Archive for May, 2009

Sacramento Foreclosure Trustee Auctions up in May, But So Were Loan Modifications

According to ForeclosureRadar.com, the numbers of Trustee Sales held at the county courthouse steps in Sacramento for May were up nearly 25% compared to April. There were 709 Trustee Sales held in Sacramento in April 2009 and 936 in May 2009.

Notice of default filings and Notice of Trustee Sales are also up for all of Sacramento County. For the month of May, ForeclosureRadar.com says there were 1604 Notice of Defaults filed (the first step in the foreclosoure process, which can be filed any time after the borrower is 60 days delinquent) and 1165 Notice of Trustee Sales filed. These NOT’s are notice of sales scheduled at least 21 days after the filing.

With many more loan modifications being approved, (HOPE NOW announced this week that nationally,  270,000 homeowner solutions were completed in April. This is the largest number of workouts in any month since HOPE NOW began to compile data) surely only a portion of these 1165 NOT’s will actually go to auction, so it looks like the Trustee Auction numbers will probably be lower next month than they were in My.

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Hope Now Finally Making Headway

 

Understanding Mortgage Modification Guidelines By Debunking The Myths

HOPE NOW announced this week that 270,000 homeowner solutions were completed in April. This is the largest number of workouts in any month since HOPE NOW began to compile data.

HOPE NOW’s data also showed that the number of home loans 60-plus days delinquent was the same in April as in March, at just under three million. While foreclosure sales increased, from 53,000 in March to 65,000 in April, foreclosure starts dropped by more than 16 percent.

Last month, HOPE NOW members and the mortgage lending industry modified 127,000 mortgages and completed 143,000 repayment plans. Compared to March, modifications dropped slightly, while payment plans increased. HOPE NOW explained that the reversal in numbers was partially caused by the industry beginning to implement the Obama administration’s Home Affordable Modification Program (HAMP).

The increase in repayment plans recorded in April is due, in part, to the first trial modifications completed under the administration’s program,” says HOPE NOW’s chief statistician, Michael Bright, referring to the Home Affordable Modification Program (HAMP). “Assuming borrowers complete the trial period successfully as mandated by the government, these loans will eventually be recorded as having been modified.”

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Number of Sacramento Unsold Vacant Homes Continues to Climb

I have heard from several real estate ‘old timers’, who were for the Sacramento Real Estate crash in the 90’s, that it is looking a lot more like Déjà vu; Remember Resolution Trust?  The government must be stepping in to slow the tide of incoming listings, in order to support market prices, and stop the free fall of real estate prices. So, much like they did with the Resolution Trust Corp. in the 80’s and 90’s, homes will just be trickled on the market in a more orderly fashion. I can remember vacant homes for years in the nineties… will that happen again?

The Government will systematically take the bad loans, and the subsequent foreclosed homes, off of banks books, as they take failing banks over. They will then handle the liquidation. FDIC, Fannie Mea, Freddie Mac, FHA, they would all have an incentive to support the market by slowing down the rush of inventory that would be created if they all hit the market at once.

The number of  unsold homes in inventory here in Sacramento; now approaching 25,000 properties that are vacant, but not on the market will probably continue to rise… The ‘Tsunami’ of foreclosures will not be stopped, it’s just that the number that actually make it to the market will be a much smaller number, and will help support Sacramento’s home prices. 

Statewide,there is now  4.6 months of inventory of unsold houses. Supply was as high as 16.6 months in January 2008.

FDIC Contracts Next Wave Advisors for Real Estate Services

The FDIC has certified Next Wave Advisors Inc. to assist the agency with a variety of real estate services, including lender workouts, asset valuation, and disposition of property acquired through bank takeovers and liquidations.

The FDIC has already stepped in to close 36 banks this year, and has placed 305 institutions on its high-risk watch list. But Next Wave president Dean Lyons says the new venture has “the bench strength and financial resources to handle anything that the FDIC can throw” its way.

Next Wave is a joint venture between two Southern California companies, Third Wave Partners and The Moote Group, and Houston-based Portfolio Property Advisors L.L.C. The new firm was created to fulfill FDIC assignments related to problem banks and the recapitalization of acquired assets.

All three principals in the joint venture have experience  with FDIC asset portfolio liquidation. All three participated in the Resolution Trust Corp., formed during the savings and loans crisis of the late 1980s to early 1990s.

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California Home sales rise 49% compared with April 2008.

 

Foreclosure sign sits outside home for sale in Phoenix, Arizona (Feb 2009 file photo)

The median price of homes sold in Sacramento recently dropped 34.3 percent from $190,250 in April 2008 to $125,000 last month. That’s way less than half the $342,800 in 2007, according to the California Association of Realtors.

CAR says 80 percent of Sacramento County first-timers could afford a median-priced entry-level home in the first quarter of 2009!

Central California First-time home buyers and investors are jumping to take advantage of state and federal tax breaks, low interest rates, and prices that are more affordable than they have been in many, many  years.

Inventory has gone form a high of 16.6 months to just 4.6 months! Any time the inventory is under 6 months, it is considered a sellers market! Talk about some weird combinations of market dynamics!

Statewide, for the first time in years, both volume and median price increased month over month for the last thirty days, the California Association of Realtors reported the other day.

The median price for a single-family home here in California was $256,700 in April, down 36.5% from a year earlier but 1.4% higher than the previous month, according to the California Association of Realtors

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Sacramento’s Homeless Tent City Residents Adjust to New Life Indoors

Longtime residents of Sacramento‘s dismantled tent city are moving into permanent housing, the fulfillment of a promise by Mayor Kevin Johnson.   Hot showers, a kitchen to cook in and clean clothes are new to them, they are grateful. But for some,  new rules that come with the priveliges are proving to be a challenge.

“At times I know how my dogs felt when they were in a kennel,” said said one man, “Sometimes I feel like I’m in a cage.”

Most of the people who lived in Sacramento’s Tent City had lived there for years, but in  April, police forced about 150 people to leave the sprawling encampment north of downtown. The community had existed for years, but after it was featured on national television it generated a firestorm of controversy.

“For people who have been living outside for 10, 12, 15 years, coming inside can be a rude adjustment,” said Tim Brown director of the area’s Ending Chronic Homelessness Initiative. “You have drug and alcohol issues, and socialization issues. It’s tough. But it’s also wonderful to see some of them change their lives. Camping outside all year long is no paradise. It’s a pretty difficult life.”

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What Will Budget Cuts Mean To Sacramento Area Teachers, Cops and Firemen?

Schwartzenegger wiill make tough decisions

 

SACRAMENTO-The most powerful lawmakers in the state of  California met Wednesday afternoon in order to start a plan in dealing with the state’s $21.3 billion budget deficit. Imagine. That’s a lot of money… Where’s it all going to come from? California  can no longer avoid deep cuts to schools and government services after The state’s voters rejected Tuesday’s special election budget proposals.

“I think the message was clear from the people: Go all out and make those cuts and live within your means,” Schwarzenegger said earlier Wednesday in Washington, D.C.

Gov. Arnold Schwarzenegger met with Assembly Speaker Karen Bass (D – L.A.), Senate President Pro Tem Darrell Steinberg (D – Sacramento) Assembly GOP Caucus leader Mike Villines of Clovis, and immediate past Senate Republican caucus leader Dave Cogdill of Modesto in his office at the State Capitol yesterday.

How will the upcoming payroll cuts affect our local Sacramento housing market? How many buyers will no longer be buyers when they lose their job?  How many more homes will go on the market because people have to relocate?

Could get interesting…

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First Time Sacramento Area Buyers Are Taking Advantage!

With the over 35% drop in the Sacramento area median home price, first time buyers are swarming! It’s so fun to talk to people who have realized that they can buy now. People who have been priced out of the market, people with good credit, money in the bank, great jobs and powerful thirst for  home ownership are easy to find right now.

With the Sacramento area’s affordability, first time buyers are competing with investors for homes in the more affordable pricranges; and with some of the great financing available, they are winning more than you’d think! With a lot more inventory to go through before this downturn in our market is over, I am telling people to “take your time and get it right”…

It could be a long time before the market rebounds enough for a homeowner to sell at a profit, after cost of sales is figured into the deal, so just make sure the home you write an offer on is one you and your family will be happy in for several years!

First-time home buyers who purchase homes before December 1, 2009 are eligible for a tax credit of up to $8,000.  To qualify the purchaser my not have owned a residence during the three years prior to the purchase.  The tax credit is only available when buying a primary residence.

The tax credit is determined by the price of the home and the buyers income.  The tax credit is equal to 10 percent of the purchase price of the home, up to a maximum of $8,000.  To receive the maximum credit income for single buyers may have income up to $75,000 and for married couples incomes up to $150,000.

I found this great little explanation of the tax incentives for a first time buyer vs. renting in a a market such as the one here in Sacramento…

“I’ve got a little analysis here that talks about the difference between renting versus owning. Say you’ve got somebody who earns say $75,000 annually, paying $1,500 a month rent, and they’re going to buy something for $300,000. We’ll use 5 percent as the rate.

They’re roughly going to be paying on Federal Housing Authority loan about $2,070 a month. That’s everything, give or take — taxes, insurance, principal and interest. The feds, as Robin has said, are giving an $8,000 tax credit.

They’d be paying about $12,500 in federal taxes and about $4,100 in state taxes when they’re renting. When they’re owning, they’re going to be paying about $8,100 in federal and $2,700 in state taxes.

What that comes down to is about a $5,800 a year tax benefit, which is $488 a month.

So, if your payment is, say, $2,070, and you’re going to wind up getting approximately a $488 a month tax write-off, not counting the $8,000 bonus incentive there, there’s only about $50 or $75 difference between renting and owning.

That’s a big, big piece in driving the market at $350,000 and under.”

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Special Election a Big Yawn While Sacramento Voters Defeat Budget Messures

As expected, Sacramento area voter turnout Tuesday for the Special election was very slight. Many who did show up told posters the only reason they cast a ballot was to send a message to lawmakers.

The special-election ballot agenda crafted by Gov. Arnold Schwarzenegger and California legislative leaders that would have propped up the states budget was defeated soundly yesterday.

 The defeat of the budget package will push the California State budget to a $21.3 billion deficit.

According to the Special Election Results From Twitter; so far at 4:29 this morning it shows: State proposition vote count update: 1A 34.1% yes, 1B 37.4% yes, 1C 35.4% yes, 1D 34.3% yes, 1E 33.6% yes, 1F 73.9% yes

Governor Schwarzenegger and other legislative leaders released these statements Tuesday night.

Governor Arnold Schwarzenegger:

“Tonight we have heard from the voters and I respect the will of the people who are frustrated with the dysfunction in our budget system. Now we must move forward from this point to begin to address our fiscal crisis with constructive solutions. We face a staggering $21.3 billion deficit and in order to prevent a fiscal disaster, Democrats and Republicans must collaborate and work together to address this shortfall. The longer we wait the worse the problem becomes and the more limited our choices will be. That is why tomorrow, we will come together to begin to develop a budget solution that gets our state back on track.

“We must also continue to fight for real, comprehensive budget reform that brings stability to California’s budget process and forces the state to save in the good times so that we do not face these kinds of deep deficits, devastating cuts and tax increases when the economy takes a downturn. I have been working to accomplish this kind of reform since I was elected in 2003 and I will keep working toward it because we cannot allow this harmful and out-of-control budget process to continue.”

Senate President Pro Tem Darrell Steinberg (D-Sacramento):

“The voters have spoken and they are telling us that government should do the best it can with the money it has. We will immediately and responsibly get to work to balance the budget and head off a cash crisis in July. Delay is not an option. The necessary decisions we must make will only get harder with time.”

Assembly Speaker Karen Bass:

“There are many difficult choices and a lot of hard work ahead of us. We now have to responsibly fill the budget hole that has been caused by the national recession and deepened by the failure of today’s ballot propositions. I hope the bipartisan cooperation between the Legislature and the Governor that went into this effort will continue as we move forward – the people of California clearly expect us to work together to get the job done. And we will. I do want to thank tonight the teachers, firefighters, business leaders and other Californians who worked in support of these propositions in hopes of warding off more devastating cuts to vital services. Their commitment to a better California should be appreciated by everyone on both sides of these initiatives.”

 

Assembly Republican Leader Mike Villines (R-Fresno):

“My goal in placing these initiatives on the ballot was to start to get our budget under control and help California begin to live within its means. Even though voters did not support our approach, I believe it is clear from this election that voters want the Governor and the legislature to achieve both those goals. The biggest mistake we could make in the aftermath of this election is not enacting serious reform.

“California has a big problem moving forward. We need a spending cap now more than ever, and only through spending reform and reductions will we be able to get California back on track. I believe California can emerge from this crisis fiscally sound and strong, but there is a long and difficult road ahead.”

Senator Dave Cogdill (R-Modesto):

“California voters may have sent state leaders back to the drawing board, but it’s not a mandate to abandon reform. Until we break this circle of dysfunction, California will be plagued with chronic budget deficits. Ensuring government lives within its means is the only way to prevent the boom-bust cycle that keeps repeating itself.”

 

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Sacramento Expects Few Voters for Tuesday’s Special Election

 

COW PALACE

California voters will vote on a package of budget measures in tomorrows special election. But it seems that most people are not going to even show up to vote. Sacramento State government professor Kim Nalder says voters should schedule a stop at the polls Tuesday.

“It’s incredibly important to the future of California, because we’re determining what budget priorities we have, which pots of money deserve to be switched around and which don’t. Their input is necessary,” Nadler says.

Governor Schwarzenegger has plans to sell the Cow Palace along with the Los Angeles Memorial Coliseum; San Quentin State Prison; Cal Expo; and several other state-owned fairgrounds to raise money.

Schwarzenegger said the state has no business holding onto “prime properties.”

According to reports, sales of the properties are estimated to raise $600 million to more than $1 billion.

The state is facing a $15.4 billion deficit in the next fiscal yearthat will climb to $21.3 billion, Schwarzenegger said, if Propositions 1A and 1B fail on Tuesday.

I read a great editorial the other day:

(Source: The Sacramento Bee)trackingBy The Sacramento Bee, Calif.

May 17–Like many Californians, we are deeply dissatisfied with the Legislature’s mismanagement of this state’s finances. Years of dysfunction, discord and partisan polarization have led to perpetual deficits that have been an embarrassment to the state and an impediment to economic growth for most of this decade.

Members of the Legislature have demonstrated that they cannot restrain themselves when economic times are good, and they cannot manage the fallout when times are bad. That’s why we are supporting Proposition 1A.

Once the state digs itself out of this mess — and someday it will — the long-term spending reform in this measure will help prevent California from descending into such an abyss again.

Proposition 1A was written by Republicans and forced on the Democrats who control the Legislature, the price Republicans demanded in exchange for their support for temporary tax increases. The measure would extend those taxes for a maximum of four years and then put the voters’ stamp on the expiration date. And it would place a new spending limit in the state constitution, where only the voters, not the Legislature or the governor, could tinker with it.

This new provision would limit spending in good times, when California’s economy typically generates huge spikes in tax revenue. Any money beyond the average growth rate would go into a rainy-day reserve. The Legislature could spend that money only when the economy slows and revenue slumps.

We also support Propositions 1C, 1D and 1E to provide short-term relief in the budget while lawmakers and the governor work on solving the longer-term imbalance between the state’s revenues and its projected spending. We oppose 1B because it would require increased spending on the schools at a time when the state needs to set priorities that match the treasury’s ability to pay for them.

Lawmakers in February passed a budget that cut spending from $103 billion last year to $94 billion this year and put the state on a path to spend $92 billion next year. That is less than the state spent 10 years ago, after adjusting for population growth and inflation.

That budget reduced grants to welfare recipients, cut stipends to the disabled and elderly, and slashed education spending by several hundred dollars per student. Lawmakers reduced subsidies for public transit and cut university budgets, forcing families to pay higher fees and tuition.

But these cuts only scratched the surface of what must be done. Even if the ballot measures pass, the state is facing another $15 billion shortfall next year, and more once the tax increases expire.

Given how unpleasant most of the package is, some voters may want to vote “no” to send a message telling lawmakers and the governor to try again. But the more likely result would be a return to the partisan gridlock that led to this problem in the first place.

The nation is in the worst economic downturn since the Depression. The days ahead are going to be tough enough without a renewal of ideological warfare inside the Capitol.

A “yes” vote on 1A, 1C, 1D, 1E and 1F will reward pragmatism and encourage lawmakers to work together as they begin the next phase of what can best be described as fiscal triage.

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Home Affordable Modification Program is Good for Short Sales…

Freddie Mac and Fannie Mae’s Home Affordable Modification program is Good News for Short Sales. The Home Affordable Modification Program is a key part of the Making Home Affordable Program that was announced on March 4, 2009 under Obama’s Homeowner Affordability and Stability Plan… (That’s a mouthfull huh? I had to re-read that twice to make sure that it was correct)

Short sales are complex transactions that involve delicate coordination and  cooperation from several, often opposing parties– servicers, appraisers, borrowers, lenders, Real Estate Brokers, sellers, purchasers, title agencies, and some times even  mortgage insurance companies and junior lien holders.  A short sale usually gives a better outcome for everyone involved, even investors and communities, but because of the complexity and time involved, some servicers just pursue foreclosure instead, even if a short sale would have provided a much better outcome.

Short sales will become a second-best solution; for homeowners who re-default or cannot qualify for a loan modification, the shortsale will will be the next step to keep the seller out of foreclosure.

The Making Home Affordable (MHA) Program has provided additional details on its plan to help stabilize the US housing market and prevent foreclosures, and it is good news for short sales. The foreclosure alternatives for borrowers eligible for MHA include:
–  A Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives
–  Incentives for servicers to pursue alternatives to foreclosures
–  Borrower incentives to cover relocation expenses to homes that are affordable
–  Streamlined process combining short sales and deed-in-lieu transactions
The Foreclosure Alternatives program will provide incentives for servicers and borrowers to pursue short sales in cases where a borrower is eligible for a MHA modification but unable to complete the modification process.  It provides a standard process flow, minimum performance timeframes, and standard documentation, and offers financial incentives to servicers and borrowers.  Fourteen servicers, including the five largest, have now signed contracts and begun modifications and refinancings under MHA, and including both these servicers and Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the MHA program.

Further details on short sales and the MHA
When a borrower meets the eligibility requirements for a Home Affordable Modification (HAMP) but does not qualify for a modification or cannot maintain payments during the trial period or modification, the MHA) Program recommends a short sale to avoid the foreclosure process.  This helps the borrower sell a property for less than the amount owed, helps the lender avoid the costs of foreclosure, and helps you get properties at bargain basement prices.  I’m going to deviate from the usual format today by posting all the details straight from a US Treasury Department News Release:

How The Home Affordable Short Sale/DIL Program Works:

–  Borrower Eligibility.  Borrowers will be eligible for the Foreclosure Alternative Program if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification or were unable to sustain payments under a trial period plan or a modification.  Prior to proceeding to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate.  Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor’s recovery through foreclosure Incentive Payments.

–  Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.

–  Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses.

–  Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.
   
–  Standardized Documentation: The program will publish streamlined and standardized documentation, including a Short Sale Agreement and an Offer Acceptance Letter. These documents will outline specific marketing terms, describe the rights and responsibilities of all parties and establish clear timeframes for performance.  Creating one standard set of documents that the industry can use is expected to minimize the complexity of these transactions and significantly increase use of the short sale option.

–  Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower regarding the list price and any permissible price reductions.  The price may be determined based on either: (1) an appraisal performed in accordance with USPAP and/or (2) one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.

–  Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions.  The property must be listed with a licensed realtor experienced in selling properties in the neighborhood.  Marketing of the property may run concurrently with the foreclosure process, however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property.  There will be a maximum marketing period of 1 year for the property, provided any longer period not otherwise delay foreclosure sale, to ensure diligence by servicers and borrowers in moving as quickly as possible to complete the short sale and deed-in-lieu process.

–  Selling Commissions and Fees: Reasonable and customary real estate commissions and selling costs that may be deducted from the sales price will be specified in the Short Sale Agreement.  The Servicer will agree not to negotiate a lower sales commission after an offer has been received.

–  Fees and Charges: Servicers may not charge borrowers fees for participation in the Foreclosure Alternative Program.

–  Property Eligibility:  Any junior liens, mortgages or other debts against the property must be cleared for the property to be sold as a short sale or deeded to the servicer.  The servicer can proceed with a short sale or deed-in-lieu if there is a reasonable belief that all liens on the property can be cleared.

–  Program Expiration: Eligible borrowers will be accepted until December 31, 2012.  Program payments will be made upon successful completion of a short sale or DIL.

–  Deed-in-Lieu: At the servicer’s option, the Short Sale Agreement may include a condition that the borrower agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time specified in the Agreement or any extension thereof. In this case the borrower would have 30 days to vacate the property and would be entitled to $1,500 to assist with relocation expenses, in addition to any other funds the servicer may provide to the borrower.

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