Sur Real Estate of Mind

Seize the Days

2008-12-06T15:53:00.000-08:00

Have you noticed? There haven't been any recent entries for Sur Real Estate of Mind...

In mid-September it was announced that Community Financial Resource Center and LATMAP (Los Angeles Teachers Mortgage Assistance Program), the organization/program through which I created this blog would have to temporarily suspend its programs due to the current economic and financial hardships that have threatened the existence of many organizations, companies and households. :(

Since I was the lone writer of this blog this page became inactive as well. I have now sought out new career opportunities and will not be with the aforementioned organization when/if they reinstate their programs at the beginning of next year. I have also left the "world of homeownership counseling" all together and will now be working as a commodities broker (basically working with foreign currency, gold, precious metals, futures, options, cotton, stock indices, etc.)for a firm in downtown Los Angeles while simultaneously running a t-shirt design company, Wake Up Tokyo. It may seem like a leap from homeownership counseling to investing, but I've always wanted to pursue a career in investing and thus, the "loss" opened up an opportunity. And the t-shirt company seemed like a given considering my art background.

This blog was my "baby" of sorts - my first attempt at blogging, and I felt we had a good run. I am pleased with how far it went and the impact it made. Thanks for reading!

Signing off...

Costco Realty?

2008-08-19T12:20:00.001-07:00

Wait A Sec...Costco Realty?

Some people are Starbucks junkies, others are devout Mac users, many are followers of the House of O aka Oprah and then there are those, like me, who are campaigning that Costco be recognized as it's own religion...ok maybe it's not that serious. But Costco is one of my favorite places to shop. Have you ever been to one? They have everything there. The prices are great for what you get. And let's not forget to mention the food. Not only can you snack while you shop (they have loads of samples), but you can pick up a juicy hot dog and soda with unlimited refill for $1.50 on your way out. So, imagine my surprise when my co-worker Veronica Lopez tells me that Costco has it's own mortgage and realty service. So, I had to do my own investigation...

Looks like Costco real estate services are actually through LendingTree

"Costco Member Benefits" that offer a Costco Cash Card at closing, lower rates, approved lenders, and "loan offers in minutes".

Work with one of their affiliated Realtors and receive a $2,000 cash incentive

I guess they're not much different then other discounted realtors...

EDIT: So I was thinking to myself, "If Costco does real estate, then Wal-Mart surely does!?" Well, they only do commercial properties...

Housing Bill: What It Means for Buyers

2008-08-04T11:31:00.001-07:00

Housing Bill: What It Means for Buyers
by Hassan Nicholás

As you may or may not know a Housing bill, the Housing and Economic Recovery Act of 2008, was signed into law about a month ago, on July 30^th. We’ve received some questions about it from some of our “viewers” so we’d figure we would put together a summary of what this new bill means for first-time home buyers. Incentive for this legislation came out of the need for more foreclosure prevention measures.

The tax credit feature of the loan is the only segment of the bill specifically aimed at first-time home buyers.

Under bill, first-time home buyers (defined as not having owned a home in the last three years) will be eligible for a tax credit of 10% of the purchase price up to a maximum of $7,500.

Income limitations. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 would qualify for the full $7,500 tax credit. The tax credit phases out for higher incomes.

You are only eligible if you bought after April 8^th of this year and before July 1, 2009

It’s only a one-time tax credit

The money is repaid after over 15 years, in which you make $500 payments per year starting the two years after you buy the house

If you take the full $7,500 credit your income tax bill will increase by $500 a year for 15 years.

If you sell the house before then you pay Uncle Sam the remaining balance

Essentially, the government is giving you an interest free loan to be added to your disposable income.

Property tax deductions were modified for all homeowners.

Single filers who pay property taxes increase their standard deduction by $500, $1,000 for couples filing jointly.

You can’t increase the standard deduction by more than the property tax bill. Example: You’re married and filing jointly you get an $800 deduction if you pay $800 in property taxes, not a $1,000 deduction.

As current law has it, you can deduct property taxes from federal income tax only if you itemize deductions on Schedule A. The new twist will benefit those, like retirees, who own their houses outright and therefore don’t pay any mortgage interest or people who just don’t have enough deductions to itemize on Schedule A.

FHA Program Updated

FHA loan limit increased from 95% to 110% of the median home price in the area

The cap set at 150% of the GSE limit, currently $625,000

Home buyers required to put minimum 3.5% down

Seller-Paid down payment assistance,prohibited.

Additional

The new bill will require licensing and registration of all mortgage brokers.

Mortgage lenders are now required to present home buyers and owners looking to refinance with disclosures within three (3) days of applying for some loans. Disclosures must also be required no later than seven (7) days before closing, allowing borrower to loan shop for more favorable terms. Lenders will also be required to inform borrowers of the maximum mortgage payment possible under the loan (Wow, think how that alone could have saved many homes.)

So there you have it. Remember that there is more to the Bill, as it applies to distressed homeowners primarily. As far as how it could affect potential home buyers I hope that I outlined the main points. I would also advise you do more research.

News Wire: Charitable Down Payment Assistance Programs...Gone

2008-07-23T09:58:00.000-07:00

News Wire: Charitable Down Payment Assistance Programs...Gone

by Hassan Nicholas

OK, so...remember that entry I wrote about the legitimacy of charitable down payment assistance programs? I had my suspicions and it appears I wasn’t the only one. Recently the Department of Housing and Urban Development aka HUD announced a rule intended to exclude “quid-pro-quo” down payment assistance programs. The popular program permitted FHA borrowers to receive cash gifts/contributions, directly or indirectly, from the seller. By charging a service fee popular charitable assistance programs such as Sacramento-based Nehemiah Foundation and others went around a loop hole that prohibits contributions and gifts from the seller. Now that it’s banned it has hurt the business and aspirations of many real estate agents and home buyers. Even with prices still falling in many areas, the quality (availability) and quantity (the amount) of assistance offered for first-timers has decreased substantially. All the more signs that spell out an economic slump that hasn't ran it's course yet.

Edit:

Even with the passing of the Housing Bill, charitable down payment assistance programs are not going down without a fight. Here is a statement released by AmeriDream that I stumbled upon,

"Last night, Congress introduced bipartisan legislation, H.R. 6694 that would reauthorize and reform charitable downpayment assistance. This bill would remedy a harmful provision in the new housing law which limits homeownership opportunities for low and middle-income Americans. The legislation, sponsored by U.S. Reps. Al Green (D-TX), Gary Miller (R-CA), Maxine Waters (D-CA), and Christopher Shays (R-CT) reauthorizes and reforms charitable downpayment assistance funded in part by sellers, which has helped over one million families and individuals become homeowners since 1999. The program was eliminated by legislation signed by President Bush on July 30, 2008.
The Green-Miller-Waters-Shays plan would re-authorize and reform non-profit downpayment assistance and secure it as an allowable source for FHA borrowers. The bill seeks to ensure that providers of the downpayment assistance operate in a transparent manner to guard against conflicts of interest. The bill also includes language to ensure that FHA maintains its financial stability by permanently authorizing the Secretary to assess higher premiums to higher risk borrowers."

OK, so what this means is that supporters of these types of programs are attempting to pass a bill that will counter the provision outlined above. And word is, it will more than likely not be voted until 2009.

Hassan's 7 Picks for First-time Homebuyers

2008-07-21T12:51:00.000-07:00

Hassan's 7 Picks for First-time Home-buyers

WalkScore - A very interesting site that lets you type in an address and measure the 'walkability' of that area. The score takes into account amenities, parks, business listings, etc. but does not take into account proximity to public transportation, crime, and other factors. All in all, it's still an interesting site and another tool to help in your house hunting. I input our organization's address to see how we faired. Look at the image below.
LAPD Crime Maps - As far as crime goes, LAPDCrimeMaps.org picks up where WalkSource doesn't. Input a location and the website will generate a detailed map outlining the various types of crimes committed in that radius over a given amount of time. Of course I was curious to see who our neighbors are (CFRC is located in South LA aka South Central) and saw, at least for this 3-day window, we've had a couple of auto thefts in the area. Nevertheless, I recommend house-hunters (especially New Los Angelenos) to monitor their target neighborhoods at least three months in advance. After all, this is LA...
Real Estate Terms Dictionary on Investopedia.com - Memorize this list of real estate terms and definitions and surprise your real estate agent when you've been following the Case-Shiller Index and feel although your qualifying ratios could qualify you for an Interest Only nonconforming loan, you'd rather wait still prices fall and save for a two discount points purchase.
APR Calculator from BankRate.com - A handy tool to determine the annual percentage rate on a mortgage complete with amortization schedule. Play around with this guesstimate how much that Victorian house in Angelino Heights could cost you monthly at current interest rates.
GreatSchools.net - Want to know how the middle school in your future neighborhood measures up? Get the inside scoop from parents and students themselves from this site. And if you're really savvy, check out the API (Academic Progress Index) Rank of any school here.
Google Maps - They have this great feature that allows you type in an address or area and it will show a street view of that location - essentially providing a virtual tour of the neighborhood. Yes, I know ZipRealty and Trulia do this also, but it seems smoother on Google. Plus, you can enlarge the screen size. I like to use this feature to get a feel for what the neighborhood "feels" like. Also, sometimes pictures can be deceiving, so this is a good way to follow up on interested properties. The only caveat I see is, despite looking very current (I of course tested out my own address), I'm not sure how often it is updated.
Google Transit - Another great creation by Google...with this tool you can find out how (convenient it is) to take public transportation from, say, your future home to work. Not gonna ditch the car you say? Well, as gas costs will inevitably rise and traffic in LA worsens you might value having public transportation a walk away in the future.

Honorable mention goes to i-Neighbors.org an on-line community that lets connects residents of specific neighborhoods. Find your (future) neighborhood here and get to know your future neighbors.

News Wire: CalHFAs Community Home Loan Program

2008-07-09T10:20:00.000-07:00

News Wire: CalHFA's Community Home Loan Program
by Hassan Nicholás

The State has just launched a new program to help those first-time home buyers interested in purchasing Real Estate Owned (REO) properties located in selected counties and zip codes in California. Under the Community Home Loan Program participating financial institutions will provide a special sales price on their eligible REOs located in specified areas, at below market interest rates and 100% financing. Remember that other CalHFA 1st loan program can only do up to 95% financing. All of this could add up to a great deal for those in the market for bank owned properties. As of now there is nothing on their website about this new program so we expect that they should be making updates soon.

Check out the eligible areas below.

News Wire: CitiMortgage ACCESS Program

2008-07-01T09:34:00.000-07:00

News Wire: Citi's ACCESS program will give first-time home buyers more access
by Hassan Nicholás

Citibank sheds a little hope for anxious first-time home buyers.

If you are an anxious buyer waiting for the City of LA to replenish funds into it's first-time home buyer program you are surely not alone. In fact, these days it seems as though there is a collective frustration with down payment assistance programs in general. Subject to local government budget allocations, strict income guidelines, property location restrictions, and other caveats down payment assistance programs can bottleneck the home buying process. Though for many, it is a "necessary" frustration - the difference between buying and not owning a home.

Fortunately, banks are beginning to realize this. Through CitiMortgage's ACCESS Loan Program a borrower can obtain a 1st mortgage with the option of an 8% second in down payment assistance for over 100% financing. That's more than CalHFA's 3% in down payment assistance. And the differences don't stop there. Below we highlighted the main points.

30 to 40 year fixed rates

Longer interest-only periods than other programs (10 years)

NO sales price limits

NO recapture tax if home sold later

Duplexes, 2-unit properties are eligible

Income limits much higher (mid $80k for one person household)

Household income not used, only qualifying

Funds are consistently available, backed by private funding

NO first time home buyer requirement

So, could this be a competitor to CalHFA? Possibly. Especially considering that the state's rate is still in the 7s, ACCESS could prove to be a fierce competitor for government-sponsored down payment assistance programs.

Ready to give it a try? Contact our partner mortgage broker Ira Smith @ 310-217-2500 ext. 201

Note: LATMAP through CFRC will be able to broker these loans through our Savvy, Sound and Safe Home Loan Program (SSSHLP) too!

New Homebuyer FYI #5

2008-06-24T09:51:00.000-07:00

New Homebuyer FYI #5

Pocket Listings - Think the MLS is the home buyer's panacea for all house hunting needs? The MLS may not be as comprehensive as you thought simply because many properties for sale never make it on to the MLS. These properties, called "pocket listings" are bought "in-house" or "off-market" to a preferred buyer - usually someone who has a special relationship with a seller or real estate agent. In some large real estate brokerages it is common practice to give their agents and their agents' clients an opportunity to purchase properties before they go live on the market. Sometimes pocket listings will appear on MLS for a short period, just long enough for a potential buyer to find out the home is already in escrow.
With REOs, Ca$h is not always King - The market for REOs can be competitive, which is why buyers must make more competitive offers. In some instances deals are won on terms rather then offering at or above asking price.
Co-Signer vs. Co-Borrower - So what's the difference? Not much really. The bank itself does not see a difference between co-borrower or a co-signer. If you're a co-borrower you appear on title. The bank would have a co-signer's information, but only the buyer would appear on title. If a co-borrower wants to be removed from the title (liability of the mortgage) the buyer would have have refinance. A quit-claim deed can be executed for a co-signer to sign off on title.
Home Inspections - You can ask specifically for a copy of all disclosures the seller has received from past buyers under contract. When buyers communicate some issues raised from a home inspection the sellers usually would want to see a copy of the supporting documentation to attempt to negotiate those issues. The documentation they receive is called a summary report, which is a quick overview of the inspection. Sellers are required to disclose or repair whatever has been uncovered during that inspection and represented in the summary report.

A Glimpse at Charitable Down Payment Assistance Programs

2008-06-17T11:14:00.000-07:00

Charitable Down Payment Assistance Programs: Friend or Faux?

Charitable organizations that offer down payment assistance programs have been under heat in general for the potential "loop hole" risks and other issues outlined by HUD, the IRS, and real estate professionals. Typically offering between 1 and 3%, charitable organization offering down payment assistance receive a contribution from participating seller while simultaneously giving the buyer a gift to be used as assistance for purchasing a home. Opposers point out the legal loop hole of getting around an FHA violation. Defenders' 'glass half full' perspective points out the numerous success stories of minority and low-income home buyers finally realizing their American dream. Here we attempt to give some insight to would-be buyers; outlining the pros and the cons. You be the judge.

(pros) Pros

No income restrictions. From Merchant to Millionaire, anyone would be eligible.

No property price restrictions beyond FHA guidelines

Transaction process much quicker then government-sponsored down payment assistance programs because there is no subordinate loan involved.

Program is not tied to funding since gift monies is received via the seller's "contribution"

Unlike government purchase assistance programs, charitable down payment assistance programs will not put a lien on the property

Does not require an "approved" lender. Any agent and lender can use this program for their clients.

Gift funds can be used for down payment, closing costs, rate buy downs, and pre-paids.

Can be used with any other down payment assistance programs as long as those programs accept gift funds.

They are a competitive means of a getting house hold. In slow markets, these type of programs can inject some activity.

(contras) Cons

Risk that seller will roll (amortize) their contribution into the sales price. Essentially, the buyer would be financing and paying for their own assistance. Think of it as the seller just adding their contribution to the sales price during the negotiating. If that's done enough you'll see an inventory of inflated prices.

Some have been found to violate the intent of FHA regulations

Legally, a seller cannot gift money to the buyer. A seller could get around this violation by feeding their money through a non-profit, who in turn gives it back to the buyer. If the transaction cannot be done without the seller making the "donation" then it clearly violating the true intent of FHA guidelines.

They have unusually high default rates. I wonder if the same can be said about government-sponsored assistance programs that encourage or require the buyer being educated about the home buying process...

FHA does not approve any down payment grant program. It is up to your lender to work with a reputable organization that follows FHA guidelines.

Government-sponsored programs require at least 1% from the borrower's own funds for a reason. Charitable organizations that provide down payment assistance don't.

Though these are a legal means of assisting buyers, as to whether CFRC and LATMAP will endorse these programs remains to be seen. There are some issues that we have noticed which play with the legitimacy of these programs in the first place. For starters, most of the charitable down payment assistance programs I have come across seem to follow the same formula. PreferredProgram.org, HopeFundsProgram.org, HomeDownPayment.org among others all share the same cookie-cutter format. In fact, PreferredProgram.org and HopeFundsProgram.org are exactly the same. And HomeDownPayment.org is not even a website. Their whole website is really just a 10 page PDF document that shows how the program works and who to contact. That's it? Yes, that's it.

What also raises flags is that none of the programs I've ran across require or at least promote homeownership education. What merits a program true down payment assistance can be debated. However, in our circles of other non-profit organizations we understand homeownership education and down payment assistance programs to go hand in hand. A program would include something full-service; certified home counselors, workshops, formal partnerships with real estate professionals and lending institutions. And an organization will always have more than one service/program to offer. All the aforementioned programs I listed appear to be skeleton "non-profit" organizations that are really in the business to make profit through collecting fees. If I sound hesitant I have reason to be. Many of these charitable organizations that have popped up in recent years have had their charitable status revoked by the IRS.

I am not saying that these programs are evil, however I would question the motives for some. Nehemiah and AmeriDream are arguably the most popular charitable down payment assistance programs and have the best reputation. Nehemiah, for instance, lists several banks, corporations and organizations as its partners. Both organizations have established track records within community and a history of providing service - which is why I personally can only recommended those aforementioned programs for those seeking down payment assistance grants. And the fact remains, programs like these are enabling people, who otherwise would be priced out, to purchase homes. Like with anything that deals with purchasing a home, one has to do their due diligence.

New Homebuyer FYI #4

2008-05-27T14:16:00.000-07:00

New Homebuyer FYI #4
by Hassan Nicholás

Supplemental Tax - Most home buyers are unaware of or don’t understand supplemental property tax, but if you’re not prepared it could be quite a payment shock. The tax is an additional tax beyond the normal annual tax you would pay for any increase in the value of the property as determined by the assessor. For a home buyer, this means any increase of value from the former assessed value, an addition of a room onto the house, a new pool and any other major improvements will be included. The tax, which is billed separately, reflects the tax on the difference in the new value of the property versus the old value. Tax rate can range between 1% to 1.2% depending on area code, meaning on a property whose value increased by $100,000 a buyer could expect to pay a supplemental tax of $1,000 to $1,200. The tax payer (you, the buyer) will receive the supplemental tax bill many months after purchasing the home. The bill is split it in two halves, the first of which arrives with a no-penalty deadline for 30 days and then four months thereafter to pay the second half. Because the tax is supposed to capture the current value of the property you will only receive a supplemental tax once. And any reduction in value will result in a refund of taxes paid or taxes owing.

Maintenance Costs - If you're only planning for PITI (principal, interest, taxes and insurance) then you're playing with the risk of getting into unexpected debt. Maintenance costs is definitely one of the "hidden" costs of homeownership, so if you're in the market to purchase a single-family home you must plan for it. Some experts recommend saving 1% of the purchase price for annual maintenance. Divide that percentage by twelve and it will tell you how much you should be setting aside monthly. And while we're at it, you had be saving for furnishings as well. After all, you don't want to live in a house with an empty living room.

Down Payment Assistance using Real Numbers

2008-05-19T12:40:00.001-07:00

Down Payment Assistance using Real Numbers

by Hassan Nicholás

By request we have been asked to do a demonstration of how using a down payment assistance program could work with alleviating higher costs and narrowing the affordability gap between buyers and home prices.

The bottow example uses the County of Los Angeles HOP (Home Ownership Program), ADDI (American Dream Down Payment Initiative), and MCC (Mortgage Credit Certificate) programs to illustrate this concept:

HOP offers a deferred loan of the lesser of $90k or 25% of the appraised value in targeted areas, and the lesser of $80k or 20% in non-targeted areas.

ADDI offers the greater of $10k or 6% of the appraised value of the home

MCC offers between 15-20% tax credit, depending on area.

Remember that this is only one possible scenario out of many. It is just a sneak preview as to what we cover in our workshops to help your understanding of alternative financing methods and strategies.

Down payment assistance can be a great tool for a first-time homebuyer, but for many reasons explained here and here, you should always consider all options.

NeighborHoodwinked: The Fallacy Behind the American Dream

2008-05-12T15:25:00.000-07:00

Opinion

NeighborHoodwinked: The Fallacy Behind the American Dream

by Hassan Nicholás

hood·wink   [hoo d-wingk]
–verb (used with object)
1. to deceive or trick.

Do you remember where you were when you the heard the POP!? – the defining moment that signaled the end of a hyper-inflated real estate bubble? I remember I was sitting at my desk, much like I am now, mulling over real estate news...probably finishing off some yogurt. Back then I believed in something called the “America Dream”. We talked about it in our workshops, counseling sessions. It even appeared in bold white letters on our workshop workbooks that we would pass out to anxious first-time home buyers. Now, many months later the once inspiring phrase has escaped me.

When most envision the American Dream imagery of houses guarded by pristine white picket fences, perfectly manicured lawns, and friendly neighbors comes to mind. It’s hard to ignore the temptation to want ownership of something, anything in this world. Whether it be a car, a home, or limited edition Jordan’s there’s an intangible value added that we could best describe as pride. Americans find pride in their homes (among other things), because for us it represents that we have succeeded, that we have arrived.

If you are a homeowner you deserve that feeling. Purchasing a home, for most people, will be one of the most significant purchases you will make in your lifetime. Fact. There are several

But now that we have arrived are we still living or striving for the American Dream?

Many pundits claim that house prices must fall an additional 30% to align them back to where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, thus a drop of 30% would be needed. Right? Nope. Though appealing on the surface, this simplistic analysis is flawed for a variety of reasons. The most important? It neglects the fact that a great majority of Americans buy their houses with mortgages. "And if one buys a house with mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house." Today the rate on a 30-year, fixed-rate mortgage is around 6.5%. Back in 1981, the rate hit 18.5%. Comparing house prices of today to that of the 1970s or even 1980s, when mortgage rates were treading on astronomical levels, is not only wrong but downright misleading.

We have been conditioned since birth to believe owning a home is one of the best, most secure methods of accumulating wealth. Many real estate professionals tout that owning a home is a better investment then the stock market. Though, studies have shown this is hardly the case. Homeownership is something great to experience and have, but it's not a guaranteed money maker. I was among the many that believed "real estate always appreciates". Many victims of our current real estate crisis probably repeated similar mantras, but it didn't do much to curtail the wave of price drops across the nation. The good thing about this (if anything positive can be pulled from this situation), is that I have been forced to think about homeownership in a different way. Now, feeling suddenly enlightened, I have began to explore the more realistic benefits of owning a home. And once you start thinking, you actually come up with many reasons why owning a home can be such a wonderful thing.

Just some of the reasons I came up with:

Leverage. If you been to one of our workshops you've seen an example of how one can leverage a small amount of money to buy a significant piece of property. If that property appreciates well, you discover your gains are greatly compounded.
The intangiblel. Cost of buying a home in El Sereno, $310,000. The feeling of buying your first home with a backyard big enough to house all three of your Irish Wolfhounds? Priceless. Emotions will definitely come into play as you decide whether buying is right for you. I feel it's very pertinent to consider the emotional outcomes, but don't let them the reason you make an irrational decision.
Rent vs. Buying. Through some creative financing (and I don't mean ARMs, more like deferred loans) the costs to rent could be equal to or greater then the costs of owning a home of similar square footage.
Ownership can help start/build generational wealth. On a social level, it helps build a "savings culture" and lift some families out of poverty.
Etc. There are so many other benefits to homeownership that you will discover as learn more about the process and everything real estate markets entail. Have any to share? Let me know and we can continue this list.

When Should You Buy?

2008-05-12T12:15:00.000-07:00

Before you figure out when you should buy, determine how you will buy.

Here's my list of factors you should take into account before you make one of the most (if not, the) biggest purchase in your lifetime.

Real estate data - Those who are able to interpret real estate data well can probably make a good prediction of where the market is headed. (Hint: Prices are still falling) For the rest of us, there's a gamut of real estate forums and news that can provide just as good as information that will give us insight. And pretty much how you perceive the market will determine your approach - are you a cheerleader or a doomer?

Interest rates - Watch interest rates. Why? Because your mortgage is Principal, Interest, Taxes and Insurance.

Subsidy Programs - If you're a first time home-buyer and your ability to finance a home depends on the availability and amount of assistance programs this will be a definite factor.

Motives - Why do you want to buy anyway? For an investment opportunity (a la flipping), because you want security, rental income etc.? If you are looking to add to your wealth through the future potential appreciation of your purchase then look no further to current real estate headlines and you will see that the "but, real estate is always cyclical" philosophy is currently debunked. Not saying that you can't make money off equity, but to ignore potential rental income would be a mistake.

What's your time line? - How long do you intend to stay in this house? A short-term schedule and long-term schedule will impact how you approach home-buying.

Lifestyle - A household with family or expecting family will certainly have different needs then say...a bachelor pad. Even if you home will eventually be shared by your partner, you might want to consider what type of lifestyle you will have to forgo and any other adjustments.

? - And of course there are an innumerable amount of reasons outside of this short list why you should or shouldn't buy. Hopefully, you will have considered most of them.

Have any more reasons that are missing from this list? Let me know, and we'll keep adding on...

Subsidy Programs Update

2008-05-08T12:04:00.000-07:00

Programs & Status

LAHD Low Income, Mod 120, Mod 150 - January 2009*

LACDC HOP - November 2008*

LACDC ADDI - July 2008*

LAHD ADDI - Available

LAHD MCC - Available

CalHFA (ExtraCredit Teacher, CHDAP, CHAP, HiCAP, etc.) programs - Available

*Reflect anticipated dates that are not guaranteed.

I already know what some of you are thinking. There's no way on earth I'm going to wait till November or January of next year to see if these programs will be available. For others, this is just part of a delayed waiting game that reflects the current real estate market and state of economy.

If you were counting on down payment assistance the question you should ask yourself is, will the lack of sufficient down payment assistance programs prevent my purchase or delay my purchase? If prices for your area are predicted to continue to fall, then it wouldn't exactly be advisable to buy now anyway, because you would missing out on potential savings.Your decision on whether to purchase now or later will depend on well you understand this market - specifically, your local market. If you're confused about the When you should buy, look at my list of the How should by first...

Photo Tour: Park La Brea - Miracle Mile

2008-05-06T19:17:00.000-07:00

So, my video editing skills have improved since last time I did this.

Califotography: A Pass Through Miracle Mile, Glimpse of Park La Brea

This brief photo tour shows parts of Park La Brea and Miracle Mile. This popular, growing area is sandwiched between Beverly Hills and Hancock Park, bordered loosely by Wilshire Boulevard, 3rd Street, Fairfax Ave and La Brea. It is home to the La Brea Tar Pits, LACMA, Pan Pacific Park, The Grove, and the Peterson Automotive Museum. It has a great mix of new and old mid-rise apartment complexes, beautiful one story homes, and entertainment thats spans from free jazz concerts in the park to margaritas on Monday at El Torro. Enjoy.

Here are some preview pics:

New Homebuyer FYI #3

2008-05-06T09:55:00.000-07:00

Compiled by Hassan Nicholás
FYI #3...random stuff to know

Real Estated Owned property or REO means the bank owns the property and is selling it. Bank must deliver the property to a new owner without past liens, either property taxes or HOA dues. Recorded liens - that's the guarantee. Liens that have not been recorded are not necessarily cleared by the seller or guaranteed by the Title Company. Most likely, if the HOA has put a lien on the property, the bank will pay off the lien. The bank can't close escrow unless all liens are paid off.

The short sale process is lengthy and rarely successful for first-time home buyers. Only 5-10% of short sale listings actually close, according to professionals in the field. Most are taken off the market by the owner itself or because of foreclosure. If you decide to make an offer it is advised that you put a clause in your contract that your deposit cannot be cashed until it is clear that the sale has been approved by the mortgage company and the contract has been signed.

A trustee sale is when a bank tries to offload a pre-foreclosed property. Typically, the opening bid on a trustee sale is set at the amount of the first trust deed loan balance. Sometimes short sales are taken off the market through trustee sales.

For more questions check out

The New Architects and the Re-Construction of the Real Estate Market

2008-04-24T17:38:00.000-07:00

The New Architects and the Re-Construction of the Real Estate Market

by Hassan Nicholás

At this moment, as you are reading, another headline signaling the collapse of the US real estate market is going to press. And so goes our desensitization to the current reality. In this day and age where mortgage delinquencies, subprime lending, and housing inventory are at historical highs it can be easy to have a casual attitude about our real estate market. Perhaps we have been so inundated with "doom and gloom" headlines that we have found acceptance in our fate and have resigned to the fact that if we're going to ride this wave, we got to get our feet wet.

In many ways this crisis will change the way people think about real estate in general. The so-called "American Dream" as picturesque as it sounds, has been nothing short of a nightmare for many homeowners...and even potential home buyers. Now that the "lions" and "vultures" have feasted all that we have is a shell of that "dream". When we decide collectively that we want to rebuild these abandoned neighborhoods, revive the market, and open up feasible opportunities who will be part of the re-construction?

Nonprofit Organizations

If there is a lesson to be learned it is that the home buyer must do their due diligence and not walk blindly into one of the biggest purchases they will ever make in their lifetime. Housing agencies and community development organizations target these individuals in hopes that through proper preparedness and education one can avoid making costly, emotionally devastating, sometimes unmanageable decisions.

Imagine how many families would have been saved if uneducated borrowers were fully explained adjustable-rate mortgages? Or even the correlation between their FICO score and their interest rate? Yes, some of the foreclosures are tied to the reckless spending of greedy "investors", first-timers trying to get rich off of real estate, and speculation. However, within that cloud we also find families who were simply victims; targeted by shady real estate professionals. To purchase requires a significant amount of money and likewise the buyer should invest a significant amount of time learning as much as they can about their purchase. First-time home buyer workshops offered through the aforementioned groups illustrate the home buying process to the would-be buyer as well as provides resources that can otherwise be difficult to access.

However, a homeownership education workshop is not a panacea for the inevitable. Even those who were well-informed purposely chose to dive head first into something they knew they couldn't afford - allowing greed to blind them. It is not the speculators that need education, rather the person seeking the "American Dream" - they are ones that need to be enlightened. Another group that would benefit, are of course, the current homeowners who risk foreclosure.

Policy Makers

To curb foreclosures from metastasizing any further Congress has been scrambling to put together new legislation that would alleviate the financial squeeze for distressed homeowners. A bill approved by the Senate in April of this year would give tax breaks to owners of foreclosed homes - a measure that would make the prices of "starter homes" (those that a first-time home buyer would typically start out with) artificially high - benefiting only the banks that own the foreclosed property.

Additional pressure has fallen on the weight of some of the very agents that helped perpetuate the trend of reckless lending, the big banks. Lenders such as Countrywide and GMAC have had to beef up their foreclosure prevention efforts and extend more opportunities for existing borrowers facing foreclosure. The government sponsored HOPE NOW initiative attempts to identify at risk homeowners for loan modification and restructuring, but the success that this program will achieve is yet to be seen. A California state plan called for a similar approach - but one that was limited only to borrowers who were current on their payments. It is the "limited spread" of assistance that concerns many real estate professionals and homeowners. FreedomWorks, a grassroots organization that promotes individual liberty held an educational event in March of this year for policymakers - outlining inequities found in the government's 'bail out' approach. There has been other vocal attempts coming from the real estate field to suggest a different approach for helping distressed borrowers, but until any major movements are made, options for borrowers will remain the same.

Much of the success of these programs is dependent on the leg work of the assigned nonprofit housing agencies to identify and serve eligible households. Counselors from these agencies are trained and certified to represent the borrower in all activities and correspondence with the lender and/or mortgage servicer. With their help, a borrower may be exposed to loan modification, forbearance, or any other workout plan. Other proposals have been aimed at re-working how down payment assistance programs work for first-time home buyers.

Affordable Housing Advocates

Advocacy groups supporting affordable housing initiatives can be instrumental in connecting public concerns (nonprofit organizations) with private and government backing. ACORN (Association of Community Organization for Reform Now) is one of the most vocal groups - taking their 'Stop Foreclosures' campaign nationwide. NeighborWorks, "a national network of more than 230 community-based organizations in 50 states" launched 1 888-995-HOPE, a government supported foreclosure prevention to address the needs of the many struggling homeowners.

As the US real estate crisis drags along one can imagine that years from now, when we have fully recovered, will we have learned our lesson? Most certainly most people, owner or renter, has become enlightened by this experience. Adjustable Rate Mortgage, 80/20, and short sale have entered our everyday vernacular. The real estate agent and mortgage lender professions have had their image tarnished. Consumers are more weary, lenders are more strict, and counselors are overwhelmed.

I can say that this whole debacle has certainly changed the way I view real estate and undoubtedly affected my approach to teaching homeownership to first-time home buyers. However, even amongst the "doom and gloom" there is light at the end of this tunnel.

When will this Crisis End...Seriously? Part II

2008-04-23T21:06:00.000-07:00

When will this Crisis End...Seriously? Partii: Lost In Speculation
by Hassan Nicholás

The Doomers Perspective

Great time to buy? You're probably better off waiting. There is strong evidence that we are witnessing the beginning of what will be one of the most destructive periods in our otherwise polished economic history. In it's glory days the real estate market allowed owners, first-time homebuyers and investors alike, to purchase homes with little or no money down, stated income, and "loose" allowances. Enter the moral hazard risk that, at the moment the future values for real estate fall, owners can walk, not limp, away from their investment. Cursory lending standards provided the perfect incentive for shady deals to come to fruition. There was money to be made...on both ends.

Not only did the housing bubble give spectators and buyers the ilusion that they would turn an immediate profit, it also convinced developers to build things that shouldn't have been built, encouraged consumers to spend what they didn't have, and allow banks to loan money to those people through bundled loans sold in the secondary market. So for a while lenders, real estate professionals and buyers happily indulged in "Mickey Mouse" transactions in a fantasy world supported by inflated (perhaps, with helium) prices that now seem laughable.

Everyone played their part in artificially appreciating the real estate market beyond what it could handle. But now we know the truth; we paid too much for our houses, banks lent out too much money for what homes were really worth, we were simply too wreckless with our credit. And on top of that, we had greedy lenders, agents, and appraisors orchastrating those transactions. The point is home prices are still years ahead of incomes, even with prices falling all around us, and you still want to buy? Foreclosure rates have risen in Southern California and with more resets on the horizon, we can only assume a percentage of those resets will lead to foreclosure. Inventory is up. As buyers, we have much more selection. And this is fact. But even if you can afford it, will you be lining up anytime soon to buy a (still) overpriced cookie-cutter McMansion in a decaying neighborhood laden with vacant homes? Not to mention the late developers that will add a batch of newly constructed, quickly deppreciating homes to the inventory. Just recently I received an email from the developers of the nouveau hip Santee Lofts downtown offering $100k free money incentives to be used towards purchase price, HOA fees, or upgrades. A month before that they were giving away $60,000. Panic, perhaps?

Sure, the market for real estate is in a falling - and so is the market for first-time homebuyers. Banks and other financial institutions tied to the Market have clearly experienced substantial losses as well. The outcome is that lending standards and practices have tightened. 100% financing is hard to come by, stated income is a thing of the past, and your credit risk is scrutinized a lot more carefully. Monies reserved for low and moderate income first-time homebuyers by the Government are now being used to bail out existing homeowners. And since banks themselves must pull back on how much money they can lend, first timers will have to compete with other buyers in the same pool of financing. Let's not even mention that home prices are still historically high for many.

What makes now, NOT a buyer's market is because everyone is feeling the squeeze. Unemployment, rising costs of everyday necesities (hello inflation), and limited credit will impact the incomes of many. Until sellers realize it does not matter what they think their home is worth, but what buyers feel it is worth paying for, we continue to see this drop. If you're reading this you might be amongst the many waiting for the market to bottom out so you can snatch up your dream home at cheap. Collectively, you're pushing prices down farther too. It's a waiting game that great rewards, but serious risks involved.

The only route out of our current real-estate-bubble-inspired economic malaise is realizing a new "real estate reality". Current home owners and amateur investors must recognize that some of the prices we saw over the past couple of years were an anomaly, just like enourmous gains Internet stocks realized in the '90s. Prices are falling in SoCal, but they still got a ways to go before they stabilize. Buying today could be a $100k mistake.

If there's one thing we should learn from all of this is we can no longer be casual homebuyers. We need to be savvy and smart.

"Become wealthy, knowledge is King." - Nasir Jones

First Came the Lions, Now Heed the Vultures

2008-04-08T10:51:00.001-07:00

First Came the Lions, Now Heed the Vultures

The Lambs, Lions, and Vultures of Today's Real Estate Scams
by Hassan Nicholás

And so goes the scene...

We open to a flat, barren landscape. An unforgiving sun hangs high in a cloudless sky. The naked earth resembles an abandoned wasteland, except for the pockets of dusty shrubs and aged trees hunched over. From the left a herd of gazelles move mechanically through the terrain. They stride cautiously, often pausing to scan the incessant horizon. What do they know? Behind the dry shrub, peering from the thick trunk of the trees a lioness awaits. The sun paints her coat a golden orange as she quietly preys. Her clan positioned behind her, steadfast and also patient. And then, suddenly everything stops. The gazelles in their herd, bodies frozen in time, eyes staring blankly sense their fate approaching. Within seconds they are in full flight; scattered yet moving in unison, kicking up dust in their organized confusion. The lioness and her clan follow closely behind, several times hurling themselves at their fragile bodies. They escape with their lives, but leave one. And so it seems the lions have not yet lost their pride. The gazelle, a trespasser to his own land, committed the error of putting too much faith in his own kin. With all the tenacity he can muster, he fends off the feeding of the lions, but not before his blood is drawn. Many moments later we find him, far from his herd, still haunted and dazed by the ambush. With the sun quickly easing into the horizon, he collapses to the ground overcome by fatigue. Then we hear the sound. Against the backdrop of an orange tinged sky a wake of vultures hover, circling their next victim, until they descend upon him gently like leaves falling through the wind.

They are the Lions
The mortgage crisis has exposed the underbelly of an American dream. Real estate agents, lenders, and brokers - defenders, protectors of the homeowners' financial and emotional equity have handed in their integrity in favor of greed. By now we have all become familiar with their modus operandi.

In "Fraud for profit" schemes mortgage insiders such as appraisers, real estate agents, loan officers, and lawyers, like in the wild, often work in teams to take down their prey. After falsely inflating a home's value they obtain a large mortgage using false identities or a "straw buyer". Once the house is "sold" to the buyer, they split the profits and disappear. According to a recent report by TowerGroup, a financial consultancy in Needham Massachusetts lenders will incur nearly $2.5 billion in losses as a result of mortgage fraud this year.

Another type of mortgage fraud prevalent in the post-real estate market crash was the popular "Cash back at closing" scheme. Predatory buyers, such as a greedy real estate investor, locates a home on sale for...let's say $250,000. Then, after obtaining an intentionally inflated appraisal, the buyer receives $320,000 from the lender. The investor recruits a "straw buyer" (using someone else's identity to purchase property) whose name will appear on the deed and mortgage. The seller is paid $250,000 while the buyer (investor) pockets the $70,000 difference. And with profits secure, the buyer lets the home go into foreclosure. Though there is nothing illegal about cash-back-at-closing deals in which all details of the transaction are disclosed to the lender, the opposite is true; if the mortgage company is tricked into lending (far) more than what the value of the property is, it is fraud.

These are the Vultures
The lions came and they feasted. Look around and it's hard to over look the remainders of their gluttony. The increasing inventory of houses are swelling up local markets, driving down prices further from the artificially high ones set by the predatory investors, the lions. They have turned neighborhoods to graveyards, houses a mere skeleton of an American dream turned nightmare. So, no, the chase has not ended. Though the lions retreated to their dens, some to lick their wounds, they left what remained to the vultures. And it is them that lurk in the shadows looking to take advantage of the injured homeowner. Enter foreclosure scams.

Sales agents search for troubled homeowners, who appear on lists used by banks and credit agencies to show owners approaching foreclosure - usually attracting them through mailings and poor marketing (have you seen those bland flyers that look like they took 5 min. to put together?). The sales agent offers an arrangement that sounds too good to be true; the owners put an "investor" on the home's title. In exchange, the homeowner will agree to pay a rent much smaller than the original mortgage payment that they can't afford. The "investor" takes out a new loan, and through misleading paperwork, gives the investor the right to replace the homeowner's name on title. Shortly thereafter, the "investor" stops making payments on the loan, pockets the proceeds from the equity of the home, and allows the homeowners to get evicted or foreclosed upon.

Distressed homeowners targeted by what appears to be a faith-based organization, nonprofit, or any other entity that appears trustworthy targets soon-to-be foreclosed homeowners. Just as in the aforementioned scam, homeowners sign over their ownership rights to a "surrogate owner" who in turn continues to receive payments from the homeowner. Many times the homeowner enters an agreement from six months up to two years of making monthly payments, with the promise that their home would be "returned" in their name once their credit score recovers. Instead, the home goes into foreclosure anyways, the theif disappearing with months or even years of collected payments.

Here Are the Lambs
Starting in 2009 buying a home will get costlier. In a recent agreement with New York State Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac will only buy mortgages from lenders that use independent appraisers. Since these two companies account for more than 70% of all mortgage loans, pretty much all lenders will comply. As it stands, mortgage brokers are required to have only one appraisal for each deal. The broken can then include it with applications to as many lenders as they please. However, with this change a different appraisal will have to be ordered by each lender that the home buyer applies to. Because that is an extra cost to the lender, it will be passed down to the buyer. If the buyer is shopping around this would lead to multiple appraisals being ordered - potentially costing a buyer between $1,000 to $2,000. Now this puts the mortgage brokers business in jeopardy, because the buyer could save costs by dealing directly with a lender. Still, if you look at the numbers the costs of additional appraisals does not come close to how much money is lost when a home is over valued.

Another threat that I see on the horizon is down payment assistance scams. Unfortunately, there's another predator first-time home buyers should be aware of - and this one may not be feline nor carrion. I've seen several websites pop up advertising access to down payment assistance programs to potential buyers. And I've heard from clients who've attended free conventions at luxury hotels promising thousands upon thousands of down payment assistance program money and grants (free money in this this market? I think not!), all of which either don't exist or are obsolete, to the tune of $1,000. But, if you can't afford that, they will sell you a CD on how to locate these programs for just $25. And so the chase continues. Who will come when the vultures leave?

Perhaps the hyena...

Drop in Federal Funds Rate = Drop in Mortgage Rates?

2008-04-04T11:29:00.000-07:00

Drop in Federal Funds Rate = Drop in Mortgage Rates?
by Hassan Nicholás

By now, we are all pretty accustomed to the bleek news that's reported daily about the failing real estate market. You might have even become desensitized to it and found other crises to worry about. So when we hear that the Fed announced another rate reduction, how should we respond? The little bit of optimism that we have left might tell us that we can expect a drop in mortgage rates, right? The short answer and probably most accurate is, we don't really know.

It's probably not the answer you wished for or what you've been reading from all those popular real estate discussion boards you're a member of. But my teachings in economics is begging me to resign to that fact that we can't predict the unpredictable...beyond predicting it's unpredictability (that's one for the books!).

So what does happen when the Fed reduces its rate?

For the sake of not boring you, I will keep this related to you and your interest in purchasing a home. When the Fed reduces the rate it is an attempt to stimulate the economy and encourage business. The Fund Rate is basically the rate of interest banks are charged for short-term loans.
Changes in the Fund Rate affect you because things such as credit cards, auto loans, ARMs and HELOCs (home equity lines of credit) are based off the Prime rate, which is derived from that rate of interest. So, when the Fed lowers the rate loans pinged to the Prime rate become cheaper. You will be more likely to break out the plastic in the department store, take out a car loan, or borrow money to expand your business - basically, you will be encouraged to spend and heat up the frozen credit market. Conversely, Certificates of Deposits and your online bank account at ING Direct will yield less.

Where does mortgage rates come in, you say? Since mortgage rates are long-term loans, they are less affected by changes in short-term rates. Mortgages are sold to investors as asset-backed debt called MBS (Mortgage Backed Securities). Basically, a piece of your mortgage is bought by a pool of investors, who then technically "own" your loan. The mortgage servicer, who you write your checks to, is the entity that "holds" the loan. The value of MBS are fixed, so when the future future value of MBS goes down the rate of interest to the homeowner will go up. However, this is not guaranteed. We have infact seen interest rates fall when the Fed made adjustments. [See where they're at now.] Historically, current mortgage rates are at a low, so instead of waiting for the housing market to bottom out or predict where mortgage rates are going, it might give you peace of mind (and save you money) to buy now...that is, of course, if you can afford it. But, we'll discuss whether or not now is the time to buy in another thread...

When will this crisis end...seriously?

2008-03-24T15:27:00.000-07:00

When Will This Crisis End...Seriously: A Debate Pt. I
By Hassan Nicholás

Incomes still catching up
Those who bought at the peak of the cycle pinning their hopes on incomes rising and "catching up" instead to home prices may be better off finding ways to increase their income themselves. But they had better be patient. Average incomes simply aren't rising in tune with home prices. The sooner you understand that, the better you understand prices and easier you will recognize a true bargain. Even if house prices stayed exactly where they are, it would take about 10 years for rising incomes to bring the ratios back into any sort of alignment. Which means the so-called savings that you would realize buying property in this market is superficial.

Japan, California
California has a lot of land. But home prices in built out markets, like Los Angeles proper, will not decline as much because there really is no more land (or desire in those surrounding areas). People are starting to realize the real costs of commute and are now starting to put prices on amenities, convenience, environment and so on. The migration is inward. And it is this movement that helps sustain the prices. And if what we're seeing is indeed a trend, then we can expect prices to even rise.

Correct yourself, before you wreck yourself

As long as home prices remain far above California income levels prices will have to drop. Fact. Obviously, we cannot expect home prices to fall 37% in the short term, but we can anticipate in perhaps a year or two home prices falling considerably. What we are seeing is the market correcting itself before our eyes.

Spraaaaaawlin'
Despite popular belief, the "no more land" theory example does not work too well in L.A. county. Established built-out neighborhoods like those found in Pasadena found a way to increase density by tearing down single family homes and small businesses and replacing them with multi-use developments (such as retail, condos, underground parking, etc.) Any quick glance at recent development happening in and around Los Angeles plus those waiting in pipeline and one will see the future is "up". Constant pressure to change zoning to allow more second-units behind single family homes, skyscrapers were only low-rise was permitted, lofts originally zoned for power plants, etc. are all real clues that L.A. is sprawling-- not nearly as dense as other places.

Los Angeles Flight
California’s population growth rate has slipped as many residents left for other states. Even though new arrivals from other countries and babies born in California more than offset the departure of residents for other states, foreign immigration to California is slipping – as immigrants find that other states offer plentiful jobs and cheaper housing. These changes could leave California without the educated workforce it needs, in part because of the widening achievement gap among California students. The Public Policy Institute of California projects by 2020, the state’s supply of college-educated workers won’t meet the state’s needs. So then what?

Photo Tour: Hancock Park

2008-03-24T13:06:00.000-07:00

Califotography: A Stroll Through Hancock Park

Take a stroll through one of LA's most well-kept, exclusive neighborhoods. An island unto itself, Hancock Park is home to stately mansions and plush greenery throughout - providing its residents a serene oasis in the middle of the urban jungle that is Los Angeles. Mayor Villaraigosa's house was here as well as other notable mentions. Wedged in between Korea Town and the Miracle Mile, bordered by Larchmont and Wilshire, HP offers a Beverly Hills appeal in the midst of an urban landscape. Enjoy.

Some preview pics:

News Wire: Changes to State Down Payment Assistance Programs

2008-03-24T09:23:00.000-07:00

I'll make this short...

Last Friday the state's homeownership department (CalHFA) announced some significant changes to some of their down payment assistance programs. Here are the changes and what they mean:

The maximum loan amount for CHAP has been decreased from three percent (3%) to two percent (2%) of the lesser of the sales price or appraised value.

CHAP now can only be used in CHAP designated areas

CHAP cannot be combined with a HiCAP second loan

CHAP can be used with CalHFA conventional loans; including, interest only, 30-year fixed and 40-year fixed)

CLTV cannot exceed 102% for CHAP and CHDAP

Maximum HiCAP loan amount has been changed from $7,500 to four percent (4%) of the lesser of the sales price or appraised value

HiCAP cannot be combined with CHAP

HiCAP cannot be used in conjuction with an FHA-insured first mortgage loan

Source

Higher Rates, Good or Bad?

2008-03-13T16:10:00.001-07:00

by Hassan Nicholás

High Rates, Good or Bad?

When one gets wind that interest rates are rising this could produce a myriad of emotions, some more pleasant than others. For the credit-strapped borrowers looking to take advantage of falling home prices a hike in interest rates could be a deterrent, or rather, the determining factor that could break the camel's back. Hopefully, by now we all know (or should know) that our mortgage payment is PITI..Principal, Interest, Taxes, & Insurance. Accordingly, interest rates affect the size of our monthly mortgage. So, should we be alarmed then when the Fed has risen rates? Would it then be safe to say that any savings we would have realized from a discounted purchase price would be negated? To be fair, let's make sure we understand that when the Fed talks about lowering the "rate" it is referring to the Federal funds rate, which is not the same as the mortgage rate. Now, let's look at how a rise in interest rates will affect certain groups of people.

Investors - High interest rates means you can invest your money at a higher rate of return, right? OK, but the interest rate you get paid on investments is tied to the Federal funds rate, which will be lowered March 18th. So, even if rates for 30 year mortgages are rising, currently, you will still be earning less on your investments.

ARMs/IO/Open Option ARMs - If you happen to have an ARM, Interest Only or Open Option ARM that's due to reset in a few years you could very well count on a jump (sometimes very substantial) in how much you'll shell out a month for your mortgage. You've been warned.

Buyers - It's best to buy when rates are higher and prices are lower. You'll have more interest to write off for tax time (plus, additional tax credit using a Mortgage Credit Certificate, if you qualify), greater chance to refinance later for a lower rate, and then the added incentive for sellers to lower purchases prices.

It really all depends on which side of the fence you want to be on.

Many mortgage experts believe rates will be at a standstill at least for the short-term (next 45 days). However, there are those that believe rates will drop and another minority that believes interest rates will rise. Catch the discussion on BankRate.com to see what the experts and analysts are saying.

News Wire: Confessions of a Subprime Broker

2008-03-13T10:12:00.000-07:00

Confessions of a Subprime Lender
A former broker on the fraud and greed that plagued his industry.
Mar 12, 2008 Updated: 1:09 p.m. ET Mar 12, 2008
http://www.newsweek.com/id/121512/page/1

Author and former broker Richard Bitner (left)

Over the last six months the public has learned much about the business of subprime lending, the practice that put millions of Americans with low credit scores into homes—which many may soon lose to foreclosure.
Richard Bitner, in contrast, received his subprime education earlier than the rest of us. In 2000 he and some friends founded a Dallas-based subprime mortgage company. For a few years he profited handsomely from this sector's boom, earning a paycheck in the high six figures. In the early days Bitner felt a bit like a modern-day George Bailey, as he helped marginal but deserving buyers achieve homeownership. But as lending standards slipped and mortgage brokers began gaming the system, he began to see more borrowers signing on to mortgages he suspected they couldn't afford.
Disillusioned and realizing the subprime business was becoming less and less profitable, Bitner cashed out of the industry in 2005. And when the subprime market collapsed last year, he decided to tell his story in a new self-published book, "Greed, Fraud & Ignorance: A Subprime Lender's Look at the Mortgage Collapse," which is for sale on his Web site and at Amazon. Today he's promoting the book full-time. "I could afford to take a year off and do this," he says in an interview. "I want some positive change to come from this."

While newspapers and magazines have been chronicling the rampant fraud that filled this industry, Bitner's book conveys the authority of someone who was in the trenches where this dirty work was going on. "Being a subprime lender means living in a world of gray," he writes, as he and his colleagues struggled to guesstimate whether a credit-challenged borrower would really be able to repay the mortgage they were writing.
As Bitner portrays it, a complicated mixture of factors led to the subprime boom and bust. Some of his colleagues credited the Federal Reserve's easy money policy. One friend boasts that Alan Greenspan’s rate cuts during the early 2000s helped him earn more in four years than he had in his entire career. Ratings agencies like Fitch, Moody's and Standard and Poors also played a part by giving investors confidence to buy repackaged securitized mortgages, which gave big mortgage companies seemingly limitless capital to lend out.
His biggest criticisms, though, are reserved for mortgage brokers and appraisers. As Bitner describes it, lenders like his company, which underwrote loans offered up by brokers and resold them to giants like Countrywide, spent much of their workdays trying to spot the stupid tricks brokers routinely used to get unqualified borrowers approved for loans. They'd say a buyer intended to live in a house when it was really an investment property. They'd falsify the buyer's income by having a relative pose as his employer, or use scanners and software to forge W-2 forms. They'd find ways to hide debts (like a car payment) by looking for a credit report that omitted key data. They also routinely gamed the appraisal system, encouraging appraisers to look for "comparables" that were far nicer homes in better neighborhoods—all in an effort to drive up the appraised value of the home they were mortgaging.

"The rate of property appreciation experienced on a national basis over the last seven years was not only a function of market demand, but was due, in part, to the subprime industry's acceptance of overvalued appraisals, coupled with a high percentage of credit-challenged borrowers who financed with no money down," Bitner writes.
Bitner says his company did its best to figure out whether borrowers really would be able to repay their loans. But mostly it deferred to the standards set by industry behemoths to whom it resold mortgages. "They're watching the performance of billions of dollars of loans, so we had to use their judgment for what's acceptable," he says. By the time these giants began seeing massive defaults in early 2007 it was too late, and last year Bitner's former company, which his onetime partners continued to run, was one of dozens of mortgage firms that went belly up.
In Washington, Congress has been holding " target=_blank>hearings to explore what went wrong in the subprime industry—and how to fix it for the future. Bitner has his own ideas. He believes mortgage brokers should have to pass national licensing exams, and he's a fan of the growing concept of "up-front" mortgage brokers, who charge a set and transparent fee for their services. He thinks the appraisal process should be overhauled to give appraisers more independence, and he believes subprime borrowers should attend mandatory debt counseling before their loan closes.

But he doesn't believe subprime lending should vanish entirely. Before they became infamous as "liar's loans," so-called "no documentation" loans worked just fine when they were offered only to self-employed people with good credit scores and hefty down payments. Someday, after this crisis ebbs, perhaps subprime lending will re-emerge as a business that works well by targeting a small subset of borrowers—and not the millions of homeowners who are now straining to stay in homes they really can't afford.

Response to Housing Department's Proposal (repost)

2008-03-11T14:31:00.000-07:00

repost from an email received March 10th, 2008 in response to LAHD's decision to cancel it's low and moderate income down payment assistance programs.

Dear Fellow Lenders:

The Los Angeles Housing Department announced today that it is suspending its home ownership program in favor of a new initiative that will create a city-sponsored interface between distressed properties, lenders and home buyers. Please see the attached report submitted to the City Council.

This plan, while well-intentioned, is premised on the idea that City's intervention in the normal home buying market can create efficiencies and save money. My view is that the City's role should be limited to making it down payment assistance money available to qualified home buyers who put together viable deals working with lenders and real estate agents. These three parties (home buyers, lenders and real estate agents) are best poised to take advantage of current market opportunities, over come obstacles and close deals in the most efficient manner possible.

The Housing Department correctly touts the success of their home ownership program over the last few years. And I believe it is true that they have designed and implemented a great program, but at the end of the day it is the efforts of participating lenders and real estate agents that actually make deals happen.

If you agree, I recommend you make this argument, in writing, to the Housing Department, to Mayor Villaralgosa, Councilman Herb Wesson (Chair of the Housing Committee) and to Merceds Mercado, the Housing Department's General Manager. Their addresses are listed below. Please reference City Council File # 08-0274 in your letter. Here are some points you may want to make in your letter:

The proposal is unnecessary, normal market forces and business practices are bringing distressed properties back on the market efficiently
Access to mortgage credit is still readily available for first-time buyers
The City's proposed intervention will add extra costs and delay disposing of distressed properties
Home buyers, lenders and real estate agents are in the best position to put together good deals efficiently.
Given the past success of LAHD's home ownership program and the tremendous market opportunties the exist (decreased home prices and low interest rates) the Mayor and City Council should take every possible step to increase funding to LAHD's home ownership programs in the current year.

Of course, the tone of the letter should be positive and polite. If you can't write the letter on your company letter head, perhaps you can write a personal letter. It would help to include brief antitodal stories about clients you've helped with LAHD's home ownership programs.

Thank you!

Matthew Callahan
Civic Center Home Loans & Realty, Inc.
www.GoHomeLA.com
(562) 846-7483 - Office
(562) 724-6080 - Office Fax
(562) 547-9372 - Mobile Phone
6528 Greenleaf Avenue, Suite 204
Whittier, CA 90601

CONTACT ADDRESS:

Maro Anotonio Villaraigosa

City of Los Angeles

200 North Spring Street, # 303

Los Angeles, CA 90012

Honorable Herb Wesson

Chair, Housing, Community and

Economic Development Committee

200 North Spring Street, Room 360

Los Angeles, CA 90012

Mercedes Mercado

General Manager

Los Angeles Housing Department

1200 West 7th Street, 9th Floor

Los Angeles, CA 90017

News Wire: City of LA Programs Takes A Hit

2008-03-11T14:00:00.000-07:00

The mortgage crisis is steadily running its course through the economy and arguably has left not one sector or industry unscathed or at least threatened. And from where there is weakness, there is opportunity. Potential home buyers across the nation have realized a true "buyer's market" - defined by lowering interest rates, falling home prices, and motivated sellers. Finally, it seemed, that there was hope for the low and moderate income families to get a taste of good ol' American pie. Government-backed subsidy programs aimed at first-timers increased in popularity. We've even seen their funds being depleted due to a rise in loan reservation requests. For some time I have questioned the mortality of these types of assistance programs and recently posed the question on Zillow.com. Are these government-backed programs (as good as they are) going to be around forever? My guess was, quite possibly not. And now my fears have been affirmed. Yesterday I was alerted that the City of LA Down payment assistance programs (except for one) have been canceled. That's right folks, the most generous program of them all is calling it quits and shifting their focus away from first-time home-buyers and towards existing homeowners caught up in the mortgage mess.

Here's an excerpt of the letter they sent out:

Dear Los Angeles Housing Department (LAHD) Homeownership Program Partner:

Re: Important Announcement Regarding LAHD 2008 - 2009 Homeownership Budget and Programs

The City of Los Angeles has approved its Consolidated Plan Budget for the 2008-2009 Program Year (April 1, 2008-March 31, 2009). The Low-Income Purchase Assistance Program budget has been significantly reduced from the current year's allocation. Additionally, decreased funding is anticipated for LAHD’s Moderate-Income Purchase Assistance Program.

As a result of the reduction of LAHD’s Homeownership Program budgets and the current foreclosure crisis (approximately 5,235 foreclosures occurred in the City in 2007), LAHD will redesign its Homeownership Programs to utilize its limited resources in a post-foreclosure/neighborhood stabilization strategy to mitigate the negative effects of foreclosures on the City’s neighborhoods.

Consequently, LAHD is canceling the Reservations Waiting Lists for both the Low and Moderate Income Purchase Assistance Programs and will no longer accept reservation requests. Please notify your borrowers and real estate partners of the unavailability of LAHD Low and Moderate Income Homeownership Program funds.

Despite the unavailability of funds and cancelation of the waiting lists for the Low and Moderate Income Purchase Assistance Programs, LAHD has two other Homeownership Programs currently available for eligible first-time homebuyers: Mortgage Credit Certificate Program (MCC) and the American Dream Downpayment Initiative (ADDI) Program.

...Just as I was alerting colleagues and friends the feasibility of buying right now with the help of these programs. If this is any sign to what will happen to these types of programs in general, then we are in for a true series of unfortunate events.

So, what's going to happen? It looks like we still have seen the worse of the housing bubble burst. Experts still forecast prices to continue to drop. Though this will buy homebuyers more time and save them more money, there may not be as much assistance available. With any luck, next time around LAHD will have re-allocated their budget in favor first-time homebuyers...while prices are still favorable. Let us cross our fingers.

In the mean time, I will be researching for other types of programs.

Can You Beat the Government?

2008-02-21T11:40:00.000-08:00

Can You Beat the Government?
by Hassan Nicholás

No, I am not talking about hidden tax secrets, overseas bank accounts or anything illegal for that matter. What I am actually inferring to are government-backed subsidy programs; such as the ones promoted by the California Housing Finance Agency (CalHFA) and the Los Angeles Housing Department (LAHD).

An article on Money.MSN.com by Liz Pulliam Weston listed "Not looking for first-time home buyers' programs" as #2 on her list of "8 big mortgage mistakes and how to avoid them" feature.

And she's right. It is a good idea to look into government-sponsored loans, but they might not always have the best deal.

We've seen a lot of people coming through our doors migrating towards these subsidized products. And I admit, its an aspect of our program that we emphasize greatly. Many lenders will announce that state, county and city programs is really the best deal one can get as a first-time homebuyer. For many this is true, but there's always an exception.

Case in point. Government-backed subsidy programs (we'll refer to them as GSPs for the remainder of this article) alleviate the burdens that credit-strapped first-time homebuyers face when buying a home by offering deferred junior loans, below market interest rates, and in some cases forgiveable interest. Depending on the program and income eligibility of the household, this can amount to a generous helping of government assistance to the borrower - essentially allowing you to "buy more home" then what you would qualify for on income alone.

Knee-deep in a failing real estate market with the word "recession" looming somewhere over the horizon, the popularity of GSPs has gained momentum and this Best Kept Secret is no longer. By now we all know its no secret that predatory, not necessarily subprime lending (yes, there is a difference), is what helped bring us to our current situation. It is then no suprise that buyers look to GSPs as a safe alternative while keeping an untrustworthy eye on traditional lenders. And with all the news coverage of lenders and realtors going under or getting bailed out for their wrecklessness (see Countrywide) it's understandable that many first-timers would seek refuge in the government. But by shying away from a traditional mortgage product are you narrowing your options?

Don't get me wrong, GSPs are great. But like in every decision, especially this one, you should do your due diligence and make sure it is the right decision for you. Here are some caveats that you should know:

The interest rate is set. Yes, all GSPs have fixed interest rates, which is nice. What I mean here is that the interest is set; meaning regardless if a borrower has a 620 FICO or 700 they will get the same interest rate.

But the interest rate can change. Here's something the State might not want you to know. When the demand is too high, they will artificially raise the rate. When that demand has subsided, rates will fall again.

Funds can and do run out. Buying a home in general is an intimidating, nerve-racking experience. Imagine, being in escrow and finding out from your lender that the City of LA has ran out of funds. Now your home...and sanity is on the line.

Restrictions. GSP is an income qualifying alternative that carries with it other requirements that must be met in order to be utilized. By trying to fit those guidelines a borrower might be compromising something they really want for the sake of getting what they appear to be a "good deal". For instance, short sales and foreclosed properties would not be eligible because they do not require home inspections. Additionally, there are other limitations, such as a cap on the maximum purchase price of a home that you can buy. That's why it is best to take a homeowner education workshop to learn the nuts and bolts of these programs before you apply.

They Take Longer. Escrow periods when using down payment assistance programs can take up to 15 days longer then normal escrow, for a total of 45 days.

Can you beat the government then? Sure. While lending practices have turned more strict, the news is not so bleek for the borrower with an excellent credit score - which brings us to #5 on the list from the aforementioned article, "Not shopping around for rates and terms". If your FICO lands in the 700s you can probably find a rate better than anything GSPs are offering currently. What's cool is that the state lists all going interest rates for its programs. So now you can get a head start on your loan shopping (just remember interest rate does not equal APR!). And what about the City of LA programs and State programs for teachers that offer up to zero percent interest? The only thing that beats that is a grant...and we can give up on that fairytale in this market. Even if you could beat interest rates currently offered by GSPs with your stellar credit rating you are still giving up a deferred payment of up to 30 years. However, if your FICO is not as competitive going the GSP route could save you a lot of money and "buy" you the security that your mortgage won't turn on you in three or five years (ARM perhaps?).

Both government and private-sector loans offer many benefits. Before you finalize your financing, do all the math.

If I recall it was then president of Def Jam Sean Carter who said, "Men lie, women lie, numbers don't."

Advertisement: Refinance the Right Way!

2008-02-12T15:37:00.000-08:00

Under Savvy, Sound and Safe Home Loan Program (SSSHLP) teachers and LAUSD employees have the opportunity to afford the mortgage that they deserve. Offered exclusively through a nationwide network of nonprofit organizations dedicated to building strong communities, SSSHLP offers fair and affordable alternatives with great rates and low fees.

News Wire: Even Teachers Need Extra Credit

2008-02-12T10:48:00.000-08:00

Special Home Buying Reaches Nearly 1,800 Teachers

from LAWatts.com

Nearly 1,800 teachers, administrators, classified employees, and other staff members who serve in California’s high priority schools (API Ranks 1-5) have taken advantage of the Extra Credit Teacher Program (ECTP), a special first-time home buying program administered by the California Housing Finance Agency.

The program was designed to bring quality teachers to the students who need them the most, and at the end of the day, enables them to go to the place they need the most—their own home.

Since the Extra Credit Teacher Program was launched in July 2001, the California Housing Finance Agency has financed more than $461 million in first mortgage loans and provided more than $19 million in down payment assistance through the program. These dollars add up to 1,790 educators who are now first-time homeowners, thanks to CalHFA and the ECTP.

This statewide financial program combines deferred down payment assistance, up to $15,000, with a 30-, 35- or 40-year first mortgage loan at a low interest rate. Interest on the down payment assistance loan is forgiven if the borrower remains employed at a high priority school for three years, and no payments are required on the second loan until the home is either sold, refinanced or paid in full.

Information: www.calhfa.ca. gov or (877) 9-CalHFA (877-922-5432).

link to article: http://www.lawattstimes.com/articles/2007/12/19/education/education1.txt

Want more information about CalHFA ECTP and other programs for first-time homebuyers? Call (323) 834.1434 or visit http://www.latmap.com

New Homebuyer FYI #2

2008-02-12T10:05:00.000-08:00

compiled by Hassan Nicholás
FYI #2...random stuff to know

A Lease not created equal - An auto lease on your credit report is looked upon differently then other types of credit that appear on your report. Why? Lenders figure that even if you pay off that lease, you're still going to need transportation. Which means you'll probably get another lease or have to buy a car outright. So even if you only have 10 months or less left on your lease, a lender could still count those remaining payments against since they anticipate you "replacing" it with another car lease, payment or purchase.

New Gold Faucet with your Rehab loan? Maybe not - Thinking about using a rehab loan from the government to turn that fixer-upper into the house of your dreams? Well, you might want to hold off on clearing the yard for that new pool. Unfortunately, no improvements considered to be a luxuary are permitted. But, what if the home you're going to purchase already has the pool? Well, then that's fine. Just hold off on installing the imported Italian marble tiles in the bathroom.

YSP & Pre-Closing Rate Bumps – Yield Spread Premiums can be tool for brokers and agents to pull bait and switch scams on first-time homebuyers. How does it work? The agent convinces the borrower to float the rate (probably tells them that interest rates will likely lower) up until closing. Then, the day before closing the agent announces a “rate bump” due to a dip in credit score, market conditions, cut in appraised value, a pop-up on the credit report, or whatever excuse they can make up to raise the rate – usually by ¼ but no greater than 1/8 points (anything higher might send red flags to the buyer wondering why the rate increased by so much). The agent then presents the buyer with new GFE, TIL and 1003 documents reflecting the changed rate and everything else re-disclosed and compliant (Although, in some states if the rate is changed, the buyer must be given three days notice. If that is the case an agent might backdate documents to reflect that). Since it is unlikely that the borrower can find new financing a day before closing they are practically forced to “eat” the extra cost and take the loan while the agent enjoys an extra $1,000 per transaction. And many times the buyer won’t blame the agent because they claimed to have understood the market risk of going the “floating rate” route anyway.

LATMAP Orientation Meeting

2008-01-25T15:51:00.001-08:00

News Wire: The NEW FICO Score of 2008

2008-01-04T11:34:00.000-08:00

Default Lines: The New Math of Credit Scores
by Jane J. Kim
Thursday, December 20, 2007
provided by The Wall Street Journal Online

The company that cooks up credit scores for millions of Americans is changing its recipe -- and that could affect how easily you get credit in the future.
Fair Isaac Corp., maker of the popular FICO credit score used by most lenders, says its new scoring model will do a better job predicting the likelihood of a borrower defaulting on a loan. For one thing, the new model, dubbed FICO 08, will be more forgiving of occasional slips by consumers, but will take a harder line on repeat offenders. Fair Isaac predicts its new system will help lenders reduce default rates on their consumer credit by between 5% and 15%.
The rollout of the new credit-scoring system comes at a time when lenders say they are eager for more-accurate measures of credit risk, in part because of rising loan defaults as subprime mortgages go bad and housing prices fall. And there are signs that delinquencies are creeping into other types of consumer debt, including auto loans, further prompting lenders to tighten up on credit.

The FICO score, which Fair Isaac says is used by 90% of the 100 largest banks, and other similar scores hold sway over the lives of millions of people. Financial institutions use them to determine the granting and pricing of credit, insurance, cellphone usage and, in some cases, employment and utility services. Some consumer groups have raised concerns about whether credit scores are being used properly and whether they are valid measures of credit risk for some groups of consumers, especially minorities and lower-income individuals, says Travis Plunkett, the legislative director for the Consumer Federation of America.

Credit scores, which are calculated using proprietary models, also are criticized for a lack of transparency. "This is a product, per se, but it's a product that has inordinate influence on the financial lives of hundreds of millions of Americans," says Mr. Plunkett. Fair Isaac, based in Minneapolis, says it believes it does a good job of explaining the factors that go into calculating the FICO score and in guiding consumers on how to manage their scores.

Consumers could start seeing the new FICO scores by the spring, though some lenders may take additional time to test the system to see how it works with their business and loan portfolios. Fair Isaac, which last revamped its scoring model earlier this decade, says it is accelerating its FICO 08 rollout, partly in response to lenders' demand for better risk-management tools.

The latest version of the FICO score will largely look and feel the same to consumers and lenders. Scores will still range from 300 to 850 -- the higher the better -- and the model will continue to look at the same factors, including consumers' level of credit indebtedness and payment histories, length of credit histories, number of recent credit openings and inquiries, and the type of credit used, to determine scores.

But the new model will more finely slice and dice the information in consumers' credit files to do a better job of separating the "good risks" from the "bad risks," particularly for subprime borrowers; those with "thin," or young, credit files; or consumers who are actively seeking new credit. "Those are the communities that lenders are most interested in" to determine credit risk, says Craig Watts, spokesman for Fair Isaac.

"Consumers who are low risk will score better with the new FICO version, and consumers who are high risk will score lower," says John Ulzheimer, president of consumer education for Credit.com, a personal-finance Web site. Higher-risk borrowers may find it tougher to get credit, while those with less-risky profiles -- though they may have gotten approved for credit accounts in the past -- will start to get better deals from lenders, he says.

Two people with the same FICO score currently could see their scores diverge under the new system. One possible reason: FICO 08 gives more points to consumers who maintain a variety of credit types, such as credit cards, a mortgage and auto loan, because it shows they can manage payments on different kinds of loans. On the other hand, the new scoring system penalizes to a greater degree borrowers who use a high percentage of their available credit.

FICO 08 also will draw greater distinctions among different borrowers who are at least 90 days late in making a loan payment, known as a serious delinquency. Traditionally, many credit-scoring models grouped subprime consumers into one general category. But Fair Isaac says its new model will give a higher score to a borrower in arrears if they also have a number of other credit accounts in good standing. Conversely, a person's score could drop if he or she has multiple delinquent accounts.

"Overall, more consumers will see their FICO scores go up slightly than will see their scores drop," says Tom Quinn, vice president of global scoring solutions for Fair Isaac.

Despite the new scoring model, consumers still have to make sure the information in their credit reports, which Fair Isaac relies on to come up with its score, is accurate. If consumers feel their FICO score is unfair, they would have to go to the individual credit bureaus, Experian Group Ltd., TransUnion LLC and Equifax Inc., for a copy of their credit report on file and look for any errors or missing information. If there are any, they would have to contact the credit bureau or the financial institutions to dispute those errors.

FICO 08 also aims to curtail the growing business of allowing people to polish their credit by "piggybacking" on someone else's good credit history. In recent years, credit-repair Web sites have sprung up that arrange for subprime consumers to boost their scores by becoming authorized users on accounts held by strangers with better credit. When scoring a consumer, FICO 08 won't take into consideration credit-card accounts for which that person is an authorized user. But the move also will hurt legitimate users: People who give a credit card to a child or a spouse as an authorized user to help boost their credit score.

FICO 08 is likely to face some competition from VantageScore Solutions LLC of Stamford, Conn., a joint venture of the three credit bureaus that was rolled out in 2006. Fair Isaac has sued VantageScore and the three bureaus, accusing them of using unfair and anticompetitive practices to harm the FICO brand. Recently, Equifax linked the suit with the launch of FICO 08. The company has said it wouldn't move forward with FICO 08 and that its relationship with Fair Isaac remains "strained" until the lawsuit is resolved, says David Rubinger, Equifax spokesman. The new FICO model has already been distributed to Experian, which is in the process of implementing it, while TransUnion expects to have the scoring model available for lenders to test during the second quarter of 2008. Fair Isaac says its intention is to provide the formula to all three credit-reporting agencies.

Copyrighted, Dow Jones & Company, Inc. All rights reserved.
Link to Article

News Wire: County of LA Programs - Fully Expended

2008-01-04T11:15:00.000-08:00

Another blow has been dealt to first-time homebuyers wishing to take advantage of government-back subsidized loan programs. The County of Los Angeles' Homeownership Program (HOP), American Dream Down Payment Initiative (ADDI) and S-HOP programs are now out of funds for an unspecified amount of time. Buyers who have already approved loans from these aforementioned programs are likely to be put on a waiting list or have their loan carried out in the pipeline to closing. Others, such as those getting pre approvals, will be stuck until the County replenishes it's funds - hopefully, around March/April of this year. But until then, all we can do is wait...

A Success Story: Margarito Nava

2008-01-02T10:35:00.000-08:00

December 1, 2005
Margarito Nava, Maintenence Worker and Cashier

Margarito Nava learned about CFRC’s Individual Development Account (IDA) program in the local Spanish Language newspaper La Opinion, and he wanted to find out if the program was really true. After attending an orientation, Mr. Nava enrolled in the program, which promised to match his savings with up to $4,000 that he could use for an asset purchase, including his desired goal of purchasing a home.

"[CFRC is] You are really doing a great
job to the community, Latino community. It is a big change. There isn't anything
like having your own space for the kids to jump and play--to do whatever they
want."

Mr. Nava attended the program’s homebuyer education and financial education courses. There he learned how to manage his money and budget, and learned about the homebuying process and how to get a loan. After accumulating his savings, Mr. Nava found a real estate agent to work with and then initiated his search for the house of his dreams. In about a month, Mr. Nava entered escrow. However, he was not satisfied with the deal he received.

"When we were in escrow, I didn't like
the loan. We were getting a 12% interest rate and excess in fees."

At the prompting of his CFRC financial counselor, Mr. Nava talked to a different lender, who was able to lower the interest rate on his loan by more than six percentage points. The reduced rate brought his mortgage payments to a comfortable, affordable level - even freeing up enough money to fund the addition of a new bathroom, new room and kitchen.

Although, Mr. Nava admits he is under more pressure to make his monthly mortgage and will have to become acostomed to making higher paments, like the old saying goes, si,vale la pena - that's Spanish for "It's worth it."

And for good reason. Homeownership is an opportunity that many wish for, but not all have the advantage of experiencing. Families like Mr. Nava's acknowledge this reality and seem to be up for the challenge - having to forego "a lot of things we didn't use to" and setting priorities in order to reach their goal of living in their own home. But throughout the entire process, Mr. Nava seems to be content with where he is in his life and definately appreciative of the support he received.

"I thank you for making my dream come
true. I hope you continue to help more families."

A Success Story: Teacher, Susan Naber

2007-12-11T12:48:00.000-08:00

From: Susan Naber, Magnolia Ave. Elementary

December 4, 2007

To Whom It May Concern:

Last year, I attended a LATMAP informational session expecting to get some ideas and information. I left there realizing that being a homeowner was actually a reality for me. Thanks to all the speakers that were available, I learned about so many different programs that existed to help people like me, yet I had never heard of them before that afternoon. One of the fabulous people I met at that meeting was Iris Land. Her knowledge and friendly personality stuck in my head and I knew she was the one I would want to communicate with when I was ready. And the rebate Prudential was offering wasn’t so bad either!

Iris was readily available and very helpful as soon as I called her. She recommended Joseph Guzman with National City Mortgage for my lender and set me up with Jerry Bliss for a realtor. Joseph took my information over the phone almost immediately, and Jerry called me soon after. I was referred to the Homebuyer Education Workshop offered through CFRC, a requirement for the loans I was receiving, where I got tons more information. The class was great in getting me familiar with the different opportunities I would have and what to expect during the home buying process.

"I can’t say that my whole home buying experience was rosy."

Joseph told me what I had to do to get the home I wanted (pay off a few things, defer a few things), and I was ready to do it all. He was very knowledgeable about the first time homebuyer programs, and combined programs from the City of L.A. and the Extra Credit Teacher Program to get me preapproved for just enough to get a great condo. Once I knew where I stood, Jerry was available to begin looking with me. He was so flexible with his time and I never had a problem scheduling times to see places with him, even when my own schedule was crazy.

I can’t say that my whole home buying experience was rosy. A few months into looking, I got an unexpected phone call from Joseph. The funds from the City of L.A. were depleted. I was going to be put on a waiting list. It could take months, Joseph told me. There was no way to know. In addition, he informed me that when funds do become available again, we would only have 30 days to use them. After that, I would be bumped back down to the bottom of the waiting list. Although I was upset, Jerry continued to be supportive, keeping me in the loop about new listings the whole time. It took two months until I got that call from Joseph. He told me it was my turn again, but I only had 30 days to use the funds. I called Jerry…I told him it was urgent, I needed to not only find the place, but have an accepted offer within 30 days. Jerry was on top of it. He was immediately available for me, scheduling viewings right away. Thanks to him, we found the place I wanted, negotiated a deal, and had an accepted offer within our time limit.

"I would not have been able to be a homeowner

without the help of these programs

and more importantly, the people that make it happen."

The escrow process was the most stressful experience I have ever had. Because of complications with LAUSD, my last several paychecks had been inaccurate and caused confusion as to how much I make. The numbers were inconsistent, and it was difficult for the city to figure out. They required tons of supporting documentation to verify that I didn’t surpass their income limits, and it took much longer than expected. Thank goodness that our selling realtor was patient, because we went so far past our loan contingency removal period, anyone else would have pulled out. There were several days, weeks even, when I did not know if we were going to make it. Everyone was getting nervous. In the end, although we were late, we were able to finally close escrow.

I have to say that I don’t think I would have made it through this process and kept my sanity without Jerry’s support. He fought for me the whole time. He was a mediator, and somehow kept our selling agent at bay. He was consistently optimistic about the situation, and his patience was unyielding. He was relentless in getting answers when I needed them, and constantly kept me informed of what was going on. He was so available for me that I felt like I was his only client. I will forever keep Jerry as a realtor and refer him to everyone I know! I thank Iris for making such a great connection, for being so helpful and available to me when I needed, and for going so far as to come to my new condo to deliver my much needed rebate check to me. I can see that customer service with the both of them is a priority, and in such a stressful process, it really is so important.

I appreciate my experience with LATMAP and am spreading the knowledge that I have learned about all these great programs to others. I would not have been able to be a homeowner without the help of these programs and more importantly, the people that make it happen.

Thank you,

Susan Naber

News Wire: City of LA Program - Fully Expended

2007-12-11T11:31:00.000-08:00

City of LA's Homeownership Programs have fully Expended funds

We just got word directly from the LAHD (Los Angeles Housing Department) that the low and moderate income funds for the City of LA purchase assistance programs have been fully expended and/or reserved.

As you may or may not know, LAHD receives new low income funds every April/May of each year. Lenders may still place buyers on the Waist List, however, pending the arrival of new program funds.

The Homeownership Unit has also requested additional low and moderate income funds; we will advise will let you know when those funds become available.

On the upside, there is a high likelihood that the City may receive approximately $2.5 million of moderate income funds in approximately 1-2 months.

This isn't bad news for new buyers who haven't started the homebuying process. Although, this will definately affect those who are in the process and are in escrow, with part of their planned financing coming from the City.

If you are in this situation, contact your lender and see how this will affect you. If you have already negotiated a purchase transaction, ask you r lender to submit a PRIORITY Reservation Request form ASAP.

FREE Homeownership Preservation Seminar

2007-12-03T12:08:00.000-08:00

Homeownership Preservation Seminar

Before you purchase your first home, attend this seminar and learn about

Predator Lending

Foreclosure Prevention

Home Maintenance

Guest Speaker

And much, much more!

Buying a home is the most important purchase you will make.

When: 9am – 1:30pm Saturday, December 15th
Fee: FREE!
Time: 9:00am-1:30pm
Location: 4060 S. Figueroa St. (Major Cross Street: Martin Luther King Blvd)
Los Angeles, CA 90037

* Free parking in the back of the building *
** Continental Breakfast and Lunch will be provided **

Space is limited so don’t miss this opportunity.
Call Veronica Lopez at (323) 233-1900 Ext. 224 for a reservation.

New Homebuyer FYI #1

2007-11-13T15:32:00.000-08:00

compiled by Hassan Nicholás
FYI #1...random stuff to know

Mortgage payments made on time will shoot up a credit score. Usually, it's easy for a credit score to drop but it takes more time to raise it up.

When reviewing your credit report for creditworthiness, lenders prefer borrowers who have three (3) to five (5) open credit lines/accounts.

When you have a debt with less than 8 payments left on your credit report the lender will ignore it.

Homeowners should refinance only when: 1.) They have gained significant equity in the home. 2.) The interest rate can be lowered by at least 2 points (fees and costs associated with refinancing are too costly for a one point interest rate drop). 3.) They want to get out of an ARM.

What You Need to Know About Credit

2007-11-09T17:14:00.000-08:00

Why is Good Credit Important?

The difference between a 700 FICO score and 698 is one-half percentage point. Meaning, on a $165,000 30-year fixed rate mortgage, that half point could cost you more than $19,000 in interest charges, assuming 6 percent is the lowest rate available.

Having good credit and strong FICO score makes all the difference between getting a good deal or bad one - or even none at all. Here are some facts that you should be aware of:

A typical credit card purchase ends up costing 112 percent more than if cash were used.

Your debt payments are reported to creditors once a month. While you might be able to get away with being 30 days late with some lenders, all lenders will turn their heads if you're 60 or more days late.

Lenders typically don't want to see no more than 3 - 4 open credit cards. If you must, then close the most recent card(s) first. But always pay off your outstanding debt before closing.

Before you apply for a mortgage be sure you're not spending over 30% of the maximum balance on your credit card(s). To figure this out, simply multiply your maximum limit by 0.3. That will be the number you shouldn't go over. Example: Discovery card has a maximum limit of $3,000. You have a current balance of $1,500. You should not spend over $900 (3,000 x 0.3).

It is possible to improve your credit score by 20 points in 60 days.

Any time you apply for a mortgage or car loan a tri-merged credit report is pulled. This has a negative impact on your FICO score, which is why you should keep your loan shopping condensed to five days if you know you will be applying more than once, rather then spread throughout the month. This way you will only get "hit" once, instead of for each time you your credit was pulled.

Just because negative information no longer shows up on your credit report after 7 - 10 years, that doesn't mean it isn't affecting your score. Don't try to "wait out" your debt.

To be eligible for government-backed subsidy programs (downpayment assistance), you must have a FICO score of at least 620.

A Success Story: The Gutierrez Family

2007-11-09T11:25:00.000-08:00

August 25, 2005

Maritza Gutierrez is a mother of three and works for the Los Angeles County Consumer Protection Department as an investigator. Maritza and her husband Joseph came across CFRC’s IDEA program in partnership with FHLBSF (Federal Home Loan Bank of San Francisco) and CB&T (California Bank & Trust). Maritza enrolled in August 2004 and began saving by making monthly deposits of $500.

Maritza and her husband also attended a series of financial education classes, homeownership workshop and saver club classes to learn about the nuts and bolts of the homeownership process. Maritza and Joseph put what they have learned in their financial education classes into practice and asked their children to do the same. Each family member had a budget and each learned to bargain shop. Maritza and Joseph also prepared a list of items that they should look for in a house and made sure all of their documentations were in place.

They found a property in the East Los Angeles area that needed rehabilitation, but they found much potential in the property and knew that they could work on the rehabilitation on their own to save money. With the IDEA match money of $14,400 and other saving programs that they have enrolled in, Maritza and Joseph purchased the property for $289,000. Maritza and Joseph received funds from the Los Angeles Community Development Commission Home Ownership Program and American Dream Down payment Initiative and IDA program with New Economics for Women.

After the family moved in and started the rehabilitation process, the neighbors also began to upgrade their homes to raise the values of the community. The property still has much work to be done, but Maritza and her family are excited about working on their home together and seeing the transformation of their house and neighborhood.

A Success Story: Teacher, Amy Bouse

2007-11-09T10:55:00.000-08:00

November 29, 2006

Amy Bouse has been a teacher for the past 8 years at Santa Monica High School. As she researched various homeownership assistance programs for teachers on the Internet, she stumbled upon the Los Angeles Teachers Mortgage Assistance Program (LATMAP).

Ms. Bouse decided to attend CFRC’s 8-hour homebuyer’s seminar on a Saturday, where she learned about various loan programs available to her and about the pre-approval process. "This was my second and much better homebuyer’s seminar…I learned about expectations for real estate agents and a great rebate program for teachers," said Ms. Bouse.

Through LATMAP she also met two program partners: Joseph Guzman from National City Mortgage, and Iris Land from Prudential CA Realty. The partners helped Ms. Bouse through every step of the homeownership process, including qualifying her for a loan and helping her find a home.

Ms. Bouse recently closed on her purchase, a 2 bedroom condominium located in Southwest Los Angeles. The home has great amenities and charm, including hardwood floors, and built in cabinets. But her favorite place is the terrific backyard that offers the privacy, serenity, peace and escape that she longs for at the end of her day.

Finalmente Justo

2007-11-09T10:44:00.000-08:00

Una Organización Comunitaria responde a Prestamistas Predatorios

October, 2007

Considerando la reciente onda de juicios hipotecarios que le han hecho perder tanta gente su casa a lo largo de California y la nación entera, no es una sopresa que muchas compradores de casa potenciales han echado un paso para atrás.

Y el hecho de que mayormente latinos y afroamericanos engrosan la lista de víctimas afectadas por hipotecas de alto riesgo solamente fortalece aquel temor. Vea en las noticias y le saldrán tantas historias de familias, recien dueños de su propia casa, perdiendo su hogar, su inversión, y su sueño de regalar una casa a sus niños. Es bastante para desalentar a compradores potenciales y los que ya tengan hipotecas infavorables.

El problema reside en la realidad que no hay protección para las personas, de mal crédito y poco ahorros y aún más poco opciones, a quien se tentan con una tasa baja a aceptar préstamos hipotecarios de alto riesgo. Los prestamistas predatorios lo saben y por eso se aprovechan de ésa vulnerabilidad que tienen muchos con esperanzas de tener una casa. Luego compradores de casa se encuentran en situaciones dificiles una vez la hipoteca riga una tasa más alta, entonces se hacen inmanejables los pagamientos de préstamo. Toma en cuenta que los prestamistas se muestran una vez más y más renuentes a ortorgar hipotecas y comprenderá las dificultades que se enfrenta.

Ahi entra el Centro Comunitario para Recursos Financieros (CFRC en siglas ingles) una organización sin fines de lucro que provee seguras alternativas para financiar casas. Con sede en el centro de Los Angeles, CFRC haya sido un centro de recursos financieros para muchas familias y negocios de comunidades descuidadas los angelenas. Nota que los precios para prestamos están en alza aunque hay una sobreoferta de viviendas – otra amenanza a compradores prospectivos.

"la educación es clave"

A lo largo de la nación organizaciones como CFRC han empezado a responder; ofreciendo soluciones convenientes a personas con opciones escasas. Bajo su Programa para Nuevas Compradores de Casa CFRC ofrece dos nuevos productos hipotecarios que se esperan ser el primer fase bajo el programa. Los préstamos son únicos porque están específicamente dirigidos para personas con crédito dañado y pocos fondos. Después del cierre del préstamo el comprador tiene que pasar por educación con un consejero financiero sobre las condiciones del préstamo. La organización espera atraer familias y individuos con tasas fijas competitivas de interés también la seguridad de una organización que está en el negocio de cuidar a los comunidades descuidadas. CFRC quiere que nadie se quede en cero porque encuanto a los prestamistas predatorios la educación es clave.

Por Hassan Nicholás