I am happy to report that appraisals are coming in at sales price for Palos Verdes homes that I have sold this past year.  After the new Fannie Mae appraisal changes, we were all experiencing appraisers from out of the area being assigned to Palos Verdes real estate appraisals and they were coming in low as they did not know the area.   This was true for both Palos Verdes homes sales and refinances.

Yesterday, a LA Times article regarding appraisal fee disclosure discussed the issue of who is actually getting paid for these new higher priced appraisals and where the appraisers are coming from.  Why would you care about that?  Because, the appraisers are sometimes getting paid only half the fee (and to find appraisers who will work for that lower fee, they were coming from out of the area)  “…while the balance flows to an enterprise you have never heard of — an appraisal management company — that assigns the job to the appraiser.  That management company, in turn, may be a wholly owned by or in a joint venture or affiliate relationship with your lender, which may be pocketing a significant portion of your appraisal dollars.”  Click here to read entire article.

Now the Consumer Financial Protection Bureau may require the appraisal fee be broken down to indicate how much is actually going to the appraiser and how much the appraisal management company is taking.  A decision should be made before summer.

As part of selling Palos Verdes real estate, I keep updated on area statistics, Palos Verdes homes for sale, new software, etc.  Today, I attended a class which showed us new features of our Multiple Listing Service which included searching for specific data in several different categories.  I looked at distressed properties sales in Palos Verdes to see how it compared to Los Angeles County, the State of California and nationally as reported in a recent LA Times article (click here to view article).  As you can see from the chart above, only .5 – 1% of Palos Verdes homes are in foreclosure.

71 Palos Verdes homes (all categories, including condominiums and townhouses) are in Pre Foreclosure which means a Notice of Default has been filed.  11 of those homes are currently listed for sale and 3 more are in escrow with pending sales.  107 Palos Verdes homes (all categories) are scheduled for Auction which means a Notice of Trustee sale has been filed.  10 of those homes are currently listed for sale and 7 more are in escrow with pending sales.  44 Palos Verdes homes (all categories) are REO properties which means Real Estate Owned (the bank has already foreclosed).  7 of these homes are currently listed for sale and 4 more are in escrow with pending sales.  The middle chart indicates the number of Palos Verdes houses in foreclosure and shows there are 50-100 in zip code 90274 and 100-150 in zip code 90275.

We are very fortunate that the number of Palos Verdes real estate foreclosures is less than both Los Angeles County and the State of California.  That lower rate of foreclosures is one of the reasons our real estate market more stable.

Charts courtesy of CRMLS – Realist Tax

Palos Verdes homes owners and home owners across the country often have unresolved questions regarding their home mortgage, private mortgage insurance escrow account, promised interest rate reduction, loan modification request and an array of other home loan questions.  I just read about a new federal service that became available on December 1, 2011 – the Consumer Financial Protection Bureau’s home mortgage complaint and dispute resolution hotline courtesy of last year’s Dodd-Frank financial reform legislation.

According to an LA Times article by Kenneth R. Harney,  “The complaint hotline is accessible online at www.consumerfinance.gov and by toll-free phone between 8 a.m. and 8 p.m. Eastern at (855) 411-2372.”  It also is a hotline/website for credit card disputes – there is a separate portal once you enter the site.  This is great for consumers to have another avenue to assist them with these financial disputes.  Click here to read entire LA Times story.

Photo courtesy of Arvin Design

Last week Congress approved raising the loan limits on FHA loans to $729,750.  How will that effect Palos Verdes homes owners?  At first glance, one would guess that there is not too much Palos Verdes real estate selling in the lower ranges.  Currently, 25% or 51 single family Palos Verdes houses are for sale for less than $1,000,000.  However, 46 out of the 47 Palos Verdes condos/townhomes currently for sale are under $1,000,000.

FHA mortgages require lower FICO scores than a conventional loan – 620 for FHA and 660 for conventional.  FHA mortgages require less down payment – a minimum of 3.5% versus 20% for a conventional loan.  This is attractive for some buyers and therefore helpful for some sellers of Palos Verdes real estate.  The downside for buyers is that FHA requires PMI (private mortgage insurance) which is an additional payment on top of the mortgage payment – 1.15% of the loan amount.

Kenneth R. Harney wrote a recent article in the LA Times with some wise advice, “Bottom line for house shoppers: Take a hard, close look at FHA with a local loan officer, in light of the rule changes.  Pencil out the costs, down-payment requirements and more generous standards on credit.”  Click here to read his article.

Fun wintery photo courtesy of Arvin Design

Interest rates are at historic lows and many homeowners are refinancing to take advantage of them.  When I saw the title of this article, I tried to guess the 5 reasons one would refinance other than lowering your interest rate (I did not guess them all).  This article is courtesy of HouseLogic.com:

By: Barbara Eisner Bayer

Published: October 22, 2010

There’s more to a mortgage refinance than lowering your monthly payments.

1. Change your mortgage term

If you decrease the term of your mortgage in a refinance by going from a 30-year to a 15-year, you’ll pay a lower interest rate and shorten your total interest costs. You’ll build home equity more quickly, and pay off your loan sooner, even though your monthly payments go up.

2. Move from an adjustable rate to a fixed rate

ARMs offer low introductory rates, but they also offer long periods of uncertainty that make it hard to budget. It makes sense in a mortgage refinance to go from an ARM to a fixed-rate loan during a low-interest rate environment. You’ll get emotional security and your rate won’t fluctuate with changing economic conditions.

3. Take out cash

With a cash-out mortgage refinance, you can turn an intangible asset—accumulated home equity—into a tangible one—cash. It makes sense for a project that will generate long-term benefits, like a home improvement or funding a child’s college education. However, don’t do it for frivolous reasons. Unless you’re extremely disciplined, you could find yourself in even deeper debt.

4. Consolidate two mortgages

When interest rates are low, a mortgage refinance lets you consolidate your main mortgage and an outstanding home equity loan to realize a lower overall monthly payment. Plus, you’ll have only one mortgage payment to make each month.

5. Recover from divorce

If your home is jointly owned with your soon-to-be ex-spouse, a mortgage refinance will turn a joint obligation into the responsibility of the person keeping the home. Nothing is more frustrating than tracking down a former spouse who doesn’t keep up with his or her end of the mortgage payment.

Lay the groundwork

If one of these reasons resonates with you, contact your current lender to see if it’ll offer you preferred rates or reduced closing costs on a mortgage refinance. But don’t assume the current lender is best: Leave no stone unturned by searching for lenders online and calling community banks and local credit unions.

No matter which lender you choose, a mortgage refinance for the right reasons can save you lots of money—and that’s the best reason of all.

Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®

Photo courtesy of Arvin Design

When a seller of Palos Verdes real estate and the buyer who submits an offer on a Palos Verdes home are waiting for the appraisal to come in, they generally presume that an appraisal expert from the area will be doing that appraisal.  That is not always true.  I have written several articles regarding the frustration resulting from the appraisal process (the most recent can be accessed by clicking here) created by the Dodd-Frank financial reform law last year.

In order to separate the potentially biased lender from the appraiser, a new layer was created – Appraisal Management Companies.  The LA Times printed a recent article by Kenneth R. Harney entitled, “Who’s getting appraisal fees?” which gets to the root of the issue.  The issue is that the appraisal management companies (some of which are owned by or affiliated with the lenders themselves) are  keeping as much as half the appraisal fee and offering the appraiser the other half.  According to Harney, “Most experienced independent appraisers refuse to work for $200 to $250 because they can’t pay their overhead at these rates.  Less-experienced appraisers, who sometimes have to travel long distances from their home markets, tend to be more willing to work for the lower amounts.”

This does not only affect buyers and sellers but current owners of Palos Verdes houses who are refinancing.  What can be done?  Some appraisal groups are lobbying to get this changed.  Harney has a great suggestion, “But in the meantime, consumers should demand transparency:  Of my $500 appraisal fee, who got what? And why?”

My clients purchasing Palos Verdes real estate are told by their lender not to apply for additional credit or open new accounts when they purchase a Palos Verdes home  and have a loan (or even a refi) being processed.  I can’t tell you how many times the borower forgets.  They are planning to redecorate their new home, one client needed a new car as her car died, etc.  It can be any number of reasons.  However the new lender now runs a credit check just before the loan (and house) closes.  If there is additional outstanding loans or credit, that may negatively affect the borrower’s ratios and put a hold on the new loan.

Kenneth R. Harney has written an excellent article in the LA Times warning about this very issue.  “If inquiries pop up on your files during this time, lenders must check them out to determine whether any new debt might require a re-underwriting of the originally quoted terms.”  That is just what you want to avoid.  Harney goes on to explain that lenders are even looking back 120 days before you applied for the loan looking for credit inquiries to make sure that there are not any new loans that have not been picked up by the 3 major credit reporting services. 

Harney’s cautionary advice should be heeded, “Be aware that your credit files -  not just your FICO scores – are probably being checked, rechecked and evaluated for the third of a year preceding a mortgage application and two to three months prior to the closing.  The cleaner and simpler you keep the files, the easier your path to an on-time closing should be.”  To read his entire article, click here.

Interest rates have been at historic lows since last year and all my clients have opted for fixed rate mortgages for their Palos Verdes homes.  According to a recent Los Angeles Times article by Kenneth R. Harney, adjustable rate mortgages are becoming more popular.  “Adjustables accounted for just 3% of new home loans in early 2009 but are projected to be picked by nearly 1 out of 10 borrowers in 2011.”

I thought that was a surprising statistic so I called a local lender for his input.  He had not read the article but confirmed that last year he had done more adjustable rate mortgages and the trend was continuing this year.  When I asked why, he told me that certain buyers who are tight with their loan qualification ratios are opting for adjustable rates to get loan approval as the lower adjustable rates net lower monthly mortgage payments for the first five years.  However, the majority of his loans continue to be fixed rate.

To read the LA Times article, click here.

Owners of Palos Verdes real estate take advantage of the mortgage interest deduction to help offset their higher mortgage payments which is a result of the higher home prices in Palos Verdes.  More than one client has been watching the federal governments discussions about the possibility of eliminating/reducing this deduction.

“Deduction’s deficit effect lowered – Homeowners are likely to write off less mortgage interest on taxes than anticipated” was the headline in a recent LA Times article by Kenneth R. Harney.  The article goes on to state that according to a new report by the non-partisan Joint Committee on Taxation, the mortgage interest deduction will not be decreasing revenue by as much as originally estimated:  “$88 billion less in revenue losses are now projected over the next three fiscal years – than the committee estimated early in 2010.”

There are several reasons for this reduction.  Interest rates are at record lows and many existing homeowners have refinanced their mortgages to take advantage of the lower rates.  Home prices are down resulting in lower purchase prices and smaller mortgages.  There is also some repayment of the first-time home buyer credit programs.  Let’s hope that this new report will make the mortgage interest deduction “less vulnerable to attack”.  Click here to read the entire LA Times article.

Owners of Palos Verdes real estate as well as the rest of the country are going to be hit with additional loan fees from Fannie Mae later this Spring when they purchase or refinance a home.  Freddie Mac started charging these fees before Thanksgiving.  According to a recent LA Times article by Kenneth R. Harney, these two organizations “fund or guarantee upward of two-thirds of new mortgage originations.”

Some examples of these new fees are – A buyer with a FICO score over 800 needing a $300,000 loan and less than 25% down would have to pay an additional $750 (an extra quarter of a percentage point).  A buyer with a FICO score of 679 and a down payment of less than 20% will be charged an Add-On Fee equal to 2.75% of the mortgage – for a $300,000 mortgage that would be an additional $8,250!  Condos will be charged an additional 3/4 of a point.  Rental properties and loans with interest only payments will also get separate fees.

The LA Times article goes on to say, “But these fees are just the start of the multilayered, cumulative risk-based pricing system that both Fannie and Freddie employ.  Every perceived risk factor in a loan transaction receives its own separate add-on fee.  Click here to read the entire article.