Archive for August, 2010
Fannie Mae says lenders must verify mortgage applicants’ debt loads before closing
August 30th, 2010 Categories: Buying a Home
Despite earlier reports to the contrary, it turns out that your mortgage lender will not have to pull a second full credit report on you hours before closing on your home purchase or refinancing.
In a clarification of a policy announced this year, mortgage giant Fannie Mae now says that applicants will need to come clean about any debts they’ve incurred since they submitted their mortgage application — or debts they never disclosed during the application. But a formal pre-closing credit report will not be mandatory to confirm their creditworthiness.
Instead, loan officers can use other techniques to verify that you haven’t financed a new car, taken out a personal loan or even applied for new credit in any amount that might make it more difficult for you to afford your monthly mortgage payments.
Among the techniques Fannie expects lenders to use on all applicants: commercial or in-house fraud-detection systems that have the capability of tracking applicants’ credit files from the day their loan request is approved to the moment of closing.
Though Fannie made no reference to specific services in its recent clarification letter to lenders, some commercially available programs claim to be able to monitor mortgage borrowers’ credit activities on a 24/7 basis, flagging such things as inquiries, new credit accounts and previous accounts that did not show up on the credit report pulled at the time of initial application.
One of those services is marketed by national credit bureau Equifax and dubbed Undisclosed Debt Monitoring. Aimed at what Equifax calls “the quiet period” between application and closing — often a month to three months — the system is “always on,” the company says in marketing pitches to mortgage lenders.
Home loan applicants failed to mention — or loan officers failed to detect — “up to $142 million in auto loan payments” during mortgage underwriting in first-mortgage files reviewed by Equifax last year alone, according to the credit bureau. Those loan accounts had average balances of $361 a month — more than enough to disqualify many borrowers on maximum debt-to-income ratio standards imposed by Fannie Mae, Freddie Mac and major lenders.
Why the sudden concern about new debts incurred after mortgage applications? It’s mainly because Fannie and others have picked up on a key type of consumer behavior pattern that has helped trigger big losses for the mortgage industry in recent years: Some buyers and refinancers delay creating new credit accounts until they’ve cleared strict underwriting tests on the debt-to-income ratios and been approved for a loan.
Then they splurge. Additional debt loads can run into the tens of thousands of dollars, executives in the mortgage and credit industries say. Had those new accounts been present on their credit files at application, borrowers might have been turned down for the mortgage, or required to make a larger down payment or pay a higher interest rate.
Fannie’s new policy puts the burden of detecting these debts squarely on lenders’ or loan officers’ shoulders. Whether they pull additional credit reports — still an option allowed under the revised policy — or use some form of monitoring service, lenders must guarantee that the debt loads stated in any mortgage package submitted for purchase by Fannie Mae are scrupulously accurate as of the moment of closing. If not, the lender probably will be forced to endure the most painful form of punishment in the financial industry: a forced “buyback” of the mortgage from Fannie Mae.
Billions of dollars in buybacks have been demanded by Fannie Mae and Freddie Mac this year alone — a fact that is likely to make lenders even more eager to conduct some type of refresher credit check or continuous monitoring of all new loan applicants.
What does this mean for you if you’re planning to finance a home purchase or refinance your existing mortgage into one with a lower interest rate? Tops on the list: Be aware that sophisticated new credit surveillance systems are being placed into operation in the mortgage industry.
Next, try not to inquire about, shop for or take on new credit obligations during the period between your application and the scheduled closing. If you want that new loan, keep your credit picture simple — no significant changes, no additions — until you get the mortgage.
During the heady days of the housing boom, nobody was looking for debt add-ons before closings. Now they are scanning for them all the time.
From L.A. Times
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Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.
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Why the 27% drop in home sales shouldn’t worry you (too much)
August 27th, 2010 Categories: Buying a Home
From Ann Brenoff on WalletPop
There was a collective gasp when the news broke Tuesday that existing home sales had fallen off by a whopping 27%. Economists stammered and teared up over the deterioration of the housing market. And we’re sure that more than a few real estate agents — the ones who managed to take their heads out of the oven — went straight to call Mom and see if their old bedrooms were still available.
Time to take a deep breath. Here’s what the news really means to you: Likely nothing.
Do you have a house you need to sell? No? Then put your crying towel away, or loan it to someone who really needs it.
There are 75.1 million owner-occupied housing units in America and only 4 million of them are on the market today, according to the National Association of Realtors. The rest of you should just go quietly away. Yes, your home is worth less on paper than it was a year ago or even five years ago. But that was paper money, just like what you play Monopoly with. You don’t have to sell, you likely can’t anyway, so why drive yourself nuts over it?
Now that those people have left the post, let’s work on those who really do need to sell. I may have some encouraging news for you. While that 27% free-fall is no doubt accurate, it may not be where you live. Now, more than ever before, the real estate market is hyper-localized. That means the depth to which you are impacted by the housing market crash depends not just on which city you live in or even which neighborhood of that city, but actually on which streets within that neighborhood.
Ernie Carswell, a top-producing agent with Teles Properties in Beverly Hills, offers a neat micro market report each month for Los Angeles. Looking at the one he sent me yesterday, you get a totally different feel for what’s going on in the housing market.
Here’s but one example: Comparing July 2009 with July 2010, in the high-end community of Bel-Air, Calif., the median price of sold homes went up 1.4%. Yes, up. In July 2009, there were 213 properties on the market for an average of 96 days; the inventory moving at the snail’s pace of 19.6 months. Yet in July 2010, there were 178 properties on the market for just 48 days and the inventory was expected to last 6.2 months. Higher sales prices, fewer homes to compete with, things moving faster.
Those numbers would suggest a different real estate story than what the national figures tell. Location really does matter. And before you dismiss me as out of hand and think prices are only holding in the high-end market, let me assure you they are not. Again, it’s pockets. If you are in a hot pocket, you may not be as bad off as the broader numbers suggest.
I’m not saying don’t panic, just don’t panic yet. One thing is really does underscore is the need to hire an agent who seriously knows your street. This isn’t a job for the sister-in-law who just got her license or someone who assures you that they “can sell anywhere.”
Carswell says, “As the economy and the real estate markets continue to change, the nuances between different areas and different neighborhoods are becoming increasingly magnified. One neighborhood may show a sales increase, while another neighborhood just blocks away may be experiencing a dramatic drop in sales from the previous year. While the media publishes its statistics based on national, state and county trends, this distorts the public’s perception of what could actually be happening in their own neighborhood.”
Listen to the man. He speaks the truth. Bloggers love to post items about how far the rich and famous have fallen or tell you which celebrities had to drop their asking prices by millions. But there is only one address you should be concerned with: Yours.
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Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.
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Three Lessons from Three Years of Recession
August 25th, 2010 Categories: Buying a Home
If there’s one thing that time consistently does, it’s move forward. So, as this Great Recession continues to wear us down, it may be time to cast our eyes towards the horizon as well as take stock in what we’ve learned so far, three years into this latest economic slump.
Here are three lessons we have learned within the last three years, with a glimpse to what the future holds for the new real estate.
1. A house is a home, not a piggy bank
The great agents always knew this, but it has become—and will continue to be—a truism that will linger with us for a long time to come: a house is a home, not an investment.
Too many Americans have lost too much to think of their homes as a siding-clad ATM. Instead, the best agents will be apt at matching houses with clients to find a perfect fit. A home, after all, is more than just crown moldings, copper wiring, and bay windows—it’s a sense of place, of community and of comfort. It matches who you are and fits seamlessly within your daily life.
Post-recession agents will need to have this knack for matching house with heart. It’s what real estate was always about, and it will be even more important from here on out.
2. The old way is not going to cut it
I’m sorry to say but, like your car phone, your fax machine is obsolete. It’s amazing how quickly our world has changed and hastened within the last three years. Just think, back in 2007, Twitter was still in its infancy, Facebook was just a trend, and the first iPhone had just come out, with the app craze still months away.
Clients are now buying movie tickets and SUVs online. They are texting more than they are calling. Their lives are busier than ever, so your service had better fit within their lives.
New real estate technologies, such as DotLoop’s online contract negotiation platform, will be the new normal in an industry known to drag its feet when it comes to tech tools. As this Great Recession has taught us, however, great agents can no longer afford to simply leave a message after the beep.
3. It really is all about people
As with any great crisis (opportunity?), the Great Recession has reminded us of that one ideal that real estate was always about, but somehow got buried underneath the deluge of offers and listings: it all comes down to people.
Real estate is one of the last industries that cannot be automated. No matter how many websites, laptops, or smart phones are out there, no computer program can tell you that you can get the best lunch meat at the corner deli on 6th or that the old man at the house next door will always be willing to lend you his ladder. A home, neighborhood and community can never be quantified into ones and zeros. It’s your job as an agent to be the expert of your area, and to make sure that you’re putting the people you’re serving ahead of everything else.
It’s only natural to want to get rid of this Great Recession, to tear away from this downturn and go back to “normal.” But the new normal will not be like the old normal. Three years from now, we most likely will be recovered, but we’ll also be changed—for the better.
Better technology for agents, better understanding of our clients and a better perspective will help to shape the next generation of real estate.
From RIS Media
Connect with Valerie…
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and SchusterHeart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.
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‘Fundamental Change’ for Fannie and Freddie
August 18th, 2010 Categories: Real Estate News
With sweeping financial reform legislation enacted, the White House and Congress now must focus on fixing the mess created by the failed housing finance giants Fannie Mae and Freddie Mac. It’s a complex challenge with high stakes for taxpayers and the struggling real estate market.
On Tuesday, key administration officials conferred with about 200 industry executives, affordable housing advocates and other experts about the role the government should play in the nation’s housing finance system. Treasury Secretary Timothy F. Geithner asserted that federal involvement still was needed, but he promised “fundamental change.”
“It is not tenable to leave in place the system we have today,” he said, adding that Fannie and Freddie will change dramatically when they emerge from government control.
Pressure is growing to remake or replace the mortgage leviathans, which were seized by the government in September 2008 after huge losses from subprime mortgages put them on the brink of bankruptcy. The bailout has cost U.S taxpayers nearly $150 billion. But lawmakers must tread carefully to keep from further damaging a housing market that Fannie and Freddie almost solely are supporting. The two companies, along with the Federal Housing Administration, collectively guarantee more than 90 percent of all new U.S. home loans.
“Nobody wants to mess up the mortgage market,” said Douglas Elliott, an economics fellow at the Brookings Institution think tank. “And any transition with Fannie and Freddie is going to be fraught with some risk.”
Tuesday’s event came as the second anniversary of the government seizure of the firms approached, a bailout that left taxpayers as 80 percent owners. The administration faces a January deadline, added by lawmakers to the financial reform legislation, to make recommendations to end the expensive federal conservatorship of the firms.
Congress plans to ratchet up its involvement as well, with House Financial Services Committee Chairman Barney Frank, D-Mass., saying his committee will begin hearings when members return next month.
That’s not fast enough for many Republicans, signaling another bitter partisan reform fight. They have been pushing the administration for more than a year to address the mounting losses at Fannie and Freddie by getting the government out of the housing finance business.
“It is past time to rid the American taxpayer of the liabilities of these financial institutions once and for all,” Rep. Mike Pence, R-Ind., said Tuesday as he blasted the Obama administration for continuing the bailouts of Fannie and Freddie begun under President George W. Bush.
But the Obama administration has been moving slowly for fear of further harming the housing market. There was fresh evidence of problems Tuesday as Southern California home sales plunged 21.4 percent in July compared with a year earlier, according to research firm MDA DataQuick of San Diego.
“It’s much more important to get this issue right than to do it fast,” said Michael Berman, chairman-elect of the Mortgage Bankers Association.
Shaun Donovan, the secretary of Housing and Urban Development, said the stakes were high not just for the financial system but also for average Americans because of the major investment in their homes.
Donovan said the federal government’s involvement in the housing market needed to be reduced. And Geithner said there was a strong case for a “carefully designed” government mortgage guarantee in the future, a point echoed by panelists at the conference.
There also appeared to be consensus among the participants that any government guarantee needed to be explicit, not murky and implicit like the guarantee that stood behind Fannie and Freddie as private, government-sponsored enterprises before they were seized.
William Gross, managing director of bond fund giant Pimco, said government guarantees were crucial to the housing market, helping keep mortgage rates low.
But there still is major debate about how to structure such a guarantee and what size mortgages it should cover.
“The challenge is to make sure that any government guarantee is priced to cover the risk of losses, and structured to minimize taxpayer exposure,” Geithner said.
Fannie and Freddie were created by Congress and later turned into private, government-sponsored enterprises mandated to expand homeownership with requirements to purchase a set amount of loans made to low- and moderate-income borrowers.
Fannie and Freddie combined hold the credit risk on about $5 trillion in mortgages, and losses from loans made during the housing boom have continued to mount. The Treasury Department has pledged it will cover an unlimited amount of losses through 2012. As of June 30, the department had pumped $144.9 billion into the two companies.
Federal officials have stressed that the losses came from loans purchased before the government seizure and said standards at Fannie and Freddie have tightened significantly since then. And as the housing market has stabilized, the losses at Fannie and Freddie have lessened. Fannie lost $1.2 billion in the second quarter, down from $11.5 billion in the first quarter. Freddie lost $4.7 billion in the second quarter, down from $6.7 billion in the first quarter.
Still, the losses meant the two firms would need an additional $3.3 billion from the Treasury Department, bringing their bailout cost to $148.2 billion.
From RIS Media
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Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.
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Do You Understand Why ‘Green’ Is Important?
August 12th, 2010 Categories: Environmental Issues
“Green building.” What began as a buzzword a few years ago has transformed today’s real estate industry. This month, we talk with Al Medina, director of NAR’s Green Designation, a groundbreaking educational program that provides vital training, support and information to professionals who are looking to advance their businesses and raise awareness of the environmental impact of commercial and residential real estate.
Why is NAR’s Green Designation important in today’s market?
Staying educated in a rapidly changing marketplace is vital to the success of any agent. NAR’s Green Designation prepares REALTORS® to seek out, understand and market homes with green features to potential buyers. By educating themselves in green building and sustainable business practices today, Realtors are preparing themselves for the future of real estate. And if green homes have not reached your area, they will soon.
Established areas that have green homes show a clear marketplace advantage compared to traditionally built homes in terms of time on the market and sales price. For instance, in 2009, in the Atlanta area, certified green homes on average sold 31 days faster than traditionally built homes. Today’s market requires a Realtor who is aware of these statistics in their community, and earning NAR’s Green Designation is a step in that direction.
How do brokers benefit from encouraging their sales associates to seek NAR’s Green Designation?
Having successful sales associates equates to a successful broker/manager. And success in today’s market means keeping up with green. Between local building codes that encourage green construction, federal government incentives and the increasing adoption of energy efficiency within the lifestyles of homeowners, the future of residential real estate is shifting toward green properties. The green home of today will be the standard home of tomorrow.
To adapt to this change, we created an education path tailored to an agent’s area of specialization. Brokers and agents interested in this designation complete a core course covering a broad range of green principles followed by an elective course based on their area of specialization, whether that is residential, commercial or property management.
What value does earning NAR’s Green Designation provide to agents who work primarily with buyers?
Today, green real estate is just as much about energy efficiency as sustainability. Our core and residential elective courses teach Realtors that buyers interested in green homes are motivated for different reasons and adopting green at various levels. Understanding these motivations enables Realtors to more effectively guide their buyer-clients. The course work explains the cost/benefit value of green homes, specific green home features, the various green home certifications and available buyer incentives and credits. Having knowledge in these areas and sharing them with buyer-clients adds value and allows agents to differentiate themselves from the competition.
How can working with buyers on green issues impact local communities?
NAR Green Designees are trained to be “the source of the source” and to create relationships with energy auditors, green lenders, builders and other real estate professionals who have a specialization in green. This allows agents to not only grow their business network, but to increase consumer awareness on green issues, ultimately improving the communities in which they live.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.
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Pricing Your Kitchen Remodel – 5 Factors to Keep in Mind
August 4th, 2010 Categories: Uncategorized
Homeowners who are looking to remodel their kitchen should keep the following factors—that can significantly affect the price of their remodel—in mind as they begin to make plans to upgrade their kitchen. According to Kitchen Tune-Up, homeowners should pay attention the following five factors before they begin a renovation.
1. Wood species or cabinet covering material. The material that covers the cabinet will effect the overall pricing of a kitchen renovation, but not as much as you might think. A stainless steel clad cabinet will be the most expensive and a melamine (thin plastic laminate) surface will be the least costly. Cherry is usually about 7-10% more than oak, while hickory, oak and pine usually run very close in price. Unusual cabinet woods like alder, mahogany, fir, rift cut woods, redwood, teak, etc. will usually cost more than common oak or pine.
2. Kitchen layout. The layout of the kitchen and the cabinet configuration will largely affect the price of a remodel as well. For example, a lazy susan will cost more than a sink cabinet, a stack of drawers will be higher priced than a one drawer/two door base cabinet, a U-shaped kitchen costs more than an L-shape with an island and a wall oven/cooktop combination makes the kitchen cost about $1,000 more than a free standing range. Setting a budget to design within can often save homeowners many hours of re-design.
3. Cabinet door style. A door with many details will usually cost more than a simple door. If an arch is added to a square panel, homeowners can expect to pay more. A door with lots of grooves or molding generally cost more than a simple door and a full overlay door (door that covers almost the entire cabinet face) costs more than a traditional overlay door. Doors set inside the cabinet frame (called inset) cost more than doors that are mounted over the cabinet frame.
4. Type of cabinet finish. The type of cabinet finish you choose will vary the pricing of a kitchen remodel as well. Painted cabinets will run 10-15% more than a standard stain finish and glazes or layered finishes will run 7-15% more than a standard stain due to the extra labor.
5. Cabinet construction methods and materials. Don’t skimp in the area of cabinet construction in order to save money on your kitchen renovation as better construction methods make a kitchen durable. In fact, cabinet construction may be 60% of the entire cabinet cost.
From RIS Media
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.
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