Patty's "All Things Real Estate" Blog.

There has been much publicity in the media, and no doubt from your local real estate agent, that the time has come that house payments may be less expensive than rent payments.

While this is certainly true in some geographic areas, like right here in the Pleasanton & Tri-Valley areas, there is more to maintaining a household than the actual house payment itself.  Once you make the leap from renter to homeowner, many maintenance issues and expenses that a landlord has taken care of now become the responsibility of the homeowner.  These additional expenses could wipe out any monthly savings you were expecting to gain in your reduced payment.

For example:

• Utilities – as a homeowner these are now solely your responsibility (water, garbage, gas/electric, cable, phone, internet) .
• Property Taxes – in Alameda County, taxes are approximately 1.25% of the purchase price of the home.  ($500,000 home = $6250 year in property taxes, or $520.84 per month).
• HOA Fees – if you buy in a homeowners association, be prepared to pay monthly.  The cost depends on amenities at the complex (pool, common areas, maintenance, etc.)  Do your homework on this!
• Yard maintenance – you now have to buy a lawn mower, edger, blower, tree/shrub trimmer OR hire a gardener
• Pool maintenance – you must consult with an expert at your local pool store on how to maintain your pool, then purchase chlorine, a brush, net, and other chemicals and cleaning supplies OR hire a pool service to maintain your pool.
• General Home Repairs and Appliances – the home you buy might be in great shape when you buy it, but over time, you will need to maintain many things that may have been taken care of by a landlord while you were renting.  New water heater = $1000; New heater = $3000; new air conditioner = $5000 +; new refrigerator = $2500; washer/dryer=$1500, New Roof – $10,000+; along with various other repairs like, leaky faucets, plumbing leaks, plumbing stoppages, electrical issues, painting, flooring, garage doors/openers, leaky windows, roof leaks, chimney cracks, fences & gates,  the list goes on.
• Insurance – if you have a mortgage, you will be required to carry homeowners insurance on your property. The cost of the insurance is based on the replacement value of your home.  For example on my 1800 sf home in Pleasanton, my annual insurance is approximately $700.  If you are in a flood zone, add another $500+ per year.  If you want Earthquake Insurance, add some more $$.

So, when you are planning to make the leap from renting to homeownership, make sure you consider ALL the expenses you will incur, not just the amount of your house payment. Some of the expenses can be tax deductible, but many are not.

As always, it is a good idea to consult with a real estate professional, professional lender, and CPA to help you gather information to assist you in your home buying decision.

It has been reported that we are in the worst housing market since the Great Depression and that 7.4 million families are in trouble with their mortgages.  Here’s  a breakdown of some shocking facts:

• 6.3 million US homeowners are behind on their mortgage payments as of June 2010
• In addition, there are 1.1 million REO (Foreclosed) properties
• 3.2 million HAMP (Home Affordable Modification Program) 60+ day delinquent loans
• Of that 3.2 million, 1.7 million Borrowers are likely to be eligible for HAMP modifications but have not applied
• As of June 2010, there are 389,000 active permanent loan modification in process
• the total US delinquency rate was 9.55% in June 2010
• The foreclosure inventory rate remained stable from the month prior at 3.18% so in total the national delinquent mortgage rate, which reflects both foreclosures and delinquencies, is 12.38%.
• It is estimated that over the last several years the US has sustained a 7 trillion dollar loss in home values nationwide. 
• It is also estimated in our local housing market (California) it may be 2018-2020 until we get back to 2003 home value pricing. 

(Source:  Lender Processing Services, Mortgage Monitor, DS News, Making Home Affordable June Scorecard)

This seems to be dismal news at best, however, the recent development of the Home Affordable Foreclosure Alternative (HAFA) program is a positive step in the right direction.  The HAFA  program offers solutions that are an alternative to foreclosure.  The HAFA program complements the HAMP program by making the transition into a short sale easier for the borrower if they do not qualify for a loan modification.  The ultimate goal is home retention, however, if a loan modification effort fails, HAFA is required to be considered and offered by the participating servicer.

HAFA falls under two categories, Government driven (Standard) and Servicer Specific (Non-Standard) .  Under each category, the HAFA guidelines are similar but they do have some profound differences.  Depending on who your lender is determines which HAFA program applies to you.  The best way to find out is to visit the Making Home Affordable website, click on the Loan Lookup tab and enter your lender information.  

As always, it is best to consult with a real estate professional who specializes in this area of the market.

A "Making Home Affordable" Initiative

There is now a new name for people who voluntarily default on their mortgages.  The ‘selective defaulter’ is someone who has a stable income and can more than afford their mortgage payments & monthly expenses, but because their home has lost value and is worth less than is owed on the mortgage, the homeowner decides to default voluntarily and walk away from the home & mortgage. 

I can think of many other things in our lives that lose value and we as a society dont give it a second thought.  But when our home loses value we dump it and run?   This is very puzzling to me.

When we buy a new car it loses value the day we drive it off the lot because it is now a ‘used’ car, but we keep making our monthly payments and drive it until it falls apart.  We spend thousands of dollars on electronic equipment (computers, TV’s, PDA’s),  and rooms full of expensive furniture.  These things lose their value, but we dont stop paying for them and dump them on the local street corner because of it.  I have heard people complain that they couldn’t get $50 dollars for their coffee table at a garage sale so they kept it because it ‘was expensive’ when they first bought it, but they will turn around and walk away from their HOME because their equity has devalued.  Personal property almost never increases in value no matter how long we keep them, but our real property – our homes –  eventually do if we hold on to them long enough.  That’s why real estate is called an investment.  Just like the stock market, the prices go up and down.  If we stay in for the long-term, at some point we will see a return on our investment.

For some there is a belief the banks need to be responsible for the loss of value in their homes, and this is just not true.  Just like credit card companies and auto-loan companies are not responsible for the devaluation of our personal property and vehicles.  On the contrary, consumers have a responsibility to follow through on our financial commitments.

I do understand there are many people who are upside down on their mortgages that truly cannot afford their monthly payments due to a financial hardship like the loss of a job, or the death of a spouse.  In those cases walking away from one’s home and morgage is unavoidable and not really a choice.  For those people loan modification programs, HAMP programs, HAFA programs,  short selling the home, or ultimately foreclosure are all valid and viable choices.

The HomePath financing program is a program designed to move REO homes.  The benefits of this program include:

• Low down payment and flexible mortgage terms, including fixed-rate & adjustable, at as little as 5%.
• Borrowers with less than perfect credit may qualify
• Available for owner occupied properties, or second home investments
• The down payment of at least 3% can be funded by the borrowers own savings, a gift or grant, or a loan from a non-profit organization, state, local government, or employer.
• No mortgage insurance required
• No appraisal required

Whether you are looking to purchase Pleasanton Real Estate or a home in another city, be sure to consult with your mortgage professional to determine your best options.  If you dont have a mortgage professional, contact a Realtor for a referral.  For more details on qualifications of this program visit HomePath.

Happy New Year! 

Along with the hope of prosperity, the new year also brings with it some new and exciting changes in our state and federal laws.  One important change will be new license requirements for anyone conducting mortgage loan activities.

As of January 1, 2010 new license requirements go into effect for anyone conducting residential or commercial Mortgage Loan Activities.  Any person engaging in mortgage loan activities must report to the Department of Real Estate their intent to arrange or service loans secured by real property, by January 31, 2010. 

Also, any person conducting licensed activities as a Mortgage Loan Originator (MLO) is now required to have the following:

• An endorsement on their Real Estate License
• Register with the Nationwide Mortgage Licensing System & Registry (NMLS&R)
• Satisfy the requirements to obtain an MLO license (including new qualification assessments, federal & state exams, and background checks).  NO EXCEPTIONS OR EXEMPTIONS for existing licensees.
• The MLO endorsement must be issued by January 1, 2011 on the real estate license.  (Endorsement applications for qualified MLO registrants must be submitted by September 15, 2010 to be issued by January 1, 2010.

Failure to comply can result in the assessment of penalty fees of $50 per day for the first 30 days, and $100 per day for every day thereafter up to a maximum of $10,000.

Senate Bill 36 (SB36), signed into law October 2009, was enacted to identify licensees conducting mortgage activities and bring California into compliance with the federal Secure and Fair Enforcement Mortgage License Act (SAFE Act). 

Under the SAFE Act all Department of Real Estate (DRE) licensees who conduct MLO activities must meet the following requirements to qualify for the MLO endorsement:

• Take and pass the National and California Unique State component of the SAFE written exam.
• Complete 20 hours of pre-license education.
• File an online MLO license endorsement application and license enrollment fee on the NMLS&R.
• File  a NEW set of fingerprints using a NMLS&R live scan vendor.
• Authorize NMLS&R to obtain a credit report on the applicant.

The SAFE Act prohibits the licensing of an MLO for the following reasons:

• An applicant has ever been convicted of a felony involving fraud, dishonesty, breach of trust, or money laundering; or convicted of any felony in the 7-year period prior to applying for an endorsement.
• An applicant has eve had a MLO license revoked in any governmental jurisdiction, or
• An applicant has demonstrated lack of financial responsibility by showing disregard in the management of his or her own financial condition.

Further information can be found on the DRE website at www.dre.ca.gov, or by calling the DRE Licensing Section at (877) 373-4542.