American Pacific Mortgage

American Pacific Mortgage

Thursday, May 27, 2010

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 These fixed rate loans require that all cash is withdrawn at the time of loan closing.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.


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 expos├ęs 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.

Wednesday, May 19, 2010

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

Wednesday, May 12, 2010

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, 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.


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.


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.


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!

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.


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!

Friday, May 7, 2010

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!