Governor Arnold Schwarzenegger signed SB 931 into law this past week, prohibiting lenders from pursuing deficiency judgements after short sales on all 1st liens in California, including “recourse” loans where the borrower has refinanced.
In California, once a seller has refinanced their mortgage, whether it is a cash out refinance or simply a refinance to a better interest rate, the loan becomes a recourse loan, meaning the bank can pursue the seller after the short sale for the deficiency, unless stated in writing that the debt is settled on the short sale approval.
Now, with the passage into law of SB 931, lenders are prohibited from pursuing sellers on all first mortgages in CA after a short sale.
Monday, October 18, 2010
TEMPORARY SUSPENSION OF FORECLOSURES
No doubt you’ve heard the news recently that a number of major banks have volunteered to temporarily suspend foreclosures in 23 states and Bank of America is temporarily suspending foreclosures nationwide.
While this situation is changing daily, I want to tell you what we currently know to answer any questions you may have.
• In late September and early October some lenders and servicers began voluntarily halting foreclosures in select states while they reviewed their foreclosure processes.
• So far, only Bank of America has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order. Foreclosures in the other 23 states are processed through the court system.
• Non-judicial foreclosures in California, however, do have legal requirements that lenders must follow. For example, California law requires that lenders for certain mortgage loans made between Jan. 1, 2003, and Dec. 31, 2007, attempt to make contact with borrowers to discuss options for avoiding foreclosure at least 30 days before filing a notice of default. Lenders also must sign a declaration in the notice of default stating that they tried to contact the borrower, made contact with the borrower, or fall within an exception (such as a bankruptcy filing).
• The lenders and servicers that have placed their foreclosure moratorium on properties in the 23 states where courts are involved in the foreclosure process include: Goldman Sachs Group Inc’s Litton Loan Servicing, Ally Financial Inc.’s GMAC Mortgage unit, JPMorgan Chase, and PNC Financial.
• These lenders/servicers have only temporarily halted their foreclosures while they review their foreclosure process. This is in response to findings that questioned whether some lenders/servicers were following the correct procedures to foreclose on a property.
• This halting of foreclosures is a voluntary action taken on the part of these lenders/servicers and has not been mandated by either the states or the federal government.
• Some members have begun to report the immediate impact of this moratorium on transactions that involve foreclosed properties. Delays in escrow and the removal of listed foreclosures are temporary results of this moratorium.
• The immediate impact on the market will be the slowing of home sales, which could put upward pressure on home prices in the short term. The long-term effect on the market is uncertain at this point as it depends how long the moratorium remains in place.
• Assuming the moratorium is lifted in the next month, the flow of REOs to the market should resume, but the uncertainty created by the moratorium may cause hesitation on the part of buyers.
• Federal agencies, including the Office of the Comptroller of the Currency, the Federal Housing Administration, and the conservator of Fannie Mae and Freddie Mac, have asked lenders and servicers to review their foreclosure processes. This review would apply to all states including those like California where the vast majority of foreclosures are non-judicial.
• The participating lenders and servicers believe their internal review processes should take anywhere from a few weeks to 30 days to complete.
While this situation is changing daily, I want to tell you what we currently know to answer any questions you may have.
• In late September and early October some lenders and servicers began voluntarily halting foreclosures in select states while they reviewed their foreclosure processes.
• So far, only Bank of America has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order. Foreclosures in the other 23 states are processed through the court system.
• Non-judicial foreclosures in California, however, do have legal requirements that lenders must follow. For example, California law requires that lenders for certain mortgage loans made between Jan. 1, 2003, and Dec. 31, 2007, attempt to make contact with borrowers to discuss options for avoiding foreclosure at least 30 days before filing a notice of default. Lenders also must sign a declaration in the notice of default stating that they tried to contact the borrower, made contact with the borrower, or fall within an exception (such as a bankruptcy filing).
• The lenders and servicers that have placed their foreclosure moratorium on properties in the 23 states where courts are involved in the foreclosure process include: Goldman Sachs Group Inc’s Litton Loan Servicing, Ally Financial Inc.’s GMAC Mortgage unit, JPMorgan Chase, and PNC Financial.
• These lenders/servicers have only temporarily halted their foreclosures while they review their foreclosure process. This is in response to findings that questioned whether some lenders/servicers were following the correct procedures to foreclose on a property.
• This halting of foreclosures is a voluntary action taken on the part of these lenders/servicers and has not been mandated by either the states or the federal government.
• Some members have begun to report the immediate impact of this moratorium on transactions that involve foreclosed properties. Delays in escrow and the removal of listed foreclosures are temporary results of this moratorium.
• The immediate impact on the market will be the slowing of home sales, which could put upward pressure on home prices in the short term. The long-term effect on the market is uncertain at this point as it depends how long the moratorium remains in place.
• Assuming the moratorium is lifted in the next month, the flow of REOs to the market should resume, but the uncertainty created by the moratorium may cause hesitation on the part of buyers.
• Federal agencies, including the Office of the Comptroller of the Currency, the Federal Housing Administration, and the conservator of Fannie Mae and Freddie Mac, have asked lenders and servicers to review their foreclosure processes. This review would apply to all states including those like California where the vast majority of foreclosures are non-judicial.
• The participating lenders and servicers believe their internal review processes should take anywhere from a few weeks to 30 days to complete.
Wednesday, September 8, 2010
Why do Short Sales Take so Long to Close?
Real estate professionals know that a short sale transaction can take months for it to be approved and closed.
The reality is that short sales usually take three to four times as much as a regular sale to finally get to the closing. From the time the Realtor actually gets the property under contract to the time the lender approves, it could take anywhere from 30 days to six months, depending on how fast the borrower provides critical information for lender and Investor approval.
Even then, you still have one more variable to account for which is the buyer waiting for all this time to get the contract approved by the lender. For this, setting the expectations is a key factor in any short-sale transaction.
Buyers Expectations
Buyers who make an offer on a short-sale property need to know that lenders have to "reverse underwrite" a short-sale and make sure that they are allowing the sale to happen close to market value. I say "reverse underwrite" because instead of determining affordability, they will look for "un-affordability."
They will check the seller's financials to verify that they can't afford the house anymore and consequently, they will order a price opinion from a broker or certified appraiser, commonly known as BPO (Broker's Price Opinion) to make sure the house is being sold close to market value. If the offer is too low compared to what is owed, it will make more financial sense to the Lender to just foreclose the property and re-sell it as an REO (Bank-Owned Property). All this will happen while the buyer is still waiting for a response so it is very important to set the expectations correctly from the beginning to avoid losing the buyer close to the end of the process.
Seller's Expectations
On the other hand, it is important to also educate the Seller and set the expectations with them from the beginning. They need to understand that the Lender takes its time responding, but when they do, they usually give a 72-hour timeframe to respond or provide the missing documentation. If the documentation is not provided within the specified timeframe, it usually ends up in a closed file and countless work-hours lost. Another common situation that is happening very often is borrowers being served with foreclosure paperwork from either the lender or homeowner's association while the short-sale is being processed. It is crucial to let them know that this might happen so that they are prepared for it and receive the documents knowing that they are in the best hands. Foreclosure and short-sale are parallel processes and one does not cancel the other. Sometimes a short-sale might delay a final sale date, but it will definitely not stop the Lender from starting the foreclosure proceedings.
Closing the Short Sale
Short sale success comes from educating not only the seller but also the buyer and everybody else involved in the transaction. Setting the right expectations is the most crucial part of a short sale. There are many hours involved in processing a short sale and the last thing you want is a seller or buyer walking away because the expectations were not set correctly.
RISMEDIA, September 8, 2010--
The reality is that short sales usually take three to four times as much as a regular sale to finally get to the closing. From the time the Realtor actually gets the property under contract to the time the lender approves, it could take anywhere from 30 days to six months, depending on how fast the borrower provides critical information for lender and Investor approval.
Even then, you still have one more variable to account for which is the buyer waiting for all this time to get the contract approved by the lender. For this, setting the expectations is a key factor in any short-sale transaction.
Buyers Expectations
Buyers who make an offer on a short-sale property need to know that lenders have to "reverse underwrite" a short-sale and make sure that they are allowing the sale to happen close to market value. I say "reverse underwrite" because instead of determining affordability, they will look for "un-affordability."
They will check the seller's financials to verify that they can't afford the house anymore and consequently, they will order a price opinion from a broker or certified appraiser, commonly known as BPO (Broker's Price Opinion) to make sure the house is being sold close to market value. If the offer is too low compared to what is owed, it will make more financial sense to the Lender to just foreclose the property and re-sell it as an REO (Bank-Owned Property). All this will happen while the buyer is still waiting for a response so it is very important to set the expectations correctly from the beginning to avoid losing the buyer close to the end of the process.
Seller's Expectations
On the other hand, it is important to also educate the Seller and set the expectations with them from the beginning. They need to understand that the Lender takes its time responding, but when they do, they usually give a 72-hour timeframe to respond or provide the missing documentation. If the documentation is not provided within the specified timeframe, it usually ends up in a closed file and countless work-hours lost. Another common situation that is happening very often is borrowers being served with foreclosure paperwork from either the lender or homeowner's association while the short-sale is being processed. It is crucial to let them know that this might happen so that they are prepared for it and receive the documents knowing that they are in the best hands. Foreclosure and short-sale are parallel processes and one does not cancel the other. Sometimes a short-sale might delay a final sale date, but it will definitely not stop the Lender from starting the foreclosure proceedings.
Closing the Short Sale
Short sale success comes from educating not only the seller but also the buyer and everybody else involved in the transaction. Setting the right expectations is the most crucial part of a short sale. There are many hours involved in processing a short sale and the last thing you want is a seller or buyer walking away because the expectations were not set correctly.
RISMEDIA, September 8, 2010--
Monday, August 30, 2010
Recent clients share their experience working with Susan Botticelli
08.29.10
Dear Susan,
Dianne and I would like to thank you so much for the outstanding results you provided to us on the recent sale of our home in Rancho San Diego. Most people who own real estate soon come to realize that our homes are much more than a financial investment. Homes are full of fond memories. Memories of children growing up, unforgettable times with family and friends, and holiday memories that will always remain close to our hearts are really what our homes become for us. Susan, your personal touch as our real estate agent preserved for Dianne and I everything our home was for us for fifteen years.
You provided three key factors to our successful closing: First, your marketing plan during the initial phase of the transaction was in complete alignment with current real estate conditions. You adjusted and tailored the details as the market changed, always keeping us well informed.
Second, your advice throughout the process was timely, technically accurate, and always presented clearly and completely. As you know, this transaction had a great deal of complexity involving three lending institutions, legal, tax, building code, and repair issues, as well as a variety of other circumstances unique even in today’s real estate market.
Third, and most critically, your ability to coordinate each and every detail of this complex transaction during the final phase leading up to the successful closing of the sale was tremendous. Your real estate and business acumen, and most importantly, your “personal touch”, provided us with the best service possible, and helped avoid a potential short sale and the resulting consequences.
Susan, I would strongly advise anyone who is interested in buying or selling a home in Rancho San Diego and the greater San Diego area to call you as soon as they possibly can! You and your team came through for Dianne and I, and I’m confident will come through for many other homeowners and future homeowners as well.
Warm regards,
George Fadok
Dear Susan,
Dianne and I would like to thank you so much for the outstanding results you provided to us on the recent sale of our home in Rancho San Diego. Most people who own real estate soon come to realize that our homes are much more than a financial investment. Homes are full of fond memories. Memories of children growing up, unforgettable times with family and friends, and holiday memories that will always remain close to our hearts are really what our homes become for us. Susan, your personal touch as our real estate agent preserved for Dianne and I everything our home was for us for fifteen years.
You provided three key factors to our successful closing: First, your marketing plan during the initial phase of the transaction was in complete alignment with current real estate conditions. You adjusted and tailored the details as the market changed, always keeping us well informed.
Second, your advice throughout the process was timely, technically accurate, and always presented clearly and completely. As you know, this transaction had a great deal of complexity involving three lending institutions, legal, tax, building code, and repair issues, as well as a variety of other circumstances unique even in today’s real estate market.
Third, and most critically, your ability to coordinate each and every detail of this complex transaction during the final phase leading up to the successful closing of the sale was tremendous. Your real estate and business acumen, and most importantly, your “personal touch”, provided us with the best service possible, and helped avoid a potential short sale and the resulting consequences.
Susan, I would strongly advise anyone who is interested in buying or selling a home in Rancho San Diego and the greater San Diego area to call you as soon as they possibly can! You and your team came through for Dianne and I, and I’m confident will come through for many other homeowners and future homeowners as well.
Warm regards,
George Fadok
Tuesday, July 27, 2010
Home and Design Videos
From green building to home staging, these home and design videos feature the latest industry trends and tips.
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Monday, July 12, 2010
July 2010 - San Diego Real Estate Market Update - July 2010
Avg time it takes for a homeowner in default to lose their home has gone from 251 days in Jan 2008 to 438 days in April 2010 – a 75% increase.
40% of all mortgages issued in 2010 are FHA (gov insured) – up from 20% in 2009, and 2% in 2005 & 2006
Because FHA loans only require a 3.5% down payment (“a subprime loan in sheep’s clothing”), 25% of 2007 & 2008 FHA loans have defaulted.
David Stevens, current FHA Commissioner, “This is a real estate market purely on life support, sustained by the federal government. Having FHA do this much volume is a sign of a very sick system.”
New Home Building Permits fell 10.9% in April & 5.9% in May, to its lowest level in over 50 years. Historically, new home building permits are the best leading indicator for the overall US economy.
New Home Sales dropped by 33% from April to May to their lowest point since WWII
As of mid June, mortgage purchase applications are down 42% since the April 30 end of tax credits (a 13 yr low).
The Pending Home Sales Index, a forward looking indicator, dropped 30% in May compared to April, the worst decline in 9 years.
40% of all mortgages issued in 2010 are FHA (gov insured) – up from 20% in 2009, and 2% in 2005 & 2006
Because FHA loans only require a 3.5% down payment (“a subprime loan in sheep’s clothing”), 25% of 2007 & 2008 FHA loans have defaulted.
David Stevens, current FHA Commissioner, “This is a real estate market purely on life support, sustained by the federal government. Having FHA do this much volume is a sign of a very sick system.”
New Home Building Permits fell 10.9% in April & 5.9% in May, to its lowest level in over 50 years. Historically, new home building permits are the best leading indicator for the overall US economy.
New Home Sales dropped by 33% from April to May to their lowest point since WWII
As of mid June, mortgage purchase applications are down 42% since the April 30 end of tax credits (a 13 yr low).
The Pending Home Sales Index, a forward looking indicator, dropped 30% in May compared to April, the worst decline in 9 years.
Tuesday, June 22, 2010
Continued Strong Pace for Existing-Home Sales According To NAR
Existing-home sales remained at elevated levels in May on buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates, according to the National Association of REALTORS®. Gains in the West and South were offset by a decline in the Northeast; the Midwest was steady.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, were at a seasonally adjusted annual rate of 5.66 million units in May, down 2.2 percent from an upwardly revised surge of 5.79 million units in April. May closings are 19.2 percent above the 4.75 million-unit level in May 2009; April sales were revised to show an 8.0 percent monthly gain.
Buyers Face Purchasing Delays
Lawrence Yun, NAR chief economist, said he expects one more month of elevated home sales. “We are witnessing the ongoing effects of the home buyer tax credit, which we’ll also see in June real estate closings,” he said. “However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales.
“In addition, many potential sales are being delayed by an interruption in the National Flood Insurance Program. Florida and Louisiana, also impacted by the oil spill, have the highest percentage of homes that require flood insurance.”
As the leading advocate for homeownership issues, NAR is supporting Senate amendments to extend the home buyer tax credit closing deadline through September 30 for contracts written by April 30, and to renew the flood insurance program. “Sales and related local economic activity would have been higher without delays in the closing process or flood insurance issues,” Yun noted.
Housing Still Affordable
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.89 percent in May from 5.10 percent in April; the rate was 4.86 percent in May 2009.
The national median existing-home price for all housing types was $179,600 in May, up 2.7 percent from May 2009. Distressed homes slipped to 31 percent of sales last month, compared with 33 percent in April; it was also 33 percent in May 2009.
NAR President Vicki Cox Golder said home prices have been stabilizing all year. “With distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus,” she said. “Very affordable mortgage interest rates and stabilizing home prices are encouraging home buyers who were on the sidelines during most of the boom and bust cycle.”
Pending home sales are expected to decline notably in May and June from the spring surge, but Yun added that job growth and a manageable level of foreclosures are keys to sales and price performance during the second half of the year.
Inventory Falling
A parallel NAR practitioner survey shows first-time buyers purchased 46 percent of homes in May, down from 49 percent in April. Investors accounted for 14 percent of transactions in May compared with 15 percent in April; the remaining sales were to repeat buyers. All-cash sales were at 25 percent in May, edging down from a 26 percent share in April.
Total housing inventory at the end of May fell 3.4 percent to 3.89 million existing homes available for sale, which represents an 8.3-month supply at the current sales pace, compared with an 8.4-month supply in April. Raw unsold inventory is 1.1 percent above a year ago, but is still 14.9 percent below the record of 4.58 million in July 2008.
Single-family home sales declined 1.6 percent to a seasonally adjusted annual rate of 4.98 million in May from a pace of 5.06 million in April, but are 17.5 percent above the 4.24 million level in May 2009. The median existing single-family home price was $179,400 in May, which is 2.7 percent above a year ago.
Single-family median existing-home prices were higher in 16 out of 20 metropolitan statistical areas reported in May from a year ago. In addition, existing single-family home sales rose in 18 of the 20 areas from May 2009.
Existing condominium and co-op sales fell 6.8 percent to a seasonally adjusted annual rate of 680,000 in May from 730,000 in April, but are 32.6 percent above the 513,000-unit pace in May 2009. The median existing condo price was $181,300 in May, up 3.4 percent from a year ago.
By Region
Existing-home sales in the Northeast fell 18.3 percent to an annual level of 890,000 in May from a surge in April, but are 12.7 percent higher than a year ago. The median price in the Northeast was $240,200, down 2.2 percent from May 2009.
In the Midwest, existing-home sales were unchanged in May at a pace of 1.33 million and are 22.0 percent above May 2009. The median price in the Midwest was $150,700, up 2.2 percent from a year ago.
In the South, sales increased 0.5 percent to an annual level of 2.15 million in May and are 22.9 percent above a year ago. The median price in the South was $159,000, up 1.0 percent from May 2009.
Existing-home sales in the West rose 4.9 percent to an annual rate of 1.29 million in May and are 15.2 percent higher than May 2009. The median price in the West was $221,300, up 7.4 percent from a year ago.
Source: NAR
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums, and co-ops, were at a seasonally adjusted annual rate of 5.66 million units in May, down 2.2 percent from an upwardly revised surge of 5.79 million units in April. May closings are 19.2 percent above the 4.75 million-unit level in May 2009; April sales were revised to show an 8.0 percent monthly gain.
Buyers Face Purchasing Delays
Lawrence Yun, NAR chief economist, said he expects one more month of elevated home sales. “We are witnessing the ongoing effects of the home buyer tax credit, which we’ll also see in June real estate closings,” he said. “However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales.
“In addition, many potential sales are being delayed by an interruption in the National Flood Insurance Program. Florida and Louisiana, also impacted by the oil spill, have the highest percentage of homes that require flood insurance.”
As the leading advocate for homeownership issues, NAR is supporting Senate amendments to extend the home buyer tax credit closing deadline through September 30 for contracts written by April 30, and to renew the flood insurance program. “Sales and related local economic activity would have been higher without delays in the closing process or flood insurance issues,” Yun noted.
Housing Still Affordable
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.89 percent in May from 5.10 percent in April; the rate was 4.86 percent in May 2009.
The national median existing-home price for all housing types was $179,600 in May, up 2.7 percent from May 2009. Distressed homes slipped to 31 percent of sales last month, compared with 33 percent in April; it was also 33 percent in May 2009.
NAR President Vicki Cox Golder said home prices have been stabilizing all year. “With distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus,” she said. “Very affordable mortgage interest rates and stabilizing home prices are encouraging home buyers who were on the sidelines during most of the boom and bust cycle.”
Pending home sales are expected to decline notably in May and June from the spring surge, but Yun added that job growth and a manageable level of foreclosures are keys to sales and price performance during the second half of the year.
Inventory Falling
A parallel NAR practitioner survey shows first-time buyers purchased 46 percent of homes in May, down from 49 percent in April. Investors accounted for 14 percent of transactions in May compared with 15 percent in April; the remaining sales were to repeat buyers. All-cash sales were at 25 percent in May, edging down from a 26 percent share in April.
Total housing inventory at the end of May fell 3.4 percent to 3.89 million existing homes available for sale, which represents an 8.3-month supply at the current sales pace, compared with an 8.4-month supply in April. Raw unsold inventory is 1.1 percent above a year ago, but is still 14.9 percent below the record of 4.58 million in July 2008.
Single-family home sales declined 1.6 percent to a seasonally adjusted annual rate of 4.98 million in May from a pace of 5.06 million in April, but are 17.5 percent above the 4.24 million level in May 2009. The median existing single-family home price was $179,400 in May, which is 2.7 percent above a year ago.
Single-family median existing-home prices were higher in 16 out of 20 metropolitan statistical areas reported in May from a year ago. In addition, existing single-family home sales rose in 18 of the 20 areas from May 2009.
Existing condominium and co-op sales fell 6.8 percent to a seasonally adjusted annual rate of 680,000 in May from 730,000 in April, but are 32.6 percent above the 513,000-unit pace in May 2009. The median existing condo price was $181,300 in May, up 3.4 percent from a year ago.
By Region
Existing-home sales in the Northeast fell 18.3 percent to an annual level of 890,000 in May from a surge in April, but are 12.7 percent higher than a year ago. The median price in the Northeast was $240,200, down 2.2 percent from May 2009.
In the Midwest, existing-home sales were unchanged in May at a pace of 1.33 million and are 22.0 percent above May 2009. The median price in the Midwest was $150,700, up 2.2 percent from a year ago.
In the South, sales increased 0.5 percent to an annual level of 2.15 million in May and are 22.9 percent above a year ago. The median price in the South was $159,000, up 1.0 percent from May 2009.
Existing-home sales in the West rose 4.9 percent to an annual rate of 1.29 million in May and are 15.2 percent higher than May 2009. The median price in the West was $221,300, up 7.4 percent from a year ago.
Source: NAR
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