If you missed your chance to reap the benefits of the first-time homebuyer tax credit this past year, you will get one more shot.  The Senate passed a bill on Thursday 98 to 0 that will extend the original first time homebuyer tax credit for another seven months and expand the bill to benefit some current homeowners looking to buy a new home. The bill should reach the House floor by next Thursday and then require the signature of the President.

So what does this new bill consist of? Well, for starters, contrary to many of the proposed bills, this bill does not increase the amount of tax credit. It remains $8000 for first time homebuyers. However this time around, if you are currently a homeowner that has owned your home for at least five consecutive years, you are eligible to receive a $6500 tax credit if you buy a new primary home. In other words, if you are buying a 2^nd home you will not get a tax credit, but if you looking to move and buy a new primary residence, you might be eligible.

Who is eligible? Obviously first time homebuyers, and as previously mentioned, folks that have owned a home for at least five consecutive years. But the bill limits the purchase price of the home to $800,000 and there are income caps, which disqualify any individual who makes more that $125,000 annually and couples who make more than $225,000. In addition, this tax credit offer won’t last as long the second time around. One must sign a contract by April 30 2010, and close on the home by June 30^th to qualify. And if you think they will probably end up extending the offer even further, think again.

According to Dina ElBoghdady of the Washington Post reported that Sen. Johnny Isakson (R-GA), “a longtime advocate of the tax credit, praised passage of the bill in his chamber but said the extension would be the last one. “Tax credits like this only work by creating the sense of urgency to take advantage of them”.  So if you are considering buying a home and are eligible for the tax credit, you better get a move on.

But will this extension of the tax credit really stimulate more home sales? Stephen Ohlemacher of the Associated Press reported that there are those like Senator Kit Bond (R-MO) who question its effectiveness. “For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home,” Bond said. “And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place”.  Though there may be plenty of truth to that statement, it seems that at this point there is nothing else that can be done to at least try and stimulate home buying. And the 98-0 vote in favor of the bill confirms that our Senators don’t think there is anything else that can be done either.

Some may consider this good news, for others it doesn’t help their employment status. Either way, the unemployment number in San Diego County dropped to 10.2% in September from 10.6% in August.  In fact, it’s not just San Diego that’s registered a drop in unemployment rates – it’s the whole State of California with a 12.2% rating in September, decreasing from 12.3% in August.

Let’s try and see what this means.  First, there are some economists who warned that it’s not such a good idea to put too much stock in these figures because they were sourced from a government-conducted telephone survey of households, which is generally, a less accurate way of getting the information.  It’s more logical to rely on payroll numbers which are based on data coming from a broad sampling of employers.  Others believe, however, that a drop (even something this small) is still a good sign because at least, there’s minor movement in the right direction.  It is also very possible that this slight drop is an indication that massive layoffs are beginning to taper off and slow down. 

However, even if unemployment rates are going down, it doesn’t necessarily mean that new jobs will be easy to find.  Experts are even speculating that the slowdown in unemployment rates means that the once-jobless have now found part-time jobs or jobs that don’t involve payroll, like consulting jobs for instance.  Some may even have opted out of being part of the workforce for the meantime, in their frustration from trying to find a job.  Others may have decided to return to school or enrolled in training courses to boost their resumes once the job market picks up. 

The retail and services sectors are primarily two of the segments in the employment market where there are new jobs being offered.  Retailers are being positive about sales and intend on providing good service to their customers, hence the new hires.

What does this mean if you’re thinking of purchasing real estate? Real estate prices are often driven by unemployment rates. If we’ve reached the ceiling or close to it for unemployment then it is safe to say we are at the bottom or close to the bottom of the real estate market. Prices can only drop so much while unemployment rises. Once employment starts to stabilize, you will see the real estate market start to bounce back. It may not bounce back quickly but it will come back. Try to take advantage of the San Diego real estate market.

A sweeping change in the FHA condominium approval process will drastically affect the availability of financing for condominium projects. On November 2nd of this year, FHA will remove all condominium projects from its approved list that have not been approved within the last two years. To be eligible for FHA financing, condo projects will have to go through a re-approval process. Spot loan approvals will no longer be possible as the entire project must now be approved. The immediate effect of this is that there will be very few condos available for FHA financing until the projects begin to find their way back onto the approved list. Many formerly approved projects, however, may not qualify for re-approval. This will not only impact the availability of FHA financing but VA as well. Although VA maintains its own list of approved condos, it also accepts any project listed on the FHA approved list. The FHA list has always been more extensive than VA’s.

There will be two ways that a Condominium project can be added back to the approved list. Lenders can approve projects through their DE underwriters or the projects can apply directly with FHA for approval. I have yet to speak with a lender who has said they will be re-approving projects. This means, most likely, that the projects and their HOA’s will have to work directly with FHA. The question is, “How many will do so?”.

The Conventional loan market for condos is also getting very restrictive. Several of the major Private Mortgage Insurance companies have pulled out of the condo market altogether. Typically these companies would insure the lender against loss for loans in excess of 80% loan to value making it possible for buyers to buy with less down payment. Even though there are a couple of companies still willing to insure high balance condo loans, their underwriting requirements are severe……a minimum Fico score of 760 and maximum debt ratio of 41%. The project has to be stellar in all aspects as well (owner occupancy, cash reserves, no special assessments or litigation, etc.).

So therein lays the conundrum. How do you buy a condominium in today’s market? The options are narrowing. You can still purchase properties on the current FHA approved list until November 2nd, but the escrow must close by November 30th. Spot approvals are also available but must be expedited to close by the deadline. If you intend to purchase a condo with conventional financing, be prepared for at least a 20% down payment. As for FHA, I have heard rumors that they may postpone the November 2nd deadline once again, but, if not, we will just have to wait and see how long it takes for the condo projects to find their way back to the approved list.

Please pass this article about The Condo Conundrum on to others.

UPDATE: Please read my updated comment below. I received a very good question from one of our readers.

UPDATE: FHA has extended this to December 7th, 2009. Once we get a little closer we may see another extension or possibly a change in policy.

Rick Harrell
Tri Star Mortgage, Inc.
Phone: (619) 200-9775
1081 Camino del Rio So. #128
San Diego, CA 92108
Rick@TriStarMortgageInc.com
www.TriStarMortgageInc.com

How would you feel if you lost your home to foreclosure only to find out that someone working at the bank used it to entertain friends?

Newsstands have been buzzing about the recent scandal at Wells Fargo when a high-ranking executive was reportedly seen making herself and her family comfortable in the home of Lawrence and Linda Ellins, a couple that had to surrender their oceanfront home to Wells Fargo Bank to settle their debts.  The couple was one of the many victims of the Bernard L. Madoff’s massive fraud scheme.

Neighbors and residents of the exclusive Malibu Colony were puzzled at first when they noticed that someone was occupying the Ellinses home when they knew it was already vacant and that Wells Fargo has jurisdiction over it.  The Ellinses’ real estate agent Irene Dazzan Palmer was also surprised when Wells Fargo refused to show the house to interested buyers.

Cheronda Guyton, a senior vice president responsible for commercial foreclosed properties, was identified by neighbors spending time at the house over the summer.  The clincher was when she hosted a rather lavish party last August and people even had to be ferried across from a yacht.  Neighbors and residents became outraged.

Wells Fargo conducted an internal investigation on the matter and eventually concluded that “”a single team member was responsible for violating our company policies. As a result, employment of this individual has been terminated.”  This swift and direct action on the part of Wells Fargo indicates that they want to nip the scandal in the but and make it appear that what Cheronda Guyton did was of her own accord and not sanctioned by the bank.

After terminating Guyton, the bank immediately listed the house for sale at $21 Million.  Interested buyers who were eagerly awaiting the opportunity to buy this prime property were a little disappointed at the list price.  The house is 3,800 square feet and sits on an 8,700 square foot lot.  The property is believed to be worth between $12Million to $14 Million.

Really, how would you feel?

Update: 09-18-09 – Apparently this was not a true foreclosure, it was a negotiated settlement to settle other debt and the house was turned over to Wells Fargo to help satisfy the debt. Either way, the executive made a very poor decision.

What better way to create buzz and draw huge crowds of people to the newly rehabilitated East Village than through the holding of San Diego Street Scene 2009. The Street Scene is San Diego’s traditional 2-day musical festival where many musicians (as many as 45+ bands this year) perform amidst crowds of people. For many years, the San Diego Street Scene has been held at the Gaslamp Quarter and for a short stint at Qualcomm Stadium.

Now, with the construction of PETCO Park, home of the San Diego Padres, has led to a rejuvenation of the areas surrounding it. Shops and businesses underwent a make-over as part of the redevelopment program resulting in a beautification effort to rival other neighborhoods. East Village has thus been transformed into a nightlife mecca with a profusion of bars, restaurants and even condominiums for those who wish to live right in the middle of the action.

San Diego Street Scene is a great way to bring people to the area and really help boost businesses in the Village. Imagine for 2 nights straight, more than 100,000 people were jam-packed within a 6-block radius between 14th Avenue and J St. The spillover from Street Scene was great for local bars, restaurants and other business. I know there are those who probably hated having it so close to where they live but come on, it’s only once a year. I live in Park Terrace right between 10th & 11th where the music was as loud as could be but it wasn’t that big of a deal. It’s good for the area, it’s good for business and it brings an old tradition back to the East Village.

WHAT I REALLY WANTED TO SAY, Cory McGilvery as some of you may know works with us here at Team Aguilar – Axia Real Estate has a real passion for photography and he’s pretty damn good! Cory had the opportunity to shoot Street Scene this year. I think he did an amazing job! Please take a look at the rest of the pictures he took during Street Scene by going to his website, Under My Shutter. He has some great pics!

www.undermyshutter.com

I find myself writing a lot about this subject because it pisses me off and totally ruins my day. It seems like everyday I hear of another scumbag taking advantage of someone trying to modify their home loan.

Loan modification scams happen left and right everywhere, even at the local level right here in San Diego. If you are looking for someone who can help with a loan modification, don’t take for granted the fact that there are a lot of people who take advantage of your need for their own benefit. It is therefore a necessity to know what the signs of loan modification scams are so you can guard yourself against them.

Homeowners trying to get their mortgage payment lowered or fixed are usually having a difficult time meeting their monthly payments. They often find it a problem to ask for help and advice from other people. This makes them extremely vulnerable to these loan modification scumbags. These scumbags can approach you easily through misleading marketing efforts and many other means. After all, lenders publish notices at the 90 day delinquency period which is public information. This gives the scumbags their very own hit list. So what should you watch out for to determine if you are being scammed?

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The U.S. Treasury Department reported today (August, 4^th) that the Obama Administration’s “Home Affordable Modification Program” has helped modify a whopping 235,247 loans that were at least two months delinquent. That accounts for just 9% of delinquent borrowers who are potentially eligible for loan modification. As a result of these meager numbers, the administration, as well as banks responsible for loan modifications are under quite a bit of fire. So there was a meeting held at the White House last week with members of the Obama Administration and 25 of the largest mortgage servicers who emerged from the meeting with a promise to accelerate the pace of their loan restructurings. Well, I’m glad that’s settled. Did they pinky swear?

There are 38 servicers who are participating in this voluntary program. Together, they comprise approximately 85% of all the mortgages in the country. And NOT ONE of those banks is prepared to deal with the huge number of loan modification applicants. But at the meeting, they all agreed upon a goal of getting 500,000 loan modifications under way by November 1^st. To do this, the banks are going to have to amp up their staff and training, and according to Michal Barr, assistant Treasury Secretary for Financial Institutions, “servicers must treat borrowers with more respect and respond in a more timely manner.” That’s reassuring. Let’s hear from Jean in Michigan who wrote CNNMoney.com and might just need a little more reassurance than Mr. Barr’s passive demand: “Obama’s plan is a joke. The banks are a joke. Fax, fax, fax, call, call, call and no response for months. Even Washington rep can’t get an answer or help, what a sham!!!”

According to Tami Luhby of CNNMoney.com, one way of holding institutions responsible for increasing their performance is through releasing “servicer’s progress reports” every month, allowing the public to see which institutions are lagging in implementing the plan.

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For those that have found themselves upside down on their mortgage, meaning they currently have a mortgage for more than their home is worth, the government is throwing them a lifeline of sorts. As reported by Bob Tedeschi of the New York Times, “This month, the Federal Housing Finance Agency unveiled a new version of its Home Affordable Refinance Program, whereby lenders can offer new mortgages to borrowers even if their home’s value exceeds the mortgage amount by as much as 25 percent-as long as the borrower hasn’t missed loan payments in the past year.” This is quite a step up from what the original program offered.

“Under the initial plan announced in February, lenders could refinance a loan only if the borrower’s mortgage was no more than 5 percent greater than the home’s value” according to Tedeschi. “With property values in many areas down sharply from their peak levels, 5 percent wasn’t enough to help many borrowers.” Well alright, this sounds like something that could really help some borrowers who might otherwise would have tried to do a short sale or even face foreclosure. So what, you may ask, is the catch? Of course there is a catch, but in this case, it is actually not too bad.

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It’s nice to hear that Americans are learning from the mistakes of the past. According to DSNews.com, “ING Direct says a recent survey it conducted shows consumers have learned a powerful lesson from the mortgage meltdown-save for a downpayment.”

According to their survey, 42% of Americans “think homes purchased with a bigger downpayment in recent years could have reduced the proliferation of foreclosures and prevented the sharp economic downturn.” Now I’m curious as to what the other 58% thought. Anyhooo, what matters is that a lot of people are tired of the trouble that debt can get them in to. I freak out when I have $200 on my credit card, I can only imagine what it’s like to be tens of thousands of dollars in debt.

Apparently, the survey also reveals that “more than 40 percent of homeowners may refinance this year because of historic-low mortgage rates. Homeowners surveyed indicated that they are seeking new options from the 30-year mortgage product. Nearly four in 10, or 37 percent, said they are likely to consider a mortgage that allows them to make bi-weekly payments to pay off their mortgage faster, without pre-payment penalties.” Well now we’re talking! I thought for a moment that shying away from 30 year mortgages was going to mean looking into ARMs or something. Happy to see it was bi-weekly payments instead. Good on ya, you 37%! If you can handle bi-weekly payments, you’re going to be free as a bird in a few years!

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According to the Government Accountability Office, the United States Treasury has received about $6.7 billion in dividend payments from its Troubled Assets Relief Program (TARP) investments to date. Barney Frank, the Democratic congressman from Massachusetts is proposing to use that money to prevent unemployed homeowners from losing their homes.

Jenifer McKim of the Boston Globe reported on July 9^th that Frank’s proposal came “just days after the Federal Reserve Bank of Boston released a study that showed lenders are reluctant to modify mortgages of most delinquent borrowers because they either are likely to again have trouble making payments, or conversely, can fix their problems without financial help.” Hell, I could have told you that without doing a “study”, but the bottom line is, what is being done now is not enough to prevent more and more people from having to foreclose. Especially as the unemployment rate continues to rise.

McKim wrote that Frank’s proposal is to “spend $2 billion to prevent foreclosure on borrowers who don’t qualify for other mortgage aid programs because they are unemployed.” She then adds that, “Frank’s proposal would also spend $1 billion to build and preserve affordable housing, $1.5 billion to redevelop foreclosed and abandoned homes, and $2 billion to protect tenants in apartment buildings whose owners can’t pay the mortgage.”

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