Four Factors to Watch in the Housing's Rebound

For the past year, more U.S. housing markets have had the feel of a blowout flea-market sale.

Prices were low and financing—while hard to get—was cheap for those who could get it. Once it was clear prices had found a bottom, bidding wars broke out as buyers competed over a shrinking supply of homes to get a good deal.

That sent prices up—sharply, in many markets—and for a while, buyers didn’t much mind. Falling interest rates made it possible for buyers to offer slightly higher prices without raising their monthly ownership costs.

But now, mortgage rates are up by a full percentage point over the past four months, and affordability has taken a hit, prompting concerns about a short-term “soft patch” as buyers and sellers adjust. Here’s a look at four keys to the housing puzzle:

1. Housing became less affordable in a short span. Typically in a recovery, sales pick up and then prices follow. But the current recovery has been “flip-flopped,” said Ivy Zelman, chief executive of Zelman & Associates Inc., a research and advisory firm. “We’ve had pricing accelerate out of the box” as builders took advantage of rising demand and low interest rates while adding little in the way of new construction. “That’s not typical of an upturn.”

Now, with prices up by double-digits from one year ago, rising rates have been “almost like a red light on the frantic price inflation,” said Ms. Zelman. A Zelman report last week showed that new home orders in August rose by just 1% from one year earlier, compared to year-over-year gains of 11% in July and 25% during the second quarter. “I hear more often now from builders, ‘We pushed prices too far,’” she said. “Consumers got sticker shock.”

2. Inventories are still depressed. Demand is only part of the equation of course, and some real-estate agents say the biggest drag on sales continues to be the lack of homes for sale. While the number of listings in August was up by 20% from the beginning of the year, the supply of homes for sale is below the already-depressed levels of one year ago. “There’s just not enough inventory to justify price declines,” said Ms. Zelman.

Buyers are also being pickier today because they’re looking for a home that they can live in for a long time, said Jim Klinge, a real-estate agent in Carlsbad, Calif. “Buyers want the right house,” he said. “They’ll pay more for it, and they’ll pay a higher rate.” But if it’s not available, they’ll wait.

Data tracked by John Burns Real Estate Consulting shows that in the vast majority of the nation’s 20 top markets, demand exceeds supply. In Phoenix, new-home sales are being hindered by a lack of supply, said Mike Orr, a housing analyst at Arizona State University in Tempe, Ariz. “There’s not any new homes in the places where people want to live,” he said. “People are frustrated.”

3. This should help quiet the bubble talk. Earlier this year, some worried that the housing market was back in a bubble. Any cooling down should soothe those worries. “I was more scared of the market at the beginning of the year than I am right now, because I knew that was not sustainable,” said Greg Markov, a real-estate agent in Phoenix, a market at the center of the home-price rebound over the past year.

“People were behaving irrationally, and it set us up for more ups and downs,” said Glenn Kelman, chief executive at Redfin, the real-estate brokerage.

While incomes have been growing at roughly 1% a year, home prices have been rising much faster—by around 12% nationally. Some of this happened because home prices had fallen below their traditional relationship with incomes. But a 12% pace of growth was “simply too high and not sustainable,” said Chris Flanagan, a mortgage analyst at Bank of America Merrill Lynch in a recent report.

4. How smooth a hand-off? As rising prices ease investors out of more markets, there will be less competition for some homes, slowing the pace at which prices are going up. The key going forward is how well owner-occupant, mortgage-dependent buyers are able to pick up the slack from investors, especially in an environment where rates are rising.

Unemployment is still high, especially among younger workers who would normally be first-time home buyers. Mortgage credit remains tight, and many borrowers may already have high debt loads or irregular incomes that make them marginal candidates for a loan anyway.

When interest rates normalize, “any future improvement in housing will be entirely dependent on the jobs picture,” said Jeffrey Otteau, chief executive of Otteau Valuation Group, an appraisal firm in East Brunswick, N.J. The key, he adds, is how many jobs are being added “and are they part time temporary contract workers at the bottom of the income ladder or are they the high paying jobs we need to sustain a housing recovery?”

The answer to that question will go a long way towards clarifying how fast housing heals.

The answer to that question will go a long way towards clarifying how fast housing heals.

Story by Nick Timiraos of The Wall Street Journal

New Housing Scam Emerges; California Homeowners Beware.

If you're applying for the $2 billion state-run program that helps struggling borrowers, remember, the process should be free from start to finish.

Related: Are mortgage-aid programs too little, too late?

State officials have noticed an emerging scam: Callers say they will help homeowners apply for Keep Your Home California benefits for fees of up to $900. The calls are happening statewide.

Applying for the program is free.

California, one of the hardest-hit states in the U.S., launched Keep Your Home California last year to help folks who’ve lost their jobs, seen their companies move away, or watched their home equities plummet from price-boom highs. The idea is to catch them up on mortgage payments, help them relocate after a short sale and cut their principal, by far the most controversial part of the program.

So far, it's helped about 12,000 borrowers, reflecting more than $200 million in aid. Read some of their stories here.

Officials with Keep Your Home California, a program run by the California Housing Finance Agency, encourage Californians to call 888-954-5337 instead of taking phone calls from solicitors about the program. You can also visit keepyourhomecalifornia.org.

Article by:

Written by

Lily Leung

12:56 p.m., March 7, 2012
Updated 1:10 p.m.

Sacramento: When estate vaues rise again, tax bills liely to rise faster

When real estate values rise again, tax bills likely to rise faster

By Loretta Kalb
lkalb@sacbee.com

Published: Tuesday, Aug. 23, 2011 - 12:00 am | Page 1B

Hundreds of thousands of Sacramento-area residents have experienced one upside of falling real estate prices: lower property taxes.
When the market recovers, however, their tax bills could rise much faster than they fell.
That's because the normal limits on tax increases established by Proposition 13 no longer apply as long as a property's assessment remains below its maximum taxable value, generally its last sales price plus annual inflation.
In good times, Proposition 13 allows the assessed value of a property to rise by no more than 2 percent a year – even though the actual market value may have gone up much more. There are no such limits on properties worth less than taxable value.
How much could taxes rise?
That's not a question people are in hurry to ask. Home prices in the region are about 50 percent below the peak of 2006, and most resales in the Sacramento market are bank-owned or short sales. Recovery still seems out of reach.
Real estate sales data so far signal that property taxes will likely go down again, or remain flat, for the 2012 tax cycle, said John Solie, assistant assessor for Sacramento County.
When taxes do rise later this decade, the shock to owners will depend on the pace of recovery. In a slow upswing, owners might not notice, at least, not right away.
Over time, however, the shift to higher taxes is likely to produce a slew of appeals, assessors say.
"After the last recession we were going into a real estate market that was increasing 10 to 20 percent a year," Yolo County Assessor Joel Butler said. "People really felt it, and they talked to us about it.
"This recession is so different than anything we've ever experienced. I don't see us coming out like a lion, as we did last time."
In the 1990s, when the real estate market took a long dive, nearly a third of all Sacramento County properties had lowered assessments.
This time, the share exceeds 40 percent in Sacramento County, and it's still climbing.
Already in the four-county region – Sacramento, Yolo, Placer and El Dorado – the volume of reduced-tax properties exceeds 300,000.
"This is pretty unprecedented for property taxation since Proposition 13 passed, in any number of ways," said El Dorado County Assessor Karl Weiland.
"We've had three (significant) years of negative values," he said. "That has never happened."
Weiland said he believes assessors will take a conservative approach in restoring taxable values.
"This has been a topic of discussion among all assessors," Weiland said. "We're simply trying to formulate some idea as to how we're going to deal with this.
"Everybody is scratching their heads and saying, 'OK, we've dealt with the decrease in values, and we've followed the market down. Now we've got to figure out how we follow the market up."

Read more: http://www.sacbee.com/2011/08/23/3854636/when-real-estate-values-rise-again.html#ixzz1VzEh0010

If you live in the Greater Sacramento and surrounding areas, and would like a current estimate of value on your property, email us with your address, and we will be happy to send you copy based on Metrolist.  (same stats that appraisers use)

 We are always on the lookout for the latest news on Short Sales.  One thing is for sure, working with an experienced team can make the difference!   We have been working with Short Sales throughout our Real Estate career since 1994.

(Original Article from http://abclocal.go.com/kfsn/story?section=news/business&id=8264936)

FRESNO, California (KFSN) -- California realtors are calling on lenders to do more to prevent families from going into foreclosure. This after a recent survey found more than half of Central Valley realtors characterized closing short sale transactions as "difficult" or "extremely difficult."

Sal Valencia said, "You can't do anything if they aren't willing to talk, not willing to respond, even acknowledge you."
Valencia has been trying to short sell his Central Fresno home since August of 2009.
"At the time there was a lot of things that changed in our lives that we couldn't afford our home anymore," said Valencia.
Instead of going into foreclosure - he chose another alternative. A short sale -- where homeowners with a proven hardship negotiate an agreement with their lender to sell their home for less than what they owe. But so far - he's run into a number of man-made roadblocks.
Valencia said, "The most difficult part is the lack of communication."
Don Faught, California Association of Realtors said, "Californian's are being victimized by a process that should be helping them."
At a news conference outside Valencia's home - a group of Central Valley realtors said he's not alone - calling the short sale process "broken."
Fresno Realtor, Patrick Prince said, "The vast majority of properties we put through into contract, the buyer cancels and moves on to another property before we can get a short sale."
They say the problem is with the lenders slow response times, repeated requests for documentation and poor communication with their clients. Some realtors even said the lender foreclosed on the home before the short sale was completed.
Prince said, "I think the process is similar enough among all the lenders that it could be streamlined across the board."
They're now calling for reform. Demanding the lender appoint a single point of contact for each transaction -- speed up the approval process -- and stop foreclosure proceedings while negotiating a short sale. Solutions they believe will help thousands of homeowners who face foreclosure each year.
Valencia said, "I'd hate for someone to go through this. That's the only reason I'm here."

(Copyright ©2011 KFSN-TV/DT. All Rights Reserved.)

California pending home sales rise in June, distressed properties remain flat C.A.R. reports

For release:
July 20, 2011
California pending home sales rise in June, distressed properties remain flat C.A.R. reports
LOS ANGELES (July 20) – California pending home sales rose for the second consecutive month in June, while the share of distressed property sales was unchanged, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today. 
Pending home sales:
Pending home sales in California rose in June, according to C.A.R.’s Pending Home Sales Index (PHSI)*.  The index was 119.0 in June, an increase of 1.9 percent from May’s revised index of 116.8, based on contracts signed in June.  The index also was up 4.4 percent from June 2010.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.
“Pending home sales have improved in the last couple of months and the next few months should bring continued gains,” said C.A.R. President Beth L. Peerce.  “So much depends on the direction of the economy going forward. As for the makeup of the market, distressed sales continue to be a significant part of the market with the split between short sales and REO sales varying greatly across the state.”
Distressed housing market data:

• The total share of all distressed property types sold statewide was unchanged in June from May’s revised 47 percent.  The share also was unchanged from a year prior.
• Of the distressed properties sold statewide, 19 percent were short sales, a decline from last month’s share of 20 percent and last year’s share of 21 percent.
• At 27 percent, the share of REO (real estate-owned) sales was unchanged compared with May, but was up from 25 percent reported in June 2010.
• Non-distressed sales made up the remaining share of home sales in June at 53 percent, unchanged from both previous month and year.

Multimedia:

• View a video of C.A.R. Chief Economist Leslie Appleton-Young discussing highlights of the June existing home sales and price report, which was released July 14.
• View a chart of pending sales compared with closed sales.
  
  # # #

Share of Distressed Sales to Total Sales
(Single-family)

Type of Sale	June-10	May-11	June-11
REOs	25%	27%	27%
Short Sales	21%	20%	19%
Total Distressed Sales	47%	47%	47%

 
Single-family Distressed Home Sales by Select Counties
(Percent of total sales)

County	June-10	May-11	June-11
Amador	44%	61%	51%
Butte	27%	44%	34%
Humboldt	20%	17%	29%
Kern	68%	66%	66%
Lake	62%	80%	86%
Los Angeles	47%	45%	47%
Madera	54%	85%	83%
Marin	20%	28%	26%
Mendocino	32%	51%	63%
Merced	53%	59%	64%
Napa	49%	43%	51%
Orange	33%	36%	35%
Riverside	69%	65%	61%
Sacramento	62%	65%	65%
San Bernardino	69%	69%	69%
San Diego	25%	29%	28%
San Luis Obispo	40%	40%	42%
Solano	66%	71%	72%
Sonoma	43%	48%	51%
Tehama	67%	62%	73%
CALIFORNIA	47%	47%	47%

*Note:  C.A.R.’s pending sales information is generated from a survey of more than 70 associations of REALTORS® and MLSs throughout the state.  Pending home sales are forward-looking indicators of future home sales activity, offering solid information on future changes in the direction of the market.  A sale is listed as pending after a seller has accepted a sales contract on a property.  The majority of pending home sales usually becomes closed sales transactions one to two months later.  The year 2008 was used as the benchmark for the Pending Homes Sales Index.  An index of 100 is equal to the average level of contract activity during 2008.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Foreclosure myths, debunked

Common myths regarding foreclosures.  As always, never seek Real Estate/Mortgage advice from an unlicensed company or person.  No monies should be exchanged upfront in a Modification or Short sale.  Please feel free to contact us privately with any questions.

Reporting from Washington—

People fear foreclosure almost as much as they fear death. But unlike death, foreclosure can be prevented.

Unfortunately, just as some people ignore an illness' symptoms in hopes that it will just go away, some troubled owners are afraid to confront their problems and take the necessary actions to save their homes. But with so much misinformation flying about, who can blame them? Here are some common responses and misconceptions.
Dread: "If I tell the mortgage company I'm having a problem, it will speed up the foreclosure process."
Contacting your lender is an important first step, and the sooner, the better. It provides you with an opportunity to explain your situation and what steps you are taking to deal with it. Yes, your lender can be your adversary, but that's much later in the process. Right now, the lender can be your best ally. So call the lender early.
Fear: "If I miss just one payment, I'll lose my home."
The foreclosure process doesn't even begin until you are at least 90 days delinquent on your mortgage. But by that time, you are three months behind, and that's a deep hole from which to try to dig out.
It's much easier to get back on track after missing a single payment, so reach out to your lender and ask for help in making up your deficit. Even if you think you might miss a payment or two, let your lender know what's up. Lenders have a financial interest in keeping you in your home and may be willing to modify the terms of your loan or devise a repayment plan.
Regret: "I'll rob Peter to pay Paul until I can get back on my feet."
Many people try to ride out their financial difficulties by depleting their savings or even dipping into their retirement accounts. Although using your mattress money may be the right step, pilfering from your IRA or 401(k) plan should be the last thing you do, if you do it at all. Long before that drastic step, seek help. Otherwise, by the time you do seek help, you could be in even more desperate straits and your options will be fewer.
Ignorance: "What choice is there but to lose my home?"
There are plenty of choices, but most people don't know what they are. And they won't until they speak with a lender. Yet many delinquent borrowers think they can handle their problems on their own without help. Most can't.
Panic: "I'm receiving so many offers from people who say they are trying to help me save my home that they all must be scams."
Yes, there are a lot of dishonest people offering false promises. And if you take up with one, it could make your financial situation much worse. At the same time, lenders are hiring all sorts of companies to try to make contact with borrowers who won't answer their mail or pick up their phones. So how do you know the good guys from the bad?
Beware of cold callers who don't already have your loan number. If that's missing, the deal is probably bogus. According to Freddie Mac, one of the country's largest mortgage investors, the companies it hires to deal with delinquent borrowers will know that number.
Other tip-offs include upfront fees and pressure to sign something immediately. You shouldn't have to pay anything in advance. Pay only for services rendered. And don't put your signature on anything, especially something that's incomplete, until you have a chance to run it by a financial advisor, your tax preparer or someone you trust.
Terror: "My lender isn't responding to my inquiries."
Don't give up. Never give up. Again, this is a process, and it takes longer than you think. So be patient.
At the same time, keep detailed records of all your calls. Once contact is made, write down the name of the person with whom you spoke, his or her identification number, the date and time of your conversation and a summary of what was said. Also make copies of all your correspondence and other paperwork. Lenders tend to lose things.
Alarm: "To get my lender's attention, I should stop making my payments."
You don't need to be behind to get help. Millions of owners are in the same boat as you. Lenders are absolutely swamped. Even years into the housing crisis, they still don't have the staffing with the training and experience to handle the onslaught. So be patient — and keep trying and trying to reach your lender.
Keep making your payments, too — to your lender, no one else. If you stop, it will hurt your credit and increase the possibility that you will lose your home. And if someone wants you to mail the payments to him or her instead, you almost certainly will lose your home if you do.
Alert: "If I've been turned down for a loan modification, there is no point in seeking further help."
Just because you didn't qualify before doesn't mean you won't qualify now. Look at the federal loan-modification programs as well as your lender's. Besides, program parameters change all the time, so the rules might have been liberalized since you last sought help. Or your situation may have changed for the worse.
A housing counseling agency can help at any time, but it can be particularly helpful if you've been rejected. The Consumer Credit Counseling Service of Greater Atlanta says many owners are refused because they did not provide proper documentation or failed to consider all their expenses.
Also, the lender may have made a processing error or not followed the rules. You won't be able to spot these miscues, but an experienced counselor will. You can find a government-approved counseling agency at http://www.hud.gov.


Reported by the Los Angeles Times

Short Sales frustrating, but better than foreclosures

We found this great article via the California Association of Realtors.  Gives a great insight on what goes on behind the scenes as far as how the industry is making changes and streamlines in the  daunting process of a short sale.  If you have any further questions, or would like a private consultation, please feel free to contact us.

Yoli and Sharon,

Rebecca U. Cho, Staff Writer

Posted: 06/11/2011 08:01:10 PM PDT

Short sales have been anything but short in duration. As lenders grapple with the huge volumes of distressed properties and navigate the complex web of loan ownership created by bundling mortgages, transactions have stalled for months.
Real estate professionals and homeowners are frustrated - and the California Association of Realtors has been pushing to speed up the process. The trade group is working with lending institutions such as Fannie Mae to shorten the time brokers and agents must wait for approval on short sales.
Short sales, in which the lender agrees to accept the sale of a home for less than is owed on the property, help lenders and homeowners avoid foreclosures. And such transactions make up a significant portion of the housing market: 19 percent of total home sales in California were short sales in April, according to C.A.R. statistics on existing single-family homes.
Doug Shepherd, the president of the Inland Valley Association of Realtors, C.A.R.'s regional chapter, spoke on the present state of the short sales process and ongoing improvements in streamlining the process. Shepherd is also the owner of Shepherd Realty Group based in Riverside.
Q: Are short sales a relatively new type of transaction in real estate?
A: I started doing short sales in the early 1990s in the Inland Empire, the last time we had a real downturn, when they closed the Air Force bases around here and property values dropped. It occurs
often after a run-up on prices and when equities can't catch up. It's always been there. Q: Why are we experiencing big delays in short sales today?
A: Inefficiency and sheer volume. Because it's a national issue and the way mortgages are bundled today, who owns it? Bank of America services or collects payments on hundreds of thousands of loans in the United States. But they can make decisions on only 10 percent of loans. So on 90 percent of loans, people are making payments to BofA as the servicer, but someone else owns the loan. So it's this whole thing of who really owns the loan. Nine out of 10 times you're not talking to the decision maker.
Q: How has the short sales process been for real estate agents and Realtors?
A: It's very frustrating. And our national and state associations are trying to put forth some measures to help alleviate this. It's the time involved and the uncertainty. If I take five listings, it could be five different banks and each could have their own processes. So it's very inconsistent and time consuming. You can imagine you can open an escrow today and not see a paycheck until December or sooner. A buyer may say I don't want to wait anymore and you have to go out and find another.
Q: What kind of changes are the associations pushing for?
A: Fannie Mae and Freddie Mac are working with us. We're trying get a streamlined program or a consistent set of guidelines so a homeowner can say, "I can start this process, I know what to expect. I qualify or I don't."
Q: Do you see signs of improvement?
A: There's an online platform banks use now called Equator. It's streamlined, the homeowner or Realtor can go online and enter information rather than faxing over papers that get lost. Those kinds of things are speeding up the process for many institutions.
Q: What role are short sales playing in the housing recovery?
A: First and foremost they lessen the amount of distressed properties that are foreclosed on and come onto the community as vacant property. A homeowner in a short sale tends to maintain it before moving out. In a foreclosure, they may move out and get evicted and property may become a blight on the community, so it will pull down the community as well as the individual homeowner.
Another reason we want to do short sales is it's good for the homeowner, institution and community. It's good for the homeowner because it lessens the credit impact and allows them to be in control when they move and how they go about it. It's good for the institutions because they lose less money and don't have to take properties back. And it's good for the communities because the housing stock stays in a better condition

Read more: http://www.sbsun.com/business/ci_18256673#ixzz1Pvl8SvDW

Successful Thinker's 1st Annual Mother's Day Shopping Boutique, May 1st, 2011!

Mother’s Day

Sunday, May 1^st, 2011,

Shopping Boutique!

Noon – 4pm.

Shop till you drop and support local vendors and artisans! 

Over 20 vendors including:

Jewelry, accessories, massage, cupcakes, make-up, handcrafted items and so much more!

Proceeds to Benefit Elk Grove's Relay for Life

Location:

Hampton INN

2305 Longsport Court

Elk Grove, CA 95758

(Right off of Laguna Blvd. / Harbor Point, near I-5)   

Contact Yoli or Sharon for vendor application or more information

sharoninrealestate@gmail.com

yoli.manzo@gmail.com                              

Foreclosure Rates Hold Steady

Sharon and I get questions regarding foreclosures all the time. We came across this article today, and thought it was worthy to pass along.

In Sacramento, our inventory is still very low. Even though there are a lot of foreclosures and short sales listed, properties are still selling fast. Borrowing money is at an all time low right now. It is definitely a great time to purchase property!

NEW YORK (CNNMoney.com) -- The foreclosure crisis has entered a new phase: The number of properties entering the foreclosure process has dropped, and now nearly matches the number of repossessions.

The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes.

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But lenders repossessed more than 95,000 homes -- a record -- and that was up from 76,000 a year ago.

RealtyTrac spokesman, Rick Sharga, said the initial default rate should be higher, given the numbers of borrowers who have missed one or two payments. Normally, when a third payment is missed, lenders take immediate action.

"It appears that lenders are allowing delinquencies to go on longer before they issue notices of default," he said.

Lenders may delay filing for a couple of reasons. In some cases, a notice of default puts lenders on the clock; regulations force them to foreclose within a certain time frame, sometimes before they want to.

Second, borrowers might vacate their homes when they receive default notices, leaving the houses empty, subject to vandalism, and forcing lenders to take over the expense of maintaining them.

However, once lenders have begun the initial foreclosure process, they are moving quickly to repossession.

That's in part because as housing markets have improved, as it has in California, lenders are able to resell foreclosed homes more quickly and avoid further losses.

In other markets, according to Sharga, they may take homes back but not necessarily put them on the market again right away. That may represent a deliberate effort to manage the flow of foreclosures to prevent further erosion of home prices.

Not only would a flood of properties and lower prices hurt lenders' profits, it would leave more mortgage borrowers owing more than their homes are worth. As more homeowners plunge underwater, more would default, causing a new round of home price drops and still more foreclosures.

5 most affordable home markets

For the 44th straight month, Nevada led all states in the rate of foreclosure filings. One in every 84 households there received some kind of filing during the month, more than four times the national average.

The other "sand states," Florida (one in 155 households), Arizona (one in 165) and California (one in 194) followed in a familiar foreclosure pecking order.

All of the top 10 metro area hot spots recorded drops in foreclosure activity during August. In the worst hit city, Las Vegas, filings dropped 25% year-over-year but still came to one for every 73 households.

Modesto and Stockton, both medium-sized cities in California's Central Valley, closely trailed Las Vegas in filing rate. Rounding out the first five metro areas were Cape Coral and Miami.

5 Real Estate Scams You Need to Know About

With so much predatory scammers around, we thought this was an excellent article to help you notice the red flags in all those "To Good to be True" offers.

Still in doubt? Feel free to contact us with any questions.

Yoli and Sharon
Your Favorite Real Estate Team.

Don't be duped by mortgage fraud. Here are a few common scams and the red flags you should look for in a transaction.

By Melissa Dittmann Tracey | August 2010

Mortgage fraud is pervasive: An estimated $4 billion to $6 billion in annual losses result from mortgage fraud, according to FBI reports. “An entire community can be damaged by mortgage fraud,” says Rachel Dollar, a lawyer from Santa Rosa, Calif., and editor of the Mortgage Fraud Blog. Mortgage fraud can lead to a spike in foreclosures, home values plummeting, and lenders raising their rates and fees to recover losses.

The crimes are often complex, involving several parties and occurring over multiple transactions. To protect you and your clients, educate yourself about mortgage fraud and be on guard for any warning signs in a transaction. You can start by reviewing these five scams, and then test your knowledge by taking our Mortgage Fraud Quiz.

1. The Foreclosure Rescue Scheme

The Scam: “Rescuers” promise cash-strapped home owners that they can save their home from foreclosure. The rescue, which involves paying upfront fees, can take multiple forms, such as the perpetrator obtaining a new loan on behalf of the owner or by having the owner sign over the home’s deed and then rent the home until they can repurchase it. Eventually, the home owner loses the home, either to foreclosure or the fictitious rescue company.

Red Flags: With foreclosure rescue programs, borrowers are often advised to sign over the title of their house to a third party, become renters of their home, not contact their lender, or send mortgage payments to a third party, according to Fannie Mae, which provides fact sheets on mortgage fraud.

2. Loan Documentation Fraud

The Scam: This fraud involves numerous schemes in which a borrower provides inaccurate financial information — such as about their income, assets, and liabilities — or employment status in order to qualify for a loan with lower rates and more favorable terms. Occupancy fraud is one growing area: Borrowers say they plan to live in the property when they actually intend to rent it.

Red Flags: Documentation may raise suspicion if the employer’s address is shown as a post office box, accumulation of assets compared to the person’s income appears too high or low, the new house is too small to accommodate occupants, the person has no credit history, or the application is unsigned or undated, according to Fannie Mae.

3. Appraisal Fraud

The Scam: A faulty appraisal — saying a property is worth more than what it really is — is connected to many types of mortgage fraud. It entails manipulating or overstating comparables, market values, or property characteristics in order to obtain a higher appraisal. The higher property appraisal, which generates false equity, is done by falsifying an appraisal document or using an appraiser accomplice to obtain the higher value.

Red Flags: Be skeptical of appraisals that are dated prior to the sales contract, list comparable sales that do not contain similarities to the property or are outside the neighborhood, the owner is not the seller listed on the contract or the title, or a third party participating in the transaction orders the appraisal, Freddie Mac warns.

4. Illegal Property Flipping

The Scam: This entails purchasing properties and reselling them at inflated prices. These scams usually involve faulty appraisals and inaccurate loan documents. The property is then refinanced or resold immediately after purchase for an inflated value. The home is purchased at a higher price, often by straw buyers working with the “flipper,” and eventually falls into foreclosure.

Red Flags: Some key things to look for are rapid refinancing of a property; the seller recently having acquired the title or acquiring the title concurrent with the transaction; an appraisal that comes in too high; a property that was recently in foreclosure being purchased at a much lower price than its sales price; or the owner listed on the appraisal and title not matching the seller on the sales contract, according to Fannie Mae.

5. Short Sales Schemes

The Scam: Borrowers owe more than the current value of their home so they fake financial hardship and no longer make their mortgage payments. An accomplice of the borrower then submits a low offer to purchase the property in a short sale agreement. The lender agrees to the short sale, unaware that it was premeditated. The property, after being purchased at the reduced price, is then often resold at the home’s actual value for profit.

Red Flags: The borrower suddenly defaults on the mortgage with no workout discussions with the lender, an immediate offer is made to a lender at a short sale price, the short sale offer is less than current market value, or a cash back is offered at closing to the delinquent borrower (disguised as “repairs” or other payouts, for example) and is not disclosed to the lender, according to Fannie Mae.

You can report instances of suspected mortgage fraud to Stopfraud.gov.

Free Short Sale Workshop This Wednesday.

Sharon Boatright, Yoli Manzo and Special Guest, Steve Beede, are hosting a Free and Informative Short Sale Workshop.

In the past, it was rare that a bank or lender would accept a short sale. However due to the overwhelming market changes, lenders have become much more negotiable when it comes to these transactions. Recent policy changes within many organizations have made the chances of getting a short sale approved even higher.

The following information describes the short sale process:
Home owners are "short" when they owe an amount on their property that is higher then the current market value.

A short sale occurs when a negotiation is entered into with the homeowner's mortgage company to accept less than the full balance of the loan at closing. A buyer closes the property and the property is "sold short"

At the class you will learn the Homeowner Consequences of Foreclosure vs. Shorsale.
As well as how the process works and receive a free list of all the items you will need to present your "Short Sale" request.

Seating is limited, so do email us for your reservation.
yoli.manzo@gmail.com or sharoninrealestate@gmail.com

Class is Thursday, July 22nd 2010, 6:30pm.
Remax Gold
9280 W. Stockton Blvd. #110
Elk Grove, CA 95758


Steve Beede, Attorney at Law, In 1994, Steve graduated law school and immediately formed his own firm specializing in real estate and business, BPE Law Group, which has since grown into one of the most respected firms in Sacramento handing cases nation-wide. In addition to leading his law firm and advising and representing clients world-wide, Steve is in demand as a seminar speaker, coach, and business consultant.