An Agents Perspective: Survey of California Residential Market

Included in our analysis is a survey consisting of 11 questions concerning the California residential real estate market. These questions were answered by 237 residential real estate agents located throughout California, each with at least three years experience.

The answers to the following questions will give a better understanding of the 2009 and 2010 California residential market from an agent’s perspective. Each agent was asked 11 questions regarding inventory levels, buyer activity, sales volume, foreclosures, short sales, and financing, all in relation to the California real estate market. The following data was accumulated from February 14, 2010 to February 25, 2010.

1. Are inventory levels in your market on average increasing or decreasing?
Over 60% of those surveyed agreed that inventory levels are currently decreasing, while only about 30% believe that inventory levels are increasing. The current market is demand-driven, and is therefore absorbing much of the supply (inventory levels).

2. To what extent has buyer activity increased or decreased over the past year?
Over 79% of those surveyed agreed that buyer activity has increased over the past year. On average, prices for a single family residence decreased dramatically, leading to an increase in buyer activity and an increase in demand.

3. What do you expect will happen to buyer activity in 2010?
Over 60% of those surveyed believe that buyer activity will continue to increase throughout 2010. The sustained increase in demand (buyer activity) can be attributed to the continuation of low prices as well as the buyer tax credit.

4. What do you expect will happen to sales volume when the buyer tax credit expires in April?
Over 70% of those surveyed believe that sales volume will decrease now that the tax credit has expired. The current tax credit includes up to $8,000 in government assistance for qualified first-time home buyers purchasing a principal residence, and up to $6,500 in government assistance for qualified repeat home buyers.

5. What proportion of buyers in your market are owner-occupants, not investors/landlords?
Over 75% of those surveyed believe that buyers are owner-occupants as opposed to investors or landlords. To some degree this is due to the current mortgage incentives given to owner occupant residencies.

6. Is favorable financing for purchases readily available?
Over 75% of those surveyed agree that favorable financing is either somewhat or readily available. Although lenders have become more stringent concerning lending and FICO scores, historical trends confirm that financing has become easier to obtain.

7. Have foreclosures in your market increased or decreased since early 2009?
Foreclosures vary typically by market. Although there is an increase in default payments, the variations in foreclosures can be attributed to the increase in loss mitigation efforts (short sales, loan modifications), which have helped many homeowners find ways to avoid foreclosures.

8. Have short sales in your market increased or decreased since early 2009?
Over 80% of those surveyed believe that short sales have increased since early 2009. The downturn in the California residential market has led many homeowners to seek assistance in the form of loss mitigation, in an effort to avoid foreclosures.

9. In your opinion, what effect have short sales and foreclosures had on home values during 2009?
Over 86% of those surveyed believe that 2009 home values were negatively affected by short sales and foreclosures. Due to homeowner debt and a lender’s willingness to rid itself of a property in default, many short sales are typically priced below fair market value, leading to a negative effect on home values.

10. In your opinion, what will be the future effects of foreclosures and short sales on home values?
75% of those surveyed believe that short sales and foreclosures will still have some effect on home values in the future. Therefore, a majority of the agents surveyed believe that home values will continue to decrease.

11. In your opinion, what will be true of housing values in 2010?
There is disparity concerning housing values in 2010. Over 44% of those surveyed believe that housing values will decrease in 2010. This can be attributed to the continuation of short sales and foreclosure, which lower housing values.

Published with permission from "A STATE IN TURMOIL: Why The California Residential Real Estate Market Has Just Begun To Fall" By Eli Tene, Gil Priel and Jeff Woodsworth. This text may not be redistributed or reproduced without the written consent of its authors.

Conclusion

The outlook for 2010 was summed up appropriately by Dr. Alex Villacorta, Senior Statistician at Clear Capital, when he stated: “The sustainability of the current price gains will be challenged in 2010, given that most lenders and analysts predict a significantly larger number of REOs will reach the markets. Further, this suggests that as the dynamics of supply and demand evolve, different markets will have varied responses to the increased REO activity. That is to say, depending on the market, if the supply of housing does not dramatically increase for reasons outlined in the previous section, or if demand does not become curtailed due to reasons explained above, then it is believed that housing will have bottomed in most affordable markets and will stay flat or experience modest price growth. Top-tier, less-affordable markets remain weak and unbalanced.

However, despite any promising data today, there are a multitude of reasons to believe that the fundamentals recently supporting stability in the housing market will diminish in 2010. Specifically, the reduction of loan purchases by the Federal Government and subsequent increasing interest rates, the expiration of the tax credit, and the continued weaknesses in the overall economy will likely stymie demand in 2010. Furthermore, the failure of loan modifications to prevent foreclosures, and the anticipated increases in defaults from borrowers of Option ARMs and other loans, will serve as a continuing source of bank-owned properties to be liquidated in competition with one another and will greatly increase the inventory of homes. Any economics student can tell you that when supply goes up or demand goes down, prices must go down. And that is expected to occur in 2010. The extent of this price decline is undeterminable at this stage, but the risk is palpable.

Published with permission from "A STATE IN TURMOIL: Why The California Residential Real Estate Market Has Just Begun To Fall" By Eli Tene, Gil Priel and Jeff Woodsworth. This text may not be redistributed or reproduced without the written consent of its authors.

2010 Forecast

The outlook appears promising despite formidable obstacles that will be realized in 2010, which will pose significant challenges to continued recovery. Our market-by-market analysis of housing values and supply trends shows that most California markets appear to be stabilizing. Home value direction has gone from decreasing to flat and, in some markets, turned positive, while supply of housing in most markets is in balance with demand or less. However, despite the stability of home values achieved over the second half of 2009, there are many factors that suggest 2010 could expose this façade and become another down year for the housing market, with values dropping further before stabilizing. Those factors are addressed below:

1. Rising Mortgage Rates: Just as low mortgage rates were partially responsible for the recovery manifested in 2009, increased rates could be the cause of a housing slump in 2010. Homeowners tend to buy a home not on the basis of what the home costs in absolute terms, but rather on how the mortgage payment will affect their monthly earnings. That is to say, for most home buyers, the key to home affordability is monthly cash flow. A rise in interest rates decreases the overall affordability of the home. Therefore, buyers will be willing to spend less overall, driving economic demand down. This could cause housing to again become overpriced.

2. FHA Restructuring: The Federal Housing Administration suffered heavy losses during the housing downturn, which could lead to additional bailouts from the government. As a result, the FHA slightly tightened standards and raised fees in January. If increased tightening occurs, it could reduce availability of financing and diminish the qualified-buyer pool. That would decrease demand and force further decline in values.

3. Failed Loan Modifications: Loan modifications are the reason many delinquent loans have avoided foreclosure, which has served to moderate the supply of foreclosed homes entering the market in 2009. During 2009, the REO saturation rate dropped 16 from 41.5% in the first quarter to 25.5% upon the release of the HDI Market Report in January 2010.vii However, while 728,000 homeowners have signed up for modifications, just 31,000 have permanent workouts. So it is reasonable to expect that many homes that have been in the modification pipeline will be moved belatedly into the foreclosure pipeline and will add to the supply of foreclosed homes in 2010.

4. Expiration of Mortgage-Backed Securities Purchase Program: The government set aside $1.25 trillion to buy back mortgage-backed securities (MBS), which has been the primary cause of low mortgage rates throughout the downturn. The program is set to expire March 31st. Purchases from the program made up 50% of the MBS issued in 2009, and it is very possible that interest rates will rise without the supplementary demand created by the Federal Government. Also, as stated previously, a rise in rates decreases the affordability of owning a home and will depress demand at current market prices.

5. Mortgage Interest Rate Resets: California has a high concentration of option adjustable rate mortgages that gave the borrower the option to pay a monthly amount less than that necessary to pay the interest on the loan. Thus not only are these loans in a negative equity position due to a falling market, but they are also building negative amortization. Interest-only loans that allowed interest payments for three, five, or seven years were popular with purchasers in expensive markets that did not quality for government-backed loans. Both negative amortization and interest only-type loans are about to reset, dramatically increasing the monthly payments for those borrowers. Of the pool of outstanding Option ARM loans, 88% have not yet experienced a reset event. Research carried out by Fitch showed that 94% of borrowers with Option ARM loans made only the minimum payment. And in the past year, the portion of Option ARMs that were delinquent, in foreclosure, or foreclosed rose from 16% to 37%.1 From the graphs, it seems evident that by the end of 2010, and through 2012, those resets will place heavy burdens on borrowers, who will likely forfeit their homes to banks that in turn will have to foreclose and liquidate the properties. These re-sets will likely cause the next wave of foreclosures, one that will be large and weigh on home values for a long time. Therefore the re-casting of Option ARM loans in the coming months and years will be the source of a tremendous amount of bank-owned housing inventory, which will exert downward pressure on home values.

6. Expiration of the Home Buyer Tax Credit: The program established by the federal government giving buyers an $8,000 tax credit, enacted to shore up the housing market, expired on April 30, 2010. Many home buyers have entered the market prematurely to take advantage of this additional incentive to buy a home now. Many of them perhaps would have waited until 2010 to buy a home, but opted to buy sooner to take advantage of the credit. Those buyers will not be available to buy in 2010. As a result of the expiration of this credit, the demand for housing in 2010 could be greatly diminished, and home prices could decline.

7. More Defaults & Foreclosures: Due to such factors as persistent unemployment and failed loan modifications as aforementioned, foreclosures will likely increase in 2010. There are nearly two million mortgages that are 90 days delinquent, and virtually all of them will end up in foreclosure. About 2.3 million have already been foreclosed on by lenders. Flooding the market with increased bank-owned (REO) properties could increase the housing supply beyond the bounds of demand at current pricing and force lenders to compete by dropping REO home prices. Similarly, short sellers, or property owners attempting to sell a property for less than what is owed on it, will be prominent in most markets, adding to distressed inventory. Home owners with negative equities have proven to have a high rate of default. According to a new study released by First American CoreLogic February 23, 2010, more than 11.3 million residential properties had negative equity at the end of 2009. That is equal to 24% of all mortgaged homes in the United States. This study also reports that an additional 2.3 million mortgages had less than 5% equity. These two numbers combined equal 29% of all mortgaged properties in the U.S. In California, 35% of all mortgaged residential properties are underwater, accounting for the largest number (2.4 million) among all the states. First American reports that once negative equity is 25%, or $70,000 greater than the property’s value, owners tend to walk away from their debt obligations and properties to the same degree as non-occupying investors.

Published with permission from "A STATE IN TURMOIL: Why The California Residential Real Estate Market Has Just Begun To Fall" By Eli Tene, Gil Priel and Jeff Woodsworth. This text may not be redistributed or reproduced without the written consent of its authors.

Professional investors move into flipping foreclosed homes

Squeezing out amateurs, private equity funds and wealthy individuals are buying distressed properties at public auctions, refurbishing them and selling them for quick profits.

Hoping there are big profits to be made in the aftermath of California's housing collapse, professional investors are flocking to the business of buying foreclosed homes at distressed prices.

The investors, primarily private equity funds and groups of wealthy individuals, purchase the homes at public auctions, which are held daily on the steps of local courthouses. They refurbish the properties and try to sell them for quick profits.

Not long ago, the typical home flipper was an amateur tapping a home equity line or savings for an investment property. But professionals have rushed in, partly because of sparse investment opportunities elsewhere.

"In crisis there's opportunity," said Rick Hudson, president of investment firm Prosperity Group Real Estate in Irvine. "Right now there's huge opportunity with flipping houses."

Closely watched gauges of professional buying have surged over the last two years.

The number of homes sold at foreclosure auctions statewide increased to 4,336 in April, from 884 in January 2009, according to research firm ForeclosureRadar. It eased back to 3,483 in July as banks offered fewer properties for sale. The auctions are dominated by professional investors who shop with cash (although not usually with actual greenbacks, for practical reasons).

Another measure, the percentage of all homes sold to absentee buyers, paints a similar picture. In the hard-hit Inland Empire, for instance, 30% of all homes sold in April went to absentee buyers -- up from 19% at the end of 2008 and the highest level in at least seven years, according to San Diego research firm MDA DataQuick. It was at 28.2% in July.

The binge of professional buying has helped spark a nascent housing recovery in Southern California because investors have cut significantly into the glut of foreclosed properties after the subprime mortgage meltdown.

Home sales in the six-county region rose 7.2% in June from May and 2.6% from a year earlier, according to MDA DataQuick. In July, overall sales tumbled primarily because of the expiration of federal tax credits, falling 20.6% from the month before in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties. But the region's median home price of $295,000 was off only 1.7% from June.

The fragile rebound in the broader market contrasts with the behind-the-scenes scramble at foreclosure auctions.

"There's a tremendous amount of capital that is desperate to just buy anything right now," said Gil Priel, principal of a real estate investment firm in Woodland Hills.

In some cases, well-financed newcomers are elbowing out smaller investors at auction sales.

"The people who want to go and buy a house to flip, and do one or two, are already exiting the market," said Jan Brzeski, who manages a residential investment fund at Standard Capital in Los Angeles.

The swarm of new investors, however, is making a treacherous and labor-intensive business even tougher.

Investors must do their homework on dozens of homes for every one they buy. Legal and other impediments usually prevent them from going into homes prior to buying them, leaving no way to gauge repair costs. And despite being foreclosed on, the original owners often still live in the houses. That forces buyers to pay them to leave, a dynamic known as cash-for-keys.

The influx of new players is pushing up auction prices and squeezing profits. The average discount at auctions -- the difference between a home's sale price and its actual value -- is 21.6%, down from 28% in January 2009, according to ForeclosureRadar.

Last year, Chase Merritt, a Newport Beach private equity fund management firm, notched strong returns from auction sales, said Chad Horning, its chief executive. Chase Merritt bought a property in Costa Mesa in June 2009 for $315,500 and sold it 21/2 months later for $470,000. It bought a Mission Viejo home for $305,371 and sold it within two months for $375,000.

Chase Merritt launched its first foreclosure fund in May 2009 and has started two more funds since then. But "it's literally gone from a business that's very attractive, even lucrative, 12 to 18 months ago to something that almost doesn't make sense," Horning said.

"It's just like the housing bubble," he said. "It's almost like we're in a bubble at the courthouse steps."

The scramble was on display recently at an auction at the Norwalk courthouse.

A semicircle of people crowded around auctioneer Elwood Brown. Most were clad in cargo shorts and flip-flops. A few sat in lawn chairs. But their laptops and cellphones, as well as the thousands of dollars' worth of cashier's checks they clutched, marked them as professional investors girding for battle.

Brown took a swig from his oversized water bottle and announced that bidding for a four-bedroom duplex in Hawthorne would start at $179,598.60.

The price shot up within seconds as two men and a woman raised one another's bids in $1,000 increments.

"It's at 229, Daryl," a man in a polo shirt and sunglasses whispered intently into his cellphone. "About to close. Do you want it?"

He increased his offer, but a rival bidder claimed the home a few seconds later for $237,000.

Competition at the auctions is brutal, said Bruce Norris of Norris Group, a real estate investment firm in Riverside.

Norris unwittingly bought a house that was the site of a gruesome double murder. No one else bid -- a rare occurrence that showed others knew the history -- leaving Norris with less cash to bid for other houses.

"It's a very lonely place out there," Norris said.

That's only one of many risks in the foreclosure business. People who've lost their homes through foreclosure sometimes vent their anger by smashing walls, knocking over water heaters or ripping out toilets.

"We've literally had people take $20,000 of cabinetry out and feel perfectly justified doing it," Norris said.

The daily auction ritual begins each morning when banks signal which homes they are likely to dispose of that day. That sets off an early-hours scramble as would-be buyers speed through suburban neighborhoods to investigate the homes.

On a recent day, Norris steered his sport utility vehicle into the driveway of a 3,300-square-foot McMansion on a corner lot in Moreno Valley. The front lawn was brown and the backyard was littered with garbage. But the windows were intact and there was no visible damage -- far better than many foreclosures.

Aiming for an all-important look inside, Norris rang the doorbell and delivered the bad news to the teenage boy who answered the door that the home was scheduled to be sold that day.

"Do you mind if I poke around a little bit to see what kind of condition it's in?" Norris asked, angling his body to get a glimpse of the living room.

Then another car sped up and a rival buyer hurried up the driveway. She studied the house for a few seconds and craned her neck over the wooden fence protecting the backyard.

"This is a dream compared to a lot of them," she said in a satisfied tone as she rushed back to her car.

In the end, no one bought the home. The sale was delayed after the owner filed for bankruptcy protection.

Norris was philosophical, knowing that there were plenty more foreclosures.

"If you miss one," he said, "oh well, tomorrow's another pile."

walter.hamilton@latimes.com alejandro.lazo@latimes.com

Copyright © 2010, Los Angeles Times

Housing Market: 2009 Review

When 2009 began, the stock market was in the grip of a terrible bear-market sell-off that didn’t end until early March. By that time, the Dow Jones Industrial Average was half the level at which it had peaked just two years before. Credit was so limited that the situation was termed the Credit Crisis. The housing market had just taken another large leg down, and even high-end housing segments were feeling the effects of a pervasive housing price collapse that had begun two to three years before. Negative headlines assured wary home buyers that the end was not yet in sight. So 2009 was off to an abysmal start.

However, inventory absorption and recovery were evidently taking root in the most affordable and most depreciated housing segments. Buyers were encouraged to re-enter the market as the Federal Government enacted an $8000 tax credit for first-time home purchasers, which was subsequently extended (on a more limited basis) to all consumers. This federal tax credit has been believed to have spurred activity throughout the American economy. In March, the stock markets began to recover as investors took a chance that the worst was behind us. Aside from the tax credits and stock market recoveries, there were several other reasons for the stabilization of housing in 2009:

1. Low Mortgage Rates: The Federal Reserve Board kept mortgage rates low at approximately 5% throughout 2009 by purchasing $1.25 trillion in mortgage-backed securities. Buyers, aware of these historically low rates, believed that there would be a small window of opportunity to buy before financing costs increased. The result was a sense of urgency that spurred an increase in home purchasing as well as mortgage re-finance applications.

2. FHA Loans & Fannie Mae and Freddie Mac: After nearly disappearing during the market boom, FHA loans have returned. One half of all sales nationwide to first-time home buyers were insured by the FHA during the peak buying period in 2009. Also, Fannie and Freddie, now wholly owned by the federal government, purchase nine of ten mortgages.

3. Loan Modifications: In 2009, at the encouragement of federal and state governments, banks and other lenders increased their efforts to modify troubled mortgages. This provided borrowers with alternatives to foreclosure, and prevented (or perhaps only postponed) many foreclosures. According to Clear Capital’s Home Data Index (HDI) Market Report, the REO saturation rate dropped from 41.5% in the first quarter of 2009 to 25.5% in January of 2010. This decline served to limit the foreclosure inventory and thereby assisted price stabilization.

As a result of these stimuli, and as demonstrated by our market-bymarket analysis of California, by the end of 2009 values in most markets began to stabilize and, in home select markets, show consistent appreciation for the first time since 2006. According to RealtyTrac CEO James Saccacio, new foreclosure filings had been declining since peaking in June. This decline was due to trial loan modifications as well as state legislation extending the foreclosure process. The U.S. Treasury Department reported that as of early December 2009, more than 700,000 homeowners had received trial modifications. In the fourth quarter, foreclosure activity fell by 7% from the previous quarter.v All these factors have served to limit the supply of foreclosed homes and to help support a stabilized market. According to Clear Capital’s HDI Market Report, the Western United States Region, including those states that previously registered the largest decline in values (Nevada, Arizona, and California), showed a 1.2% quarterly gain in the fourth quarter. The Inland Empire (Riverside-San Bernardino-Ontario) MSA showed a 4.2% quarterly increase despite having an REO saturation rate of 51.3%. This increase provides evidence that the appetite for discounted REO homes is strong, and that the presence of these REOs is not having the expected depressing effect on the market that some anticipated.

Based upon our research, it seems evident that the least-affordable housing markets are not experiencing the balance in supply and demand that a stable housing market would demonstrate. This disparity is evidenced by high housing inventory and few sales at prevalent prices. High inventory relative to sales has, in past years, indicated that a price correction is on the horizon. Top-tier housing may be generally defined as homes valued at more than $1,000,000; but as average prices for a neighborhood increase, it appears that the sales decline. The factors driving this phenomenon include home owners in these markets being more fiscally resilient and more financially able to patiently wait to sell a home at a high price while making mortgage payments in the meantime. However, demand for these homes remains tepid, as would-be buyers experience difficulty in finding financing that does not require a large down payment to qualify. For example, in Los Angeles County, FHA and conventional loans are available to the amount of $729,750, which is expected to expire at the end of 2010. So presently, a borrower pursuing a $1,000,000 home purchase would have to bring to the transaction at least $270,250 of his or her own cash. Note the two graphs below, which are Multiple Listing Service snapshots of listing and sales activity in expensive Beverly Hills and Malibu markets from February 2010. It is evident that demand for housing at the prevalent prices is very low, and typically we would expect this to foreshadow a price correction.

Published with permission from "A STATE IN TURMOIL: Why The California Residential Real Estate Market Has Just Begun To Fall" By Eli Tene, Gil Priel and Jeff Woodsworth. This text may not be redistributed or reproduced without the written consent of its authors.

Housing Market: 2000-2008 Review

During the first half of the past decade, California experienced a remarkable period in which home values began rising at incredible rates. By 2005, some markets saw home values double and triple as buyers flooded the market, enticed by easy financing and the promise that values would continue to increase in California. While there was talk of a housing bubble by some, there was an equally convincing group that suggested that California real estate values would only go up as more and more people flocked to the Golden State. However, soon cracks started appearing in the market and the boom was followed by a nationwide housing market bust of historic proportions that eventually spread fear among holders of stocks, corporate bonds, and government and municipal bonds. Credit-default swaps threatened to destroy insurance giant AIG, the company having been ultimately saved by a titanic government bailout. Mortgage giants such as Countrywide, Wachovia, and Washington Mutual, facing insolvency, were bought by stronger competitors, who were also severely weakened and ultimately bailed out by the U.S. government. Investment banks, such as Bear Stearns and Lehman Brothers, which were century-old beacons of high finance and trade, were left bankrupt. Even companies such as General Motors and Chrysler Motors, far removed from the housing market, were driven to
declare bankruptcy. Arguably further removed still, international markets all over the globe also crashed.

The history and many of the causes of the biggest housing crash since the Florida Land Crash of the 1920s are becoming well-understood. The crisis originated with the Federal Government’s Community Reinvestment Act, which encouraged home ownership and a monetary policy that kept interest rates historically very low. These policies caused real estate values to begin a steady ascent that progressively picked up steam. Wall Street was making a lot of money packaging and selling mortgage-backed securities. Credit agencies determined those investments to be very safe, and the mortgage bonds received high credit ratings. The demand for such bonds seemed endless. Banks and mortgage brokers discovered that they could make very high profits originating loans. So the competition to capture market share gave birth to creative loan products such as teaser rates (where loan rates are low for a short time and adjust to market rates at a later date), option adjustable rate mortgages (which gave the borrower the option to make less than a full payment), and Alternate-A stated income loans (where loans were underwritten based on unverified statements of income and were nicknamed “liar-loans”). Prior to 2003, those Alternate A loans, which allowed for loans to be underwritten less stringently, were a small portion of the loan market. But between the years of 2003 and 2006, those loans increased by an incredible 340%.i In higher-priced markets, such as California, Option ARM loans (those in which a borrower could pay an amount below that required to pay even the interest, and could allow the difference to be added to the loan) were also very popular. Influenced by loan brokers and reassured by climbing values, appraisers became overly-optimistic with regard to valuations. The lucre from those loans wrought fraud and misrepresentation throughout the system, since those loans were sold to Wall Street and no risk exposure remained with most lenders involved in their origination. When the demand for those products subsided and the news of the crumbling housing market spread, the value of those mortgage-backed bonds crashed. Seemingly overnight, the mortgage-origination business virtually disappeared and was irrevocably changed. Many businesses related to lending went bust. The website ml-implode.com began tracking the instances of mortgage lender failures. As of this writing, the number was 374. Nearly 300 closed during the years 2007 and 2008.

From our analysis, it is evident that the California real estate market peaked in 2005 and 2006, then started showing signs of weakness in mid-to-late 2006. In the latter months of 2006, it was evident that the housing bubble had popped. Sellers began to reduce their prices. Unsold inventory began to build. Where there was smoke in 2006, there was fire in 2007. Home buyers had vanished and sellers were unable to sell their homes at once-prevalent high prices. The inventory of unsold homes began to pile up at a rapid rate as private sellers and banks with newly acquired foreclosed homes flooded the market. Absorption rates for sales of homes plummeted. Financing began to dry up as banks reduced their exposure by withdrawing from the market and tightening lending standards. Buyers who wanted to buy were unable to act, limited by the availability of favorable financing. Throughout 2007 and 2008, the housing market seemed to be in free fall. Some parts of California saw home values decline by 75%. The declines were most evident and severe in areas where the most affordable homes could be found, and where home prices were within reach of the lower tiers of income earners and investors. The declines were also plaguing areas where developers had overbuilt small communities on the edges of cities, and prescient builders began to liquidate new tract homes. But the symptoms soon spread to the upper levels of the housing market. The market crash in 2008, and the credit crisis that erupted in the fall of that year, caused the crash to affect the wealthiest individuals. Consequently, all rungs of the housing ladder, including homes in the top tier priced at over $1 million, were negatively affected. In 2005, the number of $1 million-plus homes sold was 54,773. In 2006, it was 50,010; while in 2007, it was 42,506. Then, in 2008, it dropped 42.5% to 24,436.ii So although top-tier housing was resilient to price declines during the initial housing correction, during 2008 and 2009 significant weakness developed to cause foreclosures and price corrections to be manifested within this upper-level price market.

Published with permission from "A STATE IN TURMOIL: Why The California Residential Real Estate Market Has Just Begun To Fall" By Eli Tene, Gil Priel and Jeff Woodsworth. This text may not be redistributed or reproduced without the written consent of its authors.

Record Low, Then Another, Then Another, Then…

The news regarding mortgage rates almost has become passé. Nearly every week this summer, Freddie Mac has announced that one of the mortgage rates it tracks has hit a new record low. According to its Primary Mortgage Market Survey, 30-year, fixed-rate mortgages are sitting at 4.44%! While the housing market certainly remains muted, according to some experts, the low rates are helping generate sales activity that would not be happening without these incredible rates.

At the Federal Reserve’s latest Open Market Committee meeting, the Fed noted that the economy is still on a recovery path, but that the rate of recovery is slowing. Many market participants were pleasantly surprised to see a change in the Fed’s policy announcement. Over the course of the last year, the Fed has acquired a massive holding of mortgage-backed securities (MBS) and Treasury debt. Up until this point, the Fed has simply collected the payments on these instruments. The Fed has now decided to begin using the collected money to purchase more government debt. While this will not have the same impact as the recent $1.5 trillion campaign, it will make some impact. Ultimately, this should help maintain ultra-low interest rates for a while.

Low rates have certainly become the norm over the last few years, as the economy has struggled. At this point in time, it is highly likely that we’ll be seeing low mortgage rates for quite some time. Even a few months ago, the economy looked as if it was going to claw its way back. Now the picture is not as certain. One of the biggest challenges is that this recovery has been driven by growth in manufacturing. However, manufacturing is beginning to lose steam. Until we see consumers spending again, the economy will remain sluggish. Of course, the big key to consumer spending is jobs. If the fall brings us good news on the labor front, we’ll see rates beginning to tick upward. Otherwise, more and more record lows will be recorded.

Strategic Asset Solutions Indicates Increasing Willingness Of Lenders To Accept Principal Reductions Of Commercial Real Estate Loans

Kevin Levine, Executive Vice President of Strategic Asset Services (SAS), a company that specializes in commercial workouts and short sales, stated that "in a workout scenario lenders may be willing to reduce the principal balance, in exchange for a full-recourse guarantee by a financially solid guarantor."

Woodland Hills, CA (PRWEB) August 11, 2010

“Commercial real estate lenders generally are motivated to secure a non-recourse loan by adding a strong guarantor,” stated Kevin Levine, Executive Vice President of Strategic Asset Services (SAS) of Woodland Hills, California a company that specializes in commercial workouts and short sales. “In a workout scenario they may even be willing to reduce the principal balance, in exchange for a full-recourse guarantee by a financially solid guarantor. However lenders never will reduce the principal obligation without obtaining something of significant value in return.”

Levine explained that SAS recently was able to negotiate a reduction of a commercial real estate loan with a principal balance of $4.7 million to $3 million. “The lender performed its own valuation analysis, and agreed with our conclusion that the property securing the loan was not worth more than $3 million and quite possibly considerably less,” Levine said. “The building had been unoccupied for some time, and the borrower had given notice to the lender that it would not continue to make the large monthly mortgage payments out of his own funds, plus pay the property taxes, insurance and ongoing maintenance expenses on the property. So the lender was faced with foreclosing on an empty building and holding it for an indefinite period of time, or accepting a new principal balance of $3 million but with a full-recourse guarantee assuring ultimate recovery of that amount.”

“Each lender has its own internal policies and procedures, and business culture,” Levine explained. Some lenders have policies in place that absolutely prohibit entering into a principal reduction with the existing borrowers. In those cases, we often can negotiate a short sale or note purchase to a third party. In other situations, the lender has no formal policy prohibiting a principal reduction; but the business culture is resistant to such a result, and we have to present a compelling case as to why this is the best course for the lender to follow in order to maximize its recovery in an already bad situation. Often there are multiple levels of authority to be convinced: loan officers, asset managers, problem loan committees, and board of directors.”

SAS (www.strategicworkouts.com) offers commercial loan modification and short sale services in California and throughout the country. The company is dealing with multi residential, retail, offices, industrial, land and its specialists bring extensive commercial real estate expertise to each assignment, including market analysis, valuation, legal, and negotiation experience. Each borrower’s unique lending situation is fully analyzed, and the borrower is assisted in preparing current operating reports and projections. Based on the detailed analysis, SAS submits to the lender a loan modification proposal. That proposal may include a principal reduction, interest rate reduction, and waiver of penalty charges. In those instances where a loan modification will not work to the mutual benefit of the borrower and lender, SAS will attempt to broker a short sale of the commercial real estate at a significant discount from the loan balance, or will seek to negotiate a sale of the note to a third-party.

SAS is a member of the Peak Corporate Network (www.peakcorp.net) headquartered in Woodland Hills, California. In addition to commercial loan modifications, PCN offers mortgage lending, loan servicing, residential short sale, 1031 exchange, trustee work, foreclosure services, Escrow and real estate sale brokerage services. These services are available primarily throughout the Western United States for both residential and commercial real estate properties and loans.

PR Web

David's Story of the Week #2

David Cavarra, head negotiator of iShortSale tells an iShortSale success story.
Visit iShortSale's Youtube Channel for tips and stories on avoiding foreclosure.

Eli's Tip of the Week For Agents Handling a Short Sale #1

Eli Tene of Peak Corporate Network gives realtors advice for dealing with clients who are in default and/plan to short sale the house.
www.dontforeclose.blogspot.com

Eli Tene told HousingWatch that homebuilders always try to load up on land during downturns

Dalia Fahmy

You can't blame them for trying to make lemonade. Toll Brothers, the nation's largest builder of luxury homes, says it has launched an investment firm to take advantage of the housing bust.

Gibraltar Capital and Asset Management, a wholly-owned subsidiary, will trade distressed property and loan portfolios, take over struggling construction projects and resell them to other builders, and help banks and developers deal with the distressed real estate on their books.

Translation: Toll Brothers, which made a ton of money selling pricey homes during the boom, is now using that money to scoop up some of those properties at cents to the dollar. Makes perfect business sense, right?

Doug Yearley, Toll Brothers' CEO thinks so, too. "We believe there are many potential investments arising from the distress in the real estate industry," he says in a press release, adding that the company plans to tap into its relationships, expertise, and of course, "capital access" to "add value."

How does this affect you?
On one hand, Gibraltar's activity will be largely financial, so it will probably do little more than give Toll another source of income. On the other hand, getting to play in the financial arena will allow Toll Brothers to buy properties extremely cheaply, since they'll be cutting out the middle man, says Mitchell Hochberg, a real estate investor and advisor at Madden Real Estate Ventures.

This could affect you one of two ways. It's good news if homebuilders pass on the savings to their customers in a few years. It's not such good news if builders use the savings to give themselves a bigger margin.

"It's a supply-and-demand issue," Hochberg told HousingWatch. "It could go either way."

Toll's foray into distressed property investment isn't completely new. Last year, the company began increasing its land holdings -- and buying distressed real estate -- for the first time since 2006, Bloomberg reports. Apparently, Toll spent $143 million in the second quarter alone on buying or optioning land, with about half of the deal falling into the distressed category. Bloomberg goes on say that others have been doing the same, with competitor Lennar buying a chunk of a $3.05 billion loan portfolio from the FDIC earlier this year.

Eli Tene, a managing director at Peak, a firm that specializes in dealing with distressed properties, told HousingWatch that homebuilders always try to load up on land during downturns.

"Homebuilders feel the bottom is near," says Tene. "They can buy land at amazing prices. It doesn't make sense for them to build yet, but this is the best time for them to buy."

For publicly traded companies, he says, it's more sensible to have a separate subsidiary that can raise funds and make investments that don't affect the parent company's bottom line.

In the grand scheme of things, however, homebuilders are small players in the massive distressed-property market. Billions of dollars change hands between banks, private equity firms, hedge funds and other investment firms each year in this space.

Many of these investors -- especially distressed-asset investors whose job is to figure out which industry is getting the biggest beating -- have been fixated on the property market all year. A survey by DebtWire, a market research firm, earlier this year found that 41 percent of distressed-debt investors thought real estate would offer the best deals this year, compared to 19 percent who thought so in 2009.

All this raises the question: Why are homebuilders so pessimistic? You may recall that a report on U.S. homebuilder confidence (released by the National Association of Home Builders on Monday) showed that it dropped to its worst level since April 2009.

My best guess is that Toll Brothers and others seem to be preparing for a long, slow recovery, not for an immediately stellar profit. The homebuilder survey only looked at short-term expectations, while Toll Brothers has its eye on the long haul.

American homebuyer, take note: If you want to make it in the real estate market, buy when prices are low and be prepared to hold on for a very long time.

Aol Real Estate

David's Story of the Week #1

David Cavarra, head negotiator of iShortSale tells an iShortSale success story.
Visit iShortSale's Youtube Channel and Blog

Raffi's tip of the week #1

Raffi Tal, COO of iShortsale gives distressed homeowners advice on how to deal with their home and avoid foreclosure.
Check out our youtube channel

Technical Mortgage Monthly - July 2010: Mortgage Rates Continue to Decline in the Summer Heat

2010 started with hopes that the US would move out the Great Recession with little more than a few bumps along the way. However, as many leading economists predicted, the year started strong, and then began to fade. While there have been discussions about a double-dip recession, most analysts believe the US is simply moving through an anticipated slowing, on the way to returning to a healthier growth rate. As we move toward the halfway mark of summer, mortgage rates have continued to slowly slide downward, giving those with excellent credit and resources another historic chance at buying or refinancing a home with cheap money.

While many analysts did predict a mid-year slowing, the impact of the Euro-zone debt crises was not fully anticipated. The actual economic impact is not expected to be sizable, but for interest rates, the international “flight-to-quality,” did flood the US bond market, especially Treasuries, with an unexpected inflow of cash. This, combined with some slowing in manufacturing, which so far has lead the current recovery, has help drive mortgage rates downward again. Additionally, the US housing market has lost some of its direct support, in the form of tax credits, which has pushed sales of both new and existing homes downward. Of course, the economy will continue to struggle until we begin to see some recovery in the labor market.

As we move through summer, there is a high probability that mortgage rates will continue to remain depressed. With the Euro-zone debt crisis, there is little appetite in the US to try to finance too much more stimulus for the economy. We’re likely in a situation where we’ll wait to see if the stimulus packages of the past were enough to push the economy forward in the near future. However, even if the economy does begin showing greater signs of life, we could see mortgage rates remain very low until consumer attitudes brighten significantly. That, of course, will require a sizeable drop in unemployment, and a huge gain in new jobs.

Is Uncertainty in the Mortgage Market a Good Thing?

Mortgage rates have continued to hold very steady recently as economic news has fluctuated between positive and negative. On the positive side, Gross Domestic Product has ticked up to 5.7% for the final quarter of 2009. While the respected ISM Manufacturing Index did slow to a reading of 56.5, this remains well above 50.0. Any reading above 50.0 indicates that manufacturing is growing. Retail sales also showed signs of expansion, however, other indicators are pointing to weakness in this nascent economic recovery. Housing continues to struggle to find its footing, and Consumer Confidence plunged after three months of steady growth. While the unemployment rate is holding steady, the economy continues to slowly bleed jobs.

Over the last year, we’ve become very accustomed to direct government intervention in the secondary mortgage market. At the end of this month, the Fed’s program of buying mortgage-backed securities will expire. While many analysts are predicting that rates will begin to increase at the end of the month, there are many other things happening that may directly impact mortgage rates. Both Fannie Mae and Freddie Mac are now under government conservatorship. The future, and even the existence, of these companies is not guaranteed. There are proposals to strengthen the companies, and there are proposals to completely start from scratch. Of course, there is little doubt that the US government will continue to play a major role in housing. How this plays out will be very influential for mortgage rates, and for the housing market as a whole.

With the recovery proceeding at a muted pace with both good and bad news effecting rates, we’re likely to see mortgage rates remaining fairly steady through March. However, factors outside of the market could cause some unexpected fluctuations. So, is uncertainty in the mortgage market a good thing? It probably is, that is, as long as that uncertainty means we’re moving toward normalized markets and a healthy economy.

Tighter standards slow down housing market

Borrowers plow through piles of paperwork, endure lengthy scrutiny

By Bill Briggs

msnbc.com contributor

Tanya is a self-employed writer with solid credit and enough savings to put 30 percent down on her chosen Connecticut house. But for the past year, no lender would approve her. Then one got personal.

While dissecting the account she shares with her boyfriend, “they demanded to know what my relationship was with him. I finally gave up, decided I would just rent,” said Tanya, who asked that her last name be withheld should she opt to “go back to that bank.”

Businessman Ben Wilkinson-Raemer and his wife tried for six months to purchase a (very small) apartment in Manhattan's West Village neighborhood, on the market for $400,000. He dutifully provided underwriters mounds of requested financial records. He winced when they also scoured the bank account of his 85-year-old grandmother because she gave him $10,000 toward the purchase. Despite his excellent 700 credit score, the loan was rejected.

“We opened a bottle of Champagne,” Wilkinson-Raemer said. “We were just so happy to have the whole weight off our shoulders.”

Even for successful buyers with sterling credit, seeking a mortgage these days can feel like a simultaneous root canal and colonoscopy. Tighter loan restrictions were expected after the mortgage fiasco. A quarterly Federal Reserve survey of loan officers at large banks confirms they have tightened standards significantly over the past three years, although now some lenders are beginning to loosen up.

But as the housing market continues to struggle, with home sales plummeting last month, some mortgage brokers say the pendulum of scrutiny has swung too far, causing transactions to take far longer than necessary, putting buyers through too much hassle and blocking qualified applicants from purchasing.

The real estate business seems to have switched its motto from “location, location, location” to “documentation, documentation, documentation.” Potential buyers must chronicle every dollar of income and all assets via pay stubs, W-2s, tax returns, bank statements, credit reports and sometimes even letters from employers or family members. Mortgage brokers blame new federal lending rules for injecting unneeded delays in the loan process, and they accuse some underwriters of focusing on their own job security rather than fairly analyzing a consumer’s default risk.

“The big difference today is the fact that underwriters look at the guidelines with a strict black-and-white viewpoint and are unwilling to interpret the guidelines for fear of job loss,” said Kirk Jaffe, chief operating officer of Los Angeles-based Peak Financial Partners Inc., which offers real estate services. “It is always easier to say no than to say yes.”

“The changing rules during the last couple of years are making it much more difficult to obtain mortgages, slowing our economy, causing our housing market to decline,” said Warren Greenlee, who runs RE/MAX at the Lake in Mooresville, N.C.

Many brokers and agents agree that home-loan snags are stalling the housing recovery and damaging the economy, hurting businesses that sell the types of goods and services and new homeowners typically buy.

“The changes are far-reaching," Greenlee said. "Some are comical.”

Like the lender who — due to an inspector’s typo — temporarily refused to fund a mortgage for a Greenlee client. When naming the property in his report, the inspector mistakenly inserted a space between the words “Four” and “Square.” The bank, JPMorgan Chase, insisted the inspector redo his report. “In years past,” Greenlee said, “the lender would have never noticed or cared.”

The simplest loans — those involving one person with one checking and savings account —require 33 pages of disclosure documents, said Todd Huettner, president of Denver-based Huettner Capital, a real estate mortgage brokerage.

Home-loan frustrations, Huettner said, are touching “every borrower.” But the most qualified applicants — high-income, high-credit folks who three years ago zoomed through the process with 10-minute pre-qualification calls and no-doc loans — now are most apt to choke on red tape because they have “the most complex finances,” he said. In such cases, an underwriter often demands extra documentation from the borrower “five, six, or seven” times.

“And considering that each iteration takes about a week, that’s why people are spending two and three months trying to get a loan done,” he said.

According to a survey conducted earlier this year by The Work Number — an employment verification database used by more than half of the Fortune 500 companies — 72 percent of respondents said they are confused by the flood of disclosure forms.

“We were joking while signing all the paperwork that, on paper, I don’t think anybody knows us better right now,” said Aaron Lupo. Last week, he and his wife closed on a $150,000 home in Olathe, Kan. The underwriters “know everything there is to know about us.”

But consumers like Wilkinson-Raemer in Manhattan, stuck in rental purgatory, are paying the steepest price.

In a “normal market,” about six of every 10 loan applicants are approved, estimated Paul McFadden, a loan officer at the Legacy Group in Bellevue, Wash. Before 2008, at the height of the subprime lending craze, roughly nine of every 10 loans were approved, he said.

“Now, it is probably three out of 10,” McFadden said. “As a lender, we've all had to adjust to a new reality.”

“In many cases, borrowers who have proven their ability to buy homes and pay for mortgages are being penalized and declined mortgages,” Jaffe said.

Huettner also blamed federal reforms for mucking up the mortgage machine.

RESPA — the Real Estate Settlement Procedures Act — requires lenders to supply good-faith estimates to would-be buyers, revealing loan terms and closing costs. As a result of the law, which went into effect Jan. 1, brokers cannot order property appraisals until their clients have had the good-faith estimates for three days — an “artificial delay,” according to Huettner.

Then there’s the federal Home Valuation Code of Conduct, which prohibits lenders, brokers and agents from selecting or having “substantive” communication with a residential appraiser. The idea was to ensure appraiser independence.

Before the mortgage crisis, fraudulent appraisals inflated many home values. Yet as a result of the new code of conduct, appraisers now might come from 20 to 50 miles away and are unfamiliar with the neighborhood’s nuances. As a result they often write “egregiously low” appraisals, Huettner and other brokers contend.

“The regulatory stuff coming from Washington ... it’s bad,” Huettner said. But he said the pendulum might not have swung as far as some believe.

Some of “the whining you’re hearing,” Huettner believes, lies with “inexperienced” mortgage brokers who “don’t have underwriting expertise.”

Huettner doesn’t see loan guidelines as being substantively different from years past. The real change: the paper trail of income evidence that’s now required.

He said the new scrutiny of borrowers is a change from recent years but not unprecedented.

"Go talk to someone who bought a home 40 years ago," he said. "They had to produce all kinds of documentation.”

“The end result here is that lenders and investors want to be certain that they have minimized any opportunity for default prior to originating a mortgage,” said Jim Sahnger, a mortgage brokers in Jupiter, Fla.

“As procedures were implemented to verify all aspects of the application, confidence has returned. And part of the result is the lowest mortgage rates we have ever seen,” Sahnger said. But “today, just because you have a FICO score in the 740-plus range does not mean you don’t have to prove it.”

www.msnbc.com

1031 Exchanges are not just for Real Property

A tax-deferred like-kind exchange of personal property allows a corporate or individual taxpayer to sell their existing personal property and acquire more profitable and/or productive personal property (of like kind) while deferring Federal, and in most cases, State capital gain income tax liabilities.



The Internal Revenue Service has recently ruled that Intellectual Property such as trade names, trademarks, and customer-based intangibles that can be separately described and valued apart from goodwill and can qualify as like-kind property under § 1031 (provided the properties satisfy the other requirements of § 1031 including the nature and character rules of Regulation § 1.1031(a)-2(c)(1)).

Priel's Perspective - “The Light at the End of the Tunnel”

The Peak Corporate Network Newsletter

I want to start by saying it is clear to me that there are some buying opportunities in today’s uncertain market.

Many real estate investors, myself included, have been saying that commercial real estate is the next shoe to drop, our next crisis. However, the collapse is actually being held up by a “slow-motion” release of inventory. It is clear that values have declined significantly and many in the industry have serious problems holding on to their investments. The emerging reality is that the idea that an investor can sit idle waiting to buy “Class A” malls or apartments for 9 to 10 caps will not happen during this downturn.

The reasons for this are the “Slow-Motion” release of distressed assets by lenders, the willingness to work with borrowers without regulator pressure, and the fact that there is a huge amount of capital waiting to jump in on any opportunity put out to market.

Now that I made my point clear, I do need to make it equally clear that we are not in a “Boom” market or that I expect values to quickly recover to our 2006 peaks. The “Slow-Motion” idea also applies to any recovery. It will be drawn out as hard times will continue for the short to medium term – buyers beware!!

Many lenders are continuing to play the “extend and pretend” game with their loans and over time will need to take action by disposing of their bad debt and assets. This, in turn, means that these will sell at distressed values and further delay the rebound of investments.

The experts at Strategic Asset Solutions, one of the Peak Corporate Network affiliates, act on behalf of borrowers in debt restructuring on commercial properties. We have seen a significant shift in lender willingness to work with a borrower to reach a new realistic basis for their loans and creating a solid value for both lender and borrower/owner. This is accomplished with principal reductions, rate reduction (temporary and permanent), extended maturity date, funding reserve for property repairs, etc. The bottom line is giving the borrower a reason to stick with the program.

These types of negotiations will increase over the coming years as loans are nearing maturity. Deutsche Bank estimates that more than 65% of the loans that have been packaged in commercial mortgage backed securities (CMBS) will not qualify for refinancing when they become due. Some will be restructured while others will turn into distressed asset sales over time.

Another reason why the commercial real estate market will not collapse is that a bulk of mortgages are held by a single lender (not securitized) that is not under the strict scrutiny of Federal Bank Regulators. This gives that lender ample time to attempt to work out a problem loan in a smooth and orderly manner. The downside, again, is that it drags out any correction for years and of course is a delay for any real rebound is values. A 40% decline in values is not uncommon and it takes a robust rebound to bring it back.

In a recent real estate investor magazine survey, 65% of the responding investors indicated that they plan to boost their investment in real estate over the next 12 months. This is an increase of 30% from last year.

For anyone contemplating making an acquisition there of course remain many concerns that are very real, they include:

- Vacancies continue to increase
- Rental rates continue to fall
- 100’s of properties are in default in most markets
- Sales have plunged
- Appraisals and values are falling
- More equity required by lenders
- Still a disconnect between seller and buyers

These concerns will continue to dominate every due diligence model and challenge decision making by prospective investors over the next few years.

The analysis should be made under an extremely conservative perspective as is required in this very volatile market. This strategy is in the face of what we see as very stiff competition for a very limited supply of distressed properties.

At Peak, we continue to make bids for some of these assets and in many cases competing with as many as fifty “all-cash, quick –close” bidders. We recently purchased a non-performing note secured by two office buildings, in Southern California, with a firm belief that we would ultimately own the underlying assets. In a clear example of money being available, we were overbid at our foreclosure sale by aggressive buyers paying all-cash with little or no due diligence.

I do believe the next 12 months will provide a better flow of deals although many will likely be sold in an auction environment. This requires costly due diligence with a low likelihood of success making it more palatable to the large institutional players who will be the winning bidders with adequate staffing and resources.

As an explanation of the low flow of deals, it seems that the institutions that acquired banks assets during the crisis have had no real reason to sell and no pressure to do so. Now that it is clear that there is a lot of liquidity we feel that change is coming. Currently, Wells Fargo, LNR, and others, are taking billions in loans and assets to market. The capital is available and I would expect an even larger flow of capital looking for safety in the U.S. as economies like Greece and other European countries have their own crisis. Many believe the worst of our crisis is over and the U.S. is a safe haven once again.

In conclusion, the factors I have discussed make me believe that the light visible ahead in the tunnel is not an imminent train wreck, but rather it is the light of optimism.

Gil Priel

Founder and Managing Partner

Peak Corporate Network

Eli Tene, Co-Founder of PCN, discussed the advantaged of short sales on Fox Business News

To see the video Click Here

9 Consumer Awareness Tips You Should Know About Loan Modifications

An increasing number of homeowners are currently seeking a loan modification but not everyone can get one. Many troubled homeowners are simply getting lost in the system and are dangerously close to falling victim to a preventable foreclosure. With assistance from a certified loan modification specialist, distressed homeowners can effectively adjust the terms of their mortgage and avoid foreclosure.

There are many types of loan modifications: lowering payments by lowering the interest rate and/or by stretching out the term of the loan, converting an adjustable interest rate to a fixed interest rate, taking past due payments and adding them on the back end of the loan balance, variable step payment plans, and, in rare cases, reducing the principal balance or any combination of the above.

These 9 tips will help you navigate safely through the process of getting a bank approval for a loan modification.

1. Don't Wait. Act Now!

Falling into foreclosure is a time sensitive situation. If you wait, saving your home will become more difficult. It is imperative you take action right away.

2. Hire a Loan Modification Specialist.

Lenders are knowledgeable and experienced and they hold a significant advantage over the borrower. Their job is to represent THEIR interest. On the other hand, a loan modification specialist's job is to represent YOUR interest.

You wouldn't go to court without an experienced attorney. Why would you go to your lender without an experienced loan modification specialist? This is especially important because your mortgage is probably the biggest financial commitment you will ever carry.

3. Is Your Loan Modification Specialist Licensed by the DRE?

Don't let anyone take advantage of your sensitive financial situation. Make sure that your loan modification specialist is licensed by the Department of Real Estate. Only consider firms that comply with all necessary California Real Estate Laws and the California Foreclosure Consultant Act.

4. Get the Right Documents.

You and your loan specialist will need to decide on a strategy based on your hardship, your needs and your lender's requirements. You will need to provide current income and expense information to document your financial situation.

5. Loan Modification Does Not Impact Your Credit.

One of the most common misconceptions is that executed loan modifications will negatively impact your credit. In fact, being behind on your mortgage payments is what affects your credit rating. Complying with the modified payments will probably be the fastest way to remedy your credit rating.

6. Know Your Loan.

Lenders may give modification priorities to certain types of loans that were previously allocated even if the borrower is current on payments. A seasoned loan modification specialist should be able to identify if you are in a category of preferred loan types.

7. Be Realistic.

Don't have unrealistic expectations. Remember that people tend to exaggerate. Each modification is unique from lender to lender and from investor to investor. Don't expect to pay next to nothing for your loan.

8. Be Thorough.

Based on your current and projected income, make sure that the new modification terms and conditions are something with which you can comply. Be certain to obtain a full financial review from your loan modification specialist that includes a budget for paying your home loan on time.

9. Never Give Up.

If for some reason your loan modification request is denied by the lender, resubmit it. Lenders often change their rules and programs and what might not work out today may work out tomorrow. In addition, consult with your loan modification specialist about alternative foreclosure prevention options. There are other effective ways to avoid falling into foreclosure. Never give up!

http://www.peakcorpnet.com/

European Debt Crisis Keeps US Mortgage Rates Low

During the last month, mortgage rates have continued to fall even as the US economy appears to be settling into a sustainable recovery. Concerns over the debt-crisis in Europe has lead to significant money flowing into “safe” investments, with US Treasuries considered one of the world’s safest places to store cash. While many had predicted that mortgage rates would begin climbing when government supports for the mortgage and housing industry ended, limited negative impact is being experienced, so far.

Without the concerns in Europe, we might actually be seeing mortgage rates moving slowly upward. Manufacturing continues to power along, both adding jobs and rebuilding depleted inventories. We’re also seeing growth in services. Most analysts are predicting that GDP will remain within the 2.5% 3.5% range for the remainder of the year. The two areas of the economy that have the longest path to recovery are the housing industry and the labor market. Over the next few months we will be able to see whether the housing market can continue without government supports, as most program have now expired. The unemployment rate slid down to 9.7% last month, but much of the decrease was due to job seekers who abandoned their efforts to find work. While 431,000 new jobs were created, the overwhelming majority were temporary census positions.

So can mortgage rates continue to remain this low for very long? There is a reasonable chance that rates will remain low for the near term, especially if the European debt crisis continues to concern market players in the US, and also drives money from outside the US into US Treasuries. However, Fed Chair Ben Bernanke has indicated that he believes that the challenges in Europe will only have a modest impact on US economic growth. If his words sooth US markets, we could see mortgage rates beginning to move upward on each piece of positive US economic news

ABOUT THE PEAK CORPORATE NETWORK

About Us

PCN is a platform of companies founded or acquired by principals Gil Priel and Eli Tene. The desire to offer the best “one stop,” full network of real estate services, is the driving force behind the formation of these companies.

The companies offer all phases of real estate and other related financial activities and possess specific expertise in the areas of default and maximization of real estate’s holding value. From direct lending to owner management of commercial real estate in Western states, the Corporate Network is committed to being the best in its field.

Our Services

In addition to real estate investments, brokerage and loan services, the companies offer the following: foreclosure processing, tax deferred 1031 exchanges, escrows, title processing, distressed workouts and loan modification services.

The Corporate Network loyal following of clientele over many years, including: homeowners, agents & brokers, lenders, servicers and investors. The ability to offerk has enjoyed a very a wide range of services to every client, at a level of professionalism uncommon in the industry, gives Peak the distinct advantage over most other real estate firms.

http://www.peakcorpnet.com/