Why I cringe at area code 765

As a real estate investor, 3 years ago I thought I was the "golden girl" finding these great 50K single family home properties in Indiana renting at positive every year. It was a no brainer! 10% down and I'm cash flowin!

Well, in the midst of big autos crash and burn, me the individual investor is being heavily affected. 2 out of my 4 tenants have stopped paying for the last 2 months due to financial hardship and layoffs and I am now faced with evictions and small claims court. Thank the Lord for my great property management company that handles all of this, but my heart skips a beat every time I see their number pop up! What next! This is why I cringe. On the bright side, my 2 other tenants have been paying their rents for now. Just have to ride it out....

Lessons Learned:
1) Avoid investing in residential areas supported by Big Auto (duh!)
2) Prepare a reserve fund of at least 6 months just in case of situations like these
3) Always screen your renter-check credit and rental history

Extra Extra...Fed Announces $750 Billion More!

From my Friends at Intero Mortgage~

Big news hit the wires yesterday afternoon, as the Fed made a blockbuster announcement that sent Mortgage Bonds into rally mode. The Federal Reserve announced that over the course of 2009, they will purchase an additional $750B of Mortgage Backed Securities in an effort to help shore up the housing market and keep home loan rates low. They had already committed to buying $500B which started in January and was to run until June of 2009. Now they’ve committed this additional $750B to keep the program running until the end of the year or more. On the announcement, Mortgage Bonds exploded higher, leaving prices within whiskers of the best levels ever.

However, most of the media talks and news paper articles this morning are over stating what will take place. The rates will not necessarily drop to 4.5% because of this move. Rather the interest rates will be based on which coupons the Fed purchases. The Fed has not said that they will be buying the lower 4.0% or 4.5% coupon of Fannie/Freddie securities. They’ve not said what coupon level it will be at this point in time. This move will however, help to prolong the interest rate environment that we are already in! And because lenders are still not working at max capacity, they are very likely not going to pass all the gains through to the consumer. The good news is that perhaps this will help lenders feel more comfortable staffing up a bit, as this purchase program will certainly keep rates from moving significantly higher any time soon. Bottom line - although the media is already spinning it differently, this is still not a time for clients to stay on the fence, hoping and waiting for lower rates. Home loan rates remain within inches of all-time historic lows, but may not necessarily move significantly lower based on this purchasing plan - waiting is a very risky move.

The Fed also said they will purchase $300B in long term Treasuries...so why Treasuries? The Fed wants to keep the spread between Treasuries and Mortgage Bonds from widening, because as Mortgage Bond prices move higher, the yield or return on them may not be as attractive as those available in Treasuries. So if the Fed buys Treasuries, the yield on those instruments will also be driven lower, thereby keeping a normal spread between Treasuries and Mortgage Bonds.

Now...something else worth paying attention to - since yesterday's Fed Meeting, the US Dollar has gotten clocked, as the aggressive Fed moves appear quite inflationary. In turn, this has pushed Oil up to $51 per barrel, nearly $5 higher since yesterday afternoon. Gold, which is purchased as a hedge against inflation, is up near $950 an ounce - moving up $60 on the day! While we know there is no inflation at the present time, the chatter of future inflation could have a negative effect on Mortgage Bond prices ahead, or at least stifle their moves higher - yet another reason not to wait and to take advantage of the current historically low rates.

All this being said, we have seen the past a “honeymoon” phase after big announcements like this. That’s likely why bond prices improved dramatically yesterday, and rates are looking very good this morning! They honeymoon phase usually doesn’t last long as investors wake up to the reality of the situation as stated above.

Bank Owned Home Auctions!!! Don't be late!

I just returned from attending an auction for a bank owned home in San Jose and it was quite an experience. Basically, it was a bunch of bargain hunters gathered in a small cul-de-sac in front of the home being auctioned. There were a total of 3 different homes being auctioned.

The auctioneers were working out of the back of their trunk handing out registration cards and bright yellow bid cards. With a karaoke style microphone and an over the shoulder speaker, the auctioneer started the fast paced bidding lingo at 50K and within 10 minutes all the homes were auctioned off and everyone cleared out. There were 2 crawlers making sure no one got left out of the bidding, screaming "ohhh" " aah" everytime someones card went up. Crazy! If you were late you lost out. CLICK HERE TO SEE PHOTO.

I have more info on how these auctions work so ping me if you have questions. Don't forget your checkbook if you go to one of these. They won't let you bid without it.

Home Loan modification 101--Part 1

Ok..I have been getting a lot of emails and phone calls lately on home loan modifications so I'm going to have a series of posts dedicated to home loan modifications.

In this post, I'm going to tell you exactly what "Home Loan Modification" is and who qualifies for it. "Home Loan Modification" is also referred to as a "Loss Mitigation Program." It is the process of renegotiating one's mortgage with their current lender. The definition of "loss mitigation" to the lender is to minimize their loss from a defaulting loan. Loss Mitigation is NOT based on credit or equity. It is solely based on the ability of the homeowner to afford some type of reasonable payment moving forward. A homeowner must exhibit one and / or a combination of the following qualities in order to be considered for loss mitigation by their lender.

1) Inability to afford their mortgage payment recently or currently. Most lenders will not consider the homeowner for loss mitigation unless they are behind in their payments OR they have an adjustable rate that is due to adjust within the next 90 to 120 days. The further behind the homeowner is, the higher the priority is with the lender.

2) A legitimate reason for falling behind on mortgage payments, known as HARDSHIP. We must be able to show that they have recovered or are recovering from the hardship or that the homeowner can afford to make a lower payment on a consistent basis. Legitimate HARDSHIP reasons include the following:

a) Increased expenses or decreased income. b) Rate or payment increase. c) Death in family, divorce, illness, incarceration and many other case by case situations. d) Lenders WILL NOT accept a HARDSHIP that the homeowner says they were tricked by a mortgage broker or any reason where the homeowner points the finger at the lender. I will follow up with more information.

Monday Stats..Inventory in the Rise again!

Here they come!! More homes have arrived on the market for the 3rd straight week in row. Pending transactions are also rising but the number of homes that are coming up for sale are just outnumbering the buyers. Come on buyers! It's ripe out there for the taking!

Single Family Homes
Week /Active/ Pending
3/2/09/ 4224 /1822
3/9/09/ 4300/ 1834
3/16/09/ 4318/ 1919

Condo/Townhomes
Week/ Active/ Pending
3/2/09/ 1504/ 573
3/9/09/ 1501/ 588
3/16/09/ 1513/ 592

Million dollar short sales and bank deals in the South Bay!

Nobody is immune to the economy! Check out this list of homes that are all $1 million dollars and above in the south bay! The picture to the left is a Palo Alto short sale asking $2.8 million.

All of these homes are either selling short or already owned by the bank. This list starts in San Jose and goes North to Palo Alto. I have a lot more info on these homes so give me a shout if you need more data.

4828 TUSCANY CI/$1000000/5beds/3baths/3153sf/San Jose/6534sf lot
2267 ELKHORN CT/$1025000/5beds/3baths/2876sf/San Jose/6000sf lot
2319 FAIRCREST DR/$1028000/5beds/3baths/3000sf/San Jose/4800sf lot
1503 CALCO CREEK DR/$1049000/4beds/3baths/2773sf/San Jose/32234sf lot
3533 CASABELLA CT/$1049000/4beds/3.5baths/3665sf/San Jose/8000sf lot
169 LLEWELLYN AV/$1050000/5beds/3baths/2801sf/Campbell/8200sf lot
1582 BELLEVILLE WY/$1069000/3beds/2baths/1603sf/Sunnyvale/16552sf lot
1274 CITY VIEW PL/$1084000/6+beds/4+baths/5316sf/San Jose/29400sf lot
13424 KODIAC PL/$1088888/4beds/3baths/2194sf/Saratoga/10454sf lot
3018 HIGH MEADOW LN/$1095000/4beds/3baths/2652sf/San Jose/12632sf lot
1831 ARROYO SECO DR/$1099000/3beds/2.5baths/3143sf/San Jose/11374sf lot
18518 PASEO TIERRA/$1099000/4beds/2.5baths/2330sf/Saratoga/10454sf lot
756 PECAN WY/$1100000/5beds/4+baths/2540sf/Campbell/7840sf lot
1692 LUCCA PL/$1150000/4beds/3.5baths/3486sf/San Jose/9147sf lot
588 MINNESOTA AV/$1175000/6+beds/4+baths/5115sf/San Jose/19166sf lot
15848 RICA VISTA WY/$1200000/5beds/4+baths/4779sf/San Jose/87120sf lot
16040 ESCOBAR AV/$1225000/3beds/3baths/2096sf/Los Gatos/8400sf lot
3385 IVAN WY/$1230000/4beds/2.5baths/2059sf/Mountain View/8034sf lot
1098 AMANDA LYNE CT/$1299000/5beds/3baths/3509sf/San Jose/8000sf lot
5356 LAUREL CANYON DR/$1350000/4beds/3baths/3155sf/San Jose/23522sf lot
3517 LA CASTELLET CT/$1350000/5beds/4+baths/3718sf/San Jose/6098sf lot
14201 WORDEN WY/$1364888/3beds/2baths/1899sf/Saratoga/13932sf lot
3647 SANTA CROCE CT/$1388888/4beds/3baths/3656sf/San Jose/12197sf lot
10187 BYRNE AV/$1398000/5beds/3baths/3318sf/Cupertino/11700sf lot
16041 BLOSSOM HILL RD/$1449000/4beds/3.5baths/3523sf/Los Gatos/13939sf lot
256 CASITAS BULEVAR/$1450000/4beds/2.5baths/2382sf/Los Gatos/11325sf lot
2633 CARMELLA CT/$1450000/5beds/4+baths/3574sf/San Jose/12632sf lot
16600 BOHLMAN RD/$1500000/4beds/2.5baths/2602sf/Saratoga/168141sf lot
1451 W HACIENDA AV/$1550000/5beds/4+baths/3436sf/Campbell/9147sf lot
2151 TERRENA VALLEY DR/$1550000/4beds/4+baths/4230sf/San Jose/29185sf lot
14805 FRUITVALE AV/$1579000/4beds/2baths/2432sf/Saratoga/43560sf lot
720 GREENVIEW PL/$1695000/3beds/2.5baths/2037sf/Los Altos/21280sf lot
1679 MOUNTAIRE LN/$1700000/6+beds/4+baths/6045sf/San Jose/14374sf lot
2527 BENTLEY RIDGE DR/$1800000/6+beds/4+baths/4827sf/San Jose/23086sf lot
21350 MCKEAN RD/$1945900/5beds/4+baths/5765sf/San Jose/293158sf lot
16449 LUCKY RD/$1949000/5beds/4+baths/4913sf/Monte Sereno/73616sf lot
731 BICKNELL RD/$1999950/6+beds/4+baths/4250sf/Los Gatos/34848sf lot
862 WAVERLEY ST #A/$2195000/3beds/3.5baths/2400sf/Palo Alto/4373sf lot
14190 VICTOR PL/$2300000/6+beds/4+baths/6028sf/Saratoga/12632sf lot
655 KINGSLEY AV/$2799000/5beds/4+baths/3700sf/Palo Alto/6634sf lot

Renegotiating your Loan

Many of my clients have found themselves in mortgage mayhem as adjustable rate mortgages start to adjust and payments dramatically increase. If you find yourself worrying about how you are going to make your next mortgage payment while keeping the lights on, you may want to give your lending institution a call to permanently lower your monthly payment. Here’s how:

1. Call the Bank: This is the bank that you pay your mortgage to every month. Grab your monthly mortgage statement and you should be able to find the contact information on the upper left or right hand corner of the statement. Ask for the “Loss Mitigation” department. If you get routed to customer service first, escalate to the supervisors and be persistent about speaking to a representative in Loss Mitigation to restructure/renegotiate your loan. Don't let them push you around!
   
2. Paint the Picture: Once you get to Loss Mitigation, explain to the representative why you are having a hard time paying your loan (you can also be proactive and do this prior to your loan adjusting). Be ready to provide solid financial documentation as they are not going to take your word for it. Once they receive all of your information they will run your Debt to Income Ratio just like they did when you were qualifying for your loan and determine whether you will be a candidate for renegotiation
3. Provide Paperwork: If your lender decides to let you renegotiate your loan, do WHATEVER they say and send in everything they ask for within the require time periods otherwise, you may blow the deal completely!

Once you provide everything they need, you should receive paperwork with new loan terms spelled out. CAREFULLY READ over the new terms carefully to ensure it’s what was agreed to over the phone.

P.S. As of right now, investment properties are currently NOT eligible for renegotiating.

Realtors on Home Values

I came across this interesting survey on Homegain.com outlining Realtor sentiment on home values across the nation. Very interesting for Realtors and consumers.
Bottom line:
1) Sellers are aware that home values are going down, but not necessarily their homes.

2) "A majority of HomeGain Realtor members believe home prices will continue to fall in the next six months and that the Obama stimulus package will do little to change the direction of home values.

http://tinyurl.com/bozav4

What do you think?

I'm going to have to agree with this article as the number of short sales and bank sales are flooding inventory, and sellers who are not in that category are having to compete against lower prices. It's going to be ugly out there for a while! Cash is King!

Monday numbers!! Slight drop in inventory~

I know I missed posting last weeks number so here is quick snapshot comparison.

SANTA CLARA COUNTY ONLY
Single Family Residences
Week/ Active/ Pending
2/23/09/ 4252/ 1795
3/2/09/ 4224/ 1822

Condos-Townhomes
Week/ Active/ Pending
2/23/09/ 1520/ 572
3/2/09/ 1504/ 573

Inventory had a slight drop and pending sales are up. This market needs to continue to pull through this muddy market. Come on buyers!!

$29 million dollar Eco mansion!

Check it out!! I guess there is still some money out there.
http://tinyurl.com/c9apvb