HOPE FOR HOMEOWNERS within the U.S. FORECLOSURE PREVENTION ACT OF 2008

People ask whether there is HOPE for them from possible foreclosure in the new law signed by President Bush on July 30, 2008 (U.S. Housing & Foreclosure Prevention Act of 2008).

Everyone should be careful about this and get the advice from qualified Realtors and mortgage professionals.

We set forth below a copy of the actual text of this part of the legislation.

Posted by Harrison K. Long, Explore Properties Group, July 31, 2008
Source: Government Bill Tracking

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U.S. Housing and Foreclosure Prevention Act of 2008
H.R. 3221
TITLE IV--HOPE FOR HOMEOWNERS
SEC. 1401. HOPE for Homeowners Act of 2008

SEC. 1402. ESTABLISHMENT OF HOPE FOR HOMEOWNERS PROGRAM.
(a) Establishment- Title II of the National Housing Act (12 U.S.C. 1707 et seq.) is amended by adding at the end the following:

SEC. 257. HOPE FOR HOMEOWNERS PROGRAM.

(a) Establishment- There is established in the Federal Housing Administration a HOPE for Homeowners Program.
(b) Purpose- The purpose of the HOPE for Homeowners Program is--

(1) to create an FHA program, participation in which is voluntary on the part of homeowners and existing loan holders to insure refinanced loans for distressed borrowers to support long-term, sustainable homeownership;
(2) to allow homeowners to avoid foreclosure by reducing the principle balance outstanding, and interest rate charged, on their mortgages;
(3) to help stabilize and provide confidence in mortgage markets by bringing transparency to the value of assets based on mortgage assets;
(4) to target mortgage assistance under this section to homeowners for their principal residence;
(5) to enhance the administrative capacity of the FHA to carry out its expanded role under the HOPE for Homeowners Program;
(6) to ensure the HOPE for Homeowners Program remains in effect only for as long as is necessary to provide stability to the housing market; and
(7) to provide servicers of delinquent mortgages with additional methods and approaches to avoid foreclosure.

(c) Establishment and Implementation of Program Requirements-
(1) DUTIES OF THE BOARD- In order to carry out the purposes of the HOPE for Homeowners Program, the Board shall--‘(A) establish requirements and standards for the program; and‘(B) prescribe such regulations and provide such guidance as may be necessary or appropriate to implement such requirements and standards.
(2) DUTIES OF THE SECRETARY- In carrying out any of the program requirements or standards established under paragraph (1), the Secretary may issue such interim guidance and mortgagee letters as the Secretary determines necessary or appropriate.

(d) Insurance of Mortgages- The Secretary is authorized upon application of a mortgagee to make commitments to insure or to insure any eligible mortgage that has been refinanced in a manner meeting the requirements under subsection (e).

(e) Requirements of Insured Mortgages- To be eligible for insurance under this section, a refinanced eligible mortgage shall comply with all of the following requirements:

(1) LACK OF CAPACITY TO PAY EXISTING MORTGAGE-
(A) BORROWER CERTIFICATION-
(i) IN GENERAL- The mortgagor shall provide certification to the Secretary that the mortgagor has not intentionally defaulted on the mortgage or any other debt, and has not knowingly, or willfully and with actual knowledge, furnished material information known to be false for the purpose of obtaining any eligible mortgage.
(ii) PENALTIES-
(I) FALSE STATEMENT- Any certification filed pursuant to clause (i) shall contain an acknowledgment that any willful false statement made in such certification is punishable under section 1001, of title 18, United States Code, by fine or imprisonment of not more than 5 years, or both.
(II) LIABILITY FOR REPAYMENT- The mortgagor shall agree in writing that the mortgagor shall be liable to repay to the Federal Housing Administration any direct financial benefit achieved from the reduction of indebtedness on the existing mortgage or mortgages on the residence refinanced under this section derived from misrepresentations made in the certifications and documentation required under this subparagraph, subject to the discretion of the Secretary.‘

(B) CURRENT BORROWER DEBT-TO-INCOME RATIO- As of March 1, 2008, the mortgagor shall have had a ratio of mortgage debt to income, taking into consideration all existing mortgages of that mortgagor at such time, greater than 31 percent (or such higher amount as the Board determines appropriate).

(2) DETERMINATION OF PRINCIPAL OBLIGATION AMOUNT- The principal obligation amount of the refinanced eligible mortgage to be insured shall--
(A) be determined by the reasonable ability of the mortgagor to make his or her mortgage payments, as such ability is determined by the Secretary pursuant to section 203(b)(4) or by any other underwriting standards established by the Board; and‘(B) not exceed 90 percent of the appraised value of the property to which such mortgage relates.

(3) REQUIRED WAIVER OF PREPAYMENT PENALTIES AND FEES- All penalties for prepayment or refinancing of the eligible mortgage, and all fees and penalties related to default or delinquency on the eligible mortgage, shall be waived or forgiven.

(4) EXTINGUISHMENT OF SUBORDINATE LIENS-
(A) REQUIRED AGREEMENT- All holders of outstanding mortgage liens on the property to which the eligible mortgage relates shall agree to accept the proceeds of the insured loan as payment in full of all indebtedness under the eligible mortgage, and all encumbrances related to such eligible mortgage shall be removed. The Secretary may take such actions, subject to standards established by the Board under subparagraph (B), as may be necessary and appropriate to facilitate coordination and agreement between the holders of the existing senior mortgage and any existing subordinate mortgages, taking into consideration the subordinate lien status of such subordinate mortgages.

(B) SHARED APPRECIATION-
(i) IN GENERAL- The Board shall establish standards and policies that will allow for the payment to the holder of any existing subordinate mortgage of a portion of any future appreciation in the property secured by such eligible mortgage that is owed to the Secretary pursuant to subsection (k).‘(ii) FACTORS- In establishing the standards and policies required under clause (i), the Board shall take into consideration--‘(I) the status of any subordinate mortgage;‘(II) the outstanding principal balance of and accrued interest on the existing senior mortgage and any outstanding subordinate mortgages;‘(III) the extent to which the current appraised value of the property securing a subordinate mortgage is less than the outstanding principal balance and accrued interest on any other liens that are senior to such subordinate mortgage; and‘(IV) such other factors as the Board determines to be appropriate.

(C) VOLUNTARY PROGRAM- This paragraph may not be construed to require any holder of any existing mortgage to participate in the program under this section generally, or with respect to any particular loan.

(5) TERM OF MORTGAGE- The refinanced eligible mortgage to be insured shall--‘(A) bear interest at a single rate that is fixed for the entire term of the mortgage; and‘(B) have a maturity of not less than 30 years from the date of the beginning of amortization of such refinanced eligible mortgage.

(6) MAXIMUM LOAN AMOUNT- The principal obligation amount of the eligible mortgage to be insured shall not exceed 132 percent of the dollar amount limitation in effect for 2007 under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) for a property of the applicable size.

(7) PROHIBITION ON SECOND LIENS- A mortgagor may not grant a new second lien on the mortgaged property during the first 5 years of the term of the mortgage insured under this section, except as the Board determines to be necessary to ensure the maintenance of property standards; and provided that such new outstanding liens (A) do not reduce the value of the Government’s equity in the borrower’s home; and (B) when combined with the mortgagor’s existing mortgage indebtedness, do not exceed 95 percent of the home’s appraised value at the time of the new second lien.

(8) APPRAISALS- Any appraisal conducted in connection with a mortgage insured under this section shall--‘(A) be based on the current value of the property;‘(B) be conducted in accordance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3331 et seq.);‘(C) be completed by an appraiser who meets the competency requirements of the Uniform Standards of Professional Appraisal Practice;‘(D) be wholly consistent with the appraisal standards, practices, and procedures under section 202(e) of this Act that apply to all loans insured under this Act; and‘(E) comply with the requirements of subsection (g) of this section (relating to appraisal independence).

(9) DOCUMENTATION AND VERIFICATION OF INCOME- In complying with the FHA underwriting requirements under the HOPE for Homeowners Program under this section, the mortgagee shall document and verify the income of the mortgagor or non-filing status by procuring (A) an income tax return transcript of the income tax returns of the mortgagor, or(B) a copy of the income tax returns from the Internal Revenue Service, for the two most recent years for which the filing deadline for such years has passed and by any other method, in accordance with procedures and standards that the Board shall establish.

(10) MORTGAGE FRAUD- The mortgagor shall not have been convicted under Federal or State law for fraud during the 10-year period ending upon the insurance of the mortgage under this section.

(11) PRIMARY RESIDENCE- The mortgagor shall provide documentation satisfactory in the determination of the Secretary to prove that the residence covered by the mortgage to be insured under this section is occupied by the mortgagor as the primary residence of the mortgagor, and that such residence is the only residence in which the mortgagor has any present ownership interest.

(f) Study of Auction or Bulk Refinance Program-
(1) STUDY- The Board shall conduct a study of the need for and efficacy of an auction or bulk refinancing mechanism to facilitate refinancing of existing residential mortgages that are at risk for foreclosure into mortgages insured under this section. The study shall identify and examine various options for mechanisms under which lenders and servicers of such mortgages may make bids for forward commitments for such insurance in an expedited manner.
(2) CONTENT-
(A) ANALYSIS- The study required under paragraph (1) shall analyze--‘(i) the feasibility of establishing a mechanism that would facilitate the more rapid refinancing of borrowers at risk of foreclosure into performing mortgages insured under this section;‘(ii) whether such a mechanism would provide an effective and efficient mechanism to reduce foreclosures on qualified existing mortgages;‘(iii) whether the use of an auction or bulk refinance program is necessary to stabilize the housing market and reduce the impact of turmoil in that market on the economy of the United States;‘(iv) whether there are other mechanisms or authority that would be useful to reduce foreclosure; and‘(v) and any other factors that the Board considers relevant.
(B) DETERMINATIONS- To the extent that the Board finds that a facility of the type described in subparagraph (A) is feasible and useful, the study shall--‘(i) determine and identify any additional authority or resources needed to establish and operate such a mechanism;‘(ii) determine whether there is a need for additional authority with respect to the loan underwriting criteria established in this section or with respect to eligibility of participating borrowers, lenders, or holders of liens;‘(iii) determine whether such underwriting criteria should be established on the basis of individual loans, in the aggregate, or otherwise to facilitate the goal of refinancing borrowers at risk of foreclosure into viable loans insured under this section.‘(3) REPORT- Not later than the expiration of the 60-day period beginning on the date of the enactment of this section, the Board shall submit a report regarding the results of the study conducted under this subsection to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. The report shall include a detailed description of the analysis required under paragraph (2)(A) and of the determinations made pursuant to paragraph (2)(B), and shall include any other findings and recommendations of the Board pursuant to the study, including identifying various options for mechanisms described in paragraph (1).‘(g) Appraisal Independence-

(1) PROHIBITIONS ON INTERESTED PARTIES IN A REAL ESTATE TRANSACTION- No mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, nor any other person with an interest in a real estate transaction involving an appraisal in connection with a mortgage insured under this section shall improperly influence, or attempt to improperly influence, through coercion, extortion, collusion, compensation, instruction, inducement, intimidation, nonpayment for services rendered, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with the mortgage.

(2) CIVIL MONETARY PENALTIES- The Secretary may impose a civil money penalty for any knowing and material violation of paragraph (1) under the same terms and conditions as are authorized in section 536(a) of this Act.‘(h) Standards To Protect Against Adverse Selection-‘(1) IN GENERAL- The Board shall, by rule or order, establish standards and policies to require the underwriter of the insured loan to provide such representations and warranties as the Board considers necessary or appropriate to enforce compliance with all underwriting and appraisal standards of the HOPE for Homeowners Program.

(2) EXCLUSION FOR VIOLATIONS- The Board shall prohibit the Secretary from paying insurance benefits to a mortgagee who violates the representations and warranties, as established under paragraph (1), or in any case in which a mortgagor fails to make the first payment on a refinanced eligible mortgage.

(3) OTHER AUTHORITY- The Board may establish such other standards or policies as necessary to protect against adverse selection, including requiring loans identified by the Secretary as higher risk loans to demonstrate payment performance for a reasonable period of time prior to being insured under the program.‘(i) Premiums- For each refinanced eligible mortgage insured under this section, the Secretary shall establish and collect--‘(1) at the time of insurance, a single premium payment in an amount equal to 3 percent of the amount of the original insured principal obligation of the refinanced eligible mortgage, which shall be paid from the proceeds of the mortgage being insured under this section, through the reduction of the amount of indebtedness that existed on the eligible mortgage prior to refinancing; and‘(2) in addition to the premium required under paragraph (1), an annual premium in an amount equal to 1.5 percent of the amount of the remaining insured principal balance of the mortgage.‘(j) Origination Fees and Interest Rate- The Board shall establish--‘(1) a reasonable limitation on origination fees for refinanced eligible mortgages insured under this section; and‘(2) procedures to ensure that interest rates on such mortgages shall be commensurate with market rate interest rates on such types of loans.

(k) Equity and Appreciation-
(1) FIVE-YEAR PHASE-IN FOR EQUITY AS A RESULT OF SALE OR REFINANCING- For each eligible mortgage insured under this section, the Secretary and the mortgagor of such mortgage shall, upon any sale or disposition of the property to which such mortgage relates, or upon the subsequent refinancing of such mortgage, be entitled to the following with respect to any equity created as a direct result of such sale or refinancing:

(A) If such sale or refinancing occurs during the period that begins on the date that such mortgage is insured and ends 1 year after such date of insurance, the Secretary shall be entitled to 100 percent of such equity.
(B) If such sale or refinancing occurs during the period that begins 1 year after such date of insurance and ends 2 years after such date of insurance, the Secretary shall be entitled to 90 percent of such equity and the mortgagor shall be entitled to 10 percent of such equity.
(C) If such sale or refinancing occurs during the period that begins 2 years after such date of insurance and ends 3 years after such date of insurance, the Secretary shall be entitled to 80 percent of such equity and the mortgagor shall be entitled to 20 percent of such equity.
(D) If such sale or refinancing occurs during the period that begins 3 years after such date of insurance and ends 4 years after such date of insurance, the Secretary shall be entitled to 70 percent of such equity and the mortgagor shall be entitled to 30 percent of such equity.
(E) If such sale or refinancing occurs during the period that begins 4 years after such date of insurance and ends 5 years after such date of insurance, the Secretary shall be entitled to 60 percent of such equity and the mortgagor shall be entitled to 40 percent of such equity.
(F) If such sale or refinancing occurs during any period that begins 5 years after such date of insurance, the Secretary shall be entitled to 50 percent of such equity and the mortgagor shall be entitled to 50 percent of such equity.

(2) APPRECIATION IN VALUE- For each eligible mortgage insured under this section, the Secretary and the mortgagor of such mortgage shall, upon any sale or disposition of the property to which such mortgage relates, each be entitled to 50 percent of any appreciation in value of the appraised value of such property that has occurred since the date that such mortgage was insured under this section.

(l) Establishment of HOPE Fund-
(1) IN GENERAL- There is established in the Federal Housing Administration a revolving fund to be known as the Home Ownership Preservation Entity Fund, which shall be used by the Board for carrying out the mortgage insurance obligations under this section.
(2) MANAGEMENT OF FUND- The HOPE Fund shall be administered and managed by the Secretary, who shall establish reasonable and prudent criteria for the management and operation of any amounts in the HOPE Fund.

(m) Limitation on Aggregate Insurance Authority- The aggregate original principal obligation of all mortgages insured under this section may not exceed $300,000,000,000.

(n) Reports by the Board- The Board shall submit monthly reports to the Congress identifying the progress of the HOPE for Homeowners Program, which shall contain the following information for each month:‘(1) The number of new mortgages insured under this section, including the location of the properties subject to such mortgages by census tract.‘(2) The aggregate principal obligation of new mortgages insured under this section.‘(3) The average amount by which the principle balance outstanding on mortgages insured this section was reduced.‘(4) The amount of premiums collected for insurance of mortgages under this section.‘(5) The claim and loss rates for mortgages insured under this section.‘(6) Any other information that the Board considers appropriate.

(o) Required Outreach Efforts- The Secretary shall carry out outreach efforts to ensure that homeowners, lenders, and the general public are aware of the opportunities for assistance available under this section.

(p) Enhancement of FHA Capacity- Under the direction of the Board, the Secretary shall take such actions as may be necessary to--‘(1) contract for the establishment of underwriting criteria, automated underwriting systems, pricing standards, and other factors relating to eligibility for mortgages insured under this section;‘(2) contract for independent quality reviews of underwriting, including appraisal reviews and fraud detection, of mortgages insured under this section or pools of such mortgages; and‘(3) increase personnel of the Department as necessary to process or monitor the processing of mortgages insured under this section.

(q) GNMA Commitment Authority-‘(1) GUARANTEES- The Secretary shall take such actions as may be necessary to ensure that securities based on and backed by a trust or pool composed of mortgages insured under this section are available to be guaranteed by the Government National Mortgage Association as to the timely payment of principal and interest.‘(2) GUARANTEE AUTHORITY- To carry out the purposes of section 306 of the National Housing Act (12 U.S.C. 1721), the Government National Mortgage Association may enter into new commitments to issue guarantees of securities based on or backed by mortgages insured under this section, not exceeding $300,000,000,000. The amount of authority provided under the preceding sentence to enter into new commitments to issue guarantees is in addition to any amount of authority to make new commitments to issue guarantees that is provided to the Association under any other provision of law.

(r) Sunset- The Secretary may not enter into any new commitment to insure any refinanced eligible mortgage, or newly insure any refinanced eligible mortgage pursuant to this section before October 1, 2008 or after September 30, 2011.

(s) Definitions- For purposes of this section, the following definitions shall apply:‘(1) APPROVED FINANCIAL INSTITUTION OR MORTGAGEE- The term ‘approved financial institution or mortgagee’ means a financial institution or mortgagee approved by the Secretary under section 203 as responsible and able to service mortgages responsibly.‘(2) BOARD- The term ‘Board’ means the Board of Directors of the HOPE for Homeowners Program. The Board shall be composed of the Secretary, the Secretary of the Treasury, the Chairperson of the Board of Governors of the Federal Reserve System, and the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation, or their designees.‘(3) ELIGIBLE MORTGAGE- The term ‘eligible mortgage’ means a mortgage--‘(A) the mortgagor of which--‘(i) occupies such property as his or her principal residence; and‘(ii) cannot, subject to subsection (e)(1)(B) and such other standards established by the Board, afford his or her mortgage payments; and‘(B) originated on or before January 1, 2008.‘(4) EXISTING SENIOR MORTGAGE- The term ‘existing senior mortgage’ means, with respect to a mortgage insured under this section, the existing mortgage that has superior priority.‘(5) EXISTING SUBORDINATE MORTGAGE- The term ‘existing subordinate mortgage’ means, with respect to a mortgage insured under this section, an existing mortgage that has subordinate priority to the existing senior mortgage.‘(6) HOPE FOR HOMEOWNERS PROGRAM- The term ‘HOPE for Homeowners Program’ means the program established under this section.‘(7) SECRETARY- The term ‘Secretary’ means the Secretary of Housing and Urban Development, except where specifically provided otherwise.

(t) Requirements Related to the Board-‘(1) COMPENSATION, ACTUAL, NECESSARY, AND TRANSPORTATION EXPENSES-‘(A) FEDERAL EMPLOYEES- A member of the Board who is an officer or employee of the Federal Government shall serve without additional pay (or benefits in the nature of compensation) for service as a member of the Board.‘(B) TRAVEL EXPENSES- Members of the Board shall be entitled to receive travel expenses, including per diem in lieu of subsistence, equivalent to those set forth in subchapter I of chapter 57 of title 5, United States Code.‘(2) BYLAWS- The Board may prescribe, amend, and repeal such bylaws as may be necessary for carrying out the functions of the Board.‘(3) QUORUM- A majority of the Board shall constitute a quorum.‘(4) STAFF; EXPERTS AND CONSULTANTS-‘(A) DETAIL OF GOVERNMENT EMPLOYEES- Upon request of the Board, any Federal Government employee may be detailed to the Board without reimbursement, and such detail shall be without interruption or loss of civil service status or privilege.‘(B) EXPERTS AND CONSULTANTS- The Board shall procure the services of experts and consultants as the Board considers appropriate.

(u) Rule of Construction Related to Voluntary Nature of the Program- This section shall not be construed to require that any approved financial institution or mortgagee participate in any activity authorized under this section, including any activity related to the refinancing of an eligible mortgage.

(v) Rule of Construction Related to Insurance of Mortgages- Except as otherwise provided for in this section or by action of the Board, the provisions and requirements of section 203(b) shall apply with respect to the insurance of any eligible mortgage under this section.

(w) HOPE Bonds-
(1) ISSUANCE AND REPAYMENT OF BONDS- Notwithstanding section 504(b) of the Federal Credit Reform Act of 1990 (2 U.S.C. 661d(b)), the Secretary of the Treasury shall--‘(A) subject to such terms and conditions as the Secretary of the Treasury deems necessary, issue Federal credit instruments, to be known as ‘HOPE Bonds’, that are callable at the discretion of the Secretary of the Treasury and do not, in the aggregate, exceed the amount specified in subsection (m);‘(B) provide the subsidy amounts necessary for loan guarantees under the HOPE for Homeowners Program, not to exceed the amount specified in subsection (m), in accordance with the provisions of the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.), except as provided in this paragraph; and‘(C) use the proceeds from HOPE Bonds only to pay for the net costs to the Federal Government of the HOPE for Homeowners Program, including administrative costs.
(2) REIMBURSEMENTS TO TREASURY- Funds received pursuant to section 1338(b) of the Federal Housing Enterprises Regulatory Reform Act of 1992 shall be used to reimburse the Secretary of the Treasury for amounts borrowed under paragraph (1).
(3) USE OF RESERVE FUND- If the net cost to the Federal Government for the HOPE for Homeowners Program exceeds the amount of funds received under paragraph (2), remaining debts of the HOPE for Homeowners Program shall be paid from amounts deposited into the fund established by the Secretary under section 1337(e) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, remaining amounts in such fund to be used to reduce the National debt.
(4) REDUCTION OF NATIONAL DEBT- Amounts collected under the HOPE for Homeowners Program in accordance with subsections (i) and (k) in excess of the net cost to the Federal Government for such Program shall be used to reduce the National debt.

Are We Experiencing Continued Irresponsible Home Lending in Southern California?

Here in Southern California we continue have some apparent irresponsible home lending practices going on.

The Orange County Register, reported on July 27, 2008, in a Marketplace article that one year ago, July 27, 2007, the house at 920 W. Camile St. in Santa Ana was bank-owned and deserted and that "the subprime lending bonanza had blighted a city block".

In October of 2007, this same house sold at auction for $304,500 (a bit more than half what the prior a buyer using 100 percent subprime financing paid in 2006).

This same house at 920 W. Camile was renovated and repainted and was resold in January, 2008, for $625,000, with a $125,000 down payment and a $500,000 mortgage from Wells Fargo Bank. (according to The OC property tax records).

Why would the price of a distressed property on a this same street in Santa Ana double between October of 2007 and January 2008?

Why did Wells Fargo Bank extend good credit to the buyers on this street where comparable homes are selling for $300,000?

In November, 2007, Wells Fargo Bank issued a $289,275 mortgage for this same home at 920 W. Camile to an investor who had purchased the home at a foreclosure auction.
In January, 2008, Wells Fargo Bank issued a $500,000 mortgage to the new owners of this same home.

Does this make good sense? Is this good for Southern California and our economy? Will this help make our communities better places to live?

This kind of lending practice isn't a good thing and will not be supported by Realtors.

Posted by Harrison K. Long, Explore Properties Group
Source: Orange County Register, Marketplace, July 27, 2008



Tags: Mortgage Financing; Home Ownership Economics; Explore Real Estate; Southern California; South OC

Will Shy Bargain Hunters Make Their Deals About California and U.S. Housing During 2008?

We have a big sale going on in the OC & California housing these days.

The OC house seller continues to cut the price. We have experienced a $150,000 drop in median selling price for Orange County residences from the June 2007 peak. We went from a record high price of $645,000 a year ago to $495,000 in June 2008. During 2008 so far, the OC home sale prices fell 23 percent.

What's the cause?

Cheap money during 2004 to 2006, and aggressive lending and stupid thinking borrowers and blind regulators and greed and overinflated home prices.

The OC, California, homes could now be relatively inexpensive. It is possible that the OC home is 5.2 percent undervalued.

What usually happens when the shopkeepers at the mall can’t move enough inventory at a certain price?

The OC Housing market now offers good buyer opportunities.

Will the bargain hunters make their deals during the remainder of 2008? Or will they wait and make their deals in 2009?

Posted by Harison K. Long, Explore Properties Group, July 20, 2008
Source: Orange County Register, DataQuick Information Systems

It's Good that FHA Suspended its 90-day Rule Against Flipping

Foreclosed and abandoned homes harm neighborhoods and delay a community’s recovery.

In order to help facilities sale of bank-owned properties, the Federal Housing Administration (FHA) has temporarily suspended its 90-day rule against flipping of properties.

Under that anti-flipping rule, the FHA does not insure a mortgage loan if the sales contract is executed within 90 days of the seller’s acquisition of the property. Effective June 9, 2008, the anti-flipping rule has been waived for one year for properties acquired by lenders, their subsidiaries, and their outside vendors.
The FHA still requires homes to be “safe, secure, and sound," which may not be the condition of certain foreclosed-upon properties.

Check out Federal Housing Administration. Also check out article about California REO Transactions at California Association of Realtors.

Posted by Harrison K. Long, Explore Properties Group

U.S. Congress Should Work To Improve Our Domestic Oil Supply & Get Decreased Prices at the Gas Pump

This gasoline price at the PUMP CRUNCH is rough for all of us. Supply has not kept pace with demand, and so prices rise.

Many of steps taken in the U.S. for reduction of demand are being negated by increased demands for oil in foreign countries including India and China.

The best step we can take to decrease prices is to INCREASE SUPPLIES of oil here in the U.S.

U.S. Congress and Senate (both controlled by Democrats) has instead proposed legislation that would allow the U.S. to sue OPEC for suppressing oil production.

What?

We criticize other countries for curbing their oil production, and at the same time close off areas here in the U.S. known to have oil reserves and natural gas.

China is now working with Cuba to drill for oil 60 miles off the coast of Florida.

Meanwhile our Congress does nothing to increase our production and explore other U.S. oil resources.

On June 11, 2008, the U.S. Senate appropriations committee (controlled by Democrats) refused to consider a bill to allow exploration and drilling for oil by U.S. companies in international waters. Does that make sense?

We have advanced exploration technology available to allow development of oil in an environmentally-sensitive way while protecting surrounding habitats and wildlife.

Our U.S. Congress waits.

It is estimated that exploring a mere 2,000 acres of frozen tundra in the 1.5 million acre Arctic National Wildlife Refuge (ANWR) could produce 10.4 billion barrels of oil. It is also estimated that offshore drilling would yield 86 billion barrels of oil and large quantities of natural gas.

In the long term, we must find and develop alternative energy sources here in the U.S. and be less dependent on oil.

During the short-term, developing our own domestic sources of oil should take priority.

Our U.S. Congress with Republicans and Democrats working together should legislate for real solutions to increasE oil production, provide more oil for us and get gasoline prices down at the pump.

Posted by Harrison K. Long, Explore Properties Group, June 11, 2008
Source: Ken Calvert, U.S. Congress Representative, 44th District from California

U.S. Presidential Candidates Different Positions on Housing and the Economy

U.S. Presidential Candidates Different Positions on Housing and the Economy

The two U.S. Presidential candidates for election 2008 have different approaches to housing and economic issues.
Senator John McCain:
1. Proposes to spend up to $10 billion to allow some home owners to trade high-interest, adjustable-rate mortgages for fixed-rate loans.

That sounds good.

2. Proposes a suspension of the 18.4-cent federal gas tax and 24.4-cent diesel tax during the summer.

That sounds good too.

3. Supports a middle-class tax cut by doubling the personal tax exemption for dependents to $7,000.

This also will be good.

4. Calls for a simpler tax system with two tax rates and a generous standard deduction.

We agree.

5. Supports making permanent the 2001 and 2003 income tax cuts and proposes cutting the corporate tax rate to 25 percent from 35 percent and allowing businesses to immediately write off capital expenses.

We agree again.

6. Maintains that government assistance to the banking system should focus on preventing systemic risk that would endanger the financial system and the economy.

Senator Barak Obama:

1. Calls for greater government regulation of the U.S. financial system and proposes a new $30 billion economic stimulus plan to help home owners, including a $10 billion foreclosure prevention fund to help people keep their homes and $10 billion in relief for state and local governments hit hardest by the housing crisis.

Would that be socialism? Is he suggesting that we socialize the U.S. financial system?

2. Outlines six "core principles for reform" that would give the Federal Reserve supervisory authority over any financial institution to which it might make credit available and calls for reform and streamlining of financial regulatory agencies.

What?

3. Wants to repeal a provision in the bankruptcy law so ordinary families can modify terms of home mortgages.

What are "ordinary families"? What does he mean by "modify terms"?

4. Proposes a 10 percent mortgage tax credit for middle-class Americans.

What are "middle class Americans"?



Posted by Harrison K. Long, Explore Properties Group, Coldwell Banker Previews, June 10, 2008.
Source: Reuters News Service

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

Challenges for Real Estate Investors In This Declining Home Value Market

Some losers in this residential real estate declining market are buyers of second homes, investors who are now involved with income tax debt challenge.

Some of these people will lose their properties through short sale or foreclosure and make it to bankruptcy under the weight of a income tax bill.

While U.S. Congress has granted some tax relief to people who lose their primary homes, there is no such aid for investors who fall behind on payments on 2nd homes.

If a person buys an investment home, and it they are unable to make payments and forced to short sale that property, or if they lose it in foreclosure, the difference between the amount they borrowed and the rental home’s sale price in short sale or foreclosure will ultimately be considered by the IRS to be taxable income as forgiven debt.

Under the U.S. Mortgage Forgiveness Debt Relief Act, which is effective from Jan. 1, 2007, through Dec. 31, 2009, a homeowner does not have to pay ioncome tax on debt forgiven by a lender, as long as the loan is backed by the property the homeowner lives in.

According to the National Association of Realtors, there are about 7.5 million vacation homes in the country, about 10 percent of the number of owner-occupied homes. From 2002 to 2007, the number of vacation homes rose 18 percent, more than three times the growth in the number of owner-occupied homes and the growth in investor-owned units.

For investment property owners with a potential income tax bill, there is one possible way to minimize the damage. Negotiating with a lender could prove to be good. The lender needs to agree that foreclosure fully satisfies all obligations under the loan. With that statement, there could possibly be no outstanding unpaid debt reported by the bank that the Internal Revenue Service could treat as income. However, it is still unknown whether that tactic will work with the IRS and the US tax courts.

Posted by Harrison K. Long, Explore Properties Group, June 6, 2008
Source: California Association of Realtors, National Assoc. of Realtors

An Old Fashioned Way of Determining Value for a Home

Value of housing has many variants. The value of a certain home is determined by lots of factors specific to that property. It's difficult to asign economic value to each of these factors. This is especially true when buyers and sellers do not not have complete information about each factor.

Some web sites (like S&P and Case-Shiller) use mathematical weighting formulas to come up with opinion on home value.

However, they don't consider whether buyers have actually seen or previewed the houses and the neighborhoods.

So these sites and indexes are incapable to accurately determine economic value or price of a home.

Lenders don't look to computer-generated models to make decisions. They instead rely on old fashioned buyer and seller factors, such as comparable sales to determine how much to loan on a given property.

Buyers count on such things as appearance of the home, character and neutrality of improvements, landscaping, what kind of light the interior of the home is exposed to, character of the town and neighborhood, schools, whether others homes on the street have been improved, positive activities in the area, and management of the homeowner association.

We believe the old fashioned way of determining home value will be making a comeback.

Posted by Harrison K. Long, Explore Properties Group, June 1, 2008

Property Owners & Buyers Should Oppose CA State-mandated Energy Audits At Time Of Sale

Property Owners, Sellers, Buyers, and Realtors, should fight against any proposed California state-mandated audit law requiring time-of-sale energy efficiency audits.

CA Assembly bill 2678 was introduced in Feb. 2008, has been passed out of committee. This bill would require California Energy Commission to develop requirements for time-of-sale energy efficiency audits for residential and commercial buildings.

If this passes, owners will be required to submit for state audits and then be required to meet new retrofit standards.

If passed, this bill will add time to the home and commercial building selling process. This will also add costs for sellers, which would eventually be born by the buyers and slow the market down even further.

We and the California Association of Realtors strongly oppose this legislation.

This bill would would impose requirements at time of sale, and only at time of sale. If you are not selling your home, this would not require you to do anything.

This bill is aimed at the property owners who will be selling, is against the real estate industry as a whole, and should be opposed.

Posted by Harrison K. Long, Explore Properties Group, May 15, 2008
Source: Orange County Register, May 10, 2008

Banks & Lenders Are Taking Less Than What's Owed At Trustee Sales After Foreclosure

It's interesting that in Orange County, California, during April, 2008, buyers took foreclosure homes off the bank and lender hands at trustee sales for 21.5% less than the amount owed.

One year ago during April, 2007, the banks and lenders weren't so interested in discounting at trustee sales.

Perhaps the banks are getting smart.

It was reported that 84 percent of properties sold at the OC, California, at trustee’s sales during April, 2008, were offered at a discount.

Posted by Harrison K. Long, Explore Properties Group, May 14, 2008
Source: Orange County Register, May 14, 2008

What Should You Consider When Thinking About Foreclosure Buyer Opportunities?

What Should You Know and Consider About Foreclosure Buyer Opportunities:
Buyers must be pre-approved for a loan by a lender.
Source of Down Payment Must be confirmed.
The bank could require that you finance your purchase with them.
Expect competition for your offer.
Some buyers bid on multiple properties.
Banks won’t accept offers that are contingent on selling your home.
The best deals generally are those properties with the longest time on the market.
Bank-owned homes typically sell at less than their listing price.
Get your own buyer inspection of the property.
Consider the cost of repairs or damaged or missing appliances when bidding.
The bank will make a counter-offer to your first offer.
Some banks will not accept an offer unless it is submitted by a REALTOR®.
The bank will require the use of its own forms for the offer and purchase contract.
Banks generally are looking to sell and close escrow quickly, within two weeks to 45 days.
Posted by Harrison K. Long, Explore Group, March 28, 2008

Are Twenty Percent Down Payments Required by Lenders These Days?

Are twenty percent or ten percent down payments required by lenders these days? FHA loans were originally intended to help first-time home buyers, so the down payment requirements are flexible. The buyer can put as little as 3% down. In this situation it is OK if you get that money from a relative. These days lenders on other loans are generally requiring at least 10% down and want to confirm that this would be your own money. Some lenders are requiring extra money upfront. FHA loans may be the only way for people who have small down payments.Posted by Harrison K. Long, Explore Properties Group, March 27, 2008

Home Ownership Economics

Owning your home is a good thing. Paeans to homeownership are a commonplace for American politicians, and, since the nineteen-thirties, public policy has been designed to make home buying cheaper and easier. Homeownership, the argument goes, has tremendous social benefits, stabilizing neighborhoods and making people more willing to invest in their communities. And it has economic benefits, too, serving as a forced-savings program that allows people to leverage their incomes and build wealth. Homeownership “provides financial security for families,” Mel Martinez, the former H.U.D. Secretary, has said, and it “generates economic strength that fuels the entire nation.”
[source: New Yorker Magazine, James Surowiecki, March 10, 2008.
Posted by Harrison K. Long, Explore Properties Group, March 7, 2008