Burbank Real Estate Blog: Burbank Real Estate Agent Ana Connell (Keller Williams Realty)

The Burbank real estate landscape has changed and there are many terms out there today that buyers and sellers did not have to worry about a few years back.

If you have been thinking about purchasing a short sale property or a foreclosure property, here are some terms you should know:

ASSIGNMENT OF DEED OF TRUST: A document that transfers the lender’s (beneficiary’s) interest in a deed of trust.

BANKRUPTCY: A legal process that allows a debtor to discharge certain debts without paying the total amount due.

BENEFICIARY: The lender or person to who the obligation is owed.

BIDDING INSTRUCTIONS: An authorization form signed by the beneficiary authorizing the trustee to make the initial opening bid at a trustee’s sale and subsequent bids.

DECLARATION OF DEFAULT: A document signed by the beneficiary instructing the trustee to prepare the Notice of Default should the borrower not bring the loan current, to sell he property, encumbered by the loan, in order to satisfy the unpaid debt. This document is not recorded.

DEED OF TRUST: A written document describing the real property being given as security for an obligation.

EXTENSION AGREEMENT: An agreement that extends the due date of a note.

FORECLOSURE: Enforcing a lender’s rights upon the default of an obligation that is secured by a deed of trust. A deed of trust must contain a power of sale clause to enable he trustee to initiate a non-juridical foreclosure.

FULL RECONVEYANCE: A document prepared by the trustee or substituted trustee, when the obligation secured by the deed of trust is paid in full. When recorded, the econveyance takes the deed of trust off record.

NOTICE OF DEFAULT: A written document that is recorded, published, and posted giving notice of public record that a borrower has failed to perform his or her obligation under the erms of the promissory note. This document is recorded.

NOTICE OF TRUSTEE’S SALE: A document that is recorded, published, posted and mailed and sets forth the date, time and location of the trustee’s sale. POSTPONEMENT: A verbal announcement made at the time and location of a trustee’s sale, extending the sale to a future date.

PUBLICATION PHASE: The period of time beginning after the third month starting on the date that the Notice of Default records. This period ends with the trustee’s sale being conducted. The trustee sees that the document is recorded, published and mailed in accordance with the requirements of the civil code.

RESCISSION OF NOTICE OF DEFAULT: After the default has been brought current or by the request of the beneficiary, this document when signed by the lender and recorded by the trustee, will remove the Notice of Default from record.

REINSTATEMENT PERIOD: The time period between the time that the Notice of Default records and ends 5 business days before the trustee’s sale. The lender must allow reinstatement during this period of time. A lender may elect to allow reinstatement after the 5-day period ends, but before the trustee’s sale.

SOLDIERS’ AND SAILORS’ RELIEF ACT OF 1940: An act passed by Congress for the financial protection of those individuals serving in the military service.

SUBSTITUTION OF TRUSTEE: A document signed by the lender and recorded by the trustee whereby the beneficiary appoints a successor trustee to the trustee of record.

TRUSTEE: The party who holds title to real property in trust for the benefit of another. The trustee’s most common functions are to process a full (when a loan is paid off) or partial (when a portion of the property is being release) reconveyance and to process a non-judicial foreclosure and process a trustee’s sale.

TRUSTOR: The borrower/owner at the time the deed of trust is created.

TRUSTEE’S DEED UPON SALE: A document signed and recorded by the trustee that transfers ownership of the real property to the purchaser at a trustee’s sale.

TRUSTEE’S SALE: A public auction sale of a property described in a Notice of Trustee’s Sale, which property was Information gathered from public sources and deemed reliable but not guaranteed.

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The Obama administration has given us some new details on its $275 billion plan to help stem the tide of foreclosures nationwide.

It’s offering many incentives to investors, lenders etc. to entice them into modifying distressed mortgages to keep Americans in their homes. The steep fall in home prices is the main reason we’ve had a global financial meltdown, so the administration’s housing plan is vital to ending the deepening economic recession.

The plan is called the “Making Home Affordable Program”, which the administration thinks can help up to 9 million homeowners. There are two primary goals of this plan:

· First, it offers $200 billion to provide refinancing for homeowners who owe more than their homes are worth-also referred to as being “underwater” on their mortgages. To qualify, these homeowners-5 million of them by administration estimates-must have their mortgages in the hands of Fannie Mae or Freddie Mac, the mortgage finance giants that the government seized last September.

This plan will help, but it won’t reach lots of homeowners in places like California and Florida where homes are now worth substantially less than their mortgages.

Because most mortgages are bundled into securities and sold into a secondary market, it’s not easy for homeowners to find out whether Fannie or Freddie owns their loans or whether they’ve been pooled with other loans and sold by an investment bank to other investors.

· The other part of Obama’s plan attacks the problem of affordability. The administration provides another $75 billion in incentives to help prevent foreclosures in cases in which the homeowners, up to 4 million of them, are about to lose their homes. The money comes from the $700 billion bailout fund approved last October.

This part of the plan is extremely complex as it offers many financial incentives to mortgage servicers, who are essentially bill collectors for private investors who own pools of U.S. mortgages. Some incentives stay with the servicers while others flow through to investors.

In exchange for the incentives, a servicer would modify a mortgage so that no more than 38% of a homeowner’s monthly after-tax income was taken by the monthly mortgage payment. The government then would step in and share the cost of reworking that mortgage so that no more than 31% of the borrower’s monthly income was tied up in the payment.

· Any lender that takes new taxpayer bailout money under the administration’s Financial Stability Plan will be required to participate.

· The Obama plan got a strong endorsement Wednesday from the Financial Services Roundtable, which represents many of the largest mortgage lenders. This first step will go far in adopting consistent guidelines for everyone. But, officials confirmed that there’s no standard procedure for lenders under the Fannie and Freddie portion of the plan. It will be up to each lender to determine whether the refinances go through them or whether mortgage brokers and other intermediaries can help homeowners seek refinanced loans under the program.

· Officials were also careful to note that mortgage servicers won’t be able to modify mortgages if the terms of their contracts with the investors who own the pools of mortgages don’t allow it. There is no reliable data on how many of these investors are on the other ends of contracts that prohibit mortgage modifications.

That question is important, since many of the weakest loans underwritten during the height of the housing boom, from 2004 to 2006, were sold by now-defunct investment banks to investors abroad, many in Europe.

So who qualifies?

· Your mortgage must predate the start of 2009, you must live in the home and you’ll have to provide proof of income.

· First, are you already behind on payments or even in the foreclosure process? If the answer is no, then ask yourself whether your current mortgage rate is high enough to make it worth your while to refinance to take advantage of today’s low rates for 15-year and 30-year fixed-rate mortgages.

· You must find out who owns your loan. Most mortgages are bundled together and sold into a secondary market, where investors technically own them. If Fannie Mae or Freddie Mac placed your loan into the secondary market, you can contact the company that sends your monthly mortgage statement to discuss the new program. If your mortgage is in the portion of the secondary market where the private sector issued the mortgage-backed securities, you don’t qualify.

· To qualify under the refinance portion of the Obama plan, you can owe up to 5% more than your home is now worth. Thus, many homeowners in California, Florida, Arizona and Nevada, where home prices have plunged, won’t qualify.

There are many more details to this plan, this was just a bare bones explanation!

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* Find Out If You Qualify For Mortgage Assistance [Foreclosure Prevention] (consumerist.com)

* Clark Howard Simplifies "Making Home Affordable" Plan (hsh.com) * Obama housing rescue could help millions (dailyfinance.com)

* Looking for a Mortgage? Check Out the F.H.A.'s Rules (nytimes.com)

I get alot of questions from home buyers asking me if we are at the real estate bottom here in Burbank and the San Fernando Valley and the honest answer is, I don't know.  But I will tell you that looking at the unemployment numbers that came out today, I would guess the answer is probably, no.  But keep in mind that we won't know where the bottom actually was until things start to improve.

Unemployment hit at 25 year high for February coming in at 8.1% and to make matters worse the numbers from December were revised.....for a total loss of 681,000.  The December revision makes that the worse figure in 59 years.   If you look at the numbers more closely you'll find that the average wage has been trending up slightly indicating that more lower paying jobs were cut.  But the cuts have been widespread canvasing a wide range of industries.

The other statistic that we should all be looking at is the number of delinquent mortgages.

More homeowners are struggling to pay their mortgages, according to the latest study.   More than a tenth of households were behind on payments, 7.9% of the loans are overdue and 3.3% are in the foreclosure process.

We'll have to see how effective the new stimulus package is as far as helping homeowners avoid foreclosure, but even with that help be prepared to see short sales and foreclosures for some time to come.  On the glass is half full front I will say that there are some great deals out there!

Search for homes for sale in Burbank, Toluca Lake, Studio City, Valley Village and surroundings!

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 First, what is the pending home sales index? 

 The NAR (National Association of Realtors) developed the pending home sales index as an indicator of housing activity. It tends to be a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed and it usually takes four to six weeks to close a contracted sale.

Until housing data improves, the economy as a whole won't show significant signs of life.  The numbers that came out today offered little hope. While the pending home sales index jumped up in December, 6.3 percent to 87.7 the pending home sales index fell a very steep 7.7 percent in January.  This data indicates that we'll probably have weak home sales data for February and March. The year-on-year rate is still contracting at -6.4 percent.

Sales showed continued weakness in the Northeast, South, and Midwest but, did show a gain in the West, a region worth special attention given that the general real estate collapse has been centered here.

Bottom line is that with the labor market still in major turmoil, we probably won't see a significant rebound until later this year or beginning of next year. 

Again I have to put out the disclaimer, that all of this is very area specific in terms of how bad or good things are.  If you are in the market to buy a home, now is a great time with low interest rates and reduced prices!

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1) the loan limits on mortgages will be raised to $727,000  in high cost areas

2) the tax credit will be raised to $8,000 with NO payback....this is huge!

3) interest rates shoud react favorably to the package(see below)

4)  the bill has over $50 billion in it for foreclosure mitigation, with Treasury Secretary Geithner's  Treasury plan signaling that the second half of TARP and TALF will be used to  mitigate foreclosures through a government guarantee, drive down interest rates  by buying another $200-300 billion of mortgage paper from the GSES's thereby  freeing them up to do the same with new mortgages. Additionally Fannie Mae has just agreed to  lift the cap of 4 investment properties eligible for loans and raise it to 10. Talk to your CPA for the full details on this.

Mortgage interest  deductability, real estate tax deductability, and the $250,000/$500,000 cap  gains exclusion (an overall package worth more than $100 billion and for some a  very attractive funding source for their pet projects) has remained intact.

The "big and bold" stimulus package will really impact the real estate market as long as the banks can follow through on the lending side.  

Keep in mind that modifying mortgages is not an easy exercise due to all the different parties involved.  Many times mortgages were sold by the originating entity to Wall Street.  From that point they were repackaged and put into "tranches" or pools, based on the perceived stability or ability to pay back the mortgage.  This has created many stakeholders which in turn have to agree to modify the mortgage.

More to come.

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• White House targets housing plan (msnbc.msn.com)
• U.S. home foreclosure notices hit 274,000 in January (cbc.ca)
• Foreclosures Fall From December To January (huffingtonpost.com)

Monthly Activity Report Burbank-January 2009

Month to month average home sale price in Burbank from December 2008 to January 2009 is down $38,507, or 7%.

Average days on market, are up 3 days.

Most notably number of sold properties is down almost 58 % from December 2008.

Reasons for this trend include the significant price reductions we saw towards the end of last year, banks wanting to clear out inventory before the end of the year and buyers wanting to take advantage of low interest rates and low prices.

Ever wonder what the difference is between a foreclosure and an REO or real estate owned property?

A foreclosure is a legal process in which the owner's right to a property is terminated.  It usually involves a forced sale of the property by a public auction to repay whatever debt is owed on the property.  Real Estate Owned (REO) is real property that has been foreclosed by a lender and is now owned by the lender due to an unsuccessful sale at the public auction.

Here are some facts:

• A foreclosure property goes through a foreclosure auction which is usually held on an assigned date on the steps of the county court house.
• Foreclosure property buyers need to be able to purchase the property for CASH.
• At auction, an opening bid on the property is set by the foreclosing lender. This opening bid is usually equal to the outstanding loan balance, interest accrued, and any additional fees and attorney fees associated with the Trustee Sale. If there are no bids higher than the opening bid, the property will be purchased by the attorney conducting the sale, for the lender.
• Foreclosure property buyers inherit all unpaid liens, including mortgage debt, taxes, construction loans, home equity lines of credit, and possibly a second or third mortgage.

On the other hand, an REO property is:

• REO property is already owned by the bank.
• Home buyers are able to get a regular mortgage or loan on that property. All cash is not needed.
• REO properties in most instances come with clear title.

Some things to look for when purchasing an REO or already foreclosed property:

1. Work with your realtor and the Title Company representative to make sure that the title to the home you're buying is free and clear.
2. Understand where the pricing is in your market so you can submit a viable purchase offer. Your realtor will look at the local market conditions and historical trends prior to submitting your offer to the bank in order to make sure you have submitted an offer with appropriate pricing.
3. Banks do NOT provide many, if any, disclosures, so be prepared for some surprises.  Additionally some banks will require you to sign their private addendums.  Make sure you read each item carefully as you may not be comfortable with their terms.
4. Make sure that all home inspections are completed - don't forget a sewer line inspection - prior to close of escrow.  In fact all inspections should be completed during the first 17 days of your escrow period in order to give you plenty of time to remove contingencies.   Some banks are allowing for certain types of repairs so you may be able to ask for credits.
5. Be aware that banks will charge higher loan rates on investment properties.  So if you are thinking about buying an REO property as a second home, make sure you check out the rates ahead of time and speak to your CPA.