California Loans News

The Federal Housing Administration new reverse mortgage policy, effective October 1, may post disadvantage for one out of five senior citizens 62 and older. Experts say the program may prevent some elderly from paying off their current mortgage debt with the proceeds of a new reverse loan.

Last month, FHA commissioner David H. Stevens said in a letter to reverse mortgage lenders that “the agency must reduce the maximum amounts that seniors can receive from reverse mortgages because of an estimated $798-million budget shortfall for the program in the coming fiscal year.”

Some experts said this FHA move may have “amounted to a 10% cutback for all new FHA reverse mortgage applicants starting October 1. Borrowers who already have FHA mortgages will not be affected.”

National Reverse Mortgage Lenders Association president Peter Bell said the policy change “could leave some homeowners in danger of falling into serious delinquency on their loans or even ending up in foreclosure.” Bell further stated massive number of seniors who would be affected may equal to “tens of thousands, since about 130,000 new reverse loans are projected for fiscal 2010.”

“They’d be able to get out under their mortgage payment and have a little money in their pockets,” said Dennis Ceizyk Sr., Heartland Mortgage Inc. (Tucson, Arizona) vice president. Ceizyk cited his Phoenix clients, a couple in their late 70s. “They could no longer afford the monthly payments on their existing mortgage. They had planned to take out a reverse mortgage yielding them $92,500 in cash on a house valued at $125,000. The $92,500 lump sum would pay off their $75,000 mortgage balance, plus closing and other transaction costs, leaving them approximately $6,000.”

Meanwhile, Stevens said FHA is making program steps that would make it still viable for reverse loan applicants, especially the senior citizens.

The regulators from the US Treasury have released a quarterly mortgage report this week. The report contained findings about increasing delinquencies and foreclosures in this year’s second quarter. The second quarter numerical data is equivalent to 78 percent, compared from the report in first quarter, which noted 58 percent of only the borrowers’ payments reduction from lenders who performed loan modifications.

The 46-page report was a disclosure of As the report explained, the second quarter increase was due to the mortgage servicers cutting payments due on principal and interest instead of adding missed payments back in the reworked loans.

The report was a conjoined effort with the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The report was a survey of 64 percent of all US home loans. The former is a regulatory board of national banks. The latter is the federal government overseer of savings and loans.

“A significant shift from earlier practices (is seen), in which the vast majority of loan modifications either did not change or increased monthly payments,” the OCC and OTS both said. Both the agencies further stated, “Modifications that reduce borrowers’ monthly payments continue to show lower levels of redefaults and longer term sustainability than modifications in which payments are either increased or unchanged.”

In addition, the OCC and OTS Mortgage Metrics Report said that home retention proceedings as performed by lenders increased to almost 22 percent from the first quarter. This numerical value is also higher for 75 percent from last year’s data.

Some industry experts say that the increase may driven by the loan modifications trial for three months under President Barrack Obama’s program for Making Home Affordable, which on the other hand aims to assist troubled homeowners.

Western Digital Corp. has announced that its headquarters would be moved to Irvine beginning in 2010. The company is currently based in Lake Forest, and has agreed to make the move as part of an office space consolidation effort.

The rented area for the company’s relocated headquarters is 365,000 square feet situated in the Park Place office complex on Michelson Drive. The move is in one of Southern California’s biggest office leases for the current year. The company’s employees, 1,250 people, would be moved to the new Park Place office between late 2010 and late 2011.

Chief executive officer of Western Digital Corp. John Coyne said, “Consolidating all out Southern California personnel under one roof will facilitate tighter team collaboration, improve operational efficiencies, rationalize facilities costs and offer flexibility for future growth.”

The company’s growth in the past decade has been flourishing, which led to expansion into several locations nearby Lake Forest. Last March, Western Digital acquired SiliconSystems Inc. as an additional office in Aliso Viejo. According to real estate brokerage Studley representing Western Digital, the move to Irvine is also a result of near expiration leases late next year for the company’s current locations.

The lease is an agreement for ten years. However, financial terms of the lease were not fully disclosed. But the Park Place landlord LBA Realty said through its website that the asking price for Park Place offices is $2.15 per square foot each month.

Park Place is a complex next to the 405 Freeway. It accommodates spaces for office, retail and residential purposes. In 1978, most parts of the complex were already completed, and even was the location of the headquarters of engineering mogul Fluor. The complex has interconnected buildings, which has become a local landmark in Irvine, due to the complex’s 10-story hexagonal tower.

Pomona-based Multi Regional Multiple Listing Service (MRMLS) and MLSListings Inc. both use the same Tarasoft Matrix MLS platform, which led the two multiple listing services to allow their respective users to access all search functions of each others’ listings. The former has noted more than 30,000 subscribers in Southern California, while the latter has more than 20,000 subscribers in Sunnyvale.

President and chief executive officer of MLSListings Inc. Jim Harrison said that upon the same MLS platform used by the two services companies, the read-only data-sharing agreement has become a stress-free matter for both parties.

Harrison further explained that in June this year, when the MLSListings entered an agreement to access Tarasoft Matrix platform, the latter offered to integrate a cross link to MRMLS. The access involved no data mapping and no additional charges.

In the mean time, while MRMLS is a member of California Real Estate Technology Services (CARETS), MLSListings has also signed a letter of intent to join in CARETS. CARETS is a data aggregation service in Suthern California, which allows members to access any listing with any MLS platform. However, Harrison said that MLSListings’ focus right now is to expand its own initiative of data aggregation in Northern California.

Harrison further explained, “Putting the Realtor in mind, my (members) do most of their work in Northern California, so that’s my first priority. When we are done with that, we’ll follow through with the letter of intent with CARETS.”

On the other hand, MRMLS chief executive officer Art Carter said that despite the MLSListings’ current decision with regards to participation CARETS, the Tarasoft agreement would still expose MLSListings to Southern California MRMLS users. And that MRMLS will also have listings in Northern California through MLSAlliance, a collaborative effort for data sharing between Southern and Northern California MLS members.

Consumer protection is the main priority of a proposed state bill that would forbid mortgage firms to collect advance money from clients especially before mortgage modification and reduced monthly dues are set. The bill known as AB 764, is supported by consumer protection advocates and Santa Barbara Assemblyman Pedro Nava (D-Santa Barbara).

Advocates are currently pursuing Governor Arnold Schwarzenegger in promptly signing the bill so as to hasten consumer protection against debt modification counselors who collect thousand-dollar fees, but still fail, which leads some properties to be foreclosed instead by the lenders. Governor Schwarzenegger has until October 12 to decide whether to sign or veto the bill.

Nava said at a news conference in the state Capitol building, “AB 764 will end these scams, ban the collection of advance fees and impose severe penalties for those who violate the law.”

If the AB 764 gets signed and approved, it designates civil penalties of up to $200,000 to be awarded to individual clients and $60,000 for corporate clients. The bill also proposes a possibility of criminal penalty equivalent up to one year to serve county jail time.

Nava further explained “tough penalties” are needed, as he cited the case of differently abled senior citizen Kerstin Feist. Feist refinanced a home in Albany, east of San Francisco to pay for other obligations. In November 2008, she paid $3,000 to an Irvine loan modification counseling service for ARM interest reduction, which promised 98% success rate in negotiating with lenders. But in March this year, Feist received eviction notice as she learned that home for 45 years had been already sold in January. Feist is currently fighting the eviction.

The bill is supported by Consumers Union, California Reinvestment Coalition, AARP, the State Bar of California, Los Angeles Mayor Antonio Villaraigosa and other consumer groups.

The California Department of Real Estate (DRE) is set to launch a forum that would tackle real estate industry trends, consumer scams and licensing violations present in the current real estate situation in the state. The forum is scheduled for real estate professionals with issued licenses on October 7, 2 PM at the San Jose Convention Center. The forum is in conjunction with the convention of the California Association of Realtors.

DRE is the state department that mainly handles real estate legalities, especially issuance of license for full practice to real estate agents and other industry professionals and real estate consumer protection.

Commissioner Jeff Davi would preside over the forum. He would provide information for consumers on how to avoid loan recue scams. In addition, he would also present an overview of the Department current happenings and its prepared measures for further consumer education against fraudulent real estate deals. Currently, the DRE website has already posted information on loan modification scams and all Accusations and Desist and Refrain Orders.

Davi said, “The economic downturn coupled with the unprecedented number of foreclosures has created a rich environment for scammers who have come up with a variety of schemes to take advantage of desperate and financially stressed homeowners.”

All over the state and the nation, loan modification scams have been spreading increasingly. DRE had less than 20 loan modification complaints noted in June 2008. To date, the complaints filed with DRE have reached more than a thousand.

Davi further said, “Not only must we take aggressive regulatory action against these con artists but we must educate and provide homeowners with the tools they need to protect themselves against scammers who charge thousands of dollars in upfront fees and deliver nothing in return.”

The forum would also feature speakers from DRE’s executive staff.

George Stanley, 29, pleaded guilty about the charges of numerous scams amounting to at least $500,000 in Tulare County Superior Court. Stanley, from Moosup, Connecticut, is facing three-year imprisonment. The scheduled sentence would be on January 28, 2009.

According to Contractors State License Board, Stanley is facing one count of grand theft by false pretenses. Stanley has pending criminal cases in California counties of Butte, Imperial, San Joaquin, Ventura and Yuba. These cases include elder abuse, grand theft and fraud. The fraud charges are due to Stanley’s usage of another California contractor’s license and making up contracts without authentic license.

Investigators from the Contractors State License Board had revealed they found Stanley and his extended family to have been together in scheming. These defrauds are done to convince home and business owners to acquire asphalt paving jobs. Stanley and his family formulated the scheme by saying they had leftover asphalt from other paving works, and that the prospective client’s driveway or pothole problems would be solved based on a “good deal”, investigators disclosed. In the end, the costs were higher than the quoted price yet the asphalt work crushed even right after completion.

Last June in Butte County, Stanley was arrested along with his cousins Kevin Snow, 22, and George Snow, 19. Worth $500,000 of paving equipment were recovered from the scammers’ possession. Meanwhile, as these three went out on bail, they have also been suspected of drugging and scamming an elderly man in East Brandywine Township, Pennsylvania. The Snows posted bail, while Stanley denied being in Pennsylvania during the scam.

State licensing board registrar Steve Sands stated, “These scam artists appear to have no regard for the laws of the state.” Sands warns residents to be vigilant and check out contractor’s licenses at www.sclb.ca.gov, www.CheckTheLicenseFirst.com or call (800) 321-2752.

Real estate was the biggest loser after the bubble burst in late 2008.  California, like many other states, saw plummeting real estate prices and uncountable foreclosures.  It has not been so bad for some though, as evidenced by real estate statistics for Humboldt County, CA.

Humboldt County has consistently been among the counties with the lowest rate of foreclosures, and this has held true.  The average residential price is about $290,000.  This is 21 percent lower than during the 2006 boom days.  It is however, far better than other counties, some of which have seen drops by 40 to 50 percent.  The worst-hit counties experienced devaluations as severe as 80 percent.  Many local homeowners are grateful for this fortunate turn of events, but real estate agents are finding it harder to actually sell houses in the area.  People just seem to have less money these days.

On a brighter note, the real estate market general seems to be on the path to recovery.  If a house remained unsold for 7 months back in August 2008, today it is just 4.3 months.  This points out the fact that more people are buying houses again.  Reports of foreclosures remain high, but the turnover to smaller houses is keeping the real estate market alive.

The federal tax credit amounting to $8,000 is also making waves in the real estate market.  Nearly 40 percent of surveyed recent first-time homeowners say that they would not have bought properties had the credit not been offered.  This credit offer has a deadline set for the 1st of December this year, but buyers have only until the end of September to qualify.  There are also movements in the Senate pushing to extend this credit offer all the way to June 1, 2010.

As prices continue to drop and home sales continue to slowly rise, it may yet be years before equilibrium is reached.  Whether the real estate market could rise again to its former glory is uncertain to say the least.

A million dollars is a lot of money, but it does not buy as much as it once did.  Today, the housing market is the exception to that general rule.  In many US neighborhoods, prices are dropping and homes are being listed for much less than they would have, even just last year.

In 2007, many homes in the suburbs of California and Florida would sell for almost a million dollars.  In those days, there was almost no chance of snagging property in Rancho Santa Fe, San Diego County for $1 million.  Today however, those prices have plummeted by 15 to 30 percent, consequences of many foreclosures and short sales.  Real estate experts are seeing a drop in the demand for these expensive luxury properties and a rise in demand for more utilitarian homes.  Everyone, it seems, has less money to spare.  Living large is out and keeping finances in strict rein is in.

On the upside, those who can buy luxury properties are getting more for their money.  If one could afford the payments, one could actually get up to 20% more value for the same amount of money.  Those who have weathered the financial storm reasonably well are taking these now-cheaper properties, albeit carefully and with a reasonable amount of trepidation.

Surprisingly, in areas with few luxury homes, those properties are maintaining their value.  Unfortunately that also means that these become more difficult to sell.  Many of the owners looking to sell these houses are coming up with zero offers.  Not even features like being close to the good schools or easy access to upscale shopping districts are enticing buyers to these homes.

It is unknown how long this real estate drought will continue, or if it will ever get back to how it was in the boom days.

The California State Bar had to take the unprecedented step of waiving confidentiality in order to reveal the identities of 16 California lawyers who are under investigation for their alleged misdeeds in handling California loan modifications.

With this news just in this fourth week of September, 2009, legal experts expressed their dismay and shock at this unethical conduct displayed by their peers.  According to Chief Counsel Weiner, this situation is such an astounding crisis, as never before have so many attorneys at law used their licenses to deceive trusting clients.  The lawyers who were named by the Bar were reported to have collected fees for loan modification services.  They failed to perform these services and likewise failed to inform their clients on any developments.  They further failed to return these fees which are considered as yet unearned.  For further details, the names of these lawyers are published on www.law.com.

In the past 15 years, this is only the second time waiving confidentiality for the sake of an investigation was deemed necessary, and it would be consistent with the missions of the California State Bar which is to protect the interest of the public.

This move arose mainly from complaints filed by clients against these lawyers who had offered them with California loan modifications.  These allegations were denied and contested in informal comments as unfair and baseless, triggered only by negative reactions from clients who were dissatisfied by the results of their services.  It could cause some attorneys to reconsider helping people with the loan modifications with these charges as consequences.

Way back in March 2009, the California State Bar already issued an ethic alert against the dangers lawyers face when they work in the mortgage arena.  It had even organized an investigative team dedicated exclusively to California loan modifications.  However, a select group of mishandled cases should not lead you to generalize on the greater majority of law practitioners who are actually doing their jobs with dedication and integrity.