Details on the Homeowner Affordability & Stability Plan

This week, President Obama unveiled the Homeowner Affordability and Stability Plan, which will offer assistance to as many as 9 million homeowners, while attempting to prevent the destructive impact of foreclosures on communities. This is great news for everyone! If you are already a home owner this applies to you, if you are looking to buy this is good information to know as it shows the government is going to be putting a lot of money toward halting foreclosures and thus getting this market to turn around faster than expected.

The plan contains three main components, and only applies to primary residences not investment properties. The loans referenced in the plan cannot exceed Freddie Mac/Fannie Mae conforming loan limits.

I've outlined the plan in greater detail below.

First component - directed toward homeowners suffering from falling housing prices who still have equity in their homes, but no longer have the 20 percent equity needed to refinance. Under the plan, homeowners who have conforming loans owned or guaranteed by Freddie Mac and Fannie Mae will be allowed to refinance their homes, even if they do not have 20 percent equity left in the house.

Second component - the Homeowner Stability Initiative - designed to assist homeowners who are "underwater" on their mortgages. The $75 billion initiative will bring together lenders, servicers, and the government so that all stakeholders share in the cost of the modification. Primary mortgages would be reduced to monthly payments that do not exceed a 38 percent debt-to-income ratio, with the costs of doing so borne by the lender. The government and lender then would split the costs of further reducing the monthly payments until they were at a 31 percent debt-to income ratio. ***An important aspect of the initiative is that homeowners do not have to be delinquent to participate. The Obama Administration plans to work with federal agencies, banking and credit union regulators, and the private sector in order to develop loan modification guidelines that can be implemented across the entire mortgage market.

Third component - supporting low mortgage rates by strengthening Fannie Mae and Freddie Mac. The Treasury Dept. plans to increase their Preferred Stock Purchase Agreements with both Fannie Mae and Freddie Mac from its current $100 billion in both entities to $200 billion in each. The Treasury Dept. also will continue to purchase Fannie Mae and Freddie Mac mortgage-back securities in order to help promote stability and liquidity in the marketplace. Additionally, the Treasury Dept. will increase Fannie Mae and Freddie Mac's portfolios by $50 billion, for a total of $900 billion.

While some of the details still are being developed, such as the modification guidelines, the Obama Administration plans on using programs and funding already allocated for The Homeowner Affordability and Stability Plan and will need little legislative approval for programs under the plan.

I will keep you updated on the Homeowner Affordability and Stability Plan as more details and information become available to us.

As always, if you have any questions or concerns, please do not hesitate to contact me directly at 858.652.1218 or at micah@mLoganHomes.com.

House Passes the Economic Stabilization Act

On Friday, the House of Representatives approved the Emergency Economic Stabilization Act by a 263 to 171 vote. I thought it might be helpful to pass on a summary by the CA Association of Realtors explaining how the legislation will set the stage for the eventual recovery of the housing market and the financial health of every household in our country.

Here’s what the legislation does:

Helps American families keep their homes by requiring the Treasury Dept. and any federal agency that owns or controls troubled mortgages to modify those mortgages wherever possible; this may include reducing the principal or interest rate; and extends till the end of 2012 the exclusion from federal income tax of mortgage debt forgiveness.

Addresses the credit crisis by allowing financial institutions to immediately sell $250 billion in troubled assets to the U.S. Treasury Department under the newly created Troubled Assets Relief Program (TARP). Another $100 billion would be made available upon the President’s request. Should the President deem it necessary, and with Congressional review, the Treasury Dept. may utilize the remaining $350 billion;

Protects taxpayers by allowing the Treasury Dept. to take an ownership stake in participating companies. In addition, if after five years TARP has incurred a net loss, the President must propose legislation that would force participating companies to reimburse the government to make up the difference;

Sets up an insurance program, funded by the financial industry, to guarantee companies’ troubled assets, including mortgage-backed securities purchased prior to March 14 this year;

Curbs executive pay for companies utilizing TARP;

Sets up two oversight committees, a Financial Stability Board, and a congressional oversight panel, to which the Financial Stability Board would report;

Creates renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels; as well as continuing other tax breaks that were set to expire; and extends relief from the Alternative Minimum Tax (AMT) by another year;

Allows the SEC to suspend the required mark-to-market accounting standards and orders a study to be done on the rule’s impact on financial institutions;

Shields bank deposits by temporarily raising the FDIC insurance cap to $250,000 from $100,000; and temporarily increases the federal insurance level for credit union savings to $250,000, both till the end of 2009.

William E. Brown2008 PresidentCALIFORNIA ASSOCIATION OF REALTORS®

Short Sales - Can't live with them, can't live without them

In this current market, we simply cannot avoid short sales or bank owned properties. In fact, they comprise nearly 60 percent off all listings in some markets in San Diego. Initially, buyers were drawn to these type of listings. The words short sale, foreclosure and REO meant "WOW, a great deal, under market value, you better act now!" Well, this may still hold true, especially with bank owned properties, but many buyers see the words short sale and start running for the hills.

As a Realtor in this market, I have seen both sides of the short sale experience. I represent buyers in need of selling their home in which they owe more to their lender than what the market will pay them. I have successfully helped many sellers get "out from under their home" so they can move on with their lives and not have the stress of paying for an asset they cannot afford. I also represent buyers who are pounding the pavement looking for a deal and also a home that they can close on in a normal time frame. As a buyer's agent, this can be a challenge because you only have so much control over the seller's lender and sometimes have to wait 60-120 days for approval. That is 2 to 4 months just find out if your offer is accepted or not! This can feel like a lifetime for those anxious buyers who are waiting on the edge of their seats to find out where they will be living. This can be a challenging and stressful time for everyone involved.

What is the solution? Well, we can't do so much about the short sale solution, but simply wait until the market eventually works through them. What we can do is change our perspective and approach to how we view short sales. My business coach taught me about the "spray and pray" approach. This may sound a little odd, but it is actually a great plan. What you do is go out and house hunt. You spray the homes you like with offers and you pray that one is accepted. In this market, you can't expect a deal and also a quick closing. You have got to pull out all of the stops and keep looking and "spraying" until something sticks. And eventually it will with the right amount of perseverance and patience.

This is a great market to get into, especially for first time home buyers. The best thing to do is first talk with a lender and find out what you can afford and what amount you are qualified for. This is crucial since the lender requirements have changed. But don't let this stop you from trying. Buying a home in this market may take a little bit more effort, but if you can get in now, I am sure you won't regret it later!

The Wave of Now - Social Networking at its Finest

The days of door knocking, geographic farming and cold calling are not long gone for some sales people, but they are for me. The world is changing (and has been for the past 20 years) at a rapid pace. People want information faster and they do not want to be bombarded by sales people, especially at their own home. With the green movement, I don't want to waste paper on unnecessary flyers. With privacy laws, I don't want to be calling people in the middle of dinner, let alone show up at their front door, to see if they want to sell their house. This seems so old school and I have no desire to ruin another pair of good heels trekking up and down sidewalks in the hot sun for hours, to see if someone will talk to me. I object!!!

So how does one build their business these days? Well, I believe that with any business you have to have foresight into the future and also into the minds of your potential clients. Already, the majority of people are finding their home and often times their realtor online. Initially I thought of online social networking as impersonal and even a little far fetched. But I can tell you that this is the way things are going and I have already had success. Also, it is fun connecting with people and plus, you can do it in your underwear at midnight if you want. What a concept! I would like to share some of my favorite networking sites:

Meetup.com: This is a great way to meet like-minded people that have similar interests. You can search for groups from women entrepreneurs and vegetarians, to fitness buffs and real estate investors. Then you can find out when they are meeting next and attend their next meeting. It is a really cool concept and is a great platform for social and business networking.

Activerain.com: This is a wonderful website for people in the real estate community, and also home buyers and sellers. It is a great way to get in touch with Realtors, lenders and other real estate professionals. I highly recommend it to anyone in the industry and also those in the market to buy or sell a home.


Yelp.com: Yelp is just a cool site. Not only do you get to check out reviews about anything under the sun from cleaning services to hotels in the area, but also meet other people that have opinions and like to write about them. You can see what is hot in your area and upcoming events that may be worth checking out. I like that the reviews are from real people and from unbiased third parties.

So that's my 2 cents about social networking. The key is to stick with it and give lots of virtual hugs,you will make lots of friends and it will just make you feel good :)

The Shift

On October 3rd of last year, there was a shift. The ground underneath our feet in the Mt. Soledad area of La Jolla, CA literally shifted. The landslide that occurred that day disrupted many lives and caused homes to collapse. This was an extremely unfortunate event that left people feeling fearful of the very ground that we stand on.

Thinking back on this event, it seems as though it was a precursor to what was about to occur in the real estate market.

Change is inevitable. You have all heard that the one constant in life is change. What goes up must come down. Over the past 40 years, we have seen the real estate market change 4 times. It is interesting how the changes even occurred consistently and predictably. So why you ask - were so many people shocked when the market shifted this last time? It is almost as though people forget. They get real estate amnesia and block out the bad times and only focus on the good. They don’t want to see an ending of their new found wealth so they deny the possibility of a down turn. Now that we have arrived at that dark place that no man would go before, we must face the reality and learn from what has occurred so we are better equipped to handle the next one…and yes, there will be a next one.

Let’s explore the history of the real estate market, dating back to the old days of the early 1970s, well before my parents even though about my conception. Interest rates shot up from 7.5% to 10% and the unemployment rate rose to 9%. Times were tough, even worse than today but we recovered.

In the early1980s, the price of oil rose significantly, inflation was high and unemployment was over 10%. It is hard to believe, but my parents were thrilled that they locked in their loan at an interest rate of only 17%. Good times. But a few years later everything was back to normal.

The 1987 to 1991 downturn was a tough one too, but sure enough we all know that we recovered. Back then I am sure that not many would predict the unprecedented increase in housing prices over the next 15 years. Home prices rose over 200% in San Diego from 2001 to 2005 when the bubble finally burst.

There were many causes of the latest downfall with the primary factors being:

1. Weak lending standards and a lot of sub prime lending.

2. Exorbitant supply with 2005 being the year of the most homes every built in a one year timeframe.

3. Affordability. Income growth could not keep up with the increase housing prices so affordability was drastically affected.

When a shift happens, unfortunately many people suffer and experience the loss of their investments and even primary residence. They are electing to short sell their home in which their lender will agree to accept less than the amount the homeowner owes. They may choose to renegotiate their loan to make their payments more affordable so they can keep their home. Or they simply let it go into foreclosure where they bank repossess the property. These are all unfortunate circumstances but the truth is…another’s loss is someone else’s gain. There are vast amounts of opportunity for people right now in the marketplace. First time homebuyers have never had it so good, move up buyers wanting to purchase a nicer home and investors have an incredible amount of inventory to choose from, negotiating power and low interest rates. Now is the time that smart, savvy investors are scooping up property because they are able to disregard the fear and emotional aspects of buying and are able to see the bigger picture. Warren Buffett says that “The time to get interested is when no one else is. You can't buy what is popular and do well.” These are the words of greatest investor of all time and I don’t know how you can argue with that.

At the bottom of the bear market in October 1974 a Forbes article interviewed Buffett. Buffett, for the first time in his life, made public prediction about the market.
"How do you feel? Forbes asked.

"Like an oversexed guy in a whorehouse. Now is the time to invest and get rich."

All jokes aside, it is apparent that we have experienced a shift, however what is not so obvious is when the actual bottom will occur. The hard truth is that the local market shifts are seldom slow and landings never soft. It is like a pendulum or a golf swing…beginning very slow but accelerating very quickly through the middle.

Once we hit rock bottom, we won’t know it until it is well behind us. Remember, it is not about timing the market, but the time you spend in the market. If you follow this strategy and invest wisely, you will be prepared to handle the next real estate landslide.