Monthly 1-Minute Newsletter

See my monthly newsletter below for December, 2010. Just click on the logo below for the best summary around of local and regional market info! Have a very Happy New Year in 2011!



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Are You Having Trouble With a Loan Modification?

It's probably no surprise to many mortgage borrowers by now in this Christmas season to realize that they've had a tough time getting their loan modified this year. If they do not qualify for the Home Affordable Loan Program (HAMP), they try their bank's program. Often this application process goes on for months, while the homeowner may grow short on funds and cannot continue the monthly payment, and then they begin the process for a short sale, or worse, foreclosure. This story has been repeated over and over by many borrowers. If a loan modificaton is approved by the lender, often times the delinquent payments and refinance fees are added to the principal, making the new higher payment very unattractive, so the borrower rejects it.
One issue is that lenders have very little incentive to modify loans, as the cost of doing so cannot be billed back to the investor, and the work involved is very labor intensive and is not easily automated. Many banks have not invested in qualified staffing to take care of the high volume of distressed owners. And their agreements with investors on securitized mortgages may not actually cover the details of completing loan modifications, but do address foreclosure, so they believe they are in a risky situation with fulfillment of their contract terms.
In a 31-page study by the Federal Reserve, based on data from over 105,000 loans from 94 loans servicers dating from 2005 from California, Oregon and Washington, to determine who receives a loan modification (no discernible differences according to race and income differentials were found, "In fact, we find that Blacks/African Americans, Hispanics/Latinos and Asians are slightly more likely to receive a loan modification, and that these loan modifications have slightly larger reductions in their interest rate than those of similarly situated white borrowers"), it was still unclear after its research into the behavior of various financial institutions as to why the number of loan modifications was still falling well short of the number of foreclosures, even though the HAMP program has been declared effective with borrowers who received one, a group with a low re-default rate, despite literature published to the contrary.  Here is the complete Federal Reserve study. 

Another very clear problem is that some banks do reach out to their customers, but many borrowers fail to make contact with their banks, even after being contacted by them. And the longer a delinquent borrower spends in delinquency without contacting their bank, the more likely the home will be lost to foreclosure.

If you are interested in a loan modification, you might be successful, and you should contact your loan servicer.  But it's important to understand that possibly no matter how much information you submit to your bank, for a variety of reasons you may not get one, or you may have to struggle for up to a year or more with them. Banks are not equal in this situation--one of the factors may be if your loan is a portfolio loan or one securitized with investors. The study mentions the "lack of transparency" because data is issued in the aggregate, and information directly linked to borrowers is still difficult to track. Also, according to this study, 52% of foreclosure sales lack "reciprocal servicer contact" (does that mean the bank didn't return the borrower's initial contact)?

Overall, banks recoup a little more money if a property is sold in a short sale, rather than going into foreclosure and coming back on the market as an REO. This usually costs banks more money, and their "loss severity" rates are looked at closely when making their decisions.

The bottom line is: If you are having trouble making payments, contact your bank now. If you have to keep submitting your information over and over again for periods of 30-60-90 days, then you should obtain assistance through a Realtor who is familiar with short sales, or an attorney who specializes in loan modifications, not just any attorney, for further help. Don't wait too long.

Is the Southern California Market Stabilizing?

With so many analyses and predictions going on about the direction of the real estate market, the average person is often uncertain about the real truth. Recently, I've heard a few prospective buyers that I've been talking with express the belief that the market is going to drop even more by a certain percent, or just drop in general, all depending on what they've most recently read. But there's one truth that most real estate experts and practitioners agree on, all across the country: All real estate is local. So whether or not a large bank stops foreclosures for a while, or some other wave hits on the financial scene, it may or may not affect your immediate market in your part of the state, county or city, or even your neighborhood, depending on the many economic characteristics and forces that make up your area.
So, having said all real estate is local, in general, the number of Southern California residential sales for November fell, but overall, prices stayed stable. Southern California means the six counties of Los Angeles, Ventura, Orange, San Bernardino, San Diego and Riverside.
For Los Angeles County, the sales volume dipped by 11.5% compared to the prior year, but the median price (lumping new and resale houses and condos all together) for LA County decreased by only 1.2%; Orange County's median increased by .6%; San Diego and Ventura Counties increased price by over 3% and 2%, respectively; San Bernardino, hard hit by foreclosures, decreased another 5% in median price over last year. Per Dataquick,  the overall median price for all six counties increased by .7% even though the sales volume decreased by 15%.
Local cities, per the most recent information for new and existing houses and condos published through October 2010 by California Association of Realtors, show:

• Long Beach decreased its median price by 4.7% from prior October.
• Cerritos increased its median price by 5%.
• Lakewood stayed the same.
• San Pedro decreased by .1%.
• Bellflower decreased by 1.7%
• Gardena increased by 9%
• Buena Park increased by 3%
• Huntington Beach stayed the same
• Westminster increased by 1.1%
• Newport Beach increased by 17%
• Downey decreased by .4%.

Breaking down by zip codes in some cities show that certain areas such 90810 and 90813 in Long Beach are showing increases, but the higher priced 90803 zip code is still showing decreases in median price. That's a similar story for other zip codes such as in Newport Beach, when compared to a higher priced section within the same city.
And, to top it off buyers, the past two weeks or so saw the biggest jump in interest rates in the past several months. Many mortgage professionals believe the floor of close to 4% may be permanently gone, and as of today, FHA quotes were at 4.75%, while a 5% down conventional loan for a condo was quoted at 5%. It's easy to take a calculator to check out this would affect your monthly payment. A free calculator download is at Real Data.
Buyers should start making hay while the sun is shining!

Have a wonderful Merry Christmas, Happy New Years, and Happy Holidays.

Christmas Homes Afternoon Photo Time

Getting into the local neighborhood Christmas spirit!