Many of our clients have asked about the Economic Stimulus package and the conforming loan limits. We hope that this article answers your questions. If you would like to discuss in more details, please feel free to contact us.
LA Real Estate Group
info@myLARealEstateGroup.com
http://www.mylarealestategroup.com/
323.704.7129
As part of the Economic Stimulus package, Congress has enacted legislation that will raise the conforming loan limit to $729,750 in high cost states (from current $417,000) for loans originated through December 31, 2008.
Conforming loan rates are currently at multi-year lows -- approximately 5.5% -- as opposed to jumbo loans (above the current conforming loan limit of $417,000), which hover in the 6.5% range.
Buyers or those refinancing in the $450,000 - $850,000 price range in Los Angeles can expect to see a decrease in their projected monthly costs.
For a $600,000 loan, the current monthly payment (prinicipal and interest) is $3,792 -- $385/month more than the projected monthly payment of $3,407 under the new guidelines.
he current monthly cost of a $750,000 home (with 20% downpayment, principal, interest, property tax and insurance) is $4,581, equivalent to the monthly cost of an $820,000 home financed at 5.5%. Under proposed terms, buyers will have a 9.3% increase in purchasing power.
In the local market, where sales volume has been down 25 - 60%, expect activity for homes under $1 million to pick up as buyers capitalize on their increased spending power.
It's unclear when the new funding guidelines will come into effect. Given that the expiration date on the incentive is December 31, 2008, one can anticipate changes in the near term.
What's also unclear is what the new conforming loan limits will be for 2-,3- and 4-unit properties. Currently the limits are set at $533,850, $645,3000 and $801,950, respectively.
The single family home loan limit increase is $312,750 -- or 75%. This would translate into new conforming loan limits of $934,237, $1,129,275 and $1,429,162, respectively, for 2-,3- and 4-unit properties.
With Los Angeles' strong rental demand, these new loan limits could create an excellent buying environment for duplexes, triplexes and four-plexes.
Consult a lender to evaluate affordability under these new guidelines. Buyers should take advantage of reduced interest rates and the slow market to purchase properties under the best terms since 2005.
Wednesday, March 26, 2008
Saturday, March 22, 2008
Texting & driving... never loose another great thought
We came across this free service that translates your speech into an email or text message and sends it for you. You can also make to do lists or reminders that is sent to yourself. I personally tried this and it is very accurate.
JOTT is an online FREE service that translates your speech into an email and sends it for you. It is unbelievably accurate and simple to set up on line. You just enter your contact (you can even upload a bunch through csv), you don’t even have to enter a voice tag, it just knows??? (Spooky). Seriously how many times have you caught yourself texting while driving and said to yourself I shouldn't be doing this???
Anyway, never worry about loosing a great thought again, just pick up your phone (speed) dial JOTT, tell it to call “yourself” and start talking….when you get done (hee hee), you grab the email and VIOLA! you are a genius.
“Stop” “Learn” “Grow” “Prosper”
JOTT is an online FREE service that translates your speech into an email and sends it for you. It is unbelievably accurate and simple to set up on line. You just enter your contact (you can even upload a bunch through csv), you don’t even have to enter a voice tag, it just knows??? (Spooky). Seriously how many times have you caught yourself texting while driving and said to yourself I shouldn't be doing this???
Anyway, never worry about loosing a great thought again, just pick up your phone (speed) dial JOTT, tell it to call “yourself” and start talking….when you get done (hee hee), you grab the email and VIOLA! you are a genius.
“Stop” “Learn” “Grow” “Prosper”
Thursday, March 20, 2008
Buying Foreclosures
Many clients ask us about foreclosures. We hope that this post will answer some of your questions in this area that seems to be of much interest in today's market.
California homeowners are defaulting in record numbers andforeclosures in California will get worse before it gets any better. Foreclosure Sale signs are now common in many communities and can be easily found in many MLS searches in California. Some counties are reporting over 250% rise in foreclosures from 2006.
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments and the lender files a public default notice.
California homeowners are defaulting in record numbers andforeclosures in California will get worse before it gets any better. Foreclosure Sale signs are now common in many communities and can be easily found in many MLS searches in California. Some counties are reporting over 250% rise in foreclosures from 2006.
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments and the lender files a public default notice.
The foreclosure process can end one of four ways:
- The borrower/owner pays off the default amount to reinstate the loan during a grace period known as pre-foreclosure
- The borrower/owner sells the property to a third party during pre-foreclosure, allowing the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history
- A third party buys the property at a public auction at the end of the pre-foreclosure period
- The lender takes ownership of the property, usually with the intent to re-sell. The lender can take ownership through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction.
This process allows for three opportunities for finding bargains on foreclosure homes.
Pre-Foreclosure (NOD, LIS):
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.
Auction (NTS, NFS):
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.
Bank-owned (REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.
LA Real Estate Group can assist buyers, seller and investors with services including;
- Assist home owners that have received Notice Of Default (NOD), Lis Pendes (LIS) or Notice Of Sale (NOS/NFS) avoid damage to their credit by negotiating short sales with the mortgage provider, sell the home before foreclosures or take over the existing loands
ind investment opportunities for investors that are interested in short sales, foreclosures and bank owned properties - Assist home buyers who want to take advantage of the current market and foreclosures.
Useful Links:
Please contact us if you would like to discuss how we can help you with investing in foreclosures or if you have received a notice of default from your bank.
What is this Credit Crisis I've been hearing about?
We've been getting a lot of questions from clients, friends, business associates and the like on what exactly the "Credit Crisis" is; which the media has been hyping and splashing all over the news lately.
This is a great article... It's a quick 5 minute read and will give you a great general idea of what the "Credit Crisis" really is and how it has come about.
"What is this Credit Crisis I've been hearing about?":
March 19, 2008ECONOMIC SCENE
Can't Grasp Credit Crisis? Join the Club By DAVID LEONHARDT
Raise your hand if you don't quite understand this whole financial crisis. It has been going on for seven months now, and many people probably feel as if they should understand it. But they don't, not really. The part about the housing crash seems simple enough. With banks whispering sweet encouragement, people bought homes they couldn't afford, and now they are falling behind on their mortgages. But the overwhelming majority of homeowners are doing just fine. So how is it that a mess concentrated in one part of the mortgage business — subprime loans — has frozen the credit markets, sent stock markets gyrating, caused the collapse of Bear Stearns, left the economy on the brink of the worst recession in a generation and forced the Federal Reserve to take its boldest action since the Depression? I'm here to urge you not to feel sheepish. This may not be entirely comforting, but your confusion is shared by many people who are in the middle of the crisis. "We're exposing parts of the capital markets that most of us had never heard of," Ethan Harris, a top Lehman Brothers economist, said last week. Robert Rubin, the former Treasury secretary and current Citigroup executive, has said that he hadn't heard of "liquidity puts," an obscure kind of financial contract, until they started causing big problems for Citigroup.
I spent a good part of the last few days calling people on Wall Street and in the government to ask one question, "Can you try to explain this to me?" When they finished, I often had a highly sophisticated follow-up question: "Can you try again?" I emerged thinking that all the uncertainty has created a panic that is partly unfounded. That said, the crisis isn't close to ending, either. Ben Bernanke, the Federal Reserve chairman, won't be able to wave a magic wand and make everything better, no matter how many more times he cuts rates. As Mr. Bernanke himself has suggested, the only thing that will end the crisis is the end of the housing bust. So let's go back to the beginning of the boom. It really started in 1998, when large numbers of people decided that real estate, which still hadn't recovered from the early 1990s slump, had become a bargain.
At the same time, Wall Street was making it easier for buyers to get loans. It was transforming the mortgage business from a local one, centered around banks, to a global one, in which investors from almost anywhere could pool money to lend. The new competition brought down mortgage fees and spurred some useful innovation. Why, after all, should someone who knows that she's going to move after just a few years have no choice but to take out a 30-year fixed-rate mortgage? As is often the case with innovations, though, there was soon too much of a good thing. Those same global investors, flush with cash from Asia's boom or rising oil prices, demanded good returns. Wall Street had an answer: subprime mortgages. Because these loans go to people stretching to afford a house, they come with higher interest rates — even if they're disguised by low initial rates — and thus higher returns. The mortgages were then sliced into pieces and bundled into investments, often known as collateralized debt obligations, or C.D.O.'s (a term that appeared in this newspaper only three times before 2005, but almost every week since last summer).
Once bundled, different types of mortgages could be sold to different groups of investors. Investors then goosed their returns through leverage, the oldest strategy around. They made $100 million bets with only $1 million of their own money and $99 million in debt. If the value of the investment rose to just $101 million, the investors would double their money. Home buyers did the same thing, by putting little money down on new houses, notes Mark Zandi of Moody's Economy.com. The Fed under Alan Greenspan helped make it all possible, sharply reducing interest rates, to prevent a double-dip recession after the technology bust of 2000, and then keeping them low for several years. All these investments, of course, were highly risky. Higher returns almost always come with greater risk. But people — by "people," I'm referring here to Mr. Greenspan, Mr. Bernanke, the top executives of almost every Wall Street firm and a majority of American homeowners — decided that the usual rules didn't apply because home prices nationwide had never fallen before. Based on that idea, prices rose ever higher — so high, says Robert Barbera of ITG, an investment firm, that they were destined to fall. It was a self-defeating prophecy. And it largely explains why the mortgage mess has had such ripple effects. The American home seemed like such a sure bet that a huge portion of the global financial system ended up owning a piece of it.Last summer, many policy makers were hoping that the crisis wouldn't spread to traditional banks, like Citibank, because they had sold off the underlying mortgages to investors.
But it turned out that many banks had also sold complex insurance policies on the mortgage debt.That left them on the hook when homeowners who had taken out a wishful-thinking mortgage could no longer get out of it by flipping their house for a profit. Many of these bets were not huge, but were so highly leveraged that any losses became magnified. If that $100 million investment I described above were to lose just $1 million of its value, the investor who put up only $1 million would lose everything. That's why a hedge fund associated with the prestigious Carlyle Group collapsed last week. "If anything goes awry, these dominos fall very fast," said Charles R.Morris, a former banker who tells the story of the crisis in a new book, "The Trillion Dollar Meltdown." This toxic combination — the ubiquity of bad investments and their potential to mushroom — has shocked Wall Street into a state of deep conservatism. The soundness of any investment firm depends largely on other firms having confidence that it has real assets standing behind its bets. So firms are now hoarding cash instead of lending it, until they understand how bad the housing crash will become and how exposed to it they are. Any institution that seems to have a high-risk portfolio, regardless of whether it has enough assets to support the portfolio, faces the double whammy of investors demanding their money back and lenders shutting the door in their face.
Goodbye, Bear Stearns. The conservatism has gone so far that it's affecting many solid would-be borrowers, which, in turn, is hurting the broader economy and aggravating Wall Streets fears. A recession could cause credit card loans and other forms of debt, some of which were also based on over exuberance, to start going bad as well. Many economists, on the right and the left, now argue that the only solution is for the federal government to step in and buy some of the unwanted debt, as the Fed began doing last weekend. This is called a bailout, and there is no doubt that giving a handout to Wall Street lenders or foolish home buyers — as opposed to, say, laid-off factory workers — is deeply distasteful. At this point, though, the alternative may be worse. Bubbles lead to busts. Busts lead to panics. And panics can lead to long, deep economic downturns, which is why the Fed has been taking unprecedented actions to restore confidence.
"You say, my goodness, how could subprime mortgage loans take out the whole global financial system?" Mr. Zandi said. "That's how."
This is a great article... It's a quick 5 minute read and will give you a great general idea of what the "Credit Crisis" really is and how it has come about.
"What is this Credit Crisis I've been hearing about?":
March 19, 2008ECONOMIC SCENE
Can't Grasp Credit Crisis? Join the Club By DAVID LEONHARDT
Raise your hand if you don't quite understand this whole financial crisis. It has been going on for seven months now, and many people probably feel as if they should understand it. But they don't, not really. The part about the housing crash seems simple enough. With banks whispering sweet encouragement, people bought homes they couldn't afford, and now they are falling behind on their mortgages. But the overwhelming majority of homeowners are doing just fine. So how is it that a mess concentrated in one part of the mortgage business — subprime loans — has frozen the credit markets, sent stock markets gyrating, caused the collapse of Bear Stearns, left the economy on the brink of the worst recession in a generation and forced the Federal Reserve to take its boldest action since the Depression? I'm here to urge you not to feel sheepish. This may not be entirely comforting, but your confusion is shared by many people who are in the middle of the crisis. "We're exposing parts of the capital markets that most of us had never heard of," Ethan Harris, a top Lehman Brothers economist, said last week. Robert Rubin, the former Treasury secretary and current Citigroup executive, has said that he hadn't heard of "liquidity puts," an obscure kind of financial contract, until they started causing big problems for Citigroup.
I spent a good part of the last few days calling people on Wall Street and in the government to ask one question, "Can you try to explain this to me?" When they finished, I often had a highly sophisticated follow-up question: "Can you try again?" I emerged thinking that all the uncertainty has created a panic that is partly unfounded. That said, the crisis isn't close to ending, either. Ben Bernanke, the Federal Reserve chairman, won't be able to wave a magic wand and make everything better, no matter how many more times he cuts rates. As Mr. Bernanke himself has suggested, the only thing that will end the crisis is the end of the housing bust. So let's go back to the beginning of the boom. It really started in 1998, when large numbers of people decided that real estate, which still hadn't recovered from the early 1990s slump, had become a bargain.
At the same time, Wall Street was making it easier for buyers to get loans. It was transforming the mortgage business from a local one, centered around banks, to a global one, in which investors from almost anywhere could pool money to lend. The new competition brought down mortgage fees and spurred some useful innovation. Why, after all, should someone who knows that she's going to move after just a few years have no choice but to take out a 30-year fixed-rate mortgage? As is often the case with innovations, though, there was soon too much of a good thing. Those same global investors, flush with cash from Asia's boom or rising oil prices, demanded good returns. Wall Street had an answer: subprime mortgages. Because these loans go to people stretching to afford a house, they come with higher interest rates — even if they're disguised by low initial rates — and thus higher returns. The mortgages were then sliced into pieces and bundled into investments, often known as collateralized debt obligations, or C.D.O.'s (a term that appeared in this newspaper only three times before 2005, but almost every week since last summer).
Once bundled, different types of mortgages could be sold to different groups of investors. Investors then goosed their returns through leverage, the oldest strategy around. They made $100 million bets with only $1 million of their own money and $99 million in debt. If the value of the investment rose to just $101 million, the investors would double their money. Home buyers did the same thing, by putting little money down on new houses, notes Mark Zandi of Moody's Economy.com. The Fed under Alan Greenspan helped make it all possible, sharply reducing interest rates, to prevent a double-dip recession after the technology bust of 2000, and then keeping them low for several years. All these investments, of course, were highly risky. Higher returns almost always come with greater risk. But people — by "people," I'm referring here to Mr. Greenspan, Mr. Bernanke, the top executives of almost every Wall Street firm and a majority of American homeowners — decided that the usual rules didn't apply because home prices nationwide had never fallen before. Based on that idea, prices rose ever higher — so high, says Robert Barbera of ITG, an investment firm, that they were destined to fall. It was a self-defeating prophecy. And it largely explains why the mortgage mess has had such ripple effects. The American home seemed like such a sure bet that a huge portion of the global financial system ended up owning a piece of it.Last summer, many policy makers were hoping that the crisis wouldn't spread to traditional banks, like Citibank, because they had sold off the underlying mortgages to investors.
But it turned out that many banks had also sold complex insurance policies on the mortgage debt.That left them on the hook when homeowners who had taken out a wishful-thinking mortgage could no longer get out of it by flipping their house for a profit. Many of these bets were not huge, but were so highly leveraged that any losses became magnified. If that $100 million investment I described above were to lose just $1 million of its value, the investor who put up only $1 million would lose everything. That's why a hedge fund associated with the prestigious Carlyle Group collapsed last week. "If anything goes awry, these dominos fall very fast," said Charles R.Morris, a former banker who tells the story of the crisis in a new book, "The Trillion Dollar Meltdown." This toxic combination — the ubiquity of bad investments and their potential to mushroom — has shocked Wall Street into a state of deep conservatism. The soundness of any investment firm depends largely on other firms having confidence that it has real assets standing behind its bets. So firms are now hoarding cash instead of lending it, until they understand how bad the housing crash will become and how exposed to it they are. Any institution that seems to have a high-risk portfolio, regardless of whether it has enough assets to support the portfolio, faces the double whammy of investors demanding their money back and lenders shutting the door in their face.
Goodbye, Bear Stearns. The conservatism has gone so far that it's affecting many solid would-be borrowers, which, in turn, is hurting the broader economy and aggravating Wall Streets fears. A recession could cause credit card loans and other forms of debt, some of which were also based on over exuberance, to start going bad as well. Many economists, on the right and the left, now argue that the only solution is for the federal government to step in and buy some of the unwanted debt, as the Fed began doing last weekend. This is called a bailout, and there is no doubt that giving a handout to Wall Street lenders or foolish home buyers — as opposed to, say, laid-off factory workers — is deeply distasteful. At this point, though, the alternative may be worse. Bubbles lead to busts. Busts lead to panics. And panics can lead to long, deep economic downturns, which is why the Fed has been taking unprecedented actions to restore confidence.
"You say, my goodness, how could subprime mortgage loans take out the whole global financial system?" Mr. Zandi said. "That's how."
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