Maureen Megowan's Blog

The following are interest rate quotes from Al Hermann of American/California Financial Services

30 Yr Fixed FHA
Rate	APR
4.750%	5.274%	Details

 

Conforming 30 Yr Fixed up to $417000
Rate	APR
4.750%	4.903%	Details

 

Conforming Jumbo 30 Yr Fixed $417001 - $625500
Rate	APR
4.875%	5.021%	Details

 

Conforming Jumbo Fixed $625000 - $729750
Rate	APR
4.875%	5.019%	Details

 

Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)
Rate	APR
5.250%	3.752%	Details

The following are interest rate quotes from Ron Goodlin at Coast Captal Group at ron@coastcapitalgroup.com :

*Loan amounts from $150,000-$417,000:

30yr fixed loan            4.625%                    (4.85% apr)

15yr fixed loan            4.125%                    (4.35% apr)

5/1  arm                     3.5%                       (3.72% apr)                        

*Loan amounts from $417,000-$729,750..

30yr fixed loan            4.75%                      (4.98% apr)

10/1 arm                    4.50%                      (4.78% apr)

7/1  arm                     4.125%                    (4.39% apr)

5/1  arm                     3.75%                      (3.99% apr)

*Loan amounts from $729,750- $2,000,000

30yr fixed                   5.75%                       (6.10% apr)

10/1 arm                    5.50%                       (5.72% apr)

7/1  arm                     4.99%                       (5.2%  apr)

5/1  arm                     4.375%                     (4.59% apr)

3/1  arm                     3.875%                     (4.12% apr)

*Loan amounts from $2,000,000-$12,000,000

10/1 arm                    5.625%                       (5.89% apr)

7/1 arm                      5.375%                       (5.55% apr)

5/1 arm                      4.75%                         (5.128% apr)

3/1 arm                      4.0%                           (4.25% apr)

6 month arm               3.0%                           (5.125%apr)

If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.   For Federal tax purposes,  in many instances the debt forgiven on principal residences may be excluded from taxable income.  This was discussed by me in a separate blog entry at Debt Forgiveness - Taxable Income for Federal Tax Purposes?.

California law, SB 1055, conforms California Revenue and Tax Code Section 17144.5 with federal law, the Mortgage Forgiveness Debt Relief Act of 2007, with the following exceptions:

(1)  The maximum amount of acquisition indebtedness is reduced to $800,000 for couples filing jointly and $400,000 for individual filers;

(2)  The maximum amount of debt relief income that can be forgiven is $250,000 for couples filing jointly and $125,000 for individual filers; and

(3)  California's debt relief statute applies to property sold on or after January 1, 2007 and before January 1, 2009. At this time, there is no debt forgiveness relief for California taxpayers for property sold or foreclosed on after January 1, 2009 .

In California, purchase money home loans are considered nonrecourse because lenders are prohibited from seeking a deficiency judgment against the borrower after a foreclosure sale of real property that secures a purchase money loan. CCP §580. (  The requirements for a purchase money mortgage are discussed in my blog entry Short Sales and California Anti-Deficiency Laws ). A loan is nonrecourse if the lender's only remedy in case of default is to repossess the secured property (because the lender cannot reach the borrower's other assets to satisfy any shortfall). Under these circumstances, the unpaid principal balance of the mortgage is not seen as being "forgiven" or "cancelled" and does not cause the borrower to have cancellation of indebtedness income. Treas Reg §1.1001-2(a)(4)(i) and (c), Examples 7-8; IRS Letter Ruling 9302001. Thus, there would be no debt foregiveness in California for those who had used purchase money indebtedness to acquire or substantially improve a principal residence. Such homeowners would not have cancellation of indebtedness income to exclude because their loans were considered nonrecourse in the first place. ( Source: http://ceb.com/lawalerts/reflectionsloanforeclosures.asp?WT.mc_id=la_4415  Continuig Education of the Bar website ).

I think that it is completely unfair that California has not passed an extension of the law to conform California tax law with the Federal Debt Forgiveness provisions.  It is tragic that a homeowner who does not have a purchase money mortgage and  has lost their home through foreclosure or a short sale has not only lost a large amount of money , but may also owe a large amount of state income taxes as well because of debt forgiveness.

**NOTE: The information contained at this site is for educational purposes only and is not intended for any particular person or circumstance. A competent tax professional should always be consulted before utilizing any of the information contained at this site.**

Advantages of a Short Sale versus a foreclosure are as follows:

1 )Impact on Credit Score Less: This option usually results in less impact to the borrowers credit rating than a foreclosure, as it demonstrates that the financial difficulties were primarily due to a loss in value of the property, and not to factors in control of the borrower. Only late payments will be recorded by the credit companies and the short sale will normailly be reported as paid or negotiated. The effect of a short sale on your credit may be limited to only 12 to 18 months or as little as 50 points if payments stay current. In a foreclosure, the credit score is typically lowered from 250 to over 300 points and could affect your credit score for over 3 years.

2) Credit History: Foreclosures will remain on a credit history for 10 years or more. Short sales, however, are not reported on a credit history and are typically reported as "paid in full, settled"

3) Future Loan from Fannie Mae for Principal Reidence:  A borrower will normally be able to get another Fannie Mae loan after only 2 years after a short sale. After a foreclosure, a borrower is ineligible for a Fannie Mae loan for 5 years

4) Future Loan from another mortgage company for conventional financing:  On the form 1003 Credit Application required by lenders, a borrower must answer yes to question G in Section VIII of form 1003 that asks "have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years", which will affect the borrowers approval probability or the interest rate to be paid. There is no similar question dealing with a short sale.

5) Security Clearances: If a person has a foreclosure and is a police officer, in the military, in the CIA or any other position that requires a security clearance, the clearance will be revoked and employment will be terminated. A short sale on its own does not challenge most security clearances.

Why would a lender agree to a short-sale instead of a foreclosure action?

1) The lender could become responsible for many unpaid fees related to the property upon foreclosure, including unpaid HOA fees, property taxes, utilities, etc.
2) The lender avoids the time delays and uncertainty involved in marketing the property after foreclosure. They also avoid such costs of marketing the property as advertising.
3) The lender avoids the extensive costs of the foreclosure process including attorney's fees, possible delays due to bankruptcy filings, as well as possible deterioration of the property during the period it is owned by the lender after foreclosure.
4) if the property contains hazardous materials, particularly asbestos, lenders are often reluctant to take title to property with such materials as it puts them on the "chain of title" in case liability claims are raised due to the presence of asbestos.

The major disadvantage to a borrower relating to a short sale is the very time consuming and complex process of completing a short sale.

Deed in lieu of Foreclosure:  This option is where the borrower executes a grant deed to the lender instead of the lender going through the expense and delay of the foreclosure process. This process, however, has risks for the lender as they accept title to the property, including liability for other junior liens on the property, including mechanics liens, etc. that otherwise would have been extinguished and removed during the foreclosure process. This option is also preferable than a foreclosure process for a borrowers credit rating, however has a greater impact on the borrowers credit rating than a short sale.

The  Feb. 9^th Rolling Hills Estates City Council meeting agenda has our presentation to the City Council regarding the need for a Dog Park agendized under "Audience" items. It is important that as many supporters of a dog park on the Palos Verdes Peninsula attend this meeting as possible to show your support.

If you would also like to speak at the meeting,  please fill out a speakers card when you arrive and give it to the City Clerk. The meeting begins at 7:30 pm and our presentation will be at the very beginning of the meeting so don't be late.. The facts on the meeting are:

Rolling Hills Estates City Council Meeting

Date: 2/9/2010 7:30 PM

Location: City Council Chambers
4045 Palos Verdes Drive North
Rolling Hills Estates, California 90274

 

I have had several issues arise recently in several short sale transactions where the potential liability to our clients for a deficiency judgment was in question. The following comments relate to the anti-deficiency statutes in the State of California CCP § 580b thru (d) relating to purchase money mortgages.  A deficiency is the difference between the amount owed and what the lender was able to recover through foreclosure. These issues were discussed with an attorney with the California Association of Realtors on their legal hotline.

1. If a mortgage satisfies the conditions of a purchase money mortgage under these statutes at the time the mortgage is made,  then if the property is later converted to an investment property and rented out, the status of the mortgage as a purchase money mortgage is not changed. To qualify as a purchase money mortgage in California, the loan must be obtained at the time of purchase of the borrowers principal residence. This can include a second mortgage obtained at the time of purchase.  Although the legal issue as to whether a home equity line of credit used to purchase a home would qualify as a purchase money mortgage has not yet been fully addressed through case law, most attorneys believe that if the loan was only used to purchase the property and additional draws for other purposes were not taken, the home equity line should qualify as a purchase money mortgage.  If the initial loan was refinanced, even if no additional proceeds were drawn and the refinance was only a change in interest rate or terms, the new loan would not qualify as a purchase money mortgage and would be recourse. This is a major issue with those borrowers who have recently modified their loans which are in default, because they may have unknowingly converted their purchase money non-recourse loan to a fully recourse loan, and exposed themselvers to a potential large deficiency judgment.

2.  In obtaining a release from the lien of either a first or second lender in a short sale, even if the loans are purchase money mortgages, it is imperative that a full release from both the mortgage lien as well as the promissory note is obtained, otherwise the lender may pursue a deficiency judgment since the lender did not go through foreclosure.  Releasing the lien on the property is not enough since the property just serves as security for the promissory note.  You must get a full release on the note as well.  Often times a second mortgagee will negotiate with the borrower as to what they will require to be paid, either from the sale proceeds ( as allowed by the first mortgagee) or from the seller contribution, but this may be just for obtaining their release of the lien, and you need to make sure they will also give a full release of the promissory note, otherwise they could pursue a deficiency judgment after the short sale is closed.

3.  If a second mortgage is a purchase money mortgage, and the first mortgage forecloses out the second mortgage,  the second mortgage is precluded from pursuing a deficiency judgment as the borrower is protected by California anti-deficiency laws. Under Code Civ Proc, § 580b, the holder of a note secured by a purchase money second trust deed may not recover even though the second trust deed had become worthless by reason of a sale conducted under the senior first deed of trust. Barash v. Wood (1969, Cal App 2d Dist) 3 Cal App 3d 248, 83 Cal Rptr 153, 1969 Cal App LEXIS 1377.

4.  If the first and second mortgages are recourse and not purchase money mortgages, and the property is foreclosed on, it is important as to who initiated the foreclosure.  If the first forecloses on the property and wipes out the second mortgage, the second mortgage holder can pursue a deficiency judgment against the borrower.  If the second mortgage holder forecloses on the property and takes over the property, they would not be able to pursue a deficiency judgment.  In California, this is known as the "one-action" rule.  A lender can not both go through a non-judicial foreclosure ( foreclose on the deed of trust )and then sue to collect a deficiency judgment, however they could choose to go through a judicial foreclosure where they are not simply foreclosing on the deed of trust through a trustees sale, but instead are suing the borrower for title as well as a deficiency judgment.  This is not often done as it is much more expensive and time consuming to go through a judicial foreclosure.

The above information is provided for educational purposes only and is not intended to be definitive legal advice. The specific facts of a case can have significant impact . Anyone going through a short sale or foreclosure should obtain legal counsel from a licensed real estate attorney.

The real estate market for the Palos Verdes Peninsula and Beach Cities picked up substantially in the fourth quarter 2009. Both buyers and sellers stepped up to buy and sell. Properties that were sitting for many months sold at all levels of the market. High end properties are selling as jumbo loans have become more available. Buyers who can get financing are actively looking and aggressively offering where they see a deal. Sellers who are motivated to move are pricing their homes to sell.

News reports are mixing in some good economic news in addition to the doomsday reports favored by the media. Lower priced homes are moving briskly with buyers taking advantage of significant discounts and record low interest rates. New tax credits are also giving great incentives to new buyers.

PRICE CHANGES - Properties on average, in the South Bay are selling for approx. 96% of list price. The average price per sq. ft. for homes sold in the fourth quarter 2009 compared to the fourth quarter 2008, has fallen much less in the South Bay Beach Cities than in most markets in Southern California. Recent news reports have indicated that prices may be stabilizing in Southern California. The median price of homes in Los Angeles County has also been increasing lately due to an increase in the number of more expensive homes being sold because of the improving market for jumbo loans.

Quarterly changes in sales volumes in the beach cities compared to last year varied widely, with some strong increases in sales volumes on the Palos Verdes Peninsula, Manhattan Beach/Hermosa Beach, and Redondo Beach, but flat sales in Torrance and San Pedro.

Location	2009 4th Qtr. Sales	% Change 4th Qtr. 2008	Days on Market	Months Inventory
	Sales Price Per Sq. Ft.	# of Houses	Sales Price Per Sq. Ft.	Sales Volume
Palos Verdes Estates	$572	30	4%	200%	153	6
RPV, RHE, & PVP	455	109	3%	70%	80	4
Rolling Hills	627	5	(3%)	NA	82	5
Manhattan Beach/Hermosa	634	108	(13%)	83%	84	3
Redondo Beach	427	92	( 5% )	18%	62	3
Torrance	370	199	5%	3%	47	2
San Pedro	309	78	(  4% )	(4% )	68	3

  

  

 I have also posted below detailed market reports for each of the neighborhoods on the Palos Verdes Peninsula which lists the homes sold in each neighborhood during the 4th Quarter of 2009.

INVENTORY - The total inventory of single family homes for sale in the cities listed above has decreased significantly during the last quarter. For most of the last two decades, L.A. County has averaged an 8 month inventory.  The number of months of inventory of homes in the South Bay has shrunk significantly in the last year. Homes in the lower end of the price range in the higher priced market of the Palos Verdes Peninsula and Manhattan Beach have been also selling faster than the higher priced homes.

What is a Short Sale?

CDPE - Certified Distressed Property Expert

Short Sales are a sale of a property where the sale proceeds are not adequate to pay off the existing loans, requiring the lender to agree to accept less than full payment of their loan. At this time, the fastest growing segment of the distressed property market is the luxury market.  I am a Certified Distressed Property Expert, and those realtors that have this designation have a success rate of 85-90% closing short sales, compared to a national average of 8-10% successful closings. Whether it is caused by relocation, loss of a job or increased mortgage payments, everyone at some point has been touched by the worldwide economic downturn. If you know someone who may need some help lease don't hesitate to call or refer our services.

IT'S ALL ABOUT THE INTERNET.  We invite you to visit our award winning website at www.maureenmegowan.com.  Our website achieves extremely high placement on search engine results, such as "Palos Verdes Real Estate" and "South Bay Real Estate" on Google, for people using the internet to buy a home in Palos Verdes or the South Bay beach communities. This has made us a leader in serving relocation clients.

TAX INCENTIVES:     The Federal government's $8,000 tax credit for first time home buyers was extended for homes purchased through 4/30/2010 with a purchase price of $800,000 or less, with a new $6,500 home buyer's credit for existing homeowners. There are also substantial tax credits for qualifying energy saving expenditures.  For more info, visit the following link on my website: Income Tax Issues

FINANCING   (See our web blog for rate updates):

BUYERS AND SELLERS TAKE HEART! There is financing available for well qualified buyers due to the Federal Reserve's aggressive action in purchasing Fannie Mae and Freddie Mac securities. Extension of this loan funding program is not certain at this time. Funds for this program may run out by the end of the 1^st quarter of 2010 and interest rates may move up by upwards of a half point in the early part of this year. There are new guidelines for Fannie Mae and Freddie Mac loans, and 3.5% down payment loans are available with tight restrictions.  

BUYERS with good credit ( FICO scores above 740), an adequate down payment of 20% or more and 2 years or more employment history will qualify for Full Documentation loans. There are no Stated Loans (no documentation) offered now. If the property will be your home, not a speculative investment, you should be buying for the long term. Today's market gives buyers and sellers the opportunity to negotiate a reasonable deal for both parties.

Conforming Loans ($417,000 and below) are at approx. 4.75 %.  Rates for loans between $417,000 and $729,750 (conforming jumbos) are about one-eighth to one quarter of a percentage point higher. Conforming loans generally require a 20% down payment (less for FHA or VA loans)

Interest rates on Jumbo 30 year fixed rate mortgages (loans in excess of $729,750) have decreased substantially over the last several quarters to an average rate of approx. 5.75-6.25%. The interest rate spread between 30 year fixed rate conforming loans and Jumbo 30 year fixed rate loans is approx. 75 % to 1.25 %.  Jumbo loans also require a higher down payment of 25 to 30%. 7 year variable rate loans are available for jumbo loans at rates of approx. 5.25%.

All rates quoted above are as of 1/18/2010 with usually FICO Scores of at least 740.

On January 20, 2010, the Dept. of Housing and Urban Development announced upcoming changes to the FHA insured loan program. 

 These changes will include the following:

.  Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from itscurrent 1.75 percent. This change will be effective for FHA loans for which a case number has  been issued on or after April 5, 2010.

.  Raising the minimum credit score requirements: New borrowers will be required to have a minimum
FICO score of 580 to qualify for the FHA's 3.5 percent down payment program. New borrowers withless than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer after it goes through the normal regulatory process.

.  Reduce allowable seller concessions: The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer after it goes through the normal regulatory process.

These changes are intended to rebuild the capital reserves of the FHA, but will make it more expensive to acquire an FHA insured loan.

The following are interest rate quotes from Ron Goodlin at Coast Captal Group at ron@coastcapitalgroup.com :

*Loan amounts from $150,000-$417,000 

30yr fixed loan      4.75%                       (4.85% APR)

10/1 ARM fixed      4.125%                 (4.32% APR)

5/1 ARM fixed        3.5%                           (3.72% APR)

 

*Loan amounts from $417,000-$729,750..

30yr fixed loan      4.875%                            (4.98% APR)

10/1 Arm fixed       4.75%                         (4.90% APR)

7/1 ARM fixed       4.375%                        (4.59% APR)

5/1 ARM fixed       3.875%                        (3.99% APR)

*Loan amounts from $729,750- $2,000,000

30yr fixed                  5.875%                            (6.10% APR)

10/1 ARM fixed         5.50%                       (5.72% APR)

7/1 ARM fixed           5.25%                            (5.44% APR)

5/1 ARM fixed           4.5%                             (4.69% APR)

3/1 ARM fixed           4.125%                            (4.37% APR)

*Loan amounts from $2,000,000- $10,000,000:

 10/1 ARM fixed      5.625%                              (5.89% APR)

7/1 ARM fixed        5.375%                           (5.55% APR)

5/1 ARM fixed         4.875%                             (5.128% APR)

3/1 ARM fixed        4.75%                           (4.95% APR)

6 month arm           3.0%                          (5.125%APR)

 

The following are interest rate quotes from Al Hermann of American/California Financial Services

30 Yr Fixed FHA
Rate	APR
4.750%	5.274%	Details

 

Conforming 30 Yr Fixed up to $417000
Rate	APR
4.750%	4.903%	Details

 

Conforming Jumbo 30 Yr Fixed $417001 - $625500
Rate	APR
5.000%	5.148%	Details

 

Conforming Jumbo Fixed $625000 - $729750
Rate	APR
5.000%	5.145%	Details

 

Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)
Rate	APR
5.250%	3.795%	Details

The Los Verdes area of Rancho Palos Verdes (Area 173 in map below) had the following real estate market activity for single family residences during the 4th Quarter of 2009 :

Properties Sold: 11

Address                   Sales Price BR BA  Sq.ft.     $/Sq.ft   Yr.Blt. MLS#  Sold Date        Days on Mkt.

6917 Purple Ridge DR        $837,000     3 2.00 1,460 $573 1963 V09085508 11/25/09     101

28244 Trailriders DR           $881,000    3 2.00 1,434   $614 1962 V09089567 10/22/09     42

6903 Hartcrest DR              $900,000    4 2.00 1,956   $460 1963 V09089318 10/15/09       7

28014 Braidwood DR           $929,000    4 2.00 1,872   $496 1964 S09035309 10/20/09   194

28520 Blythewood DR          $980,000    4 3.00 2,484   $395 1963 S09069580 10/29/09    62

29061 Maplepark DR           $980,000    5 4.00 2,467   $397 1963 V09097006 10/27/09    22

6508 Abbottswood               $995,000    5 3.00 2,128   $468 1963 V09112053 11/25/09      9

6755 Monero DR              $1,012,000    3 2.00 2,427    $417 1963 V09076053 11/25/09   125

7035 Hartcrest DR            $1,015,000    5 3.00 2,242    $453 1963 V09092528 12/02/09     99

6513 Madeline Cove DR   $1,015,000     5 3.00 2,683    $378 1970 V09103427 12/30/09     97

29021 Warnick RD           $1,400,000     5 3.00 2,998    $467 1970 V09042062 10/12/09   194

 

Properties for Sale as of 12/31/09:  4

Los Verdes Street with Ocean View

Average List Price at 12/31/09:  $ 1.1 million

Average Sales Price of homes sold during 4th quarter: $ 1.0 million

Average Price per Sq. Ft. for Properties Sold during 4th Qtr:   $ 465 per sq. ft.

Properties sold at an average of 96% of List Price

 

 

For more information on buying or selling real estate in the Los Verdes area of  Rancho Palos Verdes visit my website at http://www.maureenmegowan.com

The Eastview area of Rancho Palos Verdes ( area 177 in map below) had the following real estate market activity for single family residences during the 4th Quarter of 2009 :

Properties Sold: 17

Address                    Sales Price BR BA  Sq.ft.     $/Sq.ft Yr.Blt. MLS#  Sold Date  Days on Mkt.

1835 Trudie DR               $500,000      2 1.00 853     $586 1950 V09090107 10/29/09      71

1905 Homeworth DR        $565,000     3 1.00 1,497   $377 1950 S09101122 11/04/09      45

1514 W Toscanini DR       $607,000     3 2.00 1,403   $433 1973 S09104127 11/20/09      25

1856 Peninsula Verde DR $609,000     3 2.00 1,895    $321 1970 F1817773  11/09/09       34

2130 W General ST          $610,000     3 2.00 1,250   $488 1955 S09107601 12/11/09      42

1953 Upland ST                $642,000     3 2.00 1,564   $410 1956 Y904724   11/30/09        62

1814 Peninsula Verde DR  $649,900     3 3.00 2,000   $325 1970 V09094157 12/22/09      85

2011 Jaybrook DR            $676,000     3 3.00 1,893   $357 1950 S09066478 10/09/09      71

2081 Avenida Feliciano      $687,000    4 2.00 1,790   $384 1962 S09080630 10/16/09      63

1813 Avenida Feliciano      $699,000    3 2.00 1,568   $446 1960 S09087202 10/01/09      21

28623 N Enrose AV            $699,900    3 2.00 1,856   $377 1957 S596584     12/21/09     12

2070 Caddington DR         $715,000     3 2.00 1,800   $397 1956 S09112997 12/18/09     23

1526 Caddington DR         $720,000     4 2.00 1,624   $443 1973 S09064874 11/11/09     28

1819 Avenida Feliciano      $745,000     3 2.00 1,790   $416 1962 V09086671 10/07/09     57

1300 Mount Rainier RD      $760,000     4 2.00 2,100   $362 1973 V09098881 12/18/09     58

2136 Noble View DR           $765,000    3 2.00 1,844   $415 1956 V09101012 11/06/09      40

27603 Eldena DR               $810,000    5 3.00 2,511   $323 1963 S09092577 11/06/09      34

 

Properties for Sale as of 12/31/09: 6

Average List Price at 12/31/09:  $ ,6 million

Average Sales Price of homes sold during 4th quarter: $ .7 million

Average Price per Sq. Ft. for Properties Sold during 4th Qtr:   $ 404 per sq. ft.

Properties sold at an average of 99% of List Price

 

For more information on buying or selling real estate in the Eastview area of Rancho Palos Verdes visit my website at http://www.maureenmegowan.com