Archive for March, 2009
Homeowners Warned By AG of New Scam
HOME LOANS, INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR SELLERS
Another loan modification scam has been discovered and this time, California Attorney General Edmund G. Brown Jr., warned that scam artists “have sunk to a new low” by using forged bank letterhead to con homeowners with unaffordable mortgages to pay thousands for promised but non-existent loan modification services.
The key thing homeowners should know is, in most cases, it is illegal for a person or company to charge upfront fees to begin a loan modification. Never pay anyone, except perhaps an attorney, to perform the service of negotiating with a lender to secure a change of loan terms. Scam artists will make “extravagant promises” claiming they can save your home when in reality they do nothing but separate you from your hard-earned money.
A 22-year old woman in North Hills was arrested last week for running a loan modification scam using forged bank letterhead. Anna Santos is facing charges of money-laundering,conspiracy,and four counts of grand theft. Her scam involved sending out a flyer with a bold header that read “Final Notice” and advised homeowners that they”qualified for a special program to save their home from foreclosure”. Scam artists use public records to find their victims who have been served with a “Notice of Default” (NOD), the first step in the foreclosure process.
Once the victims responded to the flyer, follow-up letters were sent notifying them the lender has confirmed their application for a loan modification. Some also received loan documents that appeared to be from the victim’s lender. They were forgeries.
They were then instructed to send mortgage payments to the “Payment Processing Department” which were bank accounts opened by the scammers. Ms. Santos picked up the payments at a PO BOX and never sent the payments to a lender. Many lost over $6,000 each in the loan modification scam.
Borrowers at risk for foreclosure should never respond to a mail solicitation offering help. Call your lender directly or check the California Department Of Real Estate Website for a list of approved foreclosure prevention consultants.
Click here for the list: http://www.rcac.org/news.aspx?80
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
B of A To Offer More Jumbo Loans
HOME LOANS, INDUSTRY NEWS, TIPS FOR BUYERS, TIPS FOR SELLERS
Bank of America has reviewed their balance sheets and decided to allocate more funds for originating jumbo loans. Jumbo loans generally range over $417,000 and can start at $729,750 in high cost areas. This is good news for borrowers seeking loans or refinances of expensive homes.
To handle the demand, the bank has added 3,000 employees to its loan origination unit, 500 from the home-equity division and 1000 new hires. B of A hopes to tap “mass-affluent” customers form Merrill Lynch as it integrates that company into its operations.
Barbara Desoer, head of the banks mortgage, home-equity and insurance services department also stated the “bank’s purchae of Countrywide Financial Corp was paying off” according to the Reuters News article. She went on to say “volume is good, application quality is holding up and the acquisition of Countrywide is really paying off for us with additional capacity.”
I wonder how they are handling all that toxic mortgage paper they inherited when they bought Countrywide and Merrill Lynch? More bailout money anyone?
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Mortgage Rates Drop, Qualifying Bar Rises
HOME LOANS, INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
Local lenders are quoting 30-year fixed rates below 5%. In fact, a rate close to 4.5% is possible if you make the grade. That means a down payment of 20% or more, a credit score of 720 or better, a reliable income that can be documented and have low debt. The other factor that is out of a borrowers control is buying in an area with stable prices.
Like it or not, the Redding area continues to see price erosion. This has caused appraisers to error on the low side when doing appraisals, especially if you are doing a refinance to take cash out of your property. Purchase loans at least are based on market forces of supply and demand and knowledgeable buyers and sellers negotiating a price that typically reflects market value.
Most of us in the real estate industry believe the underwriters have gone overboard by scrutinizing even the most qualified borrowers. In their defense, underwriters are reacting to significant tightening of rules by the secondary market (think Fannie Mae and Freddie Mac). Underwriters must not only underwrite loans that satisfy their company’s rules but must also make sure the stringent rules of the secondary market are met or the lender will have to keep the loan in their portfolio. Lenders typically package and sell the loans to recoup their capital. Most of their profits come from upfront fees and loan servicing.
What’s the answer? Here are my suggestions:
- Before you start looking for a home to buy or apply for a refinance, pull your credit reports. Pay the extra money to get your credit scores from the three credit bureaus. Review the reports for accuracy and make any needed corrections/explanations.
- Find a local lender that you can meet face-to-face with and ask if you can be preapproved (not prequalified) for a loan. This involves having all your financial information checked and verified.
- Consider a portfolio loan if you can’t qualify for the 30-year fixed. Many loans have payments fixed for 5-7 years before adjusting. By then, things should get back to normal and you can refinance with a fixed rate loan.
- Once you have a full stamp of approval, begin your home search.
Back in the good ol’ days, a few years back, fogging a mirror or casting a shadow was all that was required to get a loan. We are all paying the price today for these past mistakes. Blame the lack of sound business practices for the erosion of real estate values and retirement account declines. Will the banking industry ever learn?
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
REP GMAC On The Move
INDUSTRY NEWS, REAL ESTATE PRACTICE, REDDING RECREATION, SHASTA COUNTY
Apparently the word is not out yet about our move to a new West Redding location. Over the next few days, agents and staff will pack up and move either to our Hilltop office or new location at the corner of Court and Placer. The building has undergone extensive remodeling and promises to bring state-of-the-art technology capabilities. Bridge Mortgage will share the office space with Real Estate Professionals GMAC.
Originally, the Court Street property housed a mortuary before I arrived in town. That was demolished to make room for the current building which housed a title and escrow office over the past few decades. The location is convenient to county facilities including the planning, building and assessor’s office. This area is likely to see tremendous change when the new county courthouse is constructed nearby.
I will miss the Cobblestone Court office location I have called home for 16 years but also look forward to being much closer to my West Redding abode. Downtown eateries can expect new customers from the 40+ new arrivals within easy walking distance of their dining establishments. Some of the lunch spots I visited when I worked for 10 years at Medley Realty on Market Street in the 80’s and 90’s may see my shadow grace their doorways once again. Pat and Sandy, see you soon at The Sandwichery!
Shasta County Jail inmates will notice more activity looking out their east facing vertical windows once our busy office comes to life. The post office will be nearby when important snail mail documents must be deposited. Market Fest will be an easy walk after Thursday work day. Carnegie’s will beckon on those 100+ degree days when we need to wet our whistle.
Change is the sign of the times and I look forward to new memories in a new location with old friends. Stop by and say hi if you get the chance.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Bank Unveils “Homeownership Centers”
HOME LOANS, INDUSTRY NEWS, TIPS FOR SELLERS
Finally, one bank is taking the bull by the horns to slow the rate of home foreclosures. JP Morgan Chase developed a new concept to aid its customers at risk of losing their homes to foreclosure. The centers are staffed with counselors that meet one-on-one with customers of Washington Mutual and EMC, the former lending arm of Bear Stearns.
The centers are opening in areas with high rates of delinquent loans. The bank plans to have two dozen centers 
open nationwide by April including nine in California. Counselors promise to analyze each borrowers financial situation and give them a firm answer, if they qualify for a loan modification, one way or the other, within 30 days of their face-t0-face meeting.
Up to this point, this task was handled over the phone with lackluster results. The failure has been blamed on bank employees not taking the time necessary to fully analyze the ability of borrowers to handle a modified loan payment. Early indicators are the majority of these loan modifications fail within 6 months after homeowners fall behind, even with the lower payments.
In fact, most of the homeowners in trouble today are not the bad apples pegged to the subprime loan debacle. More than 80% cite a recent job loss or decline in income due to reduced hours as the reason they can no longer afford their house payments. Banks must decide if it is better to modify a loan or cut their losses and foreclose to get the property off the books.
I hope other banks will follow JP Morgan Chase’s lead. There will be no light at the end of the tunnel for the recession until foreclosure activity recedes to historic norms.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Banks Barred from Real Estate
INDUSTRY NEWS, REAL ESTATE LEGISLATION, REAL ESTATE PRACTICE
When President Obama signed the Omnibus Appropriations Bill into law last week, he permanently banned national banks and other financial institutions from engaging in the practice of selling real estate. The bill prevents the Treasury Department and the Federal Reserve from creating rules that would allow such activities. The banks have been pushing to enter the real estate business ever since former President Bush took office more than eight years ago.
The Bush administration sought to expand the authority of national banks to engage in real estate development and other real estate related practices, including sales. Had the Bush administration been successful, bank employees could engage in the same real estate practices that states require a real estate license for.
The current banking fiasco should be proof enough that banks should not be dabbling in real estate sales and development. Banks have failed to oversee their own activities which were rife with fraud and corruption. Underwriters looked the other way in order to get those toxic mortgages out into the marketplace. Wall Street aided the banks by providing seemingly endless streams of capital to fund these risky loans. Greed went unchecked.
The news of AIG awarding hundreds of millions in bonuses to retain employees that brought the world financial markets to their knees is ample proof these industries should be kept separate. Realtors have fought and won this long battle. Hallelujah!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Redding Chamber Manager Briefs Realtors, Compliments Missy
LOCAL GOVERNMENT, REDDING LIFESTYLES, SHASTA COUNTY
Frank Stazzarino,Jr., President of the Redding Chamber of Commerce, brought Realtors up to
date on the business climate here in Redding. The Chamber represents 1200 members and 14,000 individuals that work at these businesses. Unlike other Chambers, Redding Chamber of Commerce does not accept donations from any public agencies.
The Chamber’s mission is to promote and protect businesses. My father worked as a chamber manager in Yakima, Alhambra and Burbank during the 50’s, 60’s and 70’s so I can relate to Frank’s endeavours. They organize social events that feature local businesses and work to fight taxes and fees that burden business owners. If businesses are profitable, the community benefits as those dollars circulate through local economy because of the multiplier effect.
The Internet has changed how businesses operate today. Businesses must adjust to the fact consumers can buy many products and services online. Of course, he would prefer area residents shop locally.
He mentioned the political hot water the Chamber, Builders Exchange and Board of Realtors got into a few years back when these business groups funded a thorough audit of the city’s finances. The end result was Dr. Fratus spotlighted, among other things, the need to address health insurance and retirement benefits before they spiraled out of control. The recent economic downturn, and new GASB accounting rules, have forced the city council to take a long hard look at these perks. The Fratus study was years ahead of its time in its revelations. If tax revenues hadn’t dropped off dramatically, I believe the city would still be turning a blind eye to these future financial liabilities.
Speaking of politics, Frank is impressed with the newest addition to the city council. Missy McArthur has spent a considerable amount of time meeting with business leaders to learn the problems they are facing and soliciting ideas for potential solutions. The election also allowed businesses to ask important questions about city finances, policies and impacts on the local business climate.
Positive projects on the horizon include the $211 million Shasta County courthouse, delayed but forthcoming Veterans Home and oh so popular Trader Joe’s (opening May 1). He also pointed out the recent completion of the mall roof removal downtown and the discussions about possibly retrofitting an existing building for the police station. He also commented on the strong sense of volunteerism that exists in our community compared to other places he has lived and worked.
He closed by encouraging members to study the ballot measures that will attempt to address the dire state budget problems. He also suggested attendees consider observing a city council meeting. He said you can even watch the city council meetings online while resting comfortably in your pajamas at home, whenever you want! OK, I’m starting to feel guilty!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Pulse Detected in Local Real Estate Market
REAL ESTATE PRACTICE, SHASTA COUNTY, SHORT SALES, TIPS FOR BUYERS, TIPS FOR SELLERS
Word of mouth indicates sales activity is picking up in urban areas across the state. What about Redding? Are homes selling? Are buyers buying? Well, it depends!
I have several buyers actively looking to buy. Like most buyers these days, they are either first-time buyers or investors looking to take advantage of today’s low housing prices. The most important factor determining whether or not you will sell your home today is price. Homes under $300,000 are hot. Below $200,000, take a number. Bank repo’s? SOLD!
Buyers are finding stiff competition if they are focused on entry-level homes, especially if they are bank repo’s. Banks anxious to unload properties are aggressively pricing their homes, offering help for buyers to pay closing costs and offering above par commissions to real estate agents that produce a buyer.
In some cases, banks appear to be intentionally under pricing homes they are listing for sale to generate multiple offers and spark bidding wars. Earlier this week I checked on a bank repo on behalf of a client in Shasta Lake City that had just sold after one of four competing buyers produced the winning bid. I wrote an offer yesterday for a buyer on a home that just hit the market and it already has one other offer (so far)!
Farfield, California had the largest 4th quarter sales increase according to a ranking of 25 ZIP codes with the most improved sales volume in the US compiled by Business Week. Sunbelt states beside California with cities making the list include Florida, Arizona and Nevada. The increase in activity is attributed to price drops and cash-ready investors and first-time buyers making multiple offers on distressed properties.
In February, 121 homes sold. Homes priced under $350,000 represented 88% of the sales activity. Nothing sold over the $550,000 mark. The trend has been ever increasing demand at the lower end of the price spectrum with about half the home sales priced below $200,000. One other noteworthy trend is distress sales are nearly half the sales volume of homes sold in the Shasta MLS. Last year, distress sales (bank repo’s and short sales) were 32% of the home sales volume.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Be Wary of Owner Financing for Real Estate Purchases
HOME LOANS, SHASTA COUNTY, TIPS FOR BUYERS
The strained real estate market sales environment today has seen a resurgence 
of seller financing terms offered as an incentive to lure buyers to bite. Unlike decades ago when creative financing was common during tough economic times, today very few sellers are truly in a position to offer owner financing.
In the case where a property is owned outright, free of any loan liens, a seller can finance the purchase to a prospective purchaser. Likewise, if the seller has a small loan that will be paid in full at the time of sale using some or all of the buyers downpayment, the seller would again be in a position to carry the financing.
Of the 1544 listings on the Shasta MLS, 97 are offering owner financing. A closer look reveals many of these properties are encumbered with loans that are probably not assumable. Most loans originated since the late 1980’s require full assumption by a new buyer or are not assumable at all. Creative financing known as wrap-around loans or all-inclusive trust deeds can be risky for a buyer. Since most bank loans contain an acceleration clause, meaning the lender can call the entire loan due and payable upon title transfer, any creative attempts by a seller to wrap an existing loan without authorization from the existing lien holder, can trigger the bank to require the entire loan due and start foreclosure proceedings if the owner can’t pay off the loan.
The problem starts when a buyer tries to strike a deal with a seller using creative terms without realizing the legal implications the financing scenario can create. It’s possible the buyer will make a large downpayment, close escrow and then find out the lender has discovered their loan was wrapped with another loan without their written permission. This can trigger the acceleration of the loan. If the buyer can’t refinance and pay the lender off, the bank forecloses and the buyer loses any money invested.
Creative financing should be reviewed by an attorney and/or accountant to make certain the loan does not have any undisclosed consequences. Buyers should work with a reputable agent and seek legal advice if they don’t fully understand the loan terms. Any such loans arranged by a real estate licensee must be accompanied by a detailed financing disclosure statement which clearly addresses all terms and conditions of financing including:
- Interest rate
- Loan term
- Balloon payment due date and amount (if any)
- Monthly payment
- Late fee and grace period
- Loss payee clause on insurance
- Tax service
- Details of senior liens, if any
- Type of security instrument (deed of trust, all-inclusive, etc)
- Tax Id numbers for tax reporting purposes
- Prepayment penalty (if any)
- Recording of documents
- Title insurance
If you are considering buying real estate with owner financing, make sure you have someone looking out for your best interests. Contact me if you need assistance or have any questions.
The bottom line: If you see a property being represented as offering owner financing, ask if the property is free and clear of any liens. If so, proceed cautiously and make sure you have a real estate professional looking out for your interests. Contact me if I can help.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
CalHFA Halts Lending
HOME LOANS, INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS
Starting last fall, investors stopped buying mortgage bonds, a vital source of capital for state agencies that funded loans with below market interest rates for first-time buyers . The California Housing Finance Agency (CalHFA) used bond sales to, in turn, offer mortgages with interest rates about 1% lower than similar loans in the market place. Many states have curtailed lending activity while California, along with Texas and Wisconsin, have suspended their programs altogether according to a recent article in The Wall Street Journal.
The problem has nothing to do with bad lending practices. Despite many of the borrowers being low to moderate income, they were required to have stable incomes and good credit to take advantage of a state agency loan program. The market meltdown scared investors away from buying the state bonds combined with “the disappearance of investors who can take advantage of tax-exempt securities” according to the journalist. “As investors fled, interest rates on municipal bonds surged to the point where state agencies could no longer offer attractive mortgage rates.”
President Obama has expressed an interest in assisting state housing finance agencies but no details have been divulged. Last year, state agencies requested Congress raise the $17 billion limit on how much they could lend by $11 billion after record years in 2007 and 2008. The change was approved but the bond market collapsed at about the same time. States that are continuing their programs now price their loans above 7%, effectively taking them out of the mortgage loan market. They should consider following California’s lead by suspending their programs until bond prices recede.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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