Some Lenders Are Checking Borrowers' Social Media Accounts

Along with new lending rules for buyers and lenders that came into effect on January 1, there's more to think about, too.  According to an article in the Wall Street Journal, a buyer's Facebook and Twitter data may help a lending company determine a borrower's creditworthiness.  Ironically, these same lending companies may be backed with venture funding from Google Ventures or Accell Partners (early Facebook investor). 

Social media accounts are a way to double check a borrower's job information (see your LinkedIn account), or there's a post about how you got fired on Facebook.  And E-Bay could be a great place to check your small business reviews by others. Right now this practice of social media review is primarily used by smaller loan sources, but Fair Isaac Corp. (your FICO credit score company) is considering incorporating social media, and since it provides credit scoring for the vast majority of lender decisions, that could have a huge impact.

Lendup, a San Francisco lending source, is one company currently using a mix of credit bureau and social media information to help assess borrowers' risk and verify identities. Applicants are voluntarily sharing their Facebook, Twitter and other social sites which Lendup is using, although they don't require it.  It just helps on the road towards loan approval.  This is a company backed by Google Ventures and which expects to make 300,000 loans in 2014.

At Moven, a mobile-only bank, customers can link up their social media accounts to learn about their own financial behavior and make payments to friends. The President of Moven says social-media activity will be one factor used in lending decision on their future loans. He believes social media data says more about customers than their FICO score.

Kabbage Inc, a loan source for small businesses, requires a customer to link at least one account such as Amazon, e-Bay, or Xero for underwriting decisions.  Kabbage, Inc., is looking at how many "likes" a customer receives, and what reviews are saying about the borrower's business.

The Consumer Financial Protection Bureau and the Federal Trade Commission are taking a close look at privacy issues. If, for example, a consumer reporting company such as Experience or Equifax has inaccurate information on a borrower, the consumer may dispute that information under the Fair Credit Reporting Act. But  companies using social media in their lending decisions don't have to verify the information about you because it isn't reported to third parties, so there apparently is little or no regulation when it comes to this type of  "background check" on a borrower.

" 'There are privacy concerns. People don't understand the implications or why they may be considered undesirable' " for credit, said Jeffrey Chester, executive director of the Center for Digital Democracy in Washington, who is calling for regulation."

See the full article at http://online.wsj.com/news/articles/SB10001424052702304773104579266423512930050?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304773104579266423512930050.html

Sellers, Get the Price You Deserve!

Seller's selling tasks

Every year  National Association of Realtors publishes its survey of home buyers and sellers, but this 2011-2012 survey (most recent) on FSBO's (for sale by owner) shows one of the largest gaps I've seen in selling price.  Traditionally, the figure was about a 5% difference in selling price (including all costs)between selling on one's own vs. being represented by a REALTOR. This, however, is showing a 20% difference in price when sellers did not use professional representation.

Not to pick on just one group, though, the graphic really highlights the issues before all sellers:

Having enough time to devote to preparing your home for sale, reviewing and negotiating all items as represented in transactional documents, understanding buyer financing issues, and being on top of the current market so that your setting the right price.

Very often, sellers focus on price to the exclusion of other terms, and may actually end up with a lower bottom line.  How is this possible? It's important to recognize negotiating issues and how much to give, or not give.

For an estimate of your home's value (condo, single family or residential units), please contact me.  If you're thinking you need to save money, you should first get an accurate estimate.  Your home could be worth more than you think (although I don't endorse overpricing), and you could actually net more than you originally thought by using a knowledgeable REALTOR.

The Overall Picture for Long Beach Area Real Estate for 2013

The market has increased in price! 2013 saw upward jumps in most areas for the average annual sales price of a single family home:

• Long Beach, increased to $489,000, +18%.
• Cerritos, $605,000, +11%.
• Lakewood, $420,000, +17%.
• Huntington Beach, $803,000, +10%.
• Signal Hill, $600,000, +13%.
• Los Alamitos, $686,000, +9%.
• Seal Beach, $947,000, +25%.
• Cypress, $532,000, +17%.
• Norwalk, $318,000, +17%
• La Palma, $576,000, +18%.
• Bellflower, $356,000, +15%.
• Garden Grove, $443,000, +17%.

Along with price increases, there are: multiple offers as new buyers compete with each other and with investors, all cash purchasers, inventory shortages, sellers reaching for too high a price in some cases, an overall upward movement in mortgage interest rates, new lending rules which may have a tightening effect for some borrowers, and more buyers in the market who are emerging from a past foreclosure or short sale and are looking to buy again. And, appraisals continue to be an issue.

Keep in mind, pricing for condos, and 2-4 unit properties would be different, and should you want to know specific pricing for your city or zip code (south Los Angeles County and north Orange County areas), please contact me. 
This data is current as of January 6, 2014, and all data comes from the MLS.

Selling a California Property and 1031 Exchanging Out-of-State

Suppose that today, January 27, 2014, you closed escrow ("sold") your California property due to be part of an exchange in the state where you currently live (not California).  Did you know that the State of California now wants its money, if any is to be made? 

So, effective January 1, 2014, California Assembly Bill 92 now adds a new annual tax reporting requirement for those taxpayers who exchange California property under federal Internal Revenue Code Section 1031 for non-California replacement property.  This means "all individuals, estates, and trusts, and all business entities regardless of their residency status or commercial domicile" must report the amount of the gain (or loss) on the property which is deferred in the 1031 exchange.  If it isn't reported, then the Franchise Tax Board will estimate and decide for you what your amount of income is from the sale of your property, and assess tax, interest, and penalties due it. 

No more taking your property and then avoiding California tax by doing an out-of-state exchange, and then a later sale. Read more here about the new law.

Can I help you decide on the market value of your property? Whether it's one unit (home, condo, townhome), duplex, triplex, 4-units or more, I can help you with an income/expense analysis, plus free information about 1031 exchanges.  Please contact me at 562-896-2609, julia@juliahuntsman.com.

Chocolate chip cookie recipe

Here's a fun way to start off your year with a quick, easy, chocolate cookie recipe, with a calendar for January 2014.

Happy New Year.

Housing Equity 2013--The Gap Narrows

Housing Equity 2013

A borrower who purchased a median priced home in 2004 and held it for nine years, the current median tenure of a homeowner according to NAR’s annual Profile of Home Buyers and Sellers, would have $28,114 in equity from the combined benefit of price appreciation and paying down the mortgage principle. A borrower who bought a median price home in 2012 would have more than $23,000 in equity.

Borrowers who purchased in 2006 and 2007 at the peak of the market and thus those who experienced the sharpest price declines are now nearly in positive equity. A person who purchased in 2006 and owned through 2012 (not pictured) would have been underwater by roughly $28,200, but by 2013 this gap was down to $4,700. Continued price growth in 2014 will help to further ameliorate this gap. Homeowners who purchased since 2007 are in positive equity.

Even through the vicissitudes of the great recession, for most homeowners housing remains an effective vehicle for building equity and wealth.

Do You Have a HELOC Line of Credit Loan due for a Reset in 2014?

Starting about 10 years ago, it was not unusual to obtain a home loan with a 10% down payment from the borrower, an 80% first mortgage, and then a home equity line of credit (HELOC) as a 10% second mortgage. 

For some borrowers who have not refinanced in the meantime, and have been paying interest only on that HELOC loan, their time is coming due.  Credit lines usually have mandatory "resets" after 10 years when borrowers must now pay up or pay an amortized principal and interest payment.  For some people, who may have been paying an interest only payment of $200-$250 on a $100,000 loan, their monthly payments will probably increase significantly: they will now be paying principal and interest, along with interest rates now being set at a higher level. It was not unusual for lines of credit to be as high as $150,000.  A jump up to another $500-$600 in monthly payment may not be unexpected in these cases.

The bank that owns the note, if the borrower does not or cannot pay the new payment, can demand full payment and foreclose if there is enough equity in the property. Borrowers, depending on the bank, may be able to refinance or modify these loans.

However, with new mortgage rules coming into play in January 2014, refinance may not be possible because the homeowner may not qualify, interest rates will be higher, their credit scores may not make the grade, or the combined loan amount on the mortgages may exceed the value of the house. 

Owners should prepare themselves now by checking for the reset date in their loan documents, the amount of increase, their ability to refinance, and also finding out if they have equity in their property.  Should the borrower consider foreclosure (because after all, it's only the second), that's really not advisable: in California if the line of credit was made as part of your purchase loan, then you may be exempt from a deficiency judgment, but you would still have a foreclosure on your record, which could cause problems for years every time you applied for insurance, a job, or anything else where your credit is checked.  Even if you could avoid paying, and the bank did not spend money foreclosing because you still don't have equity in your property, your credit score would suffer with each non-payment.  Late pays/delinquencies have huge impact on your credit score, and again, it would be something to impact you for years into the future.

Borrowers should review their loan documents, and contact their banks to find out what a reset increase amount would be, and then what their other options might be.

Note:  About $30 billion in home equity lines dating to 2004 are due for resets next year, $53 billion the following year and a staggering $111 billion in 2018.

In order to find out the value of your home, please contact me.  Equity in your property could be your friend in this situation. For an easy online request, click on Long Beach Real Estate Homes and Condos for Sale here.

How Will Living in a Flood Zone Impact You in Southern California?

Belmont Shore Flood Zone Area (some
properties may have been revised per specific
elevation studies)

Let's take Belmont Shore in Long Beach as a sample area which is officially designed by FEMA to be in a flood zone as shown on the map.

This is not the only affected area of Long Beach which also include the Alamitos Bay area, areas along the flood channel in Wrigley on the west side, etc., so a homeowner should look at maps at the link at the bottom of this article.

By clicking on the map a larger view will be seen, along with the names of the flood zones.  FEMA's description of the flood zones are found on their site.  Also, by going to their site, the viewer can find his/her particular neighborhood.

What does this mean for the property owner?  First of all, if you buy a home with a federally insured mortgage, you will be required by your lender to buy flood insurance if it is located in one of the high-risk flood areas.  This type of insurance may be purchased through your insurance agent utilizing the National Flood Insurance Program.

A homeowner's insurance policy does not cover flooding, so a separate flood policy will be required. If you are in escrow, or will be soon, you will want to investigate as quickly as possible if there have ever been prior flood claims involving that property. One of the standard ways of finding out about prior claims is by ordering a CLUE Report (Comprehensive Loss Underwriter Exchange) which gives a 5-year history of the property.  These reports have been an established source for a number of years and are available at a minimal cost of approximately $20.00.  Other sources such as the seller's Transfer Disclosure Statement, a natural hazard disclosure report, and a professional and qualified home inspector are also ways of learning of prior claims and potential for flooding, and location in a flood zone.  Be aware, however, that California and federal guidelines differ on whether or not a specific property is partially located in a zone, so final determinations are made when the flood insurance is applied for.

The cost of such policies vary by type: coast policies, high risk policies and preferred risk policies. The cost can range from an extra $5,000 a year, to $196 a year, depending also on prior claims and type of coverage.

According to one local insurance agent, quotes made for the local area after October 1, 2013, are significantly higher than before, and are over $3000 for an annual quote.

Property owners, if you live in such a coastal area or other flood zone area, please find out about Elevation Certificates. By obtaining one and providing it to your insurance agent, you may obtain accurate information about your risk, and actually lower the amount of your premium in some cases.  An Elevation Certificate compares your property with the Base Flood Elevation (BFE), a marker for a flood with a one percent chance of occurring.  Insurance rates are based on the building's elevation above this base elevation.   The elevation can save the owner money, as the higher above the BFE a building is located, the lower the insurance premium will be.  Surveyors who perform the evaluations charge varying amounts, so by contacting your insurance agent you may find the most qualified professional for Elevation Certification.

If you are considering selling your home, considering the recent cost increase in this flood insurance, do you think this would be an important certification to obtain prior to putting it on the market?  Yes, it would be, because if a buyer finds out in escrow how much more the additional flood insurance is, it might be a deal breaker.  But if you, the seller, have the up front information, that is important information to provide to a buyer who can then decide if the extra insurance is feasible, or if they have options in level of coverage.

To find out more information, go to http://www.floodsmart.gov.  Find more Southern California mapped areas .  If you are unable to find a local insurance agent, please contact me for this and a FEMA Fact Sheet about Elevation Certificates.  This information is current as of 12/19/2013.
 
For an evaluation of your home's current market value, I am always available at no obligation. 

It's the end of 2013, and time to get ready for 2014

By now you may have heard about the lack of homes on the market, and how many buyers are competing with each other.  This is not only in California, but in many markets nationwide. 

So what are the reasons for buying now, in spite of this?

• Even though the total sales for 2013 is about 2.1% less than the 2012 level of California sales, the median home price has increased statewide by 28% over 2012, at $408,000.
• A percentage point increase in interest rates, from 3.5% to 4.5%, further reduced affordability.  In spite of this, interest rates are still at historic lows, making a buy in 2014 still important to pursue, because a half percentage point fluctuation in the mortgage rate changes the payment by $100 per month on a median priced home of $415,770. Most of the predictions for 2014 put the 30-year fixed rate mortgage at 5.3 percent.
• New lending rules are going into effect January 2, 2014, which will raise the cost of borrowing because of the new ability-to-repay rule and the new definition of a qualified mortgage are raising the cost of originating home loans.

What is in the buyer's favor right now is that these conditions, starting in the Fall, have helped the market cool off a little, with some houses sitting on the market for a longer period of time.  Make this your opportunity to try again, if you weren't successful the first time.

Please contact me for more information about the area you are interested in.  If you are using certain online "databases" to conduct a home search, keep in mind that some of these actually use properties that are not really listed, they may be a for-sale-by-owner, and that at least one site that many buyers think is a public database, is actually a real estate broker to which you agree to certain conditions when you use their site (Redfin).  To easily search properties that are active listings and are not stale, please go to Long Beach Homes and Condos.

Upper Limits on FHA Loans Reduced for 2014

California's high cost market has allowed for the upper FHA loan limits for a single unit (i.e., single family home or a condo) to be set at $729,750.  For certain buyers who otherwise qualified for a higher monthly loan payment, but for other reasons qualified for an FHA loan instead of a conventional loan, this was a great advantage.

But as of Friday, December 6th, that is changing.  The high cost areas in the country with those upper limits are now having new purchase loan limits reduced to $625,500 when the higher loan limit expires as of December 31, 2013.  Nationally, about 650 counties will be affected by this change. In California, there will be 16 "high-cost" counties affected, including Los Angeles and Orange Counties.  Two, three, and four-unit properties will still have respectively higher loan limits. If your loan is currently in process before December 31 and an FHA case number if obtained before then, the 2013 limits will apply.

Although most FHA borrowers fall in the lower loan "conforming" loan limit of $417,000, as the California market rises, these cutoff points may create issues for certain borrowers. FHA loans in California, per the California Association of REALTORS® 2012 Annual Housing Market Survey, constituted about 24 percent of the total loans in the state, a significantly higher number than in 2007 when it was about 2% of the total.

Prospective borrowers contemplating entering the market should take steps to improve their credit scores, as some people may qualify for a conventional loan if they have higher scores.  Consult with a credit repair advisor before taking any drastic steps, such as cancelling a credit card, as that can lower your score.  Reducing debt may also help qualify for a conventional loan.  FHA, however, is always a good resource for many first time buyers, and may be the best option for many people, especially if a short sale was completed over 2 years ago. 

Please contact me for information about what is needed to obtain loan pre-approval, as it is far better to find a good referral rather than attempt a first mortgage purchase on the internet with someone whose area of expertise is unknown to you.