In Ventura County and all of California loan modification is the option most home owners are exploring in order to keep their homes.  With a loan modification the home owner’s current lender agrees to reconstruct the loan in a way that the home owner can afford to make the payments.  Loan modifications differ from refinancing in many ways.  In today’s Real Estate market where many home owners owe more than their home’s current appraised value, loan modification seems to be the preferred and only alternative to refinancing.

Who Is most likely to Qualify For Loan Modification

• Home owners who are late on their mortgage or are in default.
• Home owners whose mortgage balance is higher than their property’s value.
• Home owners who have an adjustable rate mortgage.
• Home owners who have a negatively amortized mortgage.
• Home owners who can not afford to pay their mortgage any more.

If you fit one or more of the above criteria chances are your loan could be modified.

Possible Results of Loan Modification

• Lower interest rate.
• Lower monthly payments.
• Modify an adjustable rate loan into a fixed rate loan.
• Principal reduction thus creating a lower mortgage balance.
• Make your loan current (if defaulted) and add delinquent payments to the principal of the loan.

If you are interested in learning more about loan modification or if you would like to modify your loan please don’t hesitate to call me, Mana Tulberg, (805) 443-8898.

Wikipedia defines Satire as:

In satire, human or individual vices, follies, abuses, or shortcomings are held up to censure by means of ridicule, derision, burlesque, irony, or other methods, ideally with the intent to bring about improvement.   Although satire is usually meant to be funny, the purpose of satire is not primarily humour in itself so much as an attack on something of which the author strongly disapproves, using the weapon of wit.

Now that we have defined satire please enjoy this video:

In a short sale situation the home seller asks the lien holder(s) to accept less money from the sale of the home than what is owed to pay off the loan.

Since the lien holder(s) (lenders) do not want to lose a substantial amount from the sale of the home, a series of procedures are followed by the lien holder(s).  The lien holder has to examine and evaluate the property and determine how much of a loss is justifiable by selling the property in a short sale.

If the home owner has more than one loan on their property, the short sale process becomes even more complicated.  In such cases both lien holders want the least loss on their loan.

A long list of documents and a hardship letter are required by the lender once a home owner requests a short sale.  Some home owners decide to put their home on the market for sale before a short sale approval has been issued by their lender.  You might have come across a few short sale homes in Ventura County where the home price was increased after a few weeks from what the price was originally advertised.

In such cases the lender(s) have approved the short sale, but did not like the price.  The lender(s) then request the home owner or the home owner’s Realtor to increase the sale price of the property.

Because short sales take a long time, many buyers get tired of waiting and move on.  Unfortunately, this results in even more delay since banks review the offers serially.

The key to purchasing a short sale is a reasonable offer, patience, and tenacity … of course a great realtor won’t hurt

If you need any assistance with a short sale or any other real estate concerns, feel free to contact me, Mana Tulberg (805) 443-8898.

In the first ten months of 2008, 1593 Bank Owned Homes have sold in Ventura County.  The average days on the market for these bank owned homes were 49 days.  Below is a break down of all homes, short sale homes, and bank owned homes sold in Ventura County from January 1st, 2008-November 1st 2008.

Source: Ventura County Regional Data Share.

As the data in the table above shows, the average number of days bank owned homes in Ventura County were on the market are considerably different than the rest of the homes for sale.

Ventura County home buyers are finding that purchasing a home from a lender is much less time consuming and less frustrating than purchasing a short sale home.  In Addition, bank owned homes (also referred to as REO) are usually listed below the market value of the property.

In Ventura County home buyers are expected to encounter bank owned homes with multiple offers.  The majority of bank owned homes in Ventura County have multiple offers in the first few days of being on the market.  Due to these multiple offers, most bank owned homes in Ventura County have sold for more than the lender had originally priced the property for sale.

How to Make an Offer on a Bank Owned Home?

You have found the perfect place you have always dreamed of calling home.  The home you wish to make an offer on is a bank owned home/REO home.  So now what?

Each lender/bank has their own set of criteria when it comes to selling their inventory.  However, most lenders/banks require the following:

• Pre-qualification: The majority of lenders require that the home buyer goes through one of their local loan officers for a pre-qualification process.  One reason is to make sure that the home buyer qualifies to purchase the property.  The lender also hopes that the home buyer uses them to get a loan.  Ventura County home buyers need to be aware that they do not have to use the lender forced upon them by the bank who is selling the property.
• Lenders might ask for the home buyer’s proof of assets, proof of employment, FICO score, and pre-qualification letter.

Once the bank has accepted the home buyer’s offer, they will ask the home buyer to sign an addendum to the California Purchase Agreement.  In the lender’s addendum the home buyer is asked to agree to the lender’s terms such as, but not limited to, “Sold as-is”, “No warranty” , and for the buyer to verify all information related to the property.

Since the lender has never occupied the property, no property disclosures are presented to the home buyer.   Ventura County home buyers are advised to conduct a home inspection from a reputable home inspector as soon as they enter escrow.

Throughout escrow it is very important that the home buyer’s Realtor stays on top of the transaction.  Many banks charge an additional daily fee if the escrow does not close on the date stated and agreed upon in the purchase agreement.

Remember, bank owned homes in Ventura County are like hot cakes.  If you are ready to purchase a home, especially an REO, the most important move you need to make is:

• Get pre-qualified by a lender.
• Communicate with your Realtor regarding what is important to you in a home.
• Know your maximum price range.

Some of the bank owned homes that I have seen in Ventura County have been neglected and are in desperate need of some love and care.  As you are previewing bank owned homes try to look beyond the bad paint job, dirty floors, and/or missing appliances.  However, as you prepare to make an offer make sure you have considered all of the costs of bringing the home up to your liking.

If you are interested in purchasing a bank owned home/REO in Ventura County or if you have any questions on bank owned homes/REO please don’t hesitate to call me, Mana Tulberg: (805) 443-8898.

With the increase of mortgage defaults in California including the many Ventura County home owners who have defaulted on their mortgage, there are multitudes who are searching for the most practical way to save their home.  The distressed home owners in Ventura County are bombarded by the media ads that promise a better, safer mortgage payment on a place these home owners would like to continue calling “Home”.

I have heard from many Ventura County home owners who, in despair, have made poor choices in an attempt to improve their current mortgage status.  Home owners need to understand that they have options and that there can be dire consequences if unnecessary or ineffective adjustments are made to their mortgage.

What Is Refinancing?

When you refinance your mortgage you are paying off your existing mortgage with a new mortgage.  The new mortgage will have different, presumably better, terms.  When refinancing, since you are practically applying for a new loan, you are required to pay all the title fees, escrow fees, lender fees, appraiser fees, taxes, and depneding on the loan terms, there may even be prepayment penalties.

Most home owners refinance in order to lower their interest rate, to extend the life of their loan, and/or to pay off other debt.

Home owners in California, including those in Ventura County, seeking to refinance their mortgage in the current market do face harder refinancing criteria.  Lenders require that a home owners who are looking to refinance have a high credit score, a considerable equity in their home, and documented job security.

The Hope Act offers a solution for some home owners to refinance their existing mortgage into an FHA Insured Mortgage.  However, most home owners who have defaulted on their mortgage will find it difficult to obtain ANY refinance of their current mortgage.

What Is Loan Modification?

A loan modification is a change of some or all of the terms of your current mortgage.  Loan modification is an amendment between the home owner and their current lender.

Prior to early 2008 most lenders were not in favor of loan modifications.  Loan modifications usually result in less interest for the lender.  However, in our country’s current financial crises, lenders are desperate for some liquid assets to sell in the open market.  Loan modifications untie the lenders’ bad assets (default mortgages) and enables the lender to sell the modified loans in the open market.

Despite popular belief, a home owner does not have to be in default to apply for a loan modification.  However, a home owner needs to provide enough evidence to show that their current loan has placed the home owner in significant financial difficulty.  The lender would rather keep the home owner as a client and modify the home owner’s loan than have to liquidate the property in a foreclosure sale.   Remember lenders’ business is to collect money, not to sell homes!

In a market where home equity is scarce and many loan balances exceed home values, refinancing is almost imposible.  Hence, loan modification can be the most attractive alternative for distressed home owners in Ventura County and throughout the country.

If you would like additional information regarding loan modifications or if you have any other real estate questions or concerns, please feel free to contact me, Mana Tulberg: (805) 443-8898.

The current strong winds in Ventura County have left many Ventura County residents calling off some outdoor activities.

I was jokingly telling a friend on the East Coast of the United States that the winds have been so strong lately I’m not sure if I have any more hair left on my head!! :0)

Well, I noticed that my joke was not too far off when I came across this poor tree with it’s head cut off in Camarillo, Ventura County.

For consumers seeking to get through the current recession with minimal long term damage, you should consider the following:

1. Reduce your debt levels, especially high interest credit debt and other consumer loans.

2. Try to build and maintain an emergency cash reserve.  Ideally you would have your reserves already, but better late than never.  If you have a stable job, shoot for at least 3 months x your monthly expenses.  If you are self-employed or your income varies, try for 6 months x your expenses.  This seems like a huge sum, but this was normal for past generations to maintain substantial cash reserves.

3. Focus on maintaining your employment.  Losing a job during an economic recession can be devastating.  Maintain your professional network.  Focus on building skills that are essential to your company and keep your eyes open for potential warning signs that layoffs are coming.

4.  If you are nearing retirement, consider postponing retirement.  Retiring during an economic downturn when you have to rely on selling stock investments for income can destroy your retirement plan and force you back to work in the future.

5.  Do not panic with your long-term stock and mutual fund investments.  It is way too late to sell anything now and if you can hold on, you will likely be much better off in the future by not exiting the market now.  At least that is what history teaches us.

Folks who have low levels of debt and plenty of cash reserves are typically in a good position to take advantage of times like this when assets fall in value.  Income property, stocks, commodities and most other assets are dropping in price and once the recession ends, buyers who were able to scoop up bargains during the recession will enjoy the benefits of their increasing wealth.

This recession will end as they always do, but this will likely be longer than either of the past two recessions (7/90 – 3/01 and 3/01 – 11/01) which both ended after 8 months.  The current recession will likely look more like the recession of 7/81 – 11/82 which was 16 months long.  So if the recession began last November and lasts 16 months, then we could be heading out of it by the spring of 2009.  The problem is we won’t know for sure for another year after.

Hang in there.

In order to understand our current financial situation it is best to take a closer look at the recent history of our country’s economics.

A Bit of History

During brief recession of 2001, the Federal Reserve reduced interest rates sharply and kept the interest rates low for an extended period of time.  The availability of cheap money was one reason for the dramatic escalation in house values from 2000 – 2005.  The easy underwriting of mortgage loans also contributed to the housing bubble.  The very low interest rates were helpful to consumers, but reduced income for investors who participated in the fixed income markets.  The search for higher returns led to the creation of sub-prime loans as these borrowers paid much higher interest rates than traditional borrowers.  Other investors earned higher returns by borrowing money very cheaply and using the borrowed funds to speculate in assets around the globe.

Everything worked fine as long as the collateral (single family homes) continued to increase in value, but once home prices began to fall, many of these debt instruments tied to home values, began to fall apart causing huge losses for investors.  As losses mounted for mortgage lenders, investment banks, and commercial banks, we witnessed first hand the dramatic negative impact that excessive leverage can have on investments.  Bear Stearns was sold over a weekend to JP Morgan Chase.  Countrywide was forced to sell to Bank of America, Lehman Brothers is in bankruptcy, Merrill Lynch was sold to Bank of America for an amazingly low price, Washington Mutual was sold a fire-sale price to JP Morgan Chase, and Wells Fargo bought Wachovia.  The major investment banks have either been forced to merge with banks or they became commercial banks.  The impact of de-leveraging is still causing major volatility in the stock markets around the world.  As institutional investors desperately try to reduce their debt loads, they were forced to raise cash by selling other assets including stocks which continue to add to the market volatility.

Since housing is such a significant driver of economic growth, once home values began falling, consumer spending also began to slow dramatically.  Fully 2/3 of our economy is based on consumer spending.  Home equity lines provided plenty of credit for consumers who wanted to buy a new car or plasma TV or remodel the kitchen.  Much of consumer spending has been cut back dramatically.  When consumers cut back their spending because they are afraid of losing their job or they have maxed out their credit, business sales and profits are reduced, which can eventually lead to business layoffs.  Increasing unemployment increases consumer fear and this leads us back to reduced consumer spending and the circle continues to drag the economy down.

In an attempt to curtail this recessionary spiral, the government has tried to stimulate the economy.  The first attempt was to reduce short term interest rates.  After 8 interest rate cuts, our short term rates are now down to 1.5%.  In addition, a fiscal stimulus was announced where a tax credit was used to give most citizens a check they could spend.  The increased consumer spending was noted in the summer of 2008, but it quickly dissipated.  At this point the government is trying to figure out how to stem the tide of foreclosures hanging over the housing markets.  It could be that the cure is worst than the disease.  There is a chance that excessive intervention by the federal government to try to reduce or mitigate the recession could actually prolong the recession.  In a capitalist society, if you try to make sure nobody can lose, you will also create an environment where nobody can win.  Time has a way of taking care of imbalances in our economy and eventually balance will be restored, though it will be very tough to individuals and businesses who took on more debt than they should have.

We have seen forced selling by hedge funds, banks, and mutual fund companies to satisfy the demand for cash.  When market participants are forced to sell in a short time frame, the result is dramatically falling stock prices.   Over the past several months we have seen panic selling that defies logic.  Current stock prices are at multi-year lows and have likely been pushed below what is fair value.   At this point, investors are anticipating a severe recession in which corporate earnings are going to be sharply reduced.

On the brighter side, the recent collapse of energy prices has helped to bring gas prices back down from their historic climb earlier in the year.  Things would be much worse if we still had to deal with $150 per barrel oil.

While the news media debates whether we are officially in a recession or not, the reality of the current situation is that we have likely been in a recession for at least several quarters and possibility for up to a year already.

What Is a Recession?

The confusion comes from the definition of a recession. Some in the media mistakenly define a recession as:

“Two consecutive quarters of contraction in the Gross Domestic Product” or GDP.”

For those who did not major in economics, this simply means a period of time when the economy is shrinking. In a perfect world, our economy would expand continuously at a reasonable growth rate of 2 – 4% per year. If the growth rate is higher, we typically see excessive inflation, which is the Federal Reserve would seek to avoid by raising interest rates to slow down the economy. If the growth rate is lower, the Federal Reserve seeks to stimulate the economy by reducing interest rates and other policies that encourage lending and investment.

Our federal government has a special research group whose job it is to tell us when recessions officially begin and end. The National Bureau of Economic Research (NBER) is charged with this responsibility. According to the NBER, a recession is best defined as:

“A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

By the time the NBER announces the beginning of a recession, normally we are closer to the end of recession than the beginning. I would be willing to bet that by next spring, we will hear from the NBER that the recession began in late 2007.

Clearly our economy now easily satisfies every part of the definition of recession, especially with the substantial drop in consumer spending over the past 6 months as well as the recent increases in unemployment.

Recessions are a natural part of our economic system helping to curb excesses and maintain proper balance.  One reason why the current recession may be longer and more severe than the past recessions is that we have a bursting “credit bubble” at the same time as we are entering a recession.

During the home buying experience in Ventura County you will hear about title insurance and work with a Title Company.  Title Companies are one of many parties involved in the home purchasing process.

The Title company tracks the history of the title on the home you are planning to purchase.  The history is then presented in a document referred to as the Preliminary Title Report.

The title company searches for liens such as unpaid loans, unpaid taxes, encumbrances, or judgments against the home that you wish to purchase.

The title company pays off all existing liens, confirms the manner you choose to hold title, and verifies all information that is deemed lawful and correct.

There are many ways to hold title to your new home.  Neither your Realtor nor your loan officer are qualified to guide you in how you should hold title to your home.  The best adviser for illustrating the consequences of title holding would be your attorney.

Source: California Land Title Association