Post Election Market Update -- Don't Postpone the Refi

Now that the dust has settled, so to speak, it’s time to turn our attention back to interest rates before the holidays arrive.

Mortgage-backed securities are still moving up and down in a tight trading range…so interest rates follow, and are just off the record lows of the year.

However most of the data/market info suggests that with the Fed trying to stimulate the economy, inflation will soon kick in and rates will move up. No one thinks it will happen next week, but maybe by next month or the first quarter….so don’t delay!

NO COST / NO POINT RATES:
4.375% for a 30 YR fixed under $417,000;
4.625% for a 30 YR fixed from $418,000 to $729,000

Obviously you can obtain a lower rate if you want to pay for the closing costs and /or origination fees. Rates for adjustable loans are even lower. They can be difficult to qualify for, however, since they use a higher interest rate to underwrite due to the higher assumed risk of a shorter term loan.

I can’t believe it is already November, and Thanksgiving will be here before we know it! Hope everyone had a Happy Halloween!

Market Update...& The Battle of the Paddle

Rates are still hovering right around their record lows. If you can qualify, and your property appraises out, you can get a rate in the 3’s to low 4’s depending on your loan size and the term. Money is cheap, but is still relatively hard to qualify for in terms of documentation required!

Underwriting guidelines continue to contract, and seem to take the heaviest toll on self-employeds – for whom two years’ tax returns and YTD P& L’s are the norm. Investors don’t want to take any chances on any file, lest they be forced to “buy back” the loan at a later date…which is happening right now with hundreds of thousands of loans that went into default. Oftentimes these defaults aren’t the fault of the original mortgage lender, but are due to loss of income or other related effects from the economy, but banks as well as Fannie and Freddie are enforcing their “buy back” provisions in the contracts they have with mortgage bankers. This is why so many mortgage banks are out of business – the tremendous liability they face to buy back defaulted loans.

Battle of the Paddle

We rode our bikes down to Doheny State Beach a few Sundays ago, before the onset of rainy weather. We often jump on our bikes for a little “road riding” on weekends. Last month we rode down to San Onofre State Beach to check out the sharks we’d read about at Trail One. Alas we saw none!

This trip we planned to witness day two of the Battle of the Paddle, the largest SUP (Stand Up Paddle) competition in the world. In case you haven’t heard of this, the sport involves standing up on a large surf-type board--while using a paddle to move forward. Lots of people are doing it in harbors and in the ocean for exercise, to surf, or just to “get around.”

We hoped to watch our friend Jerry Meador. He is an old friend of mine from high school. I literally hadn’t seen him for about 40 years, YIKES!

Jerry was competing in a couple of different events, and we watched the “relay” event which was really fun. Each team had four members --with at least one woman. They had to paddle out through the surf, rounding two buoys, ride waves and/or paddle back in, and run up the sand to a spot on the beach where their teammate waited to take off next. They all had to paddle the route twice, and there were some pretty funny crashes, near misses, etc. since there were competitors both coming in and heading out at the same time --after the start of the race.

The waves got bigger in the middle of the event with some pretty nice sets coming in. Some paddlers handled the waves well and others…well, wiped out! It definitely separated the surfers from the non-surfers, albeit on super large SUP boards.

I learned there are all different kinds of SUP boards…some are more like regular long surfboards. I also found out that people of all ages can do this.

The oldest participant, who won for his age class, was on my friend Jerry’s team and is 72. They also had a team member who is a pro surfer—Leah Dawson—who is ranked as one of the top female long boarders in the world. She was fun to meet…friendly and down-to-earth. When I met her I asked her where she was from, and she replied, “Heaven. I live in Hawaii…” with a big smile on her face! Jerry had sort of arranged for a ringer on his team since his daughter Kassia is also a pro surfer.

Steve and I can’t wait to try it next, in the Harbor where there are no waves!

Rates Are Still Hot...To Match Last Week's Weather

Last Monday evening we had to sleep in our living room under the ceiling fan, with the French doors open to the ocean breeze to escape the heat! I really enjoyed the rest of the heat last week though. This morning I woke up to rain…what is going on with our weather?

Thankfully at least interest rates are still hot! Rates are still hovering at/near record lows… these are quotes for 45 day locks:

Up to $417,000
Ranging from 3% for 5/1 ARM to 4.25% 30 year fixed

$418,000 to $729,000
Ranging from 3.375% for 5/1 ARM to 4.375% for 30 yr fixed

True Jumbo loans (over $729,000)Ranging from 3.875% for 5/1 ARM to 5.375% for 30 yr fixed

Remember rates and fees/costs depend on occupancy, property type, loan-to-value and credit scores. The rates shown above all assume a one point origination fee plus costs, but may be more or less depending on loan size.



GERMANY

I had to bid adieu to my son Kenny who left Saturday afternoon for the Brandenburg University of Technology to study Architecture in a Graduate school program. His program is located in Cottbus, but they will be traveling to a number of different locations in Europe during his two years there! He was accepted less than two weeks ago, so it was a hectic time for him to say the least. He drove cross-country with all his belongings from Vermont, stopping to visit his sister Katie in Ann Arbor, and in Boulder to see old friends on his way.

After a brief two days here in the OC, he flew to Berlin and arrived Sunday evening, when he took a train to meet new university friends. His biggest packing challenges were whether to bring his tripod for his video camera, and which books to discard.

I hope he enjoys the food there…I was expecting Kenny on a trip through Germany in 1986, and to this day just the thought, much less the smell of sausage and sauerkraut makes me nauseous.


I learned of his university acceptance while on a Mexican Riviera cruise with my mother, who celebrated her 85th birthday on-board. We had a wonderful and relaxing trip complete with lovely dinners, and made new friends from Great Britain who sat at our dining table. We really enjoyed the Salsa & Salsa excursion in Mazatlan where we learned to make authentic Mexican salsas, guacamole, and margaritas AND learned to dance the salsa. (Well, mom didn’t dance, but I took a brief lesson) You can find out more about the classes with Two Dancing Chefs on www.salsaandsalsa.com . They have just opened classes at another venue in Cozumel. They are also on Facebook under Salsa Mazatlan Mexico.

Our Cruise was with Carnival and they did a great job, so I’d highly recommend them. Waiting until September we didn’t have many children on-board, but there were adults of all ages-- which was nice. My mother played in a bridge tournament during our days at sea which kept her busy and I kept her busy in-port at Puerto Vallarta and Mazatlan.

More next time on the Battle of the Paddles...

Rate Snapshot--Edging Up

Rates are edging up the last week. It hasn't been dramatic, so not time to panic yet...if you haven't taken advantage. Here goes:

Up to $417,000

Ranging from 3.125% for 5/1 ARM to 4.25% 30 year fixed

$418,000 to $729,000

Ranging from 3.375% for 5/1 ARM to 4.5% for 30 yr fixed

True Jumbo loans (over $729,000)

Ranging from 4% for 5/1 ARM to 5.375% for 30 yr fixed

All rates quoted assume a one point origination fee plus closing costs, and are dependent on FICO scores, loan-to-value, loan amount, property type, and occupancy.

I am going to be out of the office next week on a cruise down the coast to Mexico with my mother. We are celebrating her 85th birthday! If you want to take advantage of these rates before my departure, please contact me prior to Saturday evening the 18th as I will leave Sunday the 19th.

Viva la Mexico Y mi Mama!

End of the Heat Wave for Rates -- and Summer Too!

We are still seeing rates in the low 3’s to low 4’s depending on program, loan term, FICO score, etc.

Last week delivered extreme volatility in the fixed income markets. Translation: interest rates have been up and down. By Friday, we'd seen prices drop and rates had eroded as of the week's end.

Mortgage loan rates traditionally move in tandem with the pricing of Mortgage Backed Securities. Friday’s better than expected job and unemployment news sparked improvement in the stock market and pushed rates up a bit as a result.

Although the long term view is that rates will hold fairly steady at lows through year-end, the short term outlook is for increased volatility. Remember, any “good” economic news will cause funds to flow into the stock market and out of bonds, causing rates to rise.

Catching the wave and timing your rate lock will be more important in the next few months. I don't recommend waiting any longer to start a refi process, if you are still considering it.

Underwriting guidelines continue to contract. Some of the latest news is that we are required to pull a 2nd credit report at funding…and there had better not be any new inquiries on that report, or evidence must be provided that no new debt has been established. This is just another move to prevent loan fraud. It can slow down or prevent closing altogether.

Another new twist is any deposit to checking or savings accounts over $500 must be documented, unless it is an auto-deposit from employer. Also, we need all income and asset documentation to be dated within 30 days of closing, e.g. paystubs, bank statements, etc.

I like to joke that the loan process is now similar to giving birth. Possibly even more painful!

Rate Snaptshot - HEAT WAVE

We’re having a heat wave here in Orange County, both in terms of weather and rates!

Here goes:

Up to $417,000
30 yr fixed—4. 25%
20 yr fixed—4.0%
15 yr fixed—3.75%
5/1 Arm—3.125%
10/1 arm—3.625%

$418,000 to $729,000
30 yr fixed—4.375%
15 yr fixed—3.875%
5/1 Arm—3.375%

True Jumbo loans (over $729,000)
30 yr fixed—5.375%
5/1 arm—4.0%
10/1 arm—5.0%

All rates quoted assume a one point origination fee plus closing costs, and are subject to FICO scores, loan-to-value, loan amount, property type, and occupancy.

HEAT WAVE

Summer has finally arrived in Orange County--now that it’s almost over! The rest of the country has been sweltering for some time, while we were still wearing sweaters. Hopefully temperatures will remain warm at the beach through September. I was awakened last week by the fog horn in Dana Point Harbor which was a first for the summer months!

We’ve experienced a bigger than usual swell though, which is supposed to get even bigger. I noted it kept most of the swimmers out of the water this weekend—at least where I was watching at Doheny, Capo Beach and Table Rock in Laguna. Lifeguards were out in full force keeping most swimmers out of the water.

My daughter Katie has been visiting most of this month, and we stopped at Sunsets in Capo Beach on PCH on our way home Sunday. They have live music playing on their outdoor patio--with a front seat view of the ocean--every Sunday afternoon, which adds a lot of fun. This is my new favorite haunt for Sunday afternoons in South County. They usually host a big crowd of locals on Friday and Saturday nights though, complete with DJ and dancing-- for all ages. www.sunsetsbar.com

I spent five days mid-month at Rock Creek Lake in the Eastern High Sierra. (elevation 10,000 feet) My mother, who began visiting Rock Creek Canyon around 1949 joined me, along with my daughter and sister. Girls’ trip! We hiked, fished (yes we caught and ate trout) and played a lot of cards. One night we ventured out to dinner at the Convict Lake Restaurant outside Mammoth, and had a fabulous meal. Rock Creek is a very special place that I’ve been visiting since I was 3 or thereabouts (my mother claims I went there the first time when she was pregnant with me). This is where I learned to ride horses and fish. I’ve joined the pack station in the past for the fall horse drive which is a four-day endurance event driving stock down the Owens’ River Valley to Independence. For more information go to: www.rockcreeklake.com or www.rockcreekpackstation.com

Dinosaur Dash XX

This November 7th is the 20th anniversary of the Dinosaur Dash, a running event and fundraiser for the Tustin Public Schools Foundation (TPSF). It is held annually at the Tustin MarketPlace. More than 10,000 people attend each year, including volunteers and participants. This year’s Dino Dash has added a cycling tour in addition to the 10K, 5K and 2K “fun run.” Each year the logo is selected in a contest among Tustin student entries.

Last year’s Dash earned $125,000 for the District’s student and teacher support through event registrations and sponsorships. The prior year, in a better economic environment, they raised $170,000. To give some perspective, TPSF has donated over $2.3 million to the school district over the past twenty years--from all income sources—including the Dinosaur Dash.

TPSF is seeking residents who participated in the inaugural Dash to share their memories, so here goes!

I was a founding Board Member of the Foundation, and was Chair of the Inaugural Dino Dash. As Fundraiser chair on the Board, I was given the responsibility by the Board to create an annual event that would involve the entire community in an effort to support our schools.

We decided on a running event, interviewed race directors, and hired Herb Massinger of Race Pace. Hence the Dino Dash was born. I remember how hard it was initially to obtain the Board’s approval to proceed…I practically had to twist their arms and stand on my head…but finally received the go-ahead.

We held weekly meetings for what seemed months at my home with the race director and race volunteers to organize the event. The first year was tough going, and we finished with something like a meager $5000 net profit. We had big goals though, and were optimistic that the event would build over time. Of course optimism is my middle name!

I remember that Linda Jennings and I met with the General manager of Tustin Lexus, who agreed to be our Major Sponsor… and we were off and running! The first year ALMOST everything on the day of the event came off without a hitch, although the weather was cold and windy that first Sunday. I have photos of my children, who were quite young then, wearing ear muffs and jackets.

Every Board member worked the event…and we also had lots of community and school volunteers. We decided to invite local Olympians to sign autographs for young and old athletes, with the help of our own home-grown Olympians who had children in our school district. My good friend Dana Schoenfeld Reyes (Breastroke, Silver, Munich ’72) put us in touch with most of them including a number of swimmers, triathletes, runners, and more.

The event has morphed and changed over the years with all kinds of related activities: A food court, games, community booths, costume contests, contests between schools for registration, and more.

The Foundation offers grants to teachers throughout the district, sponsors a Teacher of the Year event, teacher training, scholarships for college-bound students, books, technology, a Go Green Initiative, and tutoring.

To this day one of my most treasured possessions is the baby dinosaur hatching from an egg that was presented to me for “hatching” the Dinosaur Dash. It was a difficult birth but well worth it!

for more information on Dino Dash XX or to register, go to: http://www.tpsf.net/dash.htm

Market Update and Summertime Blues

We haven’t had much sunshine to enjoy along our Orange County coastline so far this summer, but we have continued to enjoy record low interest rates. If you haven’t yet considered a refinance to lower your rate, please give me a call.

I have a number of “no point, no cost” refinances in process for clients. Although their monthly payment and interest saving is not as great as it might be if they paid all loan costs, they are not out of pocket any cash, or adding to their loan balance to enjoy a reduction in their mortgage payment.

Much of the final decision about a refinance rests on how long you expect to remain in your property. Obviously a longer time horizon makes the decision for the lowest rate possible more attractive.

New federal laws make “full disclosure” a requirement, and I have had many clients ask me questions about the total costs, and the new good Faith Estimate. In the past many loan-related costs were paid by the bank or broker, and were essentially “hidden” from view. Costs haven’t increased so much as they are just more fully disclosed today, in an attempt to provide the consumer with better and more complete information.

Newport’s Back Bay

Steve and I visited Newport Beach last Saturday afternoon for one of our favorite activities…a bike/kayak adventure. We parked at The Dunes, unloaded our bikes, and took off on the 10.5 mile loop that winds through the Upper Newport Bay Ecological Reserve and Nature Preserve, then around through the residential area off Irvine Avenue, to PCH and back. We stopped for a break at the Muth Interpretive Center to view an art exhibit by the Southern California Plein Air Painters Association-- ”SOCALPAPA” -- with wonderful renderings of the Back Bay and other local beaches, etc.


The map of the trail loop and complete information on the nature preserve can be found on the Irvine Company website at http://www.irvinecompany.com/Our-Legacy/forever-wild/back-bay-loop.aspx

After our return to the car, we packed up the bikes and changed into attire more suited to kayaking, only to discover we’d forgotten our paddles. (we own three!) So, we drove to the kayak rental spot on the bay, just under the bridge on PCH, to rent them. We decided to head inland into the preserve and enjoy the quiet…since we usually head out for a circuit of Balboa and Lido Islands. It is always fascinating to check out the “wildlife” in the inhabited portion of Newport Bay.

This trip we had expected complete quiet, but we found ourselves on the water with a large number of children and young adults playing around on kayaks and racing outrigger canoes. We were in front of the Newport Aquatic Center. We didn’t realize we could have parked here for free, and launched our kayak from here. The Aquatic Center is located on a public beach, (ahem on a man-made land extension) and is a non-profit organization that offers membership on an annual or daily basis. They house an on-site gym, shower/locker facilities, and warehouse a large number of water recreation craft. They rent their kayaks, outriggers, sculls and a few motorized boats, all of which are free for members. NAC holds all kinds of events and they train competitive teams for both juniors and adults. NAC boasts Olympic champions as members/trainers. www.newportaquaticcenter.com

But back to our kayak experience: our wildlife sightings including primarily birds and crabs (and a few fish). We needed a bird book along to identify the birds, but we counted at least five or six different ones including a group of odd-looking black ducks (cormorants I believe, after some research) that were sleeping on the sand. My best guesses for the rest were sandpipers, egrets, and swallows. The bay is host to over 200 species.

After drying off and sharing a couple of beers we drove the coast home to Capo Beach, braving the crowds through Laguna, and were thoroughly exhausted when we arrived. And still wishing for more sunshine.

Rate Snapshot and Strategic Defaults

The market continues to enjoy all-time lows in rates, although they are slightly off today.

Up to $417,000
30 yr fixed—4.5%
20 yr fixed—4.25%
15 yr fixed—3.875%
5/1 Arm—3.375%
10/1 arm—4.125%

$418,000 to $729,000
30 yr fixed—4.75%
15 yr fixed—4.25%
5/1 Arm—3.875%

True Jumbo loans (over $729,000)
30 yr fixed—5.625%
5/1 arm—4.375%
10/1 arm—5.25%

All rates quoted assume a one point origination fee plus closing costs, and are subject to FICO scores, loan-to-value, property type, and occupancy.

STRATEGIC MORTGAGE DEFAULTS

New research based on national consumer credit files, and academic papers, shows that many high credit borrowers are defaulting on their mortgages in the face of large negative equity situations. This is particularly true in states such as California and Arizona, where state laws limit the lenders’ ability to collect post-foreclosure or short sale deficiencies, vs. states such as Florida and Nevada where lenders have more recourse available to them.

Many strategic defaults are not motivated by an inability to make the mortgage payments. They are typically more related to the extended time horizon necessary to achieve a breakeven situation, e.g. 100% loan-to-value, much less realizing equity once again in the property. Many of these homeowners would still face a loss of 20% or more of original property value they paid in a cash down payment at the time of property purchase. Some are so far "under water" their property value is less than 1/2 of original value.

The Deed-in-Lieu is a more attractive option for many borrowers, vs. a short sale or foreclosure. In this case, the borrower simply deeds the property over to the lender, who saves time and money by not going through the foreclosure process or spending months processing a short sale transaction. Further, the bank does not try to execute on any deficiency (shortage) of payoff. Their goal is to quickly sell the property during the traditional summer months, while interest rates continue at record lows.

Bank of America is one lender who has instituted a new deed-in-lieu program and offers cash incentives to their borrowers in some cases.

A deed-in-lieu doesn’t have as negative an effect on your FICO score as a foreclosure or bankruptcy, but will reflect the same as a short sale, or “not paid as agreed” on the credit report.

In the case of a short sale, the bank agrees to accept less than the amount due on the mortgage through the sale of the property. These can be very sticky transactions that may take months for approval by the bank, and are especially tedious when there are two lenders, e.g. one in first position and one in second position. Although the first TD lender has priority, the second lender often jockeys for some sort of payoff as well from the seller and in some cases will pursue the seller after the close of the sale.

Many thanks to my dear friend and real estate broker Cynthia White, for providing the research on this timely issue.

The Pacific Queen

My son Drew, who earned his captain’s license in ‘05, recently became partners with Pacific Queen owner Bill Cavanaugh. The Pacific Queen is an 88’ sport fishing boat, originally built in 1944 to rescue downed planes… and has since been converted to a sport fisher. Drew has been part of the sport fishing industry for eleven years, and his partner Bill has been in it for 30 years. Drew earned his captains’ license while working on the Apollo, beginning with summers during college at UCSD.

The Pacific Queen runs anywhere from one- to eight-day trips out of Fisherman’s Landing in Point Loma. They fish primarily in Mexican waters, and mainly catch tuna in the summer, along with yellowtail and dorado. Average fares are $200 a day…and their boat holds up to 33 passengers.

Next time you want a maritime adventure I hope you give them a call! I can’t wait to go out…

Their website is www.Pacific-queen.com . For more information call Fisherman’s landing – at 619-221-8500.

I can’t say how proud I am of Drew for his achievements and for following his dream. He is a true Waterman! i.e. captain, fisherman, surfer, spearfisher…and jack of all trades on the boat!

Mortgage Bonds Hit Record Highs = Low Rates...and Vermont In May

Mortgage-backed securities today traded at a high of the last two years plus…which means rates are at their lows.

Pass it along if you know of anyone who needs to take advantage of these rates.


VERMONT

I made a visit to Vermont in May, to witness my son Kenny’s graduation from Marlboro College.

It was a wonderful experience for many reasons, but primarily because my son chose his own path, a bit outside the norm…and is pursuing his own dream, which is very different from the “typical”… especially for Southern California.

We stayed in a lovely Bed and Breakfast called the White House Inn in Wilmington. It is near many of the skiing areas in southern Vermont. Please call me for more info if you ever decide to visit for the fall foliage, or the summer Marlboro Music Festival-- which I attended last July with my mother, and is replete with world-renowned musicians who “re-charge” there for the summer, and offer amazing classical music, in a lovely setting. For tickets and information go to: http://www.marlboromusic.org/


I don’t recommend springtime for a visit, which is “Mud Season” and is far more mud (and deeper) than you can ever imagine, unless you have lived in it. Cars get stuck all the time!

Vermont is a horse of a different color. I joke every time I visit Vermont that most everyone looks to me as if they are camping. The truth is, they just look like they wear clothing that is functional and works for their environment. I shouldn’t talk. When I camp I still blow-dry my hair…If there is an electric outlet nearby!

People who live in Vermont are very concerned about the environment, sustainable lifestyles, energy efficiency, and the Eaarth. (more on the Eaarth in another Blog) Most Vermonters live in rural settings on or near farms, and spend time caring for their sugar bush, (think maple syrup) animals, caring for their spectacular home gardens, reading a lot, and thinking even more.

They don’t allow “big box” stores in Vermont, so you have to drive to Massachusetts or New Hampshire to find a WalMart, etc. It is a very interesting place that cherishes local products only.

Kenny is staying in Marlboro this summer, building his Greenhouse, (see my earlier blog on his Greenhouse) and working at a bakery/coffee shop in Brattleboro. He is a self-sustaining unit who thinks for himself, is pursuing his passion, and I am very proud of him. I don’t think he’ll live there forever…but I also don’t think he’ll return to California. He reminds me of that periodically. Here is the link to his Grenhouse design on YouTube: http://www.youtube.com.watch/

Interest Rate Update: Don't Miss!

Interest rates have continued to hover at record lows for the year; consternation abounds since the pundits all predicted rates would deteriorate at the end of March, at the finale of the Fed’s mortgage back securities buying program. If you are still considering a refinance or purchase, I’d suggest taking action now.

Up to $417,000
30 yr fixed—4.625%
20 yr fixed—4.375%
15 yr fixed—4%
5/1 Arm—3.375%
10/1 arm—4/125%

$418,000 to $729,000
30 yr fixed—4.75%
15 yr fixed—4.25%
5/1 Arm—3.875%

True Jumbo loans (over $729,000)
30 yr fixed—5.5%
5/1 arm—4.5%
10/1 arm—5.25%

Interest-only products are available, but rates are slightly higher. All rates quoted assume a one percent origination fee, and are subject to FICO scores, loan-to-value, property type, and occupancy.

June Already!

Rates have been holding pretty steadily at their lows…beyond almost everyone’s expectations.

You can enjoy a rate in the 4’s for all fixed rate loan amounts below $729,500, and in the 3’s for ARM products! Call me for specific quotes, since they vary based on loan size, property type, FICO score and occupancy.

Underwriting standards continue to contract. We are now required to re-check credit, employment and a variety of items just prior to loan closing, to insure nothing has changed from the time of application.

Social security numbers are now verified through the IRS prior to close. If you apply for a mortgage loan, be advised you should not apply for new credit, and don’t move funds from one account to another without fully documenting the transfer and source.

All unusual deposits must be documented, and all funds for closing must be sourced. All in the name of Fraud Prevention!

The federal tax credit for homebuyers expires June 30th and sales are expected to slow after that. It will be interesting to see whether they slow, or pick up steam. Most realtors I speak to would have us believe that prices are increasing and sales will continue to build steam.

We are almost half-way through it, and the year seems to have flown by. Now it is wedding season and I have two to attend this summer!

I am looking forward to a sunny, warm and relaxing weekend. Hope yours is the same.

One suggestion: The Dana Point Harbor Boat Show (which started Thursday and runs through Sunday) sounds like fun, and the weather will be perfect. They are celebrating their tenth anniversary.

My favorite pick: The Saturday night Live Music Cruise on the Dana Pride, from 6:30 to 8:00 for only $10. This cruise is always a blast! Ticket prices increase during the summer. Go to www.danawharf.com for tickets and details.

Reverse Financing Update and The Big Short

I am very excited to be able to provide Reverse mortgage financing to my clients with increased loan limits up to $625,500.

There are fabulous new programs to benefit seniors, including some with NO upfront costs to the clients. Reverse loans are all FHA loans, which carry the typical FHA mortgage insurance premium that increases the up-front costs. Now, clients can choose a program where they don't pay any of the costs.

New products include fixed rates as low as 5%. These fixed rate loans require that all cash is withdrawn at the time of loan closing. In many cases a Line of Credit makes more sense for clients, although the rate is floating vs. fixed. The interest rate is just over 2% on the line of credit, vs. 5% to 5.5%. for fixed rate loans.

Remember, Reverse loans improve cash flow since there are no payments during the loan term and all interest due accrues to the note, and is paid the end of the loan term. Funds can be accessed up front in a lump sum, monthly payments, or a line of credit--just like a HELOC--or a combination of these.


THE BIG SHORT

I’d like to highly recommend The Big Short by Michael Lewis. This author, who also wrote The Blind Side, has written a number of exposés on Wall Street and the financial industry, but none as damning as this…which was just published in March.

Recently cited by Bill Gross, Managing Partner of PIMCO, in his monthly newsletter, this book clearly lays the blame for the world-wide financial crisis at the doorstep of greedy Wall Street Bond traders who operated in secret, setting up transactions most people, even in their own companies, didn’t understand..or were unaware of.

Very interesting reading…I couldn’t put it down. The next time someone tells me the meltdown was all the government’s fault (yes they hold blame for encouraging more lenient lending guidelines) or subprime lenders’ fault for making fraudulent loans (which they certainly did, along with the knowledge of their clients) be advised nothing of this magnitude could or would have happened without the secondary market provided by Wall Street; faulty securities ratings; and the facilitation of "shorting" these instruments (Investment Banks, AIG and others) which exponentially increased the risk of every single layer (tranche) inside the securities backed by subprime loans.

California Home Buyer Tax Credit

The state tax credit isn’t as attractive as the Federal Tax Credit for first time homebuyers, which was a true credit, regardless of whether you pay or owe taxes. This state “credit” is spread out over three successive tax years, at a max of $3333 per year, and is a credit to be used for actual taxes OWED. The tax credits cannot reduce regular tax below your tentative minimum tax (TMT). It is nonrefundable and unused credits cannot be carried over. So, you need to owe up to the max to get the full benefit.

The tax credits are available for taxpayers who purchase a qualified principal residence on or after May 1, 2010, and before January 1, 2011. Additionally, these tax credits are available for taxpayers who purchase a qualified principal residence on or after December 31, 2010, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010. The purchase date is defined as the date escrow closes.

The total amount of allocated tax credit for all taxpayers may not exceed $100 million for the New Home Credit and $100 million for the First-Time Buyer Credit. The state will allocate the tax credits on a first-come, first-served basis.
Only one tax credit is allowed per taxpayer. If a taxpayer qualifies for both tax credits, the law specifies that we will allocate the amount under the New Home Credit.

Property must be occupied by the taxpayer as their principal residence for a minimum of two years immediately following the purchase.

A first-time buyer is any individual (and the individual’s spouse/RDP, if married) who did not have an ownership interest in a principal residence during the preceding 3 year period ending on the date of the purchase of the qualified principal residence.

Reservations: Taxpayers who qualify for the New Home Credit may, but are not required to, reserve a tax credit prior to the close of escrow. Reservations will become important as the state nears the $100 million cap for homes that may not close escrow before the cap is reached.

To reserve a tax credit, the taxpayer and seller need to complete, sign, and submit a reservation request to certify that they have entered into an enforceable contract on or after May 1, 2010, and on or before December 31, 2010. A copy of the signed contract must be included with the reservation request.

If you are only applying for the First-Time Buyer Credit, you will not be able to reserve the tax credit before escrow closes. Final closing statement must be filed within two weeks of closing to be eligible.

For complete information and forms, go to http://www.ftb.ca.gov/individuals/new_home_credit.shtml

Spring is in the Air!

Springtime brings sunshine, graduations, and sports playoffs!

The sunshine seems to have finally arrived to Orange County although it was in short supply last Sunday for Mother’s Day. After my usual Sunday morning yoga class at Yoga Works, http://yogaworks.com/ I took a bike ride down to the Harbor in Dana Point with Steve… his first outing on the bike since he broke his leg in January. The sun finally greeted us as we neared the headlands, which was a treat. The tide was low and there were lots of families exploring the tidepools under the watchful guidance of volunteers coordinated jointly by the City and the Ocean Institute.

On our way back home we stopped to check out the Harbor Art Show under the arbors, near the restaurants. We loved some of the work by both painters and photographers, and suggest you check it out some time. They hold an Art Show in the Harbor a couple of times during the year.

MORE MOTHER'S DAY

Steve and I took out my mother to Opah’s Saturday night to celebrate Mother’s day and had fantastic food and even better service. I was really impressed. They also own 230 Forest, our favorite in Laguna Beach, and just opened a new restaurant named Watermarc on PCH in Laguna Beach.
http://www.opahrestaurant.com/


GRADUATION

My son Kenny graduates from Marlboro College this weekend, and I am flying to Vermont to attend. I am so very proud of him. His degree is in sociology with an emphasis on urban planning and architecture, and he achieved an A on his senior thesis/project which is presented to an academic panel in an oral exam setting. He plans to finish building the college Greenhouse this summer, (see earlier blog about it for the link) and then decide about graduate school. Kenny transferred from Boulder (University of Colorado) to Marlboro in his sophomore year, seeking a more intellectual and challenging academic environment. I was sad to see him leave Boulder, but he has been incredibly happy at Marlboro.

NCAA WATER POLO

This weekend also brings the NCAA Women’s Water Polo Championships hosted by San Diego State. My daughter Katie arrives in San Diego today to coach for Michigan, who is currently ranked #7 nationally and #5 in the tournament. They face-off with #4 Cal in their opening game Friday night at 5:45…which should be interesting since Katie played for Coach Corso at Cal and was his team captain. I must say Go Blue! Sorry Mike!

http://www.ncaa.com/sports/w-wpolo/ncaa-w-wpolo-body.html

The field of teams is as follows, in order of ranking: Stanford, USC, UCLA, Cal, Michigan, Loyola Marymount, Marist and Pomona Pitzer. I am so sorry to miss it but I will be in Vermont.

LACROSSE CHAMPIONSHIPS

Finally I can’t resist congratulating the Foothill High Lacrosse team under the fine leadership of Jon Fox for winning the Orange County title again (they defeated number one ranked Corona del Mar yesterday) and will play for the CIF SS championship title this Friday night in Valencia vs. Palos Verdes, who is the northern section leader. Hope they win it all!

Rate Snapshot

The last week has seen the greatest market volatility on record, primarily in the stock market…which has had a positive effect on interest rates, at least in the short term.

As of today, here are some sample rates:

Conforming Loans (Up to $417,000)

30 YR - 4.75%
20 YR – 4.375%
15 YR – 4.125%
5/1 – 3.125%
10/1 – 4.125%

Agency Jumbo ( $418,000 to $729,000)

30 YR – 4.875%
15 YR – 4.25%
5/1 – 3.625%
7/1 – 4%

Jumbo Loans ($729,000 to $2 million)

30 YR - 5.5%
5/1 - 4.375%

All these rates assume a one point origination fee, and are dependent on loan-to-value, FICO score, property type and type of occupancy.

Don’t wait to take advantage of these, as we aren’t likely to see them again for years!

Sales Trends, Mortgage Insurance & California Wines

Sales are trending up in the OC both in terms of prices and volume. Some realtors are jumping on the bandwagon telling us that we’re past the bottom, and prices are going up….but personally I agree with those naysayers who attribute the increase in volume and prices to competition to qualify for the Homebuyer Tax Credit which expires April 30th. In order to qualify, your property must be under contract to purchase by this Friday.

The County median price was $432,000 in March, with a 9% volume increase as well. We are still seeing a substantial percentage of “distressed sales”… 1/3 were foreclosures and I didn’t find any stats on short sales but I know there are plenty.

Over 20% of last month’s sales were ALL CASH BUYERS. This is most common in sales below $450,000…which is pushing out a lot of first-timers. The investors are winning the battle unfortunately.

Mortgage Insurance

The big news of last week is that the private mortgage insurance (PMI) has just become more easily accessible to conventional borrowers (non-FHA). For the last few years there have been substantial limitations on areas of “declining values” i.e. California, Arizona, Michigan, Nevada and Florida.

The new guidelines provide Mortgage Insurance up to 90% and 95% LTV in some cases, depending on the individual company guidelines. The minimum FICO scores required in order to qualify for mortgage insurance have also been reduced. Companies “back in the market’ include MGIC, Radian and Genworth.

Up until now, the only path available was an FHA loan for those buyers without 20% down and a FICO score below 720-- here in California. I have a client with a score just below 700, and before this change he wasn’t able to qualify for PMI, although his debt-to-income ratios met the stringent guidelines.

For those of you who don’t know, PMI is typically paid monthly by the borrower, and guarantees the lender (insures) for the portion of the loan over 80% loan-to-value. These companies have been under great financial strain due to the last few years’ tremendous losses.
This announcement comes on the heels of more restrictive guidelines handed down by HUD for FHA loans. HUD is tightening up on FICO scores, by restricting loan-to-value for those borrowers with lower scores. So, they will have to come up with a larger down payment.

California Wine Festival


The first annual California Wine Festival in Dana Point was held last Thursday through Saturday. Thursday evening they held an event at the Ritz Carlton, Friday evening at the Dana Point Yacht Club, and Saturday afternoon at Doheny State Beach Park. I attended the Saturday event which was sold out at 3000 attendees. There were over 60 wineries, both well-known and boutiques that poured a wide variety of wines. Five breweries had beers and ales to sample, and a number of restaurants provided tasty appetizers. All the food and wine was unlimited, although a few booths ran out of some wines near the end of the day.

Lines were minimal, fun was in abundance, and the music was reggae/calypso style so of course I practiced my Zumba technique. The weather cooperated with sun and a light breeze, to provide an afternoon that couldn’t have been more perfect. We made new friends, and ran into old ones.

Next stop for the afternoon was Turk’s in the Harbor, on the water… for some sightseeing… and we finished the day at Sunsets’ on PCH across from Capistrano Beach…. where a band of guys my age (or older!) played surf music while we dined on pork from a whole pig they’d roasted across the street in a pit on the state beach. What a hoot! This lively bar has big screens for the sports’ fans, and live music on weekends.

Back to the Wine Festival – although this was their first time in Dana Point, they will host the same event in mid-July in Santa Barbara for the 7th year. For more info, here is their website: http://www.californiawinefestival.com/index.html

Rates, Foreclosures and BeachFire

Interest Rate Update

The end of the government’s purchase program –on March 31st—of mortgage-backed securities, was widely heralded as the precursor of a steep rise in mortgage interest rates. However, after an initial steep decline in MBS prices (pushing rates up) rates have improved and stabilized for the time being. Scott Simon, managing director of PIMCO says “We are unlikely to see a significant market disruption in the agency market stemming from the Fed’s retreat.” Translation: he doesn’t think rates are going to rise. Much.

30 year fixed rates are currently ranging from the high 4’s to the low 5’s depending on loan size, fico score, property type, loan purpose and loan-to-value. FHA rates are in the same range and go up to 96.5% loan-to-value (3.5% down.)

There is a new purchase program called HomePath requiring only 5% down on properties currently owned by Fannie Mae. The rates are a bit higher, but there is no requirement for mortgage insurance which is a big plus.

The BIG news is that true “jumbo” financing is returning to the market place. We are suddenly seeing very competitive rates from Chase, US Bank, Wells Fargo and GMAC. Great news for those with loan balances over the current high-balance Agency limit of $729,000. However, be warned, these programs are very conservative in terms of credit, personal liquidity, and loan-to value.

Foreclosure Activity Report

8.33% of all mortgages in Orange County are more than 90 days late. The national average is 8.78% and the California average is at 11.68%. Government programs to prevent foreclosures are slowing foreclosure rates…but most of these homes will likely convert to “short sales.”

My clientele’s purchases this year have primarily been short sales requiring bank approval…which is hard to come by, and can takes months to achieve. Then, when they finally agree to a price, they typically want to close the purchase within 15 to 21 days making for a mad dash at the end! Banks are not easy to deal with!

The highest percentage of distressed sales in the U.S. is in the Riverside SMSA, then Las Vegas and Sacramento.

Happy Hour at BeachFire

Friday evening I went to the BeachFire Bar & Grill in San Clemente. BeachFire opened in 2002 and is credited with the revitalization of downtown San Clemente.

They host a regular Friday evening Happy Hour all night, if you show up in “island” attire…whatever that means. I wore my yellow shell necklace from Maui and it did the trick. I had an aloha shirt in my purse as a back-up though. Drinks are $4 to $5 each, and appetizers range from $4 to $6. What a deal! Any time it rains, they also offer Happy Hour prices….otherwise known as “When it rains we pour.”

In addition to great drinks and appetizers at discounted prices, they have live Reggae music every Friday. We were rockin’… or whining, rather! (Jamaican-style dancing) The band manager treated my friends and I to Jaeger shots which was a hoot. See, you can still have fun over 50. http://beachfire.com/home.asp

My favorite Reggae band had performed the prior week…Smoothie Jones and the RedX. Now they play authentic Jamaican Reggae! I was sorry we missed them. http://www.myspace.com/smoothiejones
They used to play regularly in Dana Point, on the summer cocktail harbor cruises.

State of the Union for the Mortgage Loan Process, Part 2

I am pleased to announce I have moved to Western Reliance Funding. Western has been operating for over twelve years in Orange County, and offers some new bells and whistles in terms of service, to include in-house underwriting, and both correspondent and brokering capabilities.

Western works with a number of investors as a correspondent including CitiMortgage, Chase, BofA, GMAC, US Bank, Flagstar, Wells Fargo and more! Most exciting for me is the ability to get back into the business of Reverse loan financing, which I couldn’t offer any longer through Clarion.

My new contact information is:

kcard@westernreliancefunding.com
24422 Avenida de la Carlota, Ste. 180 Laguna Hills, CA 92653
949-470-1333 x111


As a postscript regarding Clarion: I loved working there, and they had a great run. Unfortunately, times have changed and the mortgage industry has undergone dramatic metamorphosis, necessitating my move….in order to be more effective and responsive to my clientele.

State of the Union for the Mortgage Loan Process, Part 2

HVCC is the Home Valuation Code of Conduct. It went into effect May 1, 2009, and effectively cut off all communication between loan officer, or any “party of interest,” and the appraiser. New Appraisal Management Companies (AMCs) sprung up overnight, but there are a number of companies that provide appraisals on a national basis that have been in operation for many years with fairly good results.

Mortgage companies have created their own appraisal management companies, some more equal than others. Unfortunately some of these organizations pay appraisers so little, their quality is very poor. There are others who charge more and tend to have higher quality and success.

The biggest issue, other than appraisal quality, is non-portability. The problems arise when different lenders require appraisals to be performed by specific AMC’s. This means a mortgage banker must determine where a loan will be placed BEFORE ordering appraisal. Otherwise, the appraisal may not be accepted by the lender/bank of choice.

Correspondent lenders typically have two or three choices of AMC’s to use, and as a correspondent, the target lender will accept the appraisal. However, if a loan needs to be brokered to a specific bank due to loan program and parameters, the appraisal must be ordered through that bank’s AMC. This is very limiting to borrowers since it removes much of the flexibility of choice…without ordering a second appraisal. If for some reason a file is declined or does not meet the target investor’s guidelines, a new appraisal will be required in most cases! I have had to order second appraisals on a number of loans this last year, much to my dismay (and my clients’!)

Gone are the days of calling one of my regular appraisers, asking them to “comp” a property for me to give me an idea of value, before embarking on a refinance. We are all operating “blind” these days. HVCC has also caused many appraisers to go out of business (since they AMC’s take a percentage off the top the appraiser earns much less per report than in the past) which is very unfortunate.

Why did this happen? An official of New York State put pressure congress to act to prevent “value inflation,” and this is what they came up with. Initially HVCC only affected Fannie and Freddie loans (those under $729,000) but now it has also been adopted by HUD for FHA loans.

In my opinion this bad law has made it harder for clients to obtain competitive pricing for their loan. It is very limiting, in many ways.

The State of the Union for the Mortgage Loan Process

This is the first in a series of commentary and helpful information regarding the current state of home mortgage financing. The industry has changed so dramatically in the last twenty-four months, I felt it would be helpful to explain in detail some of the changes that affect borrowers.

After the mortgage-back security debacle (MELTDOWN)-- in which subprime and stated income loans (that eventually went into default in large numbers) were packaged and sold in bulk to unsuspecting investors world-wide, sweeping changes have taken over the industry. These changes purport to be for the protection of the consumer.

A number of new laws have been enacted to change the way appraisals are performed, and the manner in which costs are incurred and disclosed to clients. In addition, mortgage originators are now required to register with a national database, and to be fingerprinted, vetted and tested.

INCOME DOCUMENTATION

There are no more “stated income” loans at this point in time-- although they may return to the marketplace at some point in the future. This is especially troublesome for those self-employed individuals who have habitually “expensed” much of their income in order to avoid taxation. Unfortunately they are not eligible for a new mortgage in most cases.

Underwriting guidelines governing loan-to-value, FICO scores, and debt-to-income ratios for all loans are much more conservative than in the recent past for obvious reasons. Unfortunately the pendulum seems to have swung a bit far in the conservative direction at present.

Virtually all lenders now require IRS transcripts of individual tax returns prior to underwriting approval. This ensures that income reported on the application and attending documentation is accurate in an attempt to avoid fraud.

As a result, it is standard practice now to collect full income documentation, to include two year’s federal tax returns with all schedules, W-2’s, 1099’s, and paystubs evidencing current employment. Also required are bank and asset/saving statements for at least one month, including all pages of the statements. On-line statements are not allowed unless they evidence the borrower name and address on them.

YES, it is back to “full documentation” in the loan world, just like the old days when I started in residential lending back in 1990.

Next time I will address HVCC, or the Home Valuation Code of Conduct, which governs the way appraisals are performed today. In my opinion this is the most detrimental change from the perspective of the client in any new mortgage transaction.

WHALE TAIL

Why the picture of the Whale's tail? Well, did you read about the woman who just completed a Stand-Up Paddle from Catalina to Dana Point Harbor? She had a whale swimming with her for over an hour during her 40 mile adventure!

I took my kayak out with Steve at Zuma Beach a few years ago, and just off Point Dume we came upon a mother whale with her baby, frolicking just off the point. It was an amazing and inspiring thing to see such large animals so close up. Very humbling.

US Tax Breaks

It’s that time of year again, and if you haven’t filed yet, here are some tips for tax breaks:

Home-buyer tax credit

Expires 4-30 (must be under sales contract) This affords first time homebuyers a credit of $8000 or $6500 for move-up homebuyers for a new primary residence. This credit is immediate and doesn’t require owing taxes to receive the refund.

Car-buyer Break

If you bought a car in ‘09 you can claim a deduction for the state and local sales taxes for up to $49,500 of purchase price.

Golf cart or Low Speed neighborhood vehicle

Yes ….that’s right… you can get a credit of up to $15,000 if you purchased one of these in ’09 or ’10. It must be a “qualified plug-in electric drive vehicle. “

Energy Credits

This is a direct dollar-for-dollar credit for moving to solar power, or buying an energy-efficient furnace, water heater, air conditioner or stove, or replacing windows…you can claim a credit up to 30% of the cost or a maximum of $1500.

College Credits

Available to those who pay college bills for themselves or a dependent, subject to maximum income levels of $90K for filing single, and $180k if filing jointly.

Jobless exemption

Up to $2400 in unemployment benefits are tax free.

Property tax deduction – without itemizing

You can claim a credit for property taxes by filling out Schedule L without itemizing deductions on your return.

Haiti Donations

If you made a donation to Haiti relief prior to March 1st of 2010, you can claim it as a charitable contribution on your ‘09 return.

Hope these help!

Help and Hope - Outreach Concern

The recent tragedy at an Orange County high school involving a student athlete was overwhelming for many in that school community, and throughout our county. It is hard to imagine what the family and friends experience in the face of such a devastating event. Outreach Concern stepped in, and provided on-site counseling.

Outreach Concern, based in Santa Ana, has been providing services to school districts for 16 years. They have been instrumental in grief counseling for many schools, but their primary focus is providing counseling services for at-risk students whose academic performance is being impacted, in order to allow faculty and administration to focus on academics.

Dr. Rick Capaldi, a client of mine, is both Executive and Clinical Director of Outreach Concern. I’d like to thank Rick and his staff for being there for those in need. www.outreachconcern.org

Post Script to Perils of Short Sales

The following information was kindly provided by a client of mine who is a tax professional.

Here are a couple of important notes regarding Cancellation of Debt (COD):

1. The Mortgage Forgiveness Debt Relief Act of 2007, only applies to “Qualified Principal Residence Indebtedness”, not to second or vacation homes, investment property or rentals. Further, the debt must have been used for the purchase or substantial improvement of the residence – not to pay off credit cards, start a business, take a vacation, buy a car, etc.

2. Those not qualifying for forgiveness of COD, can generally avoid paying tax by filing under the Insolvency clause, or one of the other eight exceptions.

3. Different elections can be made on the Federal return and the California return, which helps in the non-conformity issue.

Bottom line, very complex area; individuals with this problem should see a qualified professional tax preparer.

K.E. Noland, EA, President
Enterprise Management Corp. CFO TO GO®
17461 Irvine Blvd., Suite M, Tustin, CA 92780
Tel: (714) 505-1925 / Fax: (714) 505-9691
ken@companycfo.com / www.companycfo.com

The Perils of Short Sales

Just under 50% of the closed sales in Orange County presently are “short sales” which means the homeowner sold their home for less than the balance due on their mortgage. In such cases, the bank must approve the sale price since they are taking a loss, and the homeowner/seller may end up receiving a 1099 for the unpaid portion of the mortgage which needs to be provided with your tax returns. The federal Mortgage Forgiveness Debt Relief Act of 2007 provided an exception for homeowners who lost their home in foreclosure or a short sale, or had their loan balance reduced in a modification. (gee, I don’t know of anyone who got a balance reduction!)

You still have to report the forgiven debt on your tax return, but it’s typically not included in your income for federal tax purposes if it was your primary residence, the debt was less than $2 million (that lets most people out) and it was forgiven in years ‘07 through ’12. The bad news is California hasn’t updated their law to conform with the federal law after January 1, 2009, so you may owe taxes to the state unless this is resolved. See http://tinyurl.com/yhx89zw to see if you may receive relief prior to filing April 15th if this affects you.

One final note: A short sale will normally appear on your credit report as such, and have a negative effect on FICO scores and also prohibit mortgage financing for a period of at least two years. So proceed with caution.

Mortgage Update...and GO BLUE News

Home loan rates have been fairly stable the last few weeks, ranging from the mid-4’s to low 5’s depending on a number of specific loan factors. Rates are definitely expected to rise by the end of this month due to the termination of the government’s buying program of mortgage-backed securities. This program basically generates demand for Fannie Mae and Freddie Mac pooled mortgage securities, which in turn, maintains rates at a lower level. Once the buying stops, most experts expect demand to wane, and prices to drop, thereby causing a rise in interest rates for home loans.

Also be aware that the deadline for the Tax Credit for homebuyers is rapidly approaching – to qualify you must be under contract by April 30th and close by June 30th. This program is widely credited for the current housing demand.

The University of Michigan Women’s Water Polo Team was here in Orange County last weekend for the annual UCI Invitational Water Polo Tournament. The event is one of the premier tournaments of the women’s collegiate polo season. This year, the Michigan Wolverines, currently ranked 8th in the nation, finished the tournament in 8th place. After a strong start, they lost their leading scorer to an injury and struggled in their remaining games. Michigan has completed the season in the top ten the last two years; and participated in the NCAA championships four of the last eight years.

Oh, did I forget to mention my daughter Katie is the Assistant Coach? Katie, who captained the Cal Bears her junior and senior years at Berkeley, is in her third season coaching at Michigan…and bought a condo in Ann Arbor last year. Yes, she earned the first-time homebuyer tax credit. She’s adjusted to the cold and snow nicely. But I remember the first time she called me and said, “Mom, it is snowing, and I fishtailed twice in the parking lot when I left to go out tonight…so I decided to stay home.” Good call.

Summers are especially nice in Ann Arbor, which has a thriving downtown filled with the typical college town restaurants, galleries, bars and boutiques! Every spring they host a parade of outrageous giant-size papier-mâché puppet creations called the FestiFools parade. I attended last year with Katie. What a blast! This year it is April 11th.


The puppets are created by students and community members who perform on downtown’s State Street, to the back beat of GROOVE, a percussion ensemble from the University. These huge handmade puppets represent everything from crazy dancing eggplants to dinosaurs and famous people. FestiFools is all about the three F’s: Fun, Free and Foolish! www.festifools.org

Ann Arbor is also home to the annual Top of the Park Music Festival, which runs for three weeks at the end of June, and an Art Fair in mid-July. The Art Fair attracts over 500,000 visitors annually, and was founded in 1960. It has been recognized as a top art fair in the nation many times…I hope to get back to visit one of their fun events this year.

Market Rate Update...and A Healthy Fun Fix!

Rates continue at very attractive levels, but are not expected to last here for long. The current 30 year fixed rates are hovering at 4.75% for loans under $417,000 and 4.875% for those that are up to $729,000.

Five year adjustable rates are still between 3.5% to 3.75%, based on loan amount. Of course these rates depend on a number of factors, such as FICO score, Loan-to-value, total debt ratios, property type, purpose of loan, i.e. purchase, cash-out refinance, etc.

Speaking of loan-to-value, although values appear to be stabilizing in most areas of Southern California, I am still seeing appraisals resulting in values lower than property owners expect. Be advised that appraisers must put the most emphasis on recent sales (primarily in the last 3 months) that are comparable in terms of age, size and amenities. Unfortunately, as we all know, the majority of sales are foreclosures or short sales.

Now for the Fun Fix…
For those of you who don’t know me well, I love Zumba. Well, to be honest, I love to dance. And Zumba class satisfies my itch in addition to providing a fabulous workout.


Cumbia has become my favorite dance, then Salsa, but Samba is the most aerobically demanding. I read an article in the Wall Street Journal today about an author who swears by Zumba and its health benefits. Read about her at www.wsj.com/workout.

I usually take classes at 24 Hour Fitness, but they are offered at many gyms and YMCA's etc. You can locate a class or an instructor anywhere in the world, at the Zumba website by just plugging in a City, Zip Code, or an Instructor name. www.zumba.com

Zumba uses a whole bunch of muscles we don’t normally use here in the good ‘ole USA, with a LOT of hip action. I hope to see you there sometime! You can’t miss me, I will be the one laughing!

Under Water Properties Still Spell a Seller's Market

Online real estate tracker Zillow www.zillow.com reports that the share of Orange County single-family homes with mortgages larger than the current value of the home — so-called “negative equity” or “underwater” — was 14.4% percent in the 4th quarter of 2009, barely up from Q3’s 14%.

If that percentage sounds low, it is because according to Steve Thomas at Altera Real Estate, distressed properties now represent 33% of the market in Orange County.
But the Thomas numbers are active sales. Zillow’s math covers all single family homes in O.C., including those not on the market. (About a quarter of homes here have no mortgage to begin with.)

“We estimate 62,988 single-family homes in negative equity in Q4 out of an estimated 436,163 single-family homes (with mortgages) overall in Orange County,” said Jill Simmons of Zillow.

The number of homeowners losing their homes to foreclosure across the country peaked in December, with more than one in every thousand homes being repo’d, a high since Zillow began recording this foreclosure data in 2000.

Back to Orange County statistics, Steve Thomas of Altera Real Estate writes,

“Current statistics…do not reflect that there are fewer distressed homes coming on the market; rather, they mean that increased demand is eating up the active distressed inventories. Over the past month, the number of distressed and non-distressed homes to hit the market has been increasing, but many are going off the market as pending sales just as quickly as they are coming on.

“The number of foreclosures increased in the past two weeks from 355 to 375. The expected market time for foreclosures is a sizzling 0.90 months, a deep seller’s market. Foreclosures garner so much activity that they are like individual mini auctions and the successful buyer is really the successful bidder.

“The number of short sales on the active inventory decreased by 69 and now totals 2,249. The expected market time for short sales is 1.63 months, also a deep seller’s market. 33.7% of the active inventory is distressed. Last year at this time 44% of the inventory was distressed.”

For the breakdown, go to the Mortgage Insider Blog

What does this mean for buyers? I have a number of pre-approved buyers with 20% down and better who have made multiple offers, but can't get one accepted. They are running into all-cash buyers, or buyers with higher down payments. It is extremely tough to get an offer accepted. It is important to provide a complete package at the offer stage and put as much down as possible to sweeten the deal in the eyes of the seller.

First Thursday Laguna Beach - Art Walk

I’ve been a big fan of Laguna’s monthly Art Walks for years. This Thursday is the twelfth anniversary of the event. It runs from 6:00 to 9:00 p.m. and is always entertaining, not only for the art but the people-watching. Plein air painting abounds, as it is very popular in Laguna, along with many other styles suitable for almost any appetite. Steve oftentimes gets new ideas, and completed a four-painting series last year that was inspired by the painting of Linda Christensen, who had a show at the Sue Greenwood Gallery. www.suegreenwoodfineart.com

Speaking of the Greenwood Gallery, my friend Sally Storch shows there regularly and always sells out! We met in college, at USC, and her openings typically are a great time to catch up with old friends.

I can’t make it this month due to Steve’s accident (it’s hard to get around Art Walk on crutches) but will look forward to March’s event!
www.firstthursdayartwalk.com

Rates, Credit Score Hints, Sales Stats and Risk Factors

Interest rates continue to be very attractive…in the 4’s to low 5’s depending on loan amount, loan-to-value, purpose of loan, and credit scores. But they have nowhere to go but up, and the market reacted poorly this week to the news that the government is definitely ending the purchase program for mortgage-backed securities as of March 31, 2010.

Speaking of credit scores, I have seen a number of credit reports recently where my client’s scores were hurt because they had closed credit card accounts. They THOUGHT they were doing the right thing, but they inadvertently hurt themselves. If you pay off a credit card, it isn’t smart to close the account. Keep it open, with a zero balance, and use it once every few months for minimal purchases such as gas or food, and pay it off. In this fashion you are increasing the credit “available” to you, but not using it. The goal is to have all balances on revolving credit at or below 30% of total credit available. High balances to total credit available are the primary culprit in driving down FICO scores, right behind collections or delinquent payments.

Interest rates today are very sensitive to FICO scores, and you will pay a price for any score below 720, and in some cases with larger loan amounts, scores below 740. It is tough out there!

Sales stats for Orange County show that home sales at the “low end” of the housing market – below $500,000 – consisted primarily of foreclosures and short sales, and accounted for all of the sales gains (increases in volume) seen in the last year.

The median sale price for single family homes in Orange County was $496,070 in December. Newport Beach posted a median price of $938,500 and Laguna Beach was at $1.23 million. The sales at the higher end of the spectrum, although much lower in volume, still helped to push the median prices up.

DataQuick reported that 20% of homes sold are going to investors (vs. primary housing) and almost 25% of homes sold to all-cash buyers.

What’s The Risk?

The recent terrorist attempt on a Northwest flight bound for Detroit hit close to home for me. My daughter, who lives in Ann Arbor, Michigan, was in Europe at the time and heading for Amsterdam where the fateful flight originated. Further, she was flying home to Detroit after the holidays.

So, what are the real chances of being involved in a terrorist event on an airplane? In the decade of the 2000’s, the only American fatalities occurred on 9/11, and including those stats, only one passenger in every 25 million was killed in a terrorist attack on an American airplane during the past ten years.

Contrast that with the chance of being hit by lightening…one in 500,000 each year. Further, the stats show that these violent passenger incidents –bombing, hijacking or sabotage- were five times less common in the 2000’s than in any decade from the 40’s through the 80’s. Source: Nate Silver http://www.FiveThirtyEight.com.

Mr. Silver opines that we would be more rational to focus on prevention of a nuclear terrorist attack that could affect millions.

So the bottom line, as I always reminded my children, is to be far more worried and cautious when driving your car than flying. And don’t stand under trees in a lightening storm!

Rate Update and Remedies for Post-Holiday Blues

Rates improved nicely by the end of last week. A new 30 year fixed rate loan, up to $729,000, is going to be somewhere south of 5%, down to 4.75% if your loan amount is below $417,000.

Five year fixed rates are still at or below 4% for loans up to $729,000. The CPI figures that came out at the end of the week were lower than expected, helping keep interest rates down, and the government spending spree for mortgage backed securities is also providing assistance.

However, keep in mind these rates won’t last since we have repeatedly been reminded that the mortgage-back securities buying program will end by the end of the first quarter this year. In addition, as soon as inflation raises its ugly head it will bode ill for interest rates.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

My prescription for the end-of-the-holidays blues is great food, wine and music.

On a recent Sunday afternoon we drove to downtown San Clemente and strolled the length of Del Mar for some window shopping. Yes, we bought some touristy gift-cards too! We headed for the San Clemente Wine Company to check it out after reading a few reviews in the local newspaper. This wine shop offers a comfortable tasting area in the back of the store, where for $15 you can taste a flight of 6 wines. We had cheese, crackers and some great reds…Pinot Noirs, Cabs, and Syrahs.

The SC Wine company specializes in moderately-priced wines from California, Australia and New Zealand. The owners are currently visiting in New Zealand to locate new wines for the shop. They regularly host vintners for special tasting events, and are open 7 days a week.

Next on my “fight the blues” list is Iva Lee’s restaurant, on Camino Capistrano in San Clemente. Offering outrageously good food and music, the theme is southern-style N’awlins all the way. Gumbo, catfish, fried green tomatoes, sweet potato fries and the like are all on the menu. Blues is the obvious music of choice, and we were lucky to catch the Blue Machine Band. They play regularly on Thursdays at Iva Lee’s but also appear in other Orange county venues.

If you love Blues and Cajun cooking, you can’t miss Iva Lee’s.
The restaurant was busy for a Thursday night, so call for a reservation. After it cleared out a bit, we took advantage and danced in the dining room near our table, and in the bar. Weekend crowds might make that a bit difficult however.

Last, but not least, we dined with friends at Bistango, an old favorite in Irvine near the airport. We were celebrating three birthdays, and as always the food was outstanding and the dancing was a blast. Bistango has live music every night, with a real live dance floor. We appreciated not only the cuisine, but the art as well, which is inspiring (at least inspiring for artists like the one I live with.) Definitely my special occasion choice!

I think I have beaten the blues. Now if only the hurricane will stop so I can go outside again!

Capo Beach Sunset

I took this photo in late December from our balcony in Capo Beach. The sunset is over the ocean, looking towards San Clemente Island and the southern tip of Catalina, and was one of the most spectacular we've seen!

Renter's Paradise?

The latest vacancy rates, 8% nationwide, reflect that the U.S. is a renter’s market. Rental vacancy rates are at a 30 year high, primarily due to the economy, but also due to competition from a wave of new supply that hit the market last year. The oversupply came from a lot of condo projects gone bad, that had to be converted into rental property.

If you are renting, now might be a good time to renegotiate your lease. Many landlords are offering enticements to tenants to renew.

Orange County is number seven on the list of biggest rent declines in the country, behind San Jose, Seattle, San Francisco, Las Vegas, New York and LA. Our decline in rental rates is just under 5%.

Thanks to falling home prices, and record low mortgage rates, it now costs less in most markets to own than over the last decade, on a mortgage-payment-to-rent-payment basis. Of course, this doesn’t take into account the down payment required for ownership.

Remember-- the Homebuyer Tax Credit currently expires in June of 2010, and must be under purchase contract by April 30th to qualify. I understand the State is considering a renewal of a statewide tax credit that may pick up the slack, at least here in California. That is, if they don’t run out of money like they did last time!

Greenhouse Design

My son Kenny has designed a greenhouse for his college, Marlboro, located in Vermont.

He plans to start building in the spring--once the snow thaws and the building permits are approved by the local jurisdiction.

When it is complete, the college will be able to grow produce for their cafeteria year round, instead of just during the spring-summer-fall season.

Here is a link to his design on YouTube, or you can find it yourself on YouTube by searching for Marlboro Greenhouse.

greenhouse

Foothill High Recognized in National Rankings

US News & World Report released their national high school rankings in December, and Foothill High School, the Alma Mater of my three children, received Silver honors. Only 100 schools nationwide received Gold honors, and 461 received Silver honors.

Foothill was joined by Beckman High in the Tustin School District, and was honored among a total of 24 high schools in Orange County.

To check out the entire list, go to http://www.usnews.com/sections/education/high-schools.

There were 1750 schools recognized nationwide in all categories--Gold, Silver, Bronze and Honorable Mention.

Way to go, TUSD!