Patty Manzi's Tri-Valley Real Estate Blog

I was excited when Mike Holmes, from HGTV’s Holmes on Homes, announced he was formulating a new show called Holmes Inspections.   Unlike his current show where he goes in after a previous contractor has done shoddy work and rescues the family and home by bringing in his crew, stripping the floors, walls, electrical, and plumbing, and remodeling the entire project (or as they say in Canada; PRO-ject), this show would be about going into existing homes, performing inspections, and pointing out things that need to be repaired or upgraded. 

Great for my business, I thought, since I am real estate.  I recommend all of my clients get home inspections prior to a purchase, or even listing their homes.  Bringing a show to television about home inspections would certainly educate main-stream America about the importance of not only having an inspection, but see first hand how the process works and the benefits of knowing why something as simple as a 2″ hole in a garage wall could be a major fire hazard. 

I sat down to watch the first episode and watched the lovely homeowners explain how they had purchased the home a few years ago.  After moving into the home, they started noticing things like leaking deck roofs, frozen pipes, cold zones in the home, etc.  They were considering a remodel of the kitchen in the future as well and wanted to address potential problems before they started that process.

In comes Holmes & crew to inspect the home.  What I did not expect, and what DOES NOT happen at any regular home inspections, is the lengths to which they go to perform the inspection, which is why I dub this show Home Inspection on Steroids.  

At any regular home inspection here in California, the inspector breaks out his checklist and starts checking off things (upwards of 400 items in all) that can be visually or mechanically inspected.  Turning on/off oven, microwave, dishwasher, checking power receptacles for power, light switches, garbage disposal, air conditioning, heating, etc.  If one or more of these items is missing or fails to operate, the item is noted on the inspection report and a recommendation is made on how to rectify or repair the defect.  If something more major is noted that would require a contractor, the recommendation is made for the property owner to consult a qualified professional to investigate.  There are no tests done for asbestos, radon, or presence of any other toxic or harmful materials, and no holes are cut into walls, floors, or ceilings.

Mike Holmes’ crew on the other hand is going the extra step to investigate.  When the inspection revealed evidence of a leaking pipe, the crew removed the kitchen cabinets and adjoining wall to find an offending waste pipe in the wall.  Another item was a pipe that had frozen in winter and caused an overflow in the laundry room, of course Holmes immediately jackhammered the floor to expose the pipe.  A test was done on a heating duct to reveal the presence of asbestos which requires removal by a professional remediation company.  Every suspect item lead to the ripping out of walls, ceilings, floors, ducting and concrete.   Of course by the end of the show Mike Holmes and crew had remodeled most of the kitchen area, rewired the entire house, and corrected duct and plumbing work, and added a new deck as well. 

As much as I’d like to beleive that Mike Holmes is doing this out of the goodness of his heart and educating America on the importance of proper workmanship (and this is very important), I must remember he is a TV show host selling commercial advertising time to major tool & home improvement companies!  I can honestly say I am a bit disappointed that this show is so much like the original Holmes on Homes.  A $400 property inspection turned into a $40,000+ repair project.  It is not what I had expected.  I must also remember that most TV shows are meant to be entertainment and I doubt there is much entertainment value in having a regular, by-the-book, property inspection.  A few episodes of going down the checklist at a regular inspection and I am sure people would be snoozing! 

I hope that consumers don’t look at this show as a guide book on how property inspections are performed in the real estate world.  I would be interested to know what the inspection industry thinks of this new show.  Is it setting consumer expectations at an unrealistic level, or is there enough actual inspection represented to be educational?  Is it opening the door for change in the industry to allow a more intrusive inspection?

What are your thoughts?

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.

I’ve heard it, you’ve heard it, many people in the real estate industry are talking about it.  The banks are sitting on this huge reserve of foreclosed homes that are going to hit the market all at once and take down what’s left of our economy!……..  ~NOT! ~ Its a myth.

Last February, HUD instituted the Home Affordable Modifications Program (HAMP) which would allow a borrower to contact HUD and apply for a loan modification.  Many people jumped immediately on this opportunity, however, many banks did not have guidelines in place to be able to service the requests.  So the requests piled up until the banks were on board with the property guidelines.  Once the guidelines were received, banks were able to proceed with the modification request and there are many currently in process.

What one must realize is that the modification request is just that – a request.  There is a three month ’trial  modification period” where the borrower does pay a reduced amount on their mortgage.  It is during this trial modification period’ that the bank has to review all of the borrowers financial inforamtion to determine if they qualify, and if they qualify, they are subject to underwriting review for approval.  

The myth of the banks sitting on these reserves comes from the fact that many modifications were delayed from the beginning because the banks were not prepared with the proper guidelines, thereby delaying the beginning of the trial period.  This created an over abundance of  mods to process when the banks finally got up to speed.  The borrowers that will not be granted a modification may lose their homes to foreclosure if they have no other option.  And those homes will be hitting the market .

Yes, there may be alot of them hitting the market at the same time, but not becuase the bank is holding onto them for some arbitrary reason. Banks are required to sell all foreclosed properties to repay their investors. 

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.