RealEstate680

 I received this from an anonymous source that claims it’s a memo from Fannie Mae to Lenders.  I believe it probably true. 

FNMA has released their proposed policy to lenders for comment, however, their final policy may not be released for a while.  

In the current real estate environment of soft markets and declining property values some borrowers are finding they are upside down on their home and owe more than the property is worth.   This has led to a new scheme that we’re seeing in many areas of the country referred to as “Buy and Bail”.  

Here is an example of the new scheme that we recently witnessed:  The borrower owed $430,000 on their existing house but the value of the house was roughly $270,000.  Houses very similar to the borrower’s current residence were selling for $270,000 in the same or competing neighborhoods.   The borrower applied for a loan to purchase a new home and claimed that he will lease out the existing house.   Once the new transaction closes, the borrower intended to walk away from the previous home leaving the lender with yet another foreclosure.

This scheme has a high risk of fraud because the lease agreement on the borrower’s existing house is often fraudulent.   In an effort to stop this from happening we are implementing the following guidelines immediately for any borrower who has an existing home that is either listed or will be kept as a second home or investment property that is in either a (i) Soft Market Category 4 or 5 or (ii) area in which the appraisal indicates that values are declining or there is an over supply or a marketing time in excess of 6 months.

Existing Property is Listed For Sale:
The borrower must qualify for both the PITI on the existing property and the PITI on the new proposed property.

Conversion of the existing property to a Second Home:
The borrower must qualify for both the PITI on the existing property and the PITI on the new proposed property.
The borrower must have 6 months PITI in reserves for BOTH properties.  We may consider reserves of no less than 2 months for both properties if there is any documented equity in the existing property. 

Conversion of the existing property to an Investment Property (with a positive equity position)
75% of the rental income may be used to offset the PITI of the existing property if the borrower has a positive equity position in the property.  The equity position must be based on a current AVM and the total liens against the property.
The rental income must be documented by a fully executed copy of a lease that extends for at least a 12 month term and receipt of a security deposit from the proposed tenant deposited into the borrower’s account.  The loan specialist must verify the lease term and rental amount by contacting the tenant by phone.

Conversion of the existing property to an Investment Property (with a negative equity position)
If the existing property is in a negative equity position NO credit may be given to any proposed rental income and the borrower must qualify with the full PITI of both properties.
The borrower must have 6 months PITI in reserves for BOTH properties.

I’ve not seen this happen in the Walnut Creek home market, and I did not publish this to encourage anyone to try to committ fraud.  May point is that this industry is self correcting and we will come out the other end of theis mess with better and more accurate guidlines and less creed.

Housing supply is defined by how many months would it take to sell all the existing inventory if no additional homes came on the market.

For example, in Walnut Creek we have 328 homes on the Multiple Listing Service as of today.  According to TRENDGRAPHIX, as real estate data company, this would take approximately 4.6 month to sell.

Here’s the interesting news.  TRENDGRAPHIX show that the worst month we had in Walnut Creek with housing supply was September 2007.  Real Estate in Walnut Creek had 8.6 month of inventory. We have absorbed about 50% of our supply in nine months.  There is a very good argument for the Walnut Creek housing market to be in balance.

Of course different price ranges have different statistics, I find this very interesting and hope that families that want to buy in Walnut Creek begin the process.  Sellers should also look at these statistics, as it’s a good time to look at specific data to see if there is a shortage of inventory in their neighborhood and price range.

Homes in Walnut Creek and the 680 corridor have been excluded from Federal and State grants for years.  The purchase price and loan amounts were always too high.  The federal stimulus package continues to assist people who have the income to support the monthly mortgage payments to live in Walnut Creek and central Contra Costa County.  And here’s how.

The Nehemiah Program has been around for decades it has helped over a quarter of a million Americans purchase homes. Unlike some down payment assistance programs, Nehemiah offers down payment help to anyone who qualifies for an approved FHA loan. There are no limits on income or assets, but buyers must have an FHA loan or be pre-approved for an FHA mortgage. 

Nehemiah will allow up to 6% of the final contract sales price for down payment and/or closing costs.  It’s available for first-time and repeat homebuyers.  You can use it  for new construction and resale homes, with no geographical restrictions.

 This means a FHA loan up to a $750,000 loan amount with a supporting Nehemiah grant to cover the down payment. I’m sure certain restrictions are attache to this product, but if you want to buy a Walnut Creek home with nothing down, this may be one fo the ways to do it.

Simple arithmetic. 

The California State Department of Education has selected five Walnut Creek elementary schools to be named to list of CALIFORNIA DISTINGUISHED SCHOOLS.  This is a annual award that has gone to elementary schools in Walnut Creek for many years.  This year it means even more.

Walnut Creek real estate continues to crawl through these very tough times.  More inventory means more opportunity for home buyers.  Currently on the Walnut Creek MLS there are 318 homes for sale in Walnut Creek.  Condos from the low $200,000 to 6,000 square foot homes with an asking price of $3.5 million.  Indeed there is something for everyone.

The other piece of the pie is how long it’s taking homes to sell in Walnut Creek.  A great home on Rudger had mulitiple offers on 4 days and the flip side shows homes in Walnut Creek with days on market of over one year.  There is a tremendous amount of opportunity in Walnut Creek real estate right now.  Are you ready to take a look?

Days on market is a good way to keep in touch with home sales.  Homes sales in Brentwood continue to fluctuate, but the overall signs are improving.

Walnut Creek home sales has always been the last to soften and the first to rebound when looking at the Contra Costa real estate trends.  There are amazing similarities to these graphs.

Brentwood continues to experience a lot of bank owned properties, but the trends are very promising. 

It’s a great time to buy residential real estate!

I had the pleasure of meeting Kenneth Session today in his office in Oakland, California.  Kenny has created an incredible portfolio of REO, that’s “real estate owned by banks,” to those outside the real estate business.  His portfolio is in Alameda and Contra Costa Counties.

http://www.reuters.com/article/pressRelease/idUS16943+11-Jan-2008+BW20080111

The link above is an article that includes Kenny Sessions with Mayor Ron Dellums of Oakland, California.  It’s be coming very clear that a hand full of real estate brokers control this part of the market.  Stay tuned for more information about bank owned properties in Contra Costa County.

Walnut Creek and the 680 corridor has its share of SHORT SALES.  A short sales is when a lender accepts a reduced amount on the mortgage to avoid foreclosure.  The real estate community in Contra Costa County is just learning the procedures of short sales.  If you are interested in learning more about short sales in Walnut Creek, Pleasant Hill and the 680 corridor, I can show your the listings; and we can create a game plan that meets the needs of the buyer, seller and lender.

Whether you are buying or selling, it’s very important to deal with a real estate professioanl that knows how the short sale process works and can guide you through.  Sellers have to disclose just like a normal sale and buyers have to do the inspections needed to show the condition of the home.  In many cases this is a great way for a buyer to buy a home at a discount and for a seller to avoid foreclosure and possible bankruptcy.

We live in a very diverse county.  On the positive side, we have always had good employment, measured growth and although people in east county will argue; good transportation.  BART put Contra Costa on the map.  In the 1980s corporations moved out of San Francisco to Oakland, San Ramon and Walnut Creek.  Cheaper rents, yes; but also a better and less expensive labor force.

The past 12 months in Conta Costa County has produced a large increase in mortgage defaults.  Buyers are still relectant to get into the market.  “LOOKING FOR THE BOTTOM OF THE REAL ESTATE MARKET.”

According to Data-Quick, a real estate reporting company; last week Walnut Creek did not add any foreclosures, neither did Alamo or Danville, Lafayette, nope and Orinda and Moraga–not a one.  The 680 and 24 corridor has a few homes owned buy banks and several homeowners trying to get out from underneath their debts.

Take the time to research the real estate markets that interest you.  Walnut Creek is a good example of a buyers market.  All prices ranges from first time hone buyers to multi million dollar homes.  The new FHA financing to a perfect tool for mortgages up to $725,000 in Walnut Creek, Concord, Pleasant Hill, etc.

It’s a great time to buy a homes!

A very strong argument can be made that Martinez homes prices have increased after a year of steady decline.  The graphs above show a noticeable increase in prices.

Can the same argument be made for Walnut Creek median homes prices?   These $20,000 to $30,000 bounces are a fantastic tool for home buying negotiation. 

From March, 2006 to present, buying power has increased over $100,000.  This is very powerful buying power for a Walnut Creek home-buyer.  Use these tremendous buying and selling tools because it is a absolutely fantastic time to buy and sell a home.

The Days on Market is a indicator that homes are seller faster in the market.  The graphs above shows that Walnut Creek single family homes are selling in less days than the past 60 days.  This may be a very important indicator that buyers are coming back into the market.

Please let me know if you are looking for similar information for other east bay areas.