Do You Know About the Federal Housing Bill?

How Does Federal Housing Bill Affect You?

On June 26, 2008, the Senate passed a housing bill that will offer up to $300 billion in loans for troubled hsomeowners and establish a government rescue plan for mortgage finance giants Fannie Mae and Freddie Mac.

The President will roll over once again - but this time to the benefit of the economy and the consumer. At first, Bush said he would veto the bill, but after consulting with his "advisers" he will concede this coming week and sign the bill into law.
The bill will take effect October 1st, 2008.

What does all of this mean to you, the consumer?

For Distressed Home Owners
Some folks may be able to cancel their old mortgages with high interest rates and replace them with new fixed-rate loans lasting at least 30 years...with some caveats:

1) New loans would be no more than 90 percent of what the borrower's property is worth currently;

2) Loan must have originated on or before January 1, 2008;

3) The loan must be on the borrower's primary residence;

4) Income verification is required, which might be an issue for subprime borrowers who did not have to disclose their income to receive their current loan;5) Your housing payment has to be at least 31 percent of your monthly household income;

6) You cannot take out a home equity loan for at least five years;

7) Appreciation made on the home within five years goes back to the government;

8) Fifty percent of any appreciation after five years must go to the government.

For Home Buyers

1) Conforming loan limits increased permanently to $625,000 (great for California!)

2) The bill includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500 (The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments. )

3) The bill eliminates a program that has allowed sellers to provide down payment assistance.

For Veterans

1) Lenders will have to wait nine months, not 90 days, before beginning foreclosure proceeding on homes owned by someone returning from the military.

2) Lenders will have to wait a year before raising interest rates on a mortgage held by someone returning from military service.

I will continue to learn more about this legislation. If you have any questions, or if I can help you in any way, please call or e-mail me...I am here to help!

California Agents Representing Investment Buyers

California agents have not been able to represent investors on properties which there is a notice of default filed because the law stated that buyer's agents needed to be bonded. The issue is that the bond didn't exist. Below is information from the California Association of Realtors legal department with the latest news on this subject!

C.A.R.'s Member Legal Services team has published a revised legal article, "Notice of Default and Investor-Buyer Transactions: Home Equity Sales Contracts," which has been revised to reflect the holding in the case, Schweitzer v. Westminster Investments, 157 Cal. App. 4th 1195 (2007), review denied March 26, 2008.

The Fourth District Court of Appeal held that the bond requirement under Civil Code Section 1695.17 for an equity purchaser's representative is "void for vagueness under the due process clause and may not be enforced." The California Supreme Court has declined to review this case which means that the bond requirement has been eliminated from the Home Equity Sales Contract Law.

This article can be found on the What's New and Legal Articles pages of the Legal section on C.A.R. Online (http://www.car.org/).

A Buyers's Transaction!

Where do I Start?
For many, beginning the homebuying process can be overwhelming. You may be uncertain about taking the initial steps. I hope this guide will help clear up some of those uncertainties by providing you with some useful information about the homebuying process.

When is the right time to start talking to a professional, and who do I choose?

Anytime you have questions you want answered is the right time to start. You can begin with either a Realtor or a lender. A Realtor can help you assess your financial picture, counsel you through the entire homebuying process, find a home that suits you and introduce you to a lender who can work with you on a financing package that meets your needs. A Realtor will work through all the intricacies of the transaction until close of escrow. A lender will work with you on the loan process and can preapprove you for a loan before you even begin house-hunting.

If it happens that you are not ready for any of this, both professionals will be happy simply to provide you with information.

How do I choose a Realtor?
In today's market, finding and purchasing a home can be a very involved and a complicated process. It is essential to find a Realtor who is qualified and dedicated to providing you with the best representation. It is best that you hire a Realtor who is a Broker. A Broker has more education, knowledge and skills than a Realtor who only has a Sales license. Always check the Department of Real Estate to see how long the Realtor has had a license and if they are in good standing. You can go to: www.dre.org . Once you have found that the Realtor is experienced and a full-time professional who knows the market in the area in which you are interested, determine if they know the available inventory in your location and price range. Ask for and check for references.

Your Realtor should have the time and energy to devote to you and your search for a home. Perhaps most importantly, choose an agent with whom you have a personal rapport.

Buying a home is an intimate type of business transaction. Trying to go through the process with someone you can't relate to will not work. Find a qualified Broker who you like, one who matches your personality and meets your individual needs. This will make the home purchase experience much more enjoyable.

What happens after I have chosen a Broker Realtor and spoken with a lender?
Given your price range, decide what kind of home you want and need. Think about size, location, special features such as fireplace and garage.

Begin looking at properties with your Realtor Broker so you have a good basis for making a final decision. Assess whether the home you can afford to purchase is the right home for you. If this is not the case, you may be unrealistic in your expectations and may need to adjust them to suit your budget.

When you find the home you like, make an offer to purchase. Your Realtor Broker's knowledge of the market and market values will assist you in making sure the price you offer represents good value for the property.

I've found the home I want. I've made the offer. What happens next?
The seller may accept your offer, reject your offer, or make a counter offer. If your offer is rejected, you can make another offer or look for a different house. If the seller makes a counter offer, you can either accept that offer or counter with yet another offer. Negotiations may continue back and forth until you and the seller agree to a final purchase price and terms of the contract. When this agreement is reached, the offer is "ratified". Your Realtor will now be required to deposit the specifed amount as per your contract, into an escrow account with a Title Company. During the escrow period, which is usually 30 to 40 days, certain conditions ("contingencies") specified in the contract must be met or waived within agreed-upon time periods.

These conditions typically include: having a professional inspection of the property, obtaining formal loan approval from the lender, and reviewing the seller's disclosures.

When Will I Actually Own The Home?
You will own the home when all conditions of the contract are met and escrow closes. The following are some of the conditions commonly found in home purchase contracts:

Finding a loan for the amount and at the terms stated in the contract. You should have a pre approved loan with a lender prior to submitting an offer to purchase the property.
Receiving a satisfactory report on the condition of the home by a professional home inspector, and a termite inspector. Obtaining any other inspections you deem necessary. If major problems are discovered, you do not have to buy the home or you can renegotiate the contract.
Conducting a title search and ensuring the property is free of any legal claims against it. You will also have to buy title insurance for yourself and the lender, in case a problem with the title arises after you purchase the house.
Purchasing homeowner's or hazard insurance is required by the lender.
Asking and receiving satisfactory answers to any and all questions you have about the property.
Obtaining disclosures from the seller informing the buyer of any fact which the seller is aware of that would materially affect the value of the property.
The seller must make any repairs to the home which are agreed upon in the contract, you may purchase property in its present condition or ask the seller to credit money in escrow for repairs.
Just prior to close of escrow, your loan becomes effective (it "funds"). The escrow officer will explain the closing documents which you must sign. One of these is a HUD-1 settlement form from the lender. This form, required by federal law, itemizes the services and costs to the buyer and seller. You will also be required to pay the closing costs and the rest of the downpayment, either wired or by a cashier's check, to the title company at least 2 days prior to closing escrow.
The title company formally records the new deed of trust, and you go "on record" as the new owner. You get the keys to your new home and, it's yours!
How important is my credit?
In addition to verifying income, a lender will want a credit report showing that a borrower has repaid monthly debts on a timely and regular basis. It would be a good idea to examine your credit history prior to submitting a mortgage application. If you discover any discrepancies, be sure to notify the credit bureau to correct them, because any unexplained credit delinquencies can be a basis for a disapproval by a lender.

Many delinquent or late payment accounts can be resolved by writing a detailed explanatory letter to the credit bureau. There are several national credit bureaus that provide credit reports for a nominal fee. Listed below are the credit bureaus commonly used by the lending industry.

Equifax Information Service
P.O. Box 740241 Atlanta, GA 30374-0241
(800) 685-1111 ($8.00 service charge)

TRW Credit Data
P.O. Box 749029Dallas,TX 75374-9029
(800) 392-1122
(1 free yearly)

When writing to the above agencies, provide your full name, present address, previous 5 year addresses, social security number, date of birth, and a verification of your name and present address (e.g. a copy of a billing statement).

How do I find the best loan?
Loans are available from a number of sources, including banks, mortgage companies, federal credit unions and financial companies. Your Realtor can be a good source of information about various lenders.

Assessing current needs and future objectives
You can simplify your search for the right loan if you start with a clear understanding of your plans for the property. Such an understanding requires some soul-searching on you part as to your personal and financial goals.

Ask yourself:

Are you looking to build equity quickly? Are you expecting increases in your income?
Is there a strong possibility of a career change or other situation which might cause you to have to move in the near future?
To what extent will the tax deductions from your home's interest payments affect your present and future tax situation?
Are you planning any major improvements? If so, how will they be financed?Before you start looking for homes, it is important to have a good idea of how much you can put down and how much you can afford in monthly payments.
Downpayment
You may intend to put 20% of the purchase price as a downpayment. There are loans available with as little as 5% down, although lenders may charge somewhat higher fees or interest on these. Also, a downpayment less than 20% often includes a requirement from the lender that you purchase private mortgage insurance (PMI) as a protection against possible default.

Monthly Payments
In addition to the downpayment, lenders want to determine if a borrower has enough stable income to make payments on a mortgage. Typically, they do not want a borrower's total housing costs, principal, interest, taxes, and insurance (PITI), to exceed 33 percent of his/her monthly income. The "33" is sometimes called a "top" ratio. Also, total housing costs plus other monthly expenses (car payments, student loans, credit cards, etc.) should not exceed 38 percent of the borrower's total gross income. These parameters are not absolute. Some buyers may qualify at a higher debt-to-income ratio

Types of loans
Today's borrower can choose from several types of loans. Some loans feature the same rate and payment amount for the duration of the loan (Fixed). Others are more flexible. Their rates and payment schedules can adjust to reflect changing economic factors (Adjustable). Still others offer a convertible feature, enabling you to convert from one type of loan to another after a period of time.

Fixed rate loans
Predictability is the key feature of a fixed rate loan. You can be certain that your rate and payment will never change as long as you have the loan. This makes it easier to plan and budget your finances.

Adjustable rate loans (ARMs)
ARM interest rates are tied to-and fluctuate to reflect changes in-a published financial index. When those index rates go up or down, ARM rates do too. By law, the index a lender uses cannot be controlled by that lender (e.g. a bank cannot use its prime rate as an index). Common indices include 11th District Cost of Funds, one-year T-note, and six-month T-bill. ARMs are easier to qualify for than fixed rate loans because the interest start rate is lower.

Glossary of lending terms
Annual payment capsAn annual cap limits the amount of change in payment that can occur. The maximum amount of change is usually 7.5% of the previous year's monthly payment. Payments cannot exceed that cap, no matter what the index rate does during the year. If, for example, your monthly payment is $1,000, it cannot go up by more than $75 per month the following year.

Annual percentage rate (APR)
APR is the effective interest rate over its projected life. It includes interest plus all other costs such as lender fees and closing costs (escrow, title insurance, appraisal fee, processing, etc.) Your loan's APR is a reflection of what you'll be paying annually for the loan and a good way to compare with other loans. Your lender is required by law to quote the APR when quoting an interest rate.

Closing costs
Expenses in addition to the price of the home incurred by buyers and sellers when a home is sold. Common closing costs include escrow fees, title insurance fees, document recording fees and real estate commissions.

Index
There are a number of them. Some move sharply over relatively short time spans. Others change more slowly over longer period of time.

Interest rate adjustment caps
ARMs that don't have an annual payment cap will usually offer an annual cap of up to 2% of interest rates adjustments.

Lifetime interest rate caps
This feature puts a ceiling on the rate to which an ARM loan can be adjusted over the life of the loan. If the rate ever reaches the lifetime cap, the borrower has a fixed rate loan at that rate until the index falls again, and the rate can be adjusted downward.

Loan assumability
Unlike fixed rate mortgages, many ARM loans can be assumed by a qualified borrower. This can be a valuable benefit when the time comes to sell the home.

Margin
The interest rate for an ARM loan reflects the index plus a fixed margin. The margin covers the lender's operating expenses and profit. The margin amount must be included in the loan document, and can not change once the loan is funded.

Negative amortization
Negative amortization can occur when the payment is not large enough to cover the full amount of interest due. The borrower can choose whether he wants to pay the additional amount or have it added to the loan balance.

No prepayment penalty
Most ARMs can be paid off either fully or partially with no penalty.

Points
One point equals 1 percent of the mortgage amount. Typically lenders charge from zero to two points. Loan points are tax deductible.

Locking in
Also called a rate-lock, this is a lender's promise to commit to a certain interest rate on a loan, usually for 30 to 60 days.

Deciding on a Lender
It is important to find a lender you can depend on to provide you a loan at a competitive rate. In addition, you want your application processed swiftly and accurately at reasonable cost. The lending institution's stability, experience and commitment should also be examined.

Your Realtor can help you find a lender with a financing package that meets your needs.

What is an escrow and why is it needed?
An escrow is an arrangement in which a disinterested third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer's and seller's instructions.

People buying and selling real estate often open an escrow for their protection and convenience. The buyer can instruct the escrow holder to disburse the purchase price only upon the satisfaction of certain prerequisites and conditions. The seller can instruct the escrow holder to retain possession of the deed until the seller's requirements, including receipt of the purchase price, are met. Both rely on the escrow holder to carry out faithfully their mutually consistent instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried out.

An escrow is convenient for the buyer and seller because both can move forward separately but simultaneously in providing inspections, reports, loan commitments and funds, deeds, and many other items using the escrow holder as the central depositing point. If the instructions from all parties to an escrow are clearly drafted, fully detailed and mutually consistent, the escrow holder can take many actions on their behalf without further consultation. This saves much time and facilitates the closing of the transaction.

Who may hold escrows
The escrow holder may be any disinterested third party (some states require escrow holders to be licensed). Escrow officers with established firms generally are experienced and trained in real estate procedures, title insurance, taxes, deeds and insurance.

Impartiality
An escrow officer must remain completely impartial throughout the entire escrow process.He or she must follow instructions of both parties without bias.

Escrow instructions
Escrow instructions are written documents, signed by the parties giving them, which direct the escrow officer in the specific steps to be completed so the escrow can be closed. Typical instructions might include: the method by which the escrow holder is to receive and hold the purchase price to be paid by the buyer; the conditions under which a lapse of time or breach of purchase contract provision will terminate the escrow without a closing; instructions on the payment of prior liens.

Closing the escrow
Once the terms and conditions of the instructions of both parties have been fulfilled, the escrow is closed and the safe and accurate transfer of property and money has been accomplished.

In summary
The escrow holder facilitates real estate sales or purchases by:

Acting as the impartial depository of documents and funds.- Keeping all parties informed of progress on escrow.
Responding to lender's requirements
Securing a title insurance policy
Prorating and adjusting insurance, taxes, etc
Recording the deed and loan documents
It's not always that simple
Every escrow is unique and most are more complex than explained here. If you have further questions, contact an escrow officer or attorney to provide more detailed information.

What protection does title insurance provide?
Title insurance protects against any matter affecting the past ownership of the property. Title insurance is issued after the title company carefully examines copies of the public record. However, even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge ad experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.

Some common hidden risks that can cause a loss of title or create an encumbrance on title:

False impersonation of the true owner of the property
Forged deeds, releases, or wills
Undisclosed or missing heirs
Instruments executed under invalid or expired power of attorney
Mistakes in recording legal documents
Misinterpretations of wills
Fraud
Deeds by persons of unsound mind
Deeds by minors
Deeds by persons supposedly single, but in fact married
Liens for unpaid estate, inheritance, income or gift taxes
Title insurance will pay for defending against any lawsuit attacking your title problems or pay the insured's losses. For a one time premium, and owner's title insurance policy remains in effect as long as you or your heirs retain an interest in the property, or have any obligation under a warranty in any conveyance of it.

By combining expertise in risk elimination at the time of issuing a policy, and protection against hidden risks as long as the policy remains in effect, your title insurer protects against title loss.For more detailed information on title insurance, contact a title officer at your title company.

I hope you have found this information helpful. It is designed to be of general interest, and while the content is reliable, it is not intended as a substitute for the advice of professional lenders, accountants, escrow officers, attorneys, etc. Before acting on any matter contained herein, you should consult with your professional adviser.

Do not hesitate to call or email me if you have any questions .

Homes@JeanPowers.com
510.908.9002 Cell
800.378.7800 Bus.

Californians Can Afford to Purchase a New Home!

Group says more Californians can afford to buy their first home
By ALEX VEIGA, AP Business Writer

(02-19) 12:13 PST Los Angeles (AP) --

Frustrated California renters take heed: A trade group says it's getting easier for people to afford their first home.

With home prices in a downward spiral in many once-booming areas, the percentage of California households that can afford to finance an entry-level home increased in the last three months of 2007 compared to the same period a year earlier, the California Association of Realtors said Tuesday.

The trade group for real estate agents calculates affordability based on the minimum household income required to make a 10 percent downpayment and secure an adjustable interest rate loan at 6.21 percent.

Some 33 percent of the households in the state met those guidelines in the fourth quarter — up from 25 percent in the same three months of 2006, the association said.

Buyers needed to earn $82,200 to afford financing of $411,170, the typical statewide price for an entry-level home during the quarter, the trade association estimated.

The monthly payment for such a purchase, including taxes and insurance, was $2,740, the association said.

An entry-level home was defined as one priced at about 85 percent of the median home price in an area.

The most affordable area of the state during the quarter was the desert north of Los Angeles, where some 54 percent of households met the association's $43,800 annual income threshold to finance an entry-level home priced at $218,880.

Sacramento County was next, with 53 percent of households within the income range needed to afford a home priced at $252,920.

The least affordable area was the Central Coast region of Monterey, where only 20 percent of households earned the $118,200 needed to finance an entry-level home at $591,200.

In Los Angeles County, 27 percent of households earned the $86,700 a year needed to buy a home priced at $433,200.

Some 46 percent of households in Riverside and San Bernardino counties, which have been hit particularly hard by rising foreclosures and falling home values, earned $57,600 a year, enough to finance a $287,330 home, the association said.

In the San Francisco Bay area, meanwhile, only 23 percent of households reported income of at least $132,300, the minimum to purchase a home priced at $660,660.

Compliments of:
California Association of Realtors: www.car.org

NAR's Economist's Commentary!

Refueling the Housing Bubble?
By NAR Chief Economist Lawrence Yun

The Federal Reserve has been aggressively cutting rates recently and the question is being raised about parallels to the past. Back in 2001, in the aftermath of the internet stock bubble collapse and the September 11 terrorist attacks, Alan Greenspan — then the Fed chairman — made deep cuts in interest rates in order to stave off a possible economic recession. Many also blame Mr. Greenspan for having fueled the housing market bubble and subsequent collapse by keeping the rates too low for too long.

Now in early 2008, with the economy possibly heading into a recession — as evidenced by the GDP growth rate slowing from 4.1% in third quarter to 0.6% in the fourth quarter — the current Fed Chair, Ben Bernanke, has been following a very similar step of sharply cutting fed funds rates in order to revive economic growth — partly by making home buying financially enticing. Though there is never a direct correction between the Fed funds rate and mortgage rates, which are outside of the Fed's control and determined by the global bond market, the current 30-year mortgage rates have come down to essentially 45-year low levels. Aside from a few months in 2003, mortgage rates have never been this low since the early 1960s. A drop in the average mortgage rate from nearly 7% in mid-2005 to the current 5.7% would reduce monthly mortgage payments from $1330 to $1160 on a $200,000 mortgage. The average savings would be $340 per month or $4,000 per year on a $400,000 mortgage.

Therefore, could the Fed be simply refueling the bubble by dangling financial incentives to buy a home? Well, let's replay the key factors related to the recent bubble-collapse and see whether the same behavioral patterns will reemerge. Keep in mind that there are significant local market variations, but the markets that had the huge swings followed the below pattern:

The Fed started cutting rates from 2001 — with the Fed funds rate eventually reaching 1% by mid-2003.


The mortgage rate fell to 5.5% by the summer of 2003 from 8% in 2000. ARMS rates fell from 7% to 3.5% over the same period.


Housing demand rose with existing and new home sales hitting successive high marks in 2003, 2004, and 2005. Inventory fell as a result.


Home prices accelerated. For example, in the D.C. region home prices more than doubled from $204,000 to $426,000 from 2001 to 2005. Homeowners' net worth leapt by over $200,000 as a result — a figure many would considered good lifetime savings.


Given the general weakness in the stock market and relative "easy" wealth gains for real estate owners — there was an increasing view of homeownership and real estate as a financial play rather than in terms of family and housing needs considerations.


Housing demand ran exceptionally high, but the demand could only be realized if people could get the financing.


Global capital providers were chasing after high yields and were eager to provide the financing because…


Ratings agencies gave their blessing on subprime products, giving the impression that these were 'safe' alternatives.


Moody's, Standard & Poor's, and other ratings agency raked in revenue by giving out top Triple-A ratings (an inherent conflict of interest exists when ratings agencies get their revenue from mortgage underwriters/securitizers… rather like a professor who gives out a lot of "A" grades will draw more tuition paying students to his class).


With funding plentiful, subprime and no documentation loans proliferated — if you had a heartbeat, you could get a loan.


Housing demand was further pushed higher as herds of house-flippers entered the market, and home prices accelerated in those markets. Prices grew by leaps and bounds in markets of around 70% in short two years — places like Las Vegas, Miami, and Phoenix, and Sacramento.


Inventories were pushed down to exceptionally low levels and homebuilders could not keep up with demand.


From late 2004, the Fed began to tighten and mortgage rates climb in 2005.


Housing demand naturally fell off.


Inventory quickly built — from a combination of lower demand, builders continuing to build at a high pace, and some speculators/flippers realizing that the period of easy price gains was coming to an end.


Rising inventory held back price gains.


Price stagnation no longer permitted mortgage refinancing. Flippers/speculators started carrying burdensome mortgage costs — some begin to simply walk away — pushing inventory higher.


Non-flippers — primary homeowners, who took out subprime loans, also faced the same price stagnation, but also the resetting higher interest rates. Refinancing is not possible and some have been forced to foreclose


More and more flippers/speculators and homeowners are unable to carry the high resetting interest rates and simply walk away. Lenders begin to write-down loan losses.


After the fact and very late, the ratings agencies stated that subprime loans are no longer Triple-A quality.


Global capital providers stopped funding subprime loans and the subprime market came to a halt.


Global capital providers, having been burned, also stop funding any U.S. mortgages other than those with Fannie and Freddie backing. The jumbo loan market, therefore, struggles.


From mid-2007, a lack of market liquidity and economic slowdown forces the Fed to cut rates.


Conforming mortgage rates again fall to historic lows, but not jumbo loan rates.


The Fed has been and is further ready to make deeper cuts.
Going back to our earlier question: is the current action by the Fed simply trying to replay the same volatile game? The answer is an unambiguous NO. The same game is played out because the global capital providers will not be taken for fools again. After being burned, German mutual funds or the Chinese government or the Florida's teacher pension fund will no longer buy toxic subprime loans. Without the loans, homebuyers simply cannot enter the marketplace independent of their desires. We are back to the careful underwriting standards of verifying people's income, requiring escrow accounts, and back to thoroughly checking borrower's ability to repay the loan.

However, the current low interest rate policies of the Fed are a big help to housing because low rates can begin to furnish genuine potential homebuyers with the financial capacity to think seriously about becoming a homeowner. Furthermore, the rate cut is lessening the degree of forthcoming ARM resets, thereby lessening the burden the current subprime loan borrower faces. So the current policy of Ben Bernanke will help stabilize the housing market.

The Federal Reserve, however, should be mindful to not lower the fed funds rate too greatly. Inflation is expected to head lower in 2008 but too much money can fuel inflationary pressures. If that happens, 30-year mortgage rates will RISE, and therefore, choke off any housing recovery. A careful balance must be taken regarding how low to bring down the fed funds rate.

Though some in the blogosphere have figured Alan Greenspan as one of the key persons to blame for the current housing mess, I do not blame Mr. Greenspan. I believe there is plenty of blame to go around due to other factors. Global capital providers misunderstood and were simply not careful about purchasing securities composed on little income documentation and of risky-borrowers. Mortgage originators just originated loans to anyone including to suspicious borrowers because they had no skin in the game (see the recent academic article on this topic by a group of professors from the University of Chicago). There were also many books about how to endlessly profit from real estate. Consumers — particularly the flippers/speculators — also need to bear some of the blame.

But the biggest blame in my view goes to Moody's and Standard & Poor's — the rating agencies. If they had properly assessed the risk as is their job, then global capital would have never reached subprime homebuyers and flippers. The housing boom would have stopped dead in its tracks. We do not yet know how much of the ratings firms' assessment were clouded by their financial interest in giving out easy Triple-A grades. Many workers at Moody's and Standard & Poor's took home hefty bonus checks when revenue skyrocketed from providing high ratings.

It is also fine for people to point the finger at me. In a fast changing market conditions, I too have been off on my forecast. I knew that the boom was clearly unsustainable and I made the forecast in early 2007 that home prices were likely to experience a price decline on a national level for the first time since the Great Depression. The national median home price indeed fell by 1.4%. I believe I downgraded my forecast for ten or so straight months in 2007 as it was strongly pointed out to me. At the same time, the Blue Chip consensus forecast, comprised of about top 50 private forecasters, including forecasts by Merrill Lynch, Goldman Sachs, UCLA, and the like — had also downgraded the housing forecast by more than 20 straight months. Forecasting is never perfect. Forecasts are bound to be off but the forecaster's job is to make the best prognosis given the available information at the time. The readers should always view any forecast with caveat emptor.

But back to the original question: Will we experience a re-emergence of a housing boom from the current easy money policy by the Fed? The answer is no because as Abraham Lincoln said — fool me once, shame on you. Fool me twice, shame on me. It will be impossible to part global capital providers' money with another foolish investment.

Easing Your Children's Fears When Making a Move!

Helping Your Children Move to Their New Home!

If you’re relocating to a new city, you should try to make the transition as smooth as possible for your children. The best thing you can do is to keep them informed. Even if you think they don’t care or won’t fully understand the details, keep them as informed as possible so they feel secure about the situation. Children understand much more than some of us give them credit for. Getting them on-board for the move will help to make the relocation less stressful for the whole family.

The greatest fear preschool children typically have is that they will somehow be left behind. If you need to leave your children for a short time to search for your new home or to orient yourself to the new location, reassure them that you will be back. It may help if you bring them back something from the new location. Consider assigning them a task to complete before you return, such as packing some of their toys in boxes. This will help them feel involved in the move.

Elementary children may fear how the move will disrupt their everyday lives. Take pictures of the new location and of spots that you know they will enjoy, such as parks and pizza parlors. If possible, take them to the new location before the move to let them get a first-hand feel for the place and take the mystery out of it. Nothing is scarier to kids than the unknown.

Teenagers may be worried about fitting in and making new friends at their new school. To help ease their fears, find out as much as you can about the high school they will be attending. Make special note of the local trends, sports teams and school clubs.

Again, if possible, visit the new town before the move and visit the school that each child will attend. Schedule a meeting with the principal and teachers before their first day of school. If you can’t do it before the move, make sure to do it as soon as possible after the move. Once your children start to make new friends, encourage them to bring their new classmates home to visit.

Play tourist in your new location. This is a great way to learn the area and makes the children feel like it is a vacation. It will take time to make new friends so the touring keeps them busy and less likely to dwell on the loss of old friends.


Ready to select a REALTOR®….I am here to help!

Jean Powers
Broker Associate, CRS, ASP, LTG, PMN, SRES
Windermere Welcome Home
510.908.9002
Toll Free: 800.378.7300


Successfully Serving Alameda Since 1984

Critical Considerations When Purchasing a Home!

Thinking about purchasing a home of your own? Keep these critical considerations in mind:

*How long you plan to live in the home? If you purchase a home and get a job transfer or decide to move after only a short time, you may end up paying money in order to sell it. The value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home. The length of time that it will take to cover those costs depends on various economic factors in the area of the home. Most parts of the country have an average of 5% appreciation per year. In this case, you should plan to stay in your home at least 5 to 7 years to cover buying and selling costs. If the area you buy your home in experiences an economic up turn, the length of the time to cover these costs could be shortened, and the opposite is also true. *How long the home will meet your needs? What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you'll need to ensure that the home has the amenities that you'll need. For example, a two-bedroom dwelling may be perfect for a young couple with no children. However, if they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you'll need will help you find a home that will satisfy you for years to come.

*Your financial health - your credit and home affordability. Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good? While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not good. Generally, a couple of blemishes on a credit report will make you a good credit risk and could qualify you for the lowest interest rates. If you have more than a couple of blemishes on your report, some lenders may still provide you with a loan, but you may just have to pay a higher interest rate and fees. Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it's within your comfort zone. *To determine how much home you can afford, talk to a lender or go online and use a "home affordability" calculator. Good calculators will give you a range of what you may qualify for. Then call a lender. While some may say that the "28/36" rule applies, in today's home mortgage market, lenders are making loans customized to a particular person's situation. The "28/36" rule means that your monthly housing costs can't exceed 28 percent of your income and your total debt load can't exceed 36 percent of your total monthly income. Depending on your assets, credit history, job potential and other factors, lenders can push the ratios up to 40-60% or higher. While we're not advocating you purchase a home utilizing the higher ratios, its important for you to know your options. *Where the money for the transaction will come from. Typically homebuyers will need some money for a down payment and closing costs. However, with today's broad range of loan options, having a lot of money saved for a down payment is not always necessary - if you can prove that you are a good financial risk to a lender. If your credit isn't stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender.

*The ongoing costs of home ownership. Maintenance, improvements, taxes and insurance are all costs that are added to a monthly house payment. If you buy a condominium or a townhouse, a monthly homeowner's association fee might be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your Realtor and your lender aware of your desire to limit these costs. If you are still unsure and want buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.

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Jean Powers Broker Associate, CRS, ASP, LTG, PMN, Windermere Welcome Home Please Remember ....I am never too busy for Your referrals! Successfully Serving Alameda County Since 1984

Economic Stimulus

President Approves Higher Loan Limits: On Wednesday (2/13), President Bush signed the economic stimulus package that includes a temporary increase in the conforming loan limits for mortgages backed by the GSEs (Fannie Mae and Freddie Mac) and the FHA. The new loan limits could rise to $729,750 in high-cost regions.

According to NAR, more than 85,000 REALTORS® contacted their senators urging them to support the increased loan limits and to pass the stimulus package.

REALTOR® Impact: Higher loan limits will have a direct positive impact on REALTORS®. The policy change will allow more buyers (both first-time and move-up buyers) to access loans with lower interest rates. Currently, most home buyers in high-cost regions (such as the SF Bay Area) must finance their purchases with non-conforming "jumbo" loans. The interest rates on these loans can be up to one percentage point higher than those that fall within the current $417,000 limit. Higher rates mean higher payments which could keep potential buyers out of the market. Lower raters will make access to capital easier and provide the incentive for buyers to get off the fence and into real estate.

Next Steps: We may see new loan products as soon as late April or early May. According to sources at C.A.R., the Secretary of the U.S. Department of Housing and Urban Development will have up to 30 days to finalize the actual amount of the regional loan limits. Once the limits are set, Fannie Mae and Freddie Mac will need to update their procedures to reflect the changes. Shifting from a national loan limit to region limits is a major change for both Fannie Mae and Freddie Mac. Regardless, our sources tell us that both GSEs want to implement the new limits as soon as possible.

CAR is not sure when the FHA will respond. However, they may be able to implement the new limits quicker than the GSEs.

This report is compliments of Bay East's Governent Affairs Director David Stark!