Moreno Workgroup Blog

Since it’s inception I have always been against the pre-payment penalty it is good to know that there are some people in the goverment who care about how the American people are getting screwed on this …..

Can the Fed ban prepayment penalties? This story appeared over the weekend: “The Federal Reserve, in a bid to end abusive lending practices, will ban penalties on some high-cost mortgages that make it harder for people to refinance, a person familiar with the decision said. The prohibition on prepayment penalties, part of a broader Fed response to the collapse of the subprime mortgage market, targets high-cost loans with interest rates that reset in the first four years, the person said. Rules also would limit charges when borrowers seek to pay off mortgages in the first two years on other types of high-priced loans, the person said. The Federal Reserve Board of Governors will vote July 14 on a series of rules to strengthen protections for borrowers taking out subprime home loans. Lenders use prepayment penalties to discourage borrowers from refinancing their loans and can trap borrowers in loans they can’t afford, consumer advocates said.” 

I just finish reading an article on Inman news talking about a “huge decline” in home sales. There was a lot of other bad news that you could have fallen into and started a pity party with. However I am one to always see the glass half full. While I am optimistic I am not foolish. There is still a lot that needs to happen before I jump up and scream “Hallelujah! The Market has recovered!”

The first is that the foreclosure market has to stop hemorrhaging. The increase in the FHA guidelines has done little to prevent this from happening. Nor have I experienced any help in the recovery from FHA adding new buyers. I am not well versed and may seem a little naïve however it appears to me that they (Congress & Senate) failed to realize is that it takes investors to buy the loans. Regardless of how they are backed if there is little confidence in the housing industry then few investors will be backing those notes, regardless of what guarantees they have. Am I missing something here?

Anywho …Antioch is doing alright. I see the glass half full because while home sales have gone down the listing count for the same period has gone down also. So while fewer inventories are being sold there is less inventory coming on the market. So slowly but surely our plethora of homes are being reduced. 2007 showed a reduction in homes being listed a drop of approximately 300 homes from 2006. However, it is too soon to say if we will be deluged with more foreclosed and short sale listings in 2008. The charts show a slow downward trajectory.

Another insight is that I continue to see multiple offers on REO listings that have been cleaned up. It would do a bank well to spend a few thousand to make a home presentable before selling them. Wachovia Bank listings seem to be doing that and my present experience is that they are the ones to get the multiple offers which usually drive the price up.

BTW : The average home price for a home in Antioch is the same it was back in February of 2003.

Nuff said… Robert Moreno

The market is picking up and on many of the deals I am working there have been multiple offers. I also see the prices rising a bit as the foreclosure market gets flushed out with the bargain hunters. I do expect some more foreclosures to hit the market each month as the ARM rates adjust and people start walking away from their homes.

There has been much ballyhoo about the FED helping with the “Stimulus Package” that has gone through Congress but with the talk of recession many consumers have climbed back on the fence. I suspect this will hurt what the Stimulus Package was suppose to do, which is open the market to new buyers with a good loans at good rates.

Which brings us to the paradox of loan rates. The Fed keeps dropping the rates (short term rates) yet the rates go higher, what’s up with that. No one knows for sure however I suspect that the banks are dropping the prices down quite a bit on the homes they are selling as foreclosures and now they want to make it back some way …so what better way to recoup if your price has to be low ….raise the rates. Just my opinion, not substantiated.

Anywho …. when folks ask me …”Is this a good time to buy?” I always ask ….how long do you expect to stay in your new home? If you are looking to speculate then I would say we need to do some very extensive homework and make sure you will get a return in a year or two. There are many areas that are still appreciating. We need to find a place that is. It may not be where you want to live but you will make a profit. Or if you plan on staying in your home for at least five years then I would say, “ It is as good a time to buy as ever. Five years should be more than adequate for the housing market to recover if we were to look at historical trends. This town in California is as good as any.”

Nuff said…… Robert Moreno

IMPORTANT NEWS FOR HOME OWNERS UNDER PRESSURE OF FORECLOSURE

The following news is important to the economy of the United States and to the well being of our investments in real estate. Our investments for most of us are our homes. It is a crucial part of the recovery that this package proposed by the House be accepted by the president and Senate. Getting this packaged implemented is part of what I had spoken about before in hoping for a recovery this year.
Once this package has been passed we will still not be out of the woods unless it is implemented in a way to prevent waste and fraud. However if the government will set up an effective strategy to make this happen then this will curb the hemorrhaging our housing market has been suffering with foreclosures.
This consequently will prevent the flood of foreclosures from hitting the market place driving housing prices down further. With the flow of foreclosures slowing down it will allow our present overloaded inventories an opportunity to go down. This will allow the leverage of supply and demand to balance out.
As I had previously printed; the time to buy could be passing by. I see today many of the homes that are in foreclosure being bought up by foreign investors. They see the profits they can make off the foreclosure market.
I have tried to tell you this before but few have jumped off the fence and will continue to watch as opportunity slips by. If you would like to know how yo can take advantage of the foreclosure market right now call me at 925-437-0567.
Robert Moreno  Broker, Realtor  Moreno WorkGroup
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A component of the government’s tentative economic stimulus package announced Thursday would give an immediate lift to buyers and sellers in higher-priced housing markets.
The package, agreed upon by Democratic and Republican members of   the House, would allow government-sponsored Fannie Mae and Freddie Mac to buy mortgages at least 50 percent more expensive than the current $417,000 limit. The Senate and White House still must sign off on the proposed stimulus plan, which also includes tax rebates for Americans.
House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio announced the deal in a press conference Thursday. A higher cap, to apply for one year, would breathe life into housing markets in New York, California and other expensive markets because lenders would feel more comfortable knowing Fannie and Freddie can buy and package the loans into securities that investors consider to be relatively safe.
To address the mortgage crisis, the package also raises limits on Federal Housing Administration loans, which are insured by the government in event of default, congressional aides said.

How economic stimulus package addresses mortgage crisis

President Bush Wednesday signed off on the $168 billion stimulus packaged approved by Congress last week, which, in addition to tax rebates for millions of working Americans and business owners, includes a vital, but temporary increase in the conforming loan limit.  The economic stimulus package will allow the Federal Housing Administration, as well as Fannie Mae and Freddie Mac, to offer mortgages above the current conforming loan limit of $417,000 to as much as $729,750 in high-cost areas using a formula that considers an area’s median home price. The increase would only apply to loans originated between July 1, 2007 and Dec. 31, 2008. A host of details remain to be worked out, including how the median home price is established.

MAKING SENSE OF THE STORY FOR CONSUMERS

· It could be several months before the impact is felt in the mortgage markets. Wall Street is still working out whether investors will want to bundle securitized loans above $417,000 with loans below that level, or if they will invest in them separately.

· Rates for such loans might be higher because banks fear larger loans are riskier, but they’d still likely be lower than current jumbo rates.

· Even though the proposal does not apply to loans made before July 1, borrowers with older mortgages could refinance into new loans that would be sold to Fannie and Freddie, because those loans would be considered new loans.

“If rates were cut .75%, why aren’t you giving me .75% on my 30-yr lock?” 

Remember “Fed Funds” is the rate that banks can borrow money from each other to keep their reserve amounts in line. The “Discount Rate” is the interest rate at which an eligible financial institution may borrow funds directly from the Federal Reserve when their reserves dip below the reserve requirement. It’s considered the last resort for banks, which usually borrow from each other.

The Federal Reserve can change either – they can’t change mortgage rates!  If any borrower asks you, “If the Fed dropped their rates by .50%, why didn’t mortgage rates drop?” this site may be a huge help to you. As you will see, although they trend together, there is no precise correlation: http://library.hsh.com/?row_id=91 

Mortgage rates are dependent upon many more complicated factors than the Fed raising or lowering them. The supply of mortgages, the demand by investors for them, the value of the servicing, the credit quality of the borrower, etc. all factor into mortgage rate.   

Beyond the benefits of security and equity that most people associate with owning a home I would like you to consider some other financial benefits that many people do not really consider. While many people think about the debt and mortgage payment that comes with owning a home there are underlying tax benefits that we hope to make clear for you in this article.  

For example: 

If you rent a house for $1,000 a month payment it would cost you $12,000 a year to rent that property. $12,000 that you never would see again, plus you don’t get credit from the IRS. 

If you bought that same property for $100,000 and it cost you $1,200 a month to rent. On the surface it looks like it would cost you $200 extra a month which turns out to be $2,400 extra per year. 

Let’s look at the reality of this situation. 

You are buying a property. When you have a mortgage on a property, you are eligible to take the mortgage interest, which typically will be close to $1,100 a month, as a tax deduction. 

So you’re looking at $12,000 a year as your interest deduction. That means you can reduce your taxable income by $12,000. If you are in a 35% tax bracket you are looking at about $4,000 of real dollar savings on your income tax just from owning that property. 

So with a $4,000 savings… already your payments have dropped from $12,000 a year down to $8,000 a year. 

Now let’s look at the next piece, which is appreciation. If the house goes up the same as the national average, which is about 6% a year, the $100,000 property will go up to $106,000 in value. 

Consequently, you’ve made $6,000 on your property in one year. 

Let’s subtract that $6,000 savings from what’s left of your monthly payment, which is the $8,000 we mentioned above. Remember, you paid $12,000 for your monthly payment minus $4,000 in your tax saving, minus $6,000 in your appreciation.  

Now you’re down to $2,000 a year in the cost of purchasing your new home. This is how to assess buying property AND a great way to build a long-term assets.  

For the majority of Americans, their home is their biggest asset. If you’re renting all your life, you’re never going to build that asset.