Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
October 12, 2010
Dear C.A.R. member,
No doubt you’ve heard the news recently that a number of major banks have volunteered to temporarily suspend foreclosures in 23 states and Bank of America is temporarily suspending foreclosures nationwide.
While this situation is changing daily, I want to tell you what we currently know to answer any questions you may have.
- In late September and early October some lenders and servicers began voluntarily halting foreclosures in select states while they reviewed their foreclosure processes.
- So far, only Bank of America has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order. Foreclosures in the other 23 states are processed through the court system.
- Non-judicial foreclosures in California, however, do have legal requirements that lenders must follow. For example, California law requires that lenders for certain mortgage loans made between Jan. 1, 2003, and Dec. 31, 2007, attempt to make contact with borrowers to discuss options for avoiding foreclosure at least 30 days before filing a notice of default. Lenders also must sign a declaration in the notice of default stating that they tried to contact the borrower, made contact with the borrower, or fall within an exception (such as a bankruptcy filing).
- The lenders and servicers that have placed their foreclosure moratorium on properties in the 23 states where courts are involved in the foreclosure process include: Goldman Sachs Group Inc’s Litton Loan Servicing, Ally Financial Inc.’s GMAC Mortgage unit, JPMorgan Chase, and PNC Financial.
- These lenders/servicers have only temporarily halted their foreclosures while they review their foreclosure process. This is in response to findings that questioned whether some lenders/servicers were following the correct procedures to foreclose on a property.
- This halting of foreclosures is a voluntary action taken on the part of these lenders/servicers and has not been mandated by either the states or the federal government.
- Some members have begun to report the immediate impact of this moratorium on transactions that involve foreclosed properties. Delays in escrow and the removal of listed foreclosures are temporary results of this moratorium.
- The immediate impact on the market will be the slowing of home sales, which could put upward pressure on home prices in the short term. The long-term effect on the market is uncertain at this point as it depends how long the moratorium remains in place.
- Assuming the moratorium is lifted in the next month, the flow of REOs to the market should resume, but the uncertainty created by the moratorium may cause hesitation on the part of buyers.
- Federal agencies, including the Office of the Comptroller of the Currency, the Federal Housing Administration, and the conservator of Fannie Mae and Freddie Mac, have asked lenders and servicers to review their foreclosure processes. This review would apply to all states including those like California where the vast majority of foreclosures are non-judicial.
- The participating lenders and servicers believe their internal review processes should take anywhere from a few weeks to 30 days to complete.
NAR has sent a letter to regulators expressing their concerns over the foreclosure issue. Please visit www.realtor.org/foreclosurefor the latest developments and additional information.
C.A.R. is supportive of lenders taking action to ensure homeowners are not improperly foreclosed on and that they are following state law. We hope they are able to conduct their review expeditiously so as to minimize the impact on California’s housing market.
If you have additional questions or are experiencing problems or delays with any foreclosure transactions, please call our Customer Contact Center at (213) 739-8227.
CALIFORNIA ASSOCIATION OF REALTORS®
2010 Tax Credit for New Home / First-Time Buyer
NEW YORK (CNNMoney.com) -- Attention shoppers: You have barely a month left before the homebuyer tax credit expires. But depending on where you live, you might not want to rush out to buy.
First-time homebuyers may qualify for up to $8,000
, while those who are trading up could get as much as $6,500. But either way, buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.
And this is absolutely, positively your last chance to claim the credit. (Probably.) So don't wait, thinking the credit will be extended for a third time.
There is little sentiment for continuing this program, especially because many consider the latest iteration's results to be disappointing. Even the Senate's biggest proponent of the homebuyer tax credit, Johnny Isakson, R-Ga., is ready to let it end.
"He has no plans to introduce legislation to extend the credit," said Isakson's spokeswoman. "Part of the benefit of the tax credit was the urgency its sun-setting generated."
That urgency was less pronounced after the latest extension, which was enacted last fall. While the first version, which just covered first-time homebuyers, netted huge sales jumps, the real estate market slumped
over the winter and early spring.
That may be because some people believed that Congress would just keep adding time to the game clock, according to Nicolas Retsinas, director of Harvard's Joint Center for Housing Study. That could have kept them home by the fireside instead of out house hunting.
"The credit's influence and impact has waned considerably," said Retsinas.
"You got a lot more bang for the buck on the first go round," added Mike Larson, a real estate analyst with Weiss Research. "Most people acted on the presumption that the credit was going away."
Should you rush?
Any house hunter considering whether to hurry a purchase to take advantage of the credit should consider where they live. There are many places where home values are projected to fall steeply
over the next few months, including Los Angeles, Phoenix, Minneapolis, Washington, D.C., and most of Florida.
Take someone shopping for a typical single-family home in the Miami metropolitan area
. The median price there is about $215,000 and a qualified first-time homebuyer would pay about $207,000 after the credit is factored in.
But prices in Miami are likely to fall 22.5% this year, according to projections by Fiserv and Moody's Economy.com. So by waiting a few months you could nail a $48,000 price cut -- a much better deal than the tax credit..
On the other hand, some cities are expected to post record price gains
this year, including Eugene, Ore.; Napa, Calif.; Charleston, S.C.; and Cheyenne, Wyo. Buyers in those markets would receive a double benefit by making their purchases happen this month.
Of course, there's no guarantee that the forecasts will be accurate, but they're certainly something consumers should consider.
Not every buyer qualifies for the credit. Here are some guidelines:
- Homebuyers who have not owned a home for the past three years may earn up to $8,000 or 10% of the purchase price, whichever is lower.
- Buyers who have owned a home for five consecutive years of the past eight qualify for up to $6,500 in credits.
- There are income limits of $125,000 for single taxpayers and $225,000 for couples.
- Anyone paying more than $800,000 for the home cannot claim the credit.
There's a prohibition on claiming the first-time homebuyer credit if either member of a couple owned a home within the three-year period. They can claim the existing homebuyer credit.
Homebuyers who are under 18 or are listed as dependents on the tax returns of others don't qualify. The home must be kept at least three years.
The credit may be claimed on 2009 taxes, even if the return was already filed. Just submit an amended return.
Note that buyers get the full amount of the credit they're due even if that exceeds the amount of taxes they owe. If you're a first-time buyer and your total tax bill for the year is $6,000, you get all that back plus another $2,000.
As credit starts up at a trickle, getting a home-equity line can be a smart move - as long as you use it the right way.
(Money Magazine) -- The home-equity line of credit fueled thousands of extreme kitchen makeovers during the real estate boom. But the housing bust and the credit crisis stopped the HELOC party with a vengeance: Tens of thousands of homeowners had their lines cut or frozen, and most lenders stopped issuing new ones altogether.
But don't give up on the HELOC yet. As housing prices and the economy begin to stabilize, it's coming back. Many lenders are writing lines again, says MortgageBot, a company that processes real estate loans, albeit half as many as it did during the boom days. True, HELOCs are no longer the screaming deal they once were. Lenders used to offer the lines for half a percentage point below the prime rate (currently 3.25%), but now the cheapest you're likely to find is prime plus a point or so. Most lines also have a floor, or the lowest possible rate they can go, of about 4%.
That said, if you have more than 20% equity in your home, a line of credit can still be a relatively cheap way to borrow -- and it's a far better source of emergency cash than your credit card. "Think of a HELOC as a belt and suspenders," says Oakland money manager Marjorie Bennett. To make sure you get the most out of it, follow the rules below.
Don't borrow the max
The days when banks would lend you 100% or more of the value of your home are long gone, of course. Most lenders won't approve a line that brings your total housing debt to more than 80% of your home's value, and you'll need a minimum 740 credit score to get that much.
But there are good reasons to borrow less. Depending where you live, you probably can't rely on a rising real estate market to knock down your housing debt. You should aim to keep your total monthly debt payments at no more than a third of your take-home pay. Keep in mind that as the economy recovers, HELOC rates will rise too, so borrow only what you could keep up with if rates jump, says financial adviser Don Whalen of Alpharetta, Ga. If you were to take out a $75,000 HELOC today, for example, you'd owe $344 a month in interest; if rates rise a couple of percentage points the monthly tab will jump to $469.
Use it the right way
By now you almost certainly know that using your home-equity line for frivolities like vacation packages and plasma screens is asking for trouble. Other traditional uses may or may not still make sense:
Home improvements. Tapping your HELOC to fund necessary projects like a roof replacement is still worthwhile: You can deduct interest on up to $1 million when you use HELOC funds to improve a first or second home, which in turn sharply lowers the real cost of the loan. Renovations that won't necessarily pay for themselves, like a media room or a deluxe kitchen? Take a pass.
Car loans. At a 7.3% rate, a three-year new-car loan costs a lot more than a line of credit. A HELOC can be a good substitute -- as long as you expect to pay it back within a few years. You may be able to write off the interest. Though the rules are complicated, in general you can deduct interest on a HELOC for up to $100,000 of non-home-related uses.
Student loans. Max out government-backed Stafford and PLUS loans first. The interest on these loans is usually tax deductible, and they often offer flexible repayment plans. But if you have to take a private loan, a HELOC can be a cheaper alternative.
Small business. Entrepreneurs have long used HELOCs as easy business lines of credit to smooth out bumpy income. Steer clear of that unless you're confident the business is solid, says Newtown, Pa., financial adviser Jonathan Heller.
Make sure you keep it
If you're going to use a HELOC as an emergency fund, you have to make sure your line isn't pulled out from under you. Most banks have stopped freezing existing HELOCs, but that could happen if real estate values drop in your neighborhood. Your best defense is to use your line regularly, even if you take out just $500 at a time. Even during the worst of the credit crisis, issuers weren't freezing or closing HELOCs that were in use as long as the homeowners weren't underwater, says financial adviser Kevin Reardon of Brookfield, Wis.
If you think you'll need to use your HELOC in a few months and are concerned that it could get chopped, borrow the funds now and park them in an FDIC-insured account to keep them safe. Then start paying the loan back ASAP.
This year the housing market showed signs of life. But with foreclosures and unemployment climbing, prices have further to fall.
By Beth Kowitt, reporter
December 9, 2009: 8:26 AM ET
(Fortune magazine) -- In a dour year for the economy, the housing market has offered some glimmers of hope. Home sales have improved, recently hitting their highest level in more than two years. There's been talk of bidding wars resuming in places like Silicon Valley and New York City. And cocktail party chatter everywhere has started to turn to talk of a bottom. So at least where housing's concerned, things are looking not so bad -- right?
If that's what you think, you may not want to invite Mark Zandi to your next cocktail party. The chief economist of Moody's Economy.com, Zandi has some sobering predictions: Home prices are going to fall 5% to 10% more -- and over 30% in places like Miami -- between now and this time next year. Then they might start turning around. (Emphasis on "might.")
At the top of Zandi's list of worries are foreclosures -- specifically, the millions of loans that are in foreclosure or headed there that can't or won't be modified. According to RealtyTrac, nearly 2 million housing units in the U.S. are in foreclosure or bank-owned, and millions more are likely to join them.
Zandi estimates that 2.4 million homes will find their way into foreclosure next year. He expects banks to start putting those properties on the market more aggressively during the first half of the year, resulting in a flood of cut-rate inventory that will drag prices down.
It would be one thing if banks could sell into a hungry real estate market. But that brings us to Zandi's second concern: skyhigh unemployment.
October's 10.2% figure was higher than what most economists forecast for the peak. A soft job market, especially one this soft, means potential buyers don't have money to pour into new homes or the confidence that they'll be able to hang on to their jobs and pay the mortgage on their existing home.
Another concern: Policymakers will pull their support from the market prematurely. Aggressive government moves, like the recently extended first-time-homebuyer tax credit and the Fed's purchase of mortgage-backed securities, have been propping up the market.
The purchase plan is set to expire in March, which Zandi says could bump mortgage rates up as much as a full point. "That raises the cost of buying a home, and in this fragile market people won't buy," he says. "And that's a problem."
All those factors are figured into Economy.com's housing price outlook for 2010 -- as are local figures for income, population, interest rates, and foreclosures.
The results are broken into 100 metropolitan areas. (Last year the projections were pretty accurate, forecasting a 14.5% decline in 2009; the actual figure is likely to come in around --13.2%.)
As the sea of red above shows, the numbers are negative across the country.
The weakest areas are Florida, California, Nevada, and Arizona -- what Zandi calls the "usual suspects" -- where foreclosures are highest and likely to rise. The worst market: Miami, where the 2009 median home price of $183,530 is expected to fall 33%.
But Zandi also points to less discussed regions where prices are still inflated relative to rents, like the Pacific Northwest and New York through Virginia.
If there's a bright spot, it's pockets of the Midwest -- states like the Dakotas, Kansas, and Nebraska, which have stronger economies based on agricultural and energy industries.
Then there's Pittsburgh, which didn't have much of a housing bubble to begin with and is the only market projected to grow next year, up 0.41%.
The good news? "It's clear we're closer to the end of this crash than the beginning," says Zandi. Housing is more affordable, and construction is still low, so sales will eat up excess inventory. "We're moving in the right direction, and that's reason for optimism," he says.
Another plus: He says there's almost zero possibility of another U.S. housing bubble anytime soon.
NEW YORK (CNNMoney.com) -- Confused about whether lawmakers will extend the $8,000 first-time homebuyer credit and what it would look like?
That's understandable, since the situation is still very fluid.
Here's where things stand.
Support for the credit: There is still bipartisan support in Congress for extending the credit past Nov. 30 and making it available to more homebuyers.
The Obama administration wants the credit extended for a "limited period," Treasury Secretary Tim Geithner and Housing Secretary Shaun Donovan said Thursday. They did not elaborate.
What's on the table now: There appears to be a compromise deal that falls between the most and least generous proposals that have been put forth so far.
"There is bipartisan compromise to extend the credit through spring and expand it to existing homeowners who are stepping up to a different home," financial policy analyst Jaret Seiberg wrote in a research note for Concept Capital's Research Group.
The latest idea under discussion is a credit worth up to $8,000 for first-time homebuyers and up to $6,500 for homeowners looking to trade up to a bigger primary residence and who have already lived in their current home for five years. (CNN: Senate compromise may be in the works
To qualify for the full credit, however, homebuyers must have adjusted gross income of less than $125,000 ($225,000 for married couples filing jointly).
In addition, the credit would only apply to homes sold for $800,000 or less. Contracts to buy a home must be signed by April 30, 2010, and the deals must close by June 30 in order for a buyer to qualify for the credit.
Rationale for extending the credit:
Supporters of the credit say it has helped to boost existing home sales in recent months. Extending the credit would help further support sales, stabilize housing prices and generate jobs in the face of an expected rise in foreclosures next year, which is expected to put downward pressure
If the credit is allowed to expire, they say, the housing market and the broader economy will grow moribund again.
"The most fundamental argument for the credit is that nothing works in the economy if housing is falling -- it hurts household wealth and credit becomes tight," said Mark Zandi, chief economist at Moody's Economy.com. "[The credit] is a good insurance policy. It's vital to stem the housing price declines."
What critics say: Though extending the credit has bipartisan support, it is not without its critics.
Critics, while acknowledging that the credit has helped to generate additional home sales, say it has been poorly targeted and therefore not cost-effective.
They point to estimates that only 10% to 20% of the nearly 2 million homebuyers who will have gotten the credit by Nov. 30 bought solely because of the tax break.
In other words, a large majority of homebuyers who benefited from the credit would have bought their homes without it.
By one economist's estimate, the government may have spent $43,000 for each sale that occurred strictly because of the credit.
In a position paper published this week, the liberal Center on Budget and Policy Priorities said making the credit available to existing homeowners would not help stabilize housing prices or reduce inventory.
NEW YORK (CNNMoney.com) -- Home prices rose for the fourth month in a row during August and suffered a smaller-than-expected annual drop, according to a report issued Tuesday.
Prices in the S&P Case-Shiller Home Price index of 20 cities rose a non-seasonally adjusted 1.2% in August. It was the fourth consecutive monthly increase and followed a 1.6% gain in July.
Prices were down 11.3% versus August 2008, but that drop was less severe than expected. Analysts surveyed by Briefing.com had forecast an 11.9% year-over-year drop.
"Broadly speaking, the rate of annual decline in home price values continues to improve" said David Blitzer, chairman of Standard & Poor's index committee.
While many U.S. markets remain down versus this time last year, the relative rate of decline "has shown some real improvement," Blitzer added.
Home prices improved on an annual basis in 19 of the 20 major metropolitan markets in the survey.
State by state. In California, home prices have recovered notably from depressed levels in recent months, according to the report.
Home prices rose 2.8% in San Francisco during August, while San Diego prices were up 2.5% and Los Angeles gained 1.8% in the month.
Minneapolis had the biggest increase, with home prices rising 3.2% from July to August.
But prices continued to slide in areas that have been hit hard by foreclosures. Prices dropped 0.5% in Cleveland and 0.3% in Las Vegas during August.