Is Today's U.S. Housing Bust Unique in Economy History?

This U.S. HOUSING BUST began in good economic times. Certain developments have contributed to the current BUST.

After the 2000 stock-market problems and the September 11, 2001, terrorist attacks, and amid fears of deflation, the Federal Reserve drove short-term interest rates to historic lows.

The nation's financial system was flooded with money, and cheap money inspired a surge in home-buying.

Home prices in many US areas began to hit the top in 2004. At the same time the Fed began to raise rates.

Home affordability started to decline in some markets.

On Wall Street the securitization of mortgages had become a huge profit center. The demand for new mortgage product continued. Mortgage brokers and loan originators were getting rich.

By 2005 the mortgage industry started with new affordable products that featured low TEASER RATES in the first years of a mortgage to keep monthly payments low.

Old fashioned down payment and debt-to-income requirements were not used much by lenders during this time.

Some new borrowers lied at STATED INCOME about their annual income and net worth. Mortgage brokers helped some of these people who got LIAR LOANS.

Greed was first, and then came some fraud. Some borrowers and lenders believed that ever-rising home prices would save them.

Borrowers began defaulting on loans. The value of some homes slumped below the amount of debt. Then the home and property owners were in SHORT PAY situations.

Delinquencies, defaults and foreclosures hit the housing market hard. This is unmatched in US economy history. Past due loans and foreclosure rates have been pushed to all time highs.

What's the future?
Some believe that pressure on home prices from foreclosures may decrease in the latter part of 2008? What do you think?

Posted by Harrison K. Long, Explore Properties Group, July 18, 2008
Source: Barron's Newsletter

California Sales Tax Should Not Be Expanded to Include That For Services

The State of California and legislature (controlled for many years by Democrats) and Board of Equalization is considering sales tax expansion to include that on services, such as fees for real estate agents, physicians, dentists, lawyers, accountants, architects, gardeners, landscapers, babysitters, and so many others.

There is an obscure rule of the Board of Equalization, the state's tax collecting agency, that would allow such consideration. This elected board is itself governed by 3 Democrats and 2 Republicans.

We recognize that the state of California is in financial trouble with estimated budget deficit of $17 billion.

The state should focus on reducing its mammoth payroll and pension obligations, stop giving away money so much money through entitlement programs, increased welfare benefit payments, and that involving medical care for illegal immigrants.

Democrats don’t want to cut services. Republicans don’t want to raise taxes, and we agree.

The California sales tax currently only applies to goods that you can touch, like motor vehicles, household items, golf clubs, clothing, office supplies, computers, telephones, and digital recorders.

Our sales tax does not now apply to services, like that of a real estate agent, physician, lawyer, dentist, accountant, architect, and labor for an auto mechanic.

The State board of Equalization without permission from the legislature and governor could change this system to include sales taxes on services.

What a mistake that would be and get us tied up in court of years on constitutional issues, which would require further use of the state's precious money.

The possibility of expansion of sales tax to include services should be opposed and rejected by every California business person.

The board’s chairwoman, Judy Chu, has already during April 2008 proposed a 5 percent sales tax on services and argued that the board has such authority to make this determination on its own.

Our California State Board of Equalization and the Democrat controlled legislature should not be allowed to expand sales tax in California to include that for services.

Posted by Harrison K. Long, Explore Properties Group, June 9, 2008
Source: Orange County Register

It's Good that NAR Will Consider New Rules for Listing & Advertising of Short Sales & Distressed Properties

The good news during April 2008 from the National Assoc. of Realtors is that it is considering new rules for listing and advertising of short sale and distressed properties.

It's about time.

Rules must be made and followed regarding listing of these properties with the MLS services. The rules should bind owners and sellers, listing agents, and lenders, through the short sale process.

The health of our real estate market is dependent upon buyers having sufficient and accurage information on which they can rely for truth about the properties.

Regarding distressed properties, the market and folks who buy need MLS listings to identify whether there is lender approval of offers on short-sale.

The market needs to have MLS rules on advertising of commission offered by the owner and lender to the broker Realtors for the buyers. Buyers and their agents are dependent upon accuracy of information provided to them in order to make informed decisions and protect value.

The market and buyers deserve to know from the MLS whether the property will be tied up in a lengthy process of lender determination of eligibility, whether there is non-judicial foreclosure in the works, and what is exactly being offered.

After the rules are established, the NAR, California Association of Realtors, and local MLS groups, must enforce those rules, and not allow listings that don't comply.

Banks, lenders, and holders of notes, must not be allowed to set rules and information to be provided in the MLS listings.

Posted by Harrison K. Long, Explore Group, Realtor and Broker, Irvine, CA, May 8, 2008.

Labels: Ethics and business practices, marketing, Realtors and Brokers, short sales

What To Do If You Are Upside Down and Unable to Make Payment on Notes Secured by First and Second Deeds of Trust on Your Home

You Are Upside Down and Unable to Make Paymentd on Notes Secured by First and Second Deeds of Trust on Your Home. What do you do?

You might owe more money on your notes secured by a first deed of trust and on the note secured by the second on your home than what the property is worth.

What do you do?

Here in California we have the ONE ACTION RULE, the law preventing lenders from both foreclosing and suing you on the note. If the lender chooses the non-judicial foreclosure process, he is then prevented from suing you on the note itself. However, if the lender fails or declines to foreclose on the note, he retains the right to file and prosecute a civil lawsuit and get monetary judgment against you.

This could happen to you. It is more common these days.

If you are here in California and upside down on both the note secured by the first and that secured by the second on your home, always make all payments on the first if possible. Do whatever it takes to prevent the first from foreclosing. If you are unable to make payments on the second note, always force that note holder to foreclose. Once the holder of the second starts non-judicial foreclosure, he chooses that route and is prevented from filing a separate lawsuit for monetary judgment.

What is happening here in California is that some folks with note obligations secured by a first and a second on their home decline to make payments on either note. Their thought is to allow the holders to foreclose and to let the property go.

WAIT A MINUTE.

In that situation, the holder of the first can foreclosure and wipe out the deed of trust that was the security for the holder of the first. However, since that second holder did not exercise his right to foreclose, he could then file and prosecute a lawsuit against you for damages, the monetary amount of the note.

Think about this carefully. It is complicated. Seek and retain the advice of qualified counsel in your state and jurisdiction.

Posted by Harrison K. Long, Realtor and Broker, Explore Properties Group, www.ExploreRealEstate.net.
Also a lawyer licensed by the State Bar of California since 1976.

Sellers Should Require Serious Earnest Money Deposits On The Sale of a Home

Sellers sometimes make the mistake of contracting with a buyer for a home sale and asking earnest money deposits of less than three percent of the price. That's painful when the buyer backs out of the deal.
One way to assure that a buyer is serious is to require 3 percent or more of earnest money deposit. If the buyer doesn't and later backs out, he would only lose the small deposit and cause financial hardship for the seller. The seller would also lose the benefit of finding a buyer during the time the home was taken off the market.
Smart sellers ask buyer deposit of at least 3 percent, so that the buyer will think twice about walking away.
In some states and according to contract, if the buyer defaults prior to sale closing, the earnest money goes to the seller. In some states, the seller can also sue the buyer for damages, if the house subsequently sells for less than the original contract price, plus costs sellers incurred to carry the house until it sells. In some situations, seller can sue the buyer for specific performance, which is asking the court to force the buyer to close the deal.

Be careful and consult a local attorney for guidance on this. Keep in mind that litigation is time-consuming, expensive and uncertain.

Posted by Harrison K. Long, Explore Group, April 28, 2008

Do Lower FED Rates Signal That Mortgage Rates Will Fall?

Do Lower FED Rates Signal That Mortgage Rates Will Fall?
That depends.
The 30-year fixed rate mortgage is not tied to short-term treasuries. Fixed mortgage rates are tied to long-term bond yields that move based on anticipation of the economy and inflation. Fixed rates usually come down when there is outlook for slow economic growth. Long term mortgages are securitized and sold on the global market, and investors now demand a higher risk premium on these mortgages.
If you have 7 and 5-1 Adjustable Rate Mortgages (ARMs), there is good news, and it's tied to the treasury index. If the FED cuts rates, it usually signals better rates for ARMs.
If the FED cuts rates, those with Home Equity Lines of Credit (HELOC) will be pleased. HELOCs are mostly pegged to the prime rate, which moves in step with the Federal Reserve.

For good mortgage information, rates and products, contact Tim Sibley, First Capital Mortgage, 949-718-1511.

Posted by Harrison K. Long, Explore Group, Coldwell Banker Previews, April 27, 2008.

At The Center of Our Housing Crisis Is That Many People Have No Equity Or Are Upside Down on Loans

At the center of our housing crisis is that many people here in California and the United States have no remaining home equity or that they are upside down on their loans.
Too many people purchased homes during the past five years with no or little down payment, based upon no document loans, and with lending practices so relaxed that mortgage agents and brokers participated with at least some knowledge that loans should not be approved and funded.
Whose fault is that? Is it possible that mortgage brokers and lenders are at least partly responsible?
Even if it is determined that mortgage brokers and lenders are partly responsible, the individual borrower and homeowner has no comfort. Their primary focus would be on pressuring the mortgage broker or lender to assume the loan back and take over the property. The homeowner would ask that they be cleared of responsibility for the loan.

Posted by Harrison K. Long, Explore Properties Group, April 26, 2008

Tags: Lending, Mortgage, Ethics & broker practices

Good News that NAR Will Consider New Rules for Listing & Advertising of Short Sales

News is that the National Assoc. of Realtors is considering new rules for listing and advertising of short sale and distressed properties. That's good. We need strict rules to bind owners and sellers, listing agents, and lenders, int the short sale process. The market needs all such MLS listings to identify whether there is lender approval of offers on short-sale. The market needs to have specific MLS rules on commission offered by the owner and lender to the broker Realtors for the buyers. The market and buyers deserve to know by MLS whether the property will be tied up in a lengthy process of lender determination of eligibility, whether there is non-judicial foreclosure in the works, and what is exactly being offered. After the new rules are established, the NAR, California Association of Realtors, and local MLS groups, must enforce those rules, and not allow listings that don't comply. Banks and lenders must not be allowed to set all rules and information to be provided in the MLS listings.
Posted by Harrison K. Long, Explore Group, April 24, 2008.

Top Five Reasons to Use a REALTOR®

Top Five Reasons to Use a REALTOR®
1. REALTORS® subscribe to a strict Code of Ethics—a set of obligations that often go above those mandated by law. Known as the REALTOR® Code of Ethics, these principles embody a strong commitment to fairness, integrity, and moral conduct in business relations. Under the Code of Ethics, REALTORS® put the needs and well-being of their clients above anything else.
2. As members of C.A.R., California REALTORS® have access to confidential legal counsel, innovative marketing tools, and an extensive repository of market data. With these resources, REALTORS® are equipped to help you make important decisions throughout the home-buying or –selling process, such as how much home you can afford or what information you must disclose to the other party.
3. Among the top skills REALTORS®’ bring to the table is the ability to negotiate a favorable price. REALTORS® are knowledgeable about the small repairs and improvements you can make to enhance the “salability” of your home. According to the NATIONAL ASSOCIATION OF REALTORS®, the median price of a home sold using an agent is 16 percent higher than a home sold without the guidance of an agent.
4. Your REALTOR® acts as your advocate during each step of the transaction. Whether evaluating buyer proposals or preparing counteroffers, your REALTOR® saves you time by serving as a liaison between you and the other parties of the transaction, prepares and reviews necessary paperwork, and guides you through the process to make sure everything is handled appropriately.
5. REALTORS® are well-versed in up-to-date market data, such as inventory levels, time on market, and ratios of list-to-sold prices. Backed by education and experience in the real estate industry, your REALTOR® can help you leverage this market information to aid in your decision-making process.

Source: California Association of Realtors, 2008
Posted by Harrison K. Long, Explore Properties Group

Ask Whether Your Business or Company Implements Its Ethics and Values

It's true that most every business or company will tell you that they have and believe in values and high ethical standards. You need to dig deeper and ask how they implement those values. Ask what they do to reinforce them. Ask whether they have a plan or a program to instill and support these values. Find out about their response.
Posted by Harrison K. Long, Explore Group, April 13, 2008
Source: Bob Hunt, OC Register, April 12, 2008

Out Of These Four We Will Have An NCAA Champion in Men's Basketball

As the men's final four NCAA basketball games tip off on Saturday, April 5, 2008, we know that a champion will appear on Monday evening.
Will it be the University of North Carolina Tarheals? What a great basketball program they have lead by Roy Williams, a true champion himself.
Let's take time to celebrate the achievements of the players, coaches and administrations from these four great schools and athletic: University of North Carolina, University of Kansas, Memphis State University and UCLA.Posted by Harrison K. Long, Explore Group, April 4, 2008