bankruptcy Archives - Southern California Luxury Homes

Downsizing the Jumbo Loan

October 25, 2012/in Newsletter/by Keystone Group

For information about luxury and coastal properties in Southern California, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties services buyers and sellers of distinctive CA real estate La Jolla and Oceanside to San Juan Capistrano, Dana Point, Laguna Beach and Newport Beach to Pacific Palisades, Mission Viejo, San Clemente, and Santa Monica and Beverly Hills real estate.

Downsizing the Jumbo Loan

By Vickie Elmer in the New York Times

WITH interest rates still low, many homeowners have been saying goodbye to their “jumbo” mortgages and refinancing into conventional loans. They may need to write sizable checks at the closing, but in the end they are likely to reduce their monthly payments while improving their cash flow.

“It’s an opportunity not to be missed,” said Melissa Cohn, the chief executive of the Manhattan Mortgage Company, adding that her customers like the idea of locking in a lower rate.

Jumbo mortgages, also called nonconforming loans, exceed $625,500 in high-cost areas like New York. Unlike conforming mortgages, they do not meet specific guidelines of Fannie Mae and Freddie Mac, which repurchase loans and resell them to investors. Because lenders assume more risk, interest rates for nonconforming loans are higher than for conforming.

These days the spread between conventional and non-conventional is 0.5 percentage points, on average, according to data from HSH.com, though if the jumbo loan was taken out during the financial crisis of 2008, it could have been up to 1.8 percentage points more.

To refinance out of a jumbo loan, most borrowers will have to put in extra money — sometimes $100,000 or more — to decrease the balance to below $625,500, or $417,000 in other parts of the country. Some, though, may see this as a sound investment.

“A lot of homeowners are sitting on cash, concerned about the stock market,” said Bob Moulton, the president of the Americana Mortgage Group in Manhasset, N.Y. “They get 3.5 percent-plus by putting it into their home,” he added, referring to the prevailing rate nationwide on a 30-year fixed-rate loan.

“If you don’t have a need for the cash — if your cash position is O.K. — then that’s the right decision,” he added.

Mr. Moulton says he has had several customers eager to buy down their mortgage balances. “When people are to the cusp,” he said, referring to borrowers’ balances near the cutoff for conventional loans, “I always bring that to their attention.”

Cash-in refinancing has remained popular as homeowners work to cut their debt levels. Some 23 percent of homeowners refinancing in the second quarter decreased their mortgage balances, according to Freddie Mac; in the fourth quarter of last year it was 47 percent. The agency provides a guide for consumers on its Web site.

Sheila Walker Hartwell, the owner of Hartwell Planning, a financial planner based in Manhattan, says homeowners with a good financial foundation could greatly benefit by moving to a conventional mortgage from a jumbo. She provided one scenario in which a couple pays in $75,000 when they refinance a $700,000 mortgage, and save at least $5,900 a year on interest based on a 0.33 percentage point reduction in their interest rate. They would need to earn almost 7.5 percent a year on that money to net the same amount from savings or investments, she said.

But Ms. Hartwell cautioned that when homeowners pay into their mortgages to build up equity, “the money’s not liquid,” or readily available. She said that she would prefer that her clients develop a savings and spending plan and make sure that they have a “contingency fund” with at least six months’ and sometimes up to 12 months of living expenses. (The 12-month fund is worthwhile when the economy is uncertain or if your job or industry seems less than solid, she said.) It’s not a good idea to deplete those funds to pay down your mortgage, even if the funds are earning next to nothing, Ms. Hartwell said.

Especially, Mr. Moulton added, “if they anticipate big expenses — college expenses, home improvement — or have other debts at a higher interest rate. Then they don’t want to do this.”

Another drawback, Ms. Hartwell said: Unless the length of a loan is reduced, each time you refinance, the mortgage starts again at the beginning and initial payments are almost all interest.

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Home Prices Signal Recovery May be Here

October 23, 2012/in Bankruptcy Information/by Keystone Group

For information about luxury Los Angeles real estate, Orange County CA homes, and coastal San Diego homes in coastal areas of Southern California, call Bob Cumming of Keystone Group Properties at 310-496-8122.

Home Prices Signal Recovery May be Here

NEW YORK (CNNMoney) — A sharp boost in home prices during the spring could signal a recovery in the long-suffering U.S. housing market, according to an industry report issued Tuesday.

The S&P/Case-Shiller national home price index, which covers more than 80% of the housing market in the United States, climbed 6.9% in the three months ended June 30 compared to the first three months of 2012.

“We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change,” said David Blitzer, a spokesman for S&P, in a statement. “The market may have finally turned around.”

Two other key indexes covered in the S&P/Case-Shiller report also showed gains. The 20-city index was up 6% for the quarter and the 10-city index rose 5.8%.

National prices were up 1.2% compared with a year earlier, and the 20-city and 10-city indexes also gained year over year. It was the first time all three measures showed positive annual growth rates since the summer of 2010, when generous tax credits for homebuyers were in place.

There have been several positive industry reports over the past several weeks. In July, new home sales were 25% better than a year earlier; existing home sales gained 10% year over year; and developers applied for 30% more residential building permits.

The steep increase in home prices “feels really good after six years of straight down,” said Mark Zandi, chief economist of Moody’s Analytics.

He cautioned that the results may overstate the case for the housing recovery a bit. The mix of homes being sold has changed lately, with fewer repossessed homes on the market. Those sell at big discounts to conventionally sold homes and had been propelling prices downward.

The home price improvement is expected to have a positive impact on foreclosure rates, according to Michael Fratantoni, vice president for research and economics for the Mortgage Bankers Association.

Foreclosures have already been falling and could drop some more if the upswing in home prices continues.

As home values increase, home equity rises, and fewer mortgage borrowers will be underwater, owing more than their homes are worth. That will give them an asset to tap should they run into a tight financial patch.

An improving housing market will also give homeowners more confidence in the investments they’ve made in their homes.

“There has also been a lot of concern about strategic defaults,” said Fratantoni. “That should ease now. When home prices go up, people have a financial incentive to hold onto their homes and they’re less likely to walk away.”

Rising prices are likely to push potential homebuyers off the fence, where many have been waiting out the price decline, according to Doug Duncan, chief economist for Fannie Mae.

“Their perception that we hit the bottom takes out the risk of buying into a falling market,” he said. “That should increase demand, particularly if they also believe that mortgage rates have reached a bottom as well.”

Each of the 20 cities covered in the report recorded a gain in June, compared with a month earlier. Detroit prices jumped 6% for the month, the most of any city. Minneapolis prices climbed 4.8% and Chicago prices rose 4.6%.

In Phoenix. home prices were 13.9% higher in June than 12 months earlier, the highest gain of any of the 20 cities covered.

Several cities were still in negative territory year over year, including Atlanta, where they were off 12.1%. New York prices were down 2.1% on an annual basis, and Las Vegas prices were 1.8% lower.

For Zandi, all the positive news on housing carries over to the rest of the economy.

“Housing is beginning to act as a tailwind for the recovery,” he said.

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Mortgage Closing Costs fell 7 Percent for Homebuyers

October 22, 2012/in Bankruptcy Information/by Keystone Group

For information about Southern California luxury real estate in Los Angeles County, Orange County and San Diego coastal homes, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties serves discriminating buyers and sellers of exclusive real estate in Newport Beach, Dana Point, Laguna Beach, Laguna Niguel, Coto de Caza; and Marina Del Rey, Manhattan Beach, Hermosa Beach, Dove Canyon, Ladera Ranch, and San Juan Capistrano; and Palos Verdes, Pacific Palisades, Mission Viejo, Rancho Margarita, San Clemente, Redondo Beach, Santa Monica, Venice, Malibu, and Irvine, Bel Air, Beverly Hills, and Beverly Glen California.

Mortgage closing costs fell 7% for homebuyers

NEW YORK (CNNMoney) — Federal regulations are helping to significantly reduce the amount new homebuyers are paying come closing time.

The average cost of closing on a mortgage has fallen by 7.4% over the past year, according to a recent survey by Bankrate.com. At the end of June, a homebuyer looking to close on a $200,000 mortgage with 20% down paid an average of $3,754, $300 less than 12 months earlier.

Included in those costs are origination expenses, such as application fees and the cost of doing credit checks, and third-party fees, such as those paid for title searches and insurance.

The decline can be attributed to new regulations that require lenders to be more accurate when estimating closing costs for borrowers, said Greg McBride,

Bankrate’s senior financial analyst.

The regulation, which was put in place two years ago as part of the Real Estate Settlement Practices Act requires lenders to provide a “good faith estimate” of third-party fees that is within 10% of the actual amount the buyer will pay.

“The big drop in third-party fees indicates the lenders are doing a better job at estimating what the costs will be,” said McBride.
with scissors and the bogeyman probably aren’t keeping you awake at night, either.

The fact that everyone is scared to dabble in—much less commit to—housing makes it a close-to-perfect investment based on Mr. Buffett’s principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.

The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation’s big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit’s housing market scored a gain, inching up by 0.4%.

Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.

In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.

Other good signs: Housing starts rose 6.9% in June. Home-building stocks are on the rise, with the Philadelphia Housing Sector Index up 27% so far this year. And for those who can invest in property, rents continue their ascent. Prices are at a 10-year high, with the median unit renting for $710 a month.

Real-estate website Trulia found that it is cheaper to buy than rent in each of the nation’s 100 biggest metropolitan areas.

In other words, if you can buy a home today, you can save the difference it would cost you to rent even if you stay in the home just five years. If you can buy a property and rent it, it is almost certain that the rent will cover the cost of the financing—and the property will appreciate.

Here’s where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.

Foreclosure rates have leveled off, but market analysts believe an increase is likely.

Here’s why. Since the financial crisis, 3.7 million homes have been foreclosed on, but an additional 1.4 million remain in the national foreclosure inventory, according to CoreLogic, a real-estate research firm.

Finally, a housing recovery won’t happen, or could be snuffed out, by a rotten economy. There’s never been significant growth in housing with high unemployment. And as Dow Jones’s Kathleen Madigan noted, “Potential buyers must feel secure with their job prospects before they commit to long-term mortgages. Higher loan standards mean banks want to see an applicant’s solid income history before lending.”

There is plenty to be afraid of when it comes to home buying. But in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.

Fixed-income yields have fallen to historic lows, and the stock market has traded in a range, rising and falling skittishly on jobs, growth data and the news from Europe.

Recently, I was forced to choose between renting and buying. I decided to buy because it offered immediate monthly savings compared to renting, not to mention a mortgage-interest deduction.

So this is at least one case where I’m putting my money where my keyboard is.

Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor’s time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it’s time to be greedy.

Write to David Weidner at [email protected]

Coto de Caza CA homes for sale

Will Short Sales Hit Homes Sales?

October 20, 2012/in Bankruptcy Information/by Keystone Group

For information about luxury real estate in Southern California in Los Angeles County, and coastal Orange County and San Diego, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties serves discriminating buyers and sellers of exclusive California properties—Newport Beach homes; Manhattan Beach to Santa Monica beach homes to exclusive Los Angeles homes in Beverly Hills and Bel Air.

Will Short Sales Hit Homes Sales?

By AnnaMaria Andriotis

Could a new government program to help distressed homeowners wipe out recent gains in home prices?

On Tuesday, the Federal Housing Finance Agency announced new guidelines that are supposed to make it easier for homeowners to sell their home in a short sale. In a short sale, a home sells for less than the borrower owes on the mortgage. In addition, the new guidelines, which kick in on Nov. 1, allow homeowners with a Fannie Mae or Freddie Mac mortgage to pursue a short sale even if they haven’t fallen behind on their mortgage payments but have a hardship, such as a job loss or divorce.

Consumer advocates say change will help some of the borrowers who’ve been unable to sell the estimated 11 million American homes worth less than the value of their mortgage, according to CoreLogic. However, not all homes would qualify in this new program.

And while the changes provide new hope to distressed homeowners, experts say they could negatively impact home prices in neighborhoods that get an influx of new short sales. A rise in short sales will result in “downward pressure on home prices until we clear out the majority of these distressed properties,” says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla.

Home prices had been rising in recent months, a trend experts say is due to the limited inventory and the smaller number of distressed properties on the market. In July, median home prices were up 9.4% from a year prior, according to the National Association of Realtors. That marked the fifth back-to-back month of year-over-year increases in home prices — the longest streak since 2006. Inventory was down 24% from a year prior. And distressed sales—including short sales and foreclosures—accounted for 24% of July sales, down from 29% a year prior.

For its part, the NAR says it’s called for an expedited short sales process to help boost inventory. The FHFA says it expects short sales to settle at market prices and that they’ll help avoid foreclosures and long vacancy periods that result in declines in home values.

Still, data suggests that the impact on homeowners who aren’t in distress could be lower home values in the near term. Even if short sales fly off the market, they’ll likely go at a discounted price. According to the NAR, short sales sell at prices that are 15% lower than regular home listings on average.

Instead, the benefits for homeowners could be bigger in the long term. “It’s a better idea to clear out the backlog of distressed homes rather than delay the process in the name of supporting [home] values,” says Brad Hunter, chief economist at Metrostudy, a housing market research and consulting firm.

Santa Monica homes for sale

Finally, It Is Time to Buy a House!

October 18, 2012/in Bankruptcy Information/by Keystone Group

For information about fabulous value for distinguished Southern California luxury real estate in Los Angeles County, Orange County homes, and homes in San Juan Capistrano and La Jolla, call Bob Cumming of Keystone Group Properties at 310-496-8122.

Finally, It Is Time to Buy a House!

Warren Buffett famously once said: “Be fearful when others are greedy, be greedy when others are fearful.”

And if you’re not instinctively scared of the housing market, then global warming, saturated fat, running with scissors and the bogeyman probably aren’t keeping you awake at night, either.

The fact that everyone is scared to dabble in—much less commit to—housing makes it a close-to-perfect investment based on Mr. Buffett’s principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.

The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation’s big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit’s housing market scored again, inching up by 0.4%.

Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.

In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.

Other good signs: Housing starts rose 6.9% in June. Home-building stocks are on the rise, with the Philadelphia Housing Sector Index up 27% so far this year. And for those who can invest in property, rents continue their ascent. Prices are at a 10-year high, with the median unit renting for $710 a month. Real-estate website Trulia found that it is cheaper to buy than rent in each of the nation’s 100 biggest metropolitan areas.