be like Nike, and Just Do It!

And yes, the rumor is true that in many foreclosed homes you may see missing doors, missing knobs and in some cases even missing kitchens! You have heard the saying, "Risk vs Rewards." Take the "Risk" in buying a foreclosed home and get a killer deal! After a couple trips to Home Depot and putting a little sweat equity, you will see in the end that it was all worth it.

If you have been considering buying a Pasadena Foreclosure, call Ramiro Rivas & Associates at 626-497-4606 or visit http://www.soldbyramiro.com/ .

Mortgage Industry will say NO more often.

In a move that will stymie thousands of would-be home buyers and homeowners, Fannie Mae announced another round of mortgage guidelines changes a few weeks ago that will have a huge impact.

Unlike past revisions in which Fannie Mae tightened debt ratio and credit scoring requirements, however, the newest underwriting updates home equity and home buyer downpayments.

This is consistent with the emerging underwriting philosophy that Collateral is King.

No home equity, no downpayment, no loan.

Effective December 13, 2008, Fannie Mae will enforce the following single-family residence restrictions:

• Primary residence, "cash out" refinances are limited to 85% loan-to-value



• Second home, cash out refinances are limited to 75% loan-to-value



• Investment properties cannot be refinanced without a 25% equity position

Each bullet point represents a 5 percent tightening over the previous guidelines.

Now, to be clear, Fannie Mae isn't the only source for mortgage money. The others are comprised by the FHA, the VA, and an innumerable amount of portfolio lenders. To date, these groups have yet to announce similar loan-to-value restrictions.

But, because Fannie Mae (along with Freddie Mac) guarantees almost half of the nation's home loans, it does swing a big stick. Historically, when Fannie Mae gets tight with its money, the other groups tend to follow.

Starting 45 days from now, qualifying for a conforming mortgage will require more home equity than at any time since 2003.

Now, there are a lot of people sitting around right now, waiting for mortgage rates to fall before buying or refinancing their home.

I'd offer a more prudent idea: Just get on with it already.

None of us can predict what where mortgage rates will go. Recession, inflation, whatever -- it's a big mystery. But, we do know with 100% certainty that guidelines will tighten effective December 13, 2008, and it will prohibit Americans from getting access to mortgages.

We know this because Fannie Mae published it on its Web site.

If you're buying a home or in need of a refinance, consider moving up your timeline. If rates fall after-the-fact, you can always try to refinance into something less expensive. But if guidelines shut you out, there's nothing you can do about in hindsight.

If you know you need a conforming mortgage or a jumbo mortgage, just take care of it. Great low rates don't mean a thing if you can't get qualified. And starting December 13, 2008, the qualifying hurdles are going to be raised.

First Time Buyer Credit: Really a 0% Loan

I’ve been seeing quite a few agents and lenders using the $7,500 1st Time Buyer “Credit” in their promotional materials aimed at first time buyers. Be careful out there as many people “explaining” this “credit” to first time buyers are not including the part where it has to be repaid. The first payment of $500 begins two years after you receive the “Credit” and continues for 15 years. If you sell the property at a profit before the $7,500 is paid back, the balance is due when you sell. On the bright side, it does appear that if you do not have enough “profit” to repay the interest free loan of $7,500…it is forgiven.

Excerpted from FAQ’s On the $7,500 1st Time Buyer “Credit”:

“ …Because the tax credit must be repaid, it operates like a zero-interest loan….The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.”

“…the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale…if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed.”

“…this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales.”

It’s not that I’m against a stimulus package for increasing homes sales, but you have to wonder how many people see CREDIT and understand LOAN? They really should call it a $7,500 1st Time Buyer Interest Free LOAN. And for all you mortage and real estate professionals, maybe we understand why the government has to call it a TAX CREDIT, but to be sure your clients know the amount has to be repaid, you should call it an interest free loan when explaining it to your clients. As always consult a CPA or accountant for further clarification.