Fannie Mae announced a new national down payment requirement for all geographic locations across the country allowing up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter ® (DU®) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU.

Moreover, Fannie Mae completely eliminated its declining market policy that was established in December 2007.

The policy changes will be implemented starting June 1, 2008.

If a homeowner cannot meet their monthly mortgage payment once or twice, often, the lending institution will easily and happily forgive it, and simply expect the homeowner to “double up” on the next payment. This makes sense because things happen to all of us from time to time when there just isn’t quite enough money in the bank to make the mortgage payment.


But after a series of missed payments, warning bells go off at the lending institution. They become worried that their investment in the borrower – the homeowner – is at risk of default. At some point, usually after about 3 months of defaulted payments, the lender will file a Notice of Default with the county recorder. The notice is mailed to the borrower and other affected parties.

Homeowners who receive a Notice of Default still have a few options available to them; all is not lost! Among their options are special forbearance, partial claims, deed-in-lieu of foreclosure, loan modification, and even bankruptcy. If these options fail or disappear before the homeowner takes advantage of them, the mortgage or trust deed agreement will ultimately end in a foreclosure. That’s something that no homeowner wants: to lose a home AND have a foreclosure on their credit rating.

Homeowners who have received a Notice of Default have another option: the short sale. A “normal” sale occurs when someone sells a home and there is enough equity in their home to cover all liens and encumbrances including, but not limited to, mortgage(s) or deed(s) of trust, judgments, property taxes, and costs of sale. A short sale occurs when someone sells a home but there is no equity in the home to cover all liens and encumbrances.

To qualify for a short sale, the homeowner needs to provide a number of things to the realtor: First, they need to provide some mortgage/trust deed details, including the most recent home loan/mortgage statements, and the Notice of Default, if any. Second, they need to supply some financial information to prove that they have been, and will continue to be, unable to keep up with their home loan payments. This financial information includes, among other things, a copy of their most recent tax return, the last two or three pay stubs, and the most recent bank account statements. Finally, the homeowner needs to write a “hardship letter” which describes, in the homeowner’s own words, the cause and severity of their financial situation.

Homeowners should do their best to keep up with their regular mortgage payments. However, if things get tough and a Notice of Default is issued, there are options that the homeowner has. One of the best options for most is the short sale.

It is worth mentioning, however, because the fact that the city was in the running says something very important about the community — especially for prospective home buyers and sellers. The All-American City awards are given to ten American cities each year and this year the city of Calabasas made the short list of 20, but went no further. Some say that the awards tend to go to those cities that have made major turnarounds in recent years or perhaps have more dramatic stories. Maybe Calabasas was just out of luck this year. But the important thing for those in the real estate market is that they tried. The city put up a significant amount of time and money to send a delegation to make a pitch for their city, and that shows a community with a lot of pride.


Regardless of whether they won or lost, for people looking to buy in the San Fernando Valley the message is clear: Calabasas is a good place to live. For people looking to sell, the fact that the city is so concerned to promote itself is a good sign as well. Location has always been a major factor in the success of real estate, and if the community is attractive it can only help the resale value of local homes. So buyers can consider this a heads-up, and home-owners can take it as an encouraging sign. Calabasas CA is carving its own niche in the Greater Los Angeles real estate market.

The delegation that was sent to brag up the city had plenty to talk about. Calabasas has a great track record lately in environmental responsibility and health concern. Its second-hand smoke by-laws have made headlines across the country and its family playground has been a world leader in the inclusion of special needs children. Added to this, Calabasas has its own library, TV station, and transport system — demonstrating its independence from the city of LA. This is a place where residents can experience their own community, but are an easy drive away from all the attractions of Los Angeles. It is also clearly the home of a significant group of people who love their city and want the world to know it.

This is only good news for home buyers and sellers in the area. But it isn’t the only good real estate news coming out of Calabasas in recent weeks, as its Countrywide Financial Corporation revealed that Bank of America has invested $2 billion in the struggling mortgage lender to put the company back on a strong footing. This was somewhat comforting news for a slightly anxious national real estate market, especially since this Calabasas-based lender is one of the most important in the country.

Maybe they should have given them that award after all.

Courtesy of TheOnion.

The mortgage industry crisis has grown to be so serious that home buyers and real estate agents should take the following precautionary measures to avoid any devastating outcome that could emerge as a result of the home buyer’s inability to secure financing:

If you are the home buyer:

1) You should utilize the services of a mortgage broker and insist that the loan be locked with two or even three different lenders.

2) You should not remove the loan contingency. In today’s unstable mortgage industry anything can go wrong with your loan application - even after it’s been approved and the deal has been funded. You can never be too careful. Insist on an extension of time for your loan contingency until the transaction is completed. Prepare to walk away from the deal if the seller does not accept your extension request.

3) Ask your broker to provide a copy of the loan approval issued by the lender.

4) Review the conditions set forth in the approval with your broker and submit the requested information and/or documents to the lender as soon as possible.

If you are the buyer’s agent:

1) Advise your client to utilize the services of a mortgage broker and lock the loan with at least two different lenders.

2) Obtain a copy of the approval and follow up with your client and his or her mortgage broker to make sure that conditions are met.

3) Recommend your client not to remove the loan contingency until the deal is funded and closed.

If you are the listing agent:

1) Ask the buyer’s agent to provide a copy of the loan approval.

2) Communicate with the buyer’s agent and buyer to make sure that the requested information and/or documents are being submitted to the lender.

3) Communicate with the buyer’s broker or lender to make sure that the buyer has met the lender’s conditions.

4) If contingencies are not removed prior to an agreed upon date, give a written Notice to Buyer to Perform.

The Fed’s action sent the Dow Jones up about 230 points. Financial stocks, including Countrywide Financial were some of the biggest gainers.

After the Fed’s move and the stock market rally of Friday, I got an e-mail from one of my best friends, whose opinion is very valuable to me. My friend is an internationally recognized and respected author, speaker and attorney. His friends on Wall Street and I have always been amazed by his vision and accurate predictions, from the stock market boom of the 1990s and crash of early 2000s to the accounting scandals and housing boom. What’s more amazing is that he is not an economist; yet he has always been correct with financial market forecasts.

Here is an excerpt from his e-mail message:

“Fools rush today. The Fed must know things are a lot worse than most people know, since they wouldn’t drop the rate a full half point just to bolster a superficial stock market indicator that hasn’t even dropped 10% from its high yet. There’s a lot deeper trouble that I’m guessing they’re trying to head off, which is not a good sign.

MY PREDICTION: DOW 11,500.”

Since the start of this year, more than 50 mortgage lenders have sought bankruptcy protection from their creditors. (msnbc). What’s worse is that the number keeps growing with no end in sight. Now, it appears that Countrywide Financial, the largest U.S. mortgage lender, may be forced into bankruptcy, too. “There is a scenario,” wrote Paul Miller, a Friedman, Billings, Ramsey & Co. analyst, “in which the current liquidity crises last for longer than three months and Countrywide is forced into bankruptcy; it will be ugly, but it can happen!” (Yahoo! News).

Meanwhile, the Fed is silent. Let’s hope that silence is [still] golden.

• The economic growth is slowing
• Inflation remains the primary concern of the Federal Reserve

Never mind the Bush’s most recent assessment of the “thriving” economy. His speechwriters must have forgotten to cross check the alleged information with Bernanke’s testimony given less than four weeks ago.

Well, I sidetracked a little.

So why does Mr. Bernanke hesitate to admit the fact that the economy appears to be headed into the phase of stagflation, if it hasn’t already? Is he out of touch with reality? Does he believe that the Central Bank’s monetary policy will be able to curb the stagflation? Does it have a chance? My guess is yes. And I am guessing at the cost of inflation.

Why?

Because it is particularly difficult to curb stagflation in today’s unbalanced world economy. If stagflation continues to grow in the U.S., the U.S.’s already heavily-indebted consumers will have to cut back on their spending, which, in turn, will force the rest of the world to start spending more to keep the world economy growing. There is no chance of that happening. The Fed will be too worried about stagnation to let that happen and the central banks of other countries will be too concerned about inflation in their economies to cut rates. See The Economist, May 5, 2005. Hence, many experts bet on rate cuts starting as early as at the end of this year.

But before then…

To stay liquid and to survive the credit crunch as well as the uncertainty that lies in the months ahead, the Wall Street has virtually stopped buying mortgage-backed securities in the secondary markets. As a result, the cost of financing a home purchase in many high-valued areas of the country such as California became even more expensive. This puts many potential home buyers, who require non-conforming jumbo loans, out of the market. The implications of this could put a further dent on the already-declining housing market: home values are falling at accelerating rates; mortgages, both subprime and now even prime are defaulting by rates not seen in many decades; foreclosed homes are popping up everywhere like mushrooms.

The housing market is in pain. And the worse is yet to come since current real estate and broad financial conditions point to more trouble in the months ahead. However, real estate has been regarded as one of the best hedges against inflation; therefore, my bets are on the market rebounding by mid 2008, after the Fed starts cutting rates to curb stagnation.

real estate blogs

Well, that remains to be seen…

Web 2.0 real estate companies, such as Zillow, have a long way to go to prove that web 2.0 real estate is the wave of the future. Maybe it is… Maybe it isn’t… Zillow, and the like, have a long way to go to prove that the model is profitable. Sure, they offer cool tools… and the public enjoys using them but generally the public is not ready to utilize the services of non-traditional brokers; at least not now. It is extremely difficult to make the public change its needs and wants. But I must say, it is not impossible.

However, if and when it becomes advantageous to be a web 2.0 real estate company, what’s going to stop traditional brokerages such as Coldwell Banker, Remax, Century 21, or Realty Counselors to establish their web 2.0 gateways and utilize their already established reputation to quickly gain market share in the new Real Estate 2.0 era? Essentially, very few, easy-to-overcome barriers. It is always better to be first in the mind than to be first in the marketplace.

real estate blogs

It took me well over 12 months to finish this book (I had to juggle it with my practice) and I am thrilled that it’s finally done! Big weight off my shoulders…

In this book I share strategies and ideas that even the least business savvy real estate practitioner can utlize to take his or her business to new heights.

And, of course, autographed copies are available… along with my personal e-mail address.