Everyone hears about the problems in real estate; that there are many homes on the market and many more being lost to foreclosure every day.

In California, this is much more prevalent than in other parts of the country. California has a higher rate of foreclosure than average and values have declined in many neighborhoods. According to Realty Trac, a California based company that tracks the Nation's real estate transactions, one in every 171 households in the California were either in foreclosure, received a Notice of Default, or had been warned of pending action. This is a 121% increase in foreclosure activity over the same period in July of 2007.

Fortunately, there is always an upside to any downside. The upside to this problem is that home values have worked their way down to becoming more affordable to more buyers.

In the years between 2002 and 2005, we experienced a hot seller's market. This began to cool in 2006 and to become a buyer's market. 2007 and 2008 have brought a record number of foreclosures in California. The reasons for this are many, but it is mostly agreed that lenders were using some loan programs that made it too easy for people to buy real estate.

The market has now corrected itself and buying real estate has gone back to the buyer needing more down payment and proof of income.

Because the values have dropped and there are more foreclosure properties available, many first time home buyers are seeking out these types of properties. In addition, 150,000 to 180,000 homes have been sold to Canadians flocking here to take advantage of our buyers' market.

There is a lot of inventory on the market and the majority of it is either pre-foreclosure, auction sales, or REO properties. In the mix are also homeowner's who are not distressed, but need to make a move for one reason or another.

There are three types of distressed sale properties:

Short Sale: This property will have a seller who is likely still living in the property but is having trouble making their payments. The value of the property has declined to the point that the property is up-side down. The seller owes more than the property is worth and will need to negotiate with the current lender to take a loss on the property in order for the new buyer to close the escrow.

The advantage of a short sale property is that the seller will provide you with disclosure reports regarding the condition of the property. The new buyer can ask for repairs to be made to the property.

The disadvantage of a short sale is that they take a very long time to close. As a loan officer, my clients have to wait as long as five months for the lender to agree to terms the buyer is requesting. During that time, the property may have lost thousands of dollars in value. Buyers notice this and will tend to make offers on more than one property.

Auction Sale: Many of us have seen commercials and even, infomercials regarding buying properties at auctions.

While it is possible to get some bargains, I don't recommend it for anyone who is inexperienced at this. You will need to have all cash, payable within four days of the auction closing.

Usually, you will not be able to even see inside the property. You purchase the property as-is. There is no warranty or statement from the seller as to the condition of the property.

This is a huge drawback because many times there are significant problems that will need to be corrected. Your bargain could become a huge expense if all of the rooms have been stripped and you find that you need to add a new kitchen and bathrooms.

The most experienced, buyers are usually attracted to these properties because they are able to handle a heavy duty fixer. Repairing walls, plumbing, electrical, and other heavy duty work isn't uncommon for them and a buyer like this can make a lot of profit on an auction home.

REO Sale: Properties that the lender has had to purchase back because no one bid on them at auction are called REO properties. REO stands for real estate owned.

An REO property can be found on the MLS and most real estate agents can show you these properties. You will be able to look at the property and see the floor plan and other features the property has to offer. There is no disclosure from the seller as to the condition, but you would be allowed to have your own inspector look at the property when you have made an offer.

Many of these properties are in great condition. There are a great variety of homes available. The bargain in this property is that anyone can buy their next home and know what they are getting when they buy the property. You will usually pay less than what a seller-occupied, non distressed property would cost. This makes REO listings a great idea to look into, if the properties come up in your price range and needs list.

Those who are investing in real estate or are looking for their next homes will benefit from looking at REO and foreclosure properties.

In all cases, the seller is very motivated to sell. A buyer can get very attractive terms when they negotiate well. I recommend to my clients that they ask the seller to pay some or all of their closing costs. I work with the agent to present this to the seller in a way where we get to the bottom line benefit to the seller.

Once everyone wins, then the purchase is truly a great value.

For more information contact the author, Mary Supinger, at 619.701.4321

copyright August 2008 ALL RIGHTS RESERVED

TIPS ON PUMPING GAS   

I received this in my e-mail. I don't know who the author is, but it's a great article!

I don't know what you guys are paying for gasoline...but here in California we are also paying higher, up to $.50 per gallon. But my line of work is in petroleum for about 31 years now, so here are some tricks to get more of your money's worth for every gallon...

Here at the Kinder Morgan Pipeline where I work in San Jose, CA we deliver about 4 million gallons in a 24-hour period thru the pipeline. One day is diesel the next day is jet fuel, and gasoline, regular and premium grades. We have 34- storage tanks here with a total capacity of 16,800,000 gallons.

Only buy or fill up your car or truck in the early morning when the ground temperature is still cold. Remember that all service stations have their storage tanks buried below ground. The colder the ground the more dense the gasoline, when it gets warmer gasoline expands, so buying in the afternoon or in the evening...your gallon is not exactly a gallon. In the petroleum business, the specific gravity and the temperature of the gasoline, diesel and jet fuel, ethanol and other petroleum products plays an important role. A 1-degree rise in temperature is a big deal for this business. But the service stations do not have temperature compensation at the pumps.

When you're filling up do not squeeze the trigger of the nozzle to a fast mode. If you look you will see that the trigger has three (3) stages: low, medium, and high. In slow mode you should be pumping on low speed, thereby minimizing the vapors that are created while you are pumping. All hoses at the pump have a vapor return. If you are pumping on the fast rate, some of the liquid that goes to your tank becomes vapor. Those vapors are being sucked up and back into the underground storage tank so you're getting less fuel for your money.

One of the most important tips is to fill up when your gas tank is HALF FULL or HALF EMPTY. The reason for this is, the more gas you have in your tank the less air occupying its empty space. Gasoline evaporates faster than you can imagine. Gasoline storage tanks have an internal floating roof. This roof serves as a zero clearance between the gas and the atmosphere, so it minimizes the evaporation. Unlike service stations, here where I work, every truck that we load is temperature compensated so that every gallon is actually the exact amount.

Another reminder, if there is a gasoline truck pumping into the storage tanks when you stop to buy gas, DO NOT fill up- most likely the gasoline is being stirred up as gas is being delivered, and you might pick up some of the dirt that normally settles on the bottom. Hope this will help you get the most value for your money.

Author Unknown

A quick way to add points to a credit score is to pay the credit card bills the DAY THEY ARRIVE in the mail.

Creditors rate slow pays, 30, 60, and 90 days lates, along with those who have to pay a late fee because they waited until the last minute. Those who faithfully pay right away have better scores.

So, if you are looking to add 15 to 60 points on your scores, pay those credit card bills right away for at least four months prior to taking out your home loan.

As always, remember that taking care of your credit report as a regular habit will keep your scores at their highest all the time! Check out my book, Credit Reports and Credit Scores: Step By Step Instruction For Dramatic Improvement at www.CreditFitness.net.

The following article is the contents of an answer that I gave to another blog contributor today.

I would love to hear any comments from other professionals who are helping homeowners to keep their homes by way of a Loan Modification.

A "modification" is the end result of negotiating with the current lender or investor for a home loan that isn't working well for the homeowner.

Those homeowners who are facing foreclosure do have an option that is finally getting some attention from the public and the lenders themselves. That option typically means that the current lender may bring the interest rate down, fix an adjustable interest rate, reduce the amount of the loan, or allow the homeowner to add one to four house payments to the back end of their loans.

Many owners cannot refinance their adjusting ARM loan. They have made their payments on time and have good jobs. However, they've had a few late payments because the house payment soared upward by $600. This homeowner is a great scenario for looking into a load modification. The lender will typically want to avoid foreclosure, so a modification to the original loan is in everyone's best interest. This is just an everyday scenario, there are many others.

I like to recommend that an owner check out loan modification first. If that clearly will not work out, then consider a short sale. If a short sale will not work out, then letting the house go to foreclosure may be the only option available to the owner.

There is a method for dealing with staying in a home during the foreclosure process. That would take another long post.

Back to our original topic:

Hi SoCalGal:

It's great to hear from you. I hope that you will share your experiences in this area with me. I am always interested in knowing what others are working on.

On Sat, Jun 21, 2008 at 8:24 PM, (e-mail address not provided) wrote:

SoCalGal has posted a response to your message titled
Re: Do I tell the bank I want to go in foreclosure???? in Foreclosure Discussion.

The posted reply can be found at the following URL:

http://www.all-foreclosure.com/forums/foreclosures/messages/7710.html

If the reply pertains to an ongoing discussion, it is
requested you go to the above URL to post any response.

The posted reply reads as follows:

Dated  : June 21, 2008 at 20:24:41

Subject: Re: Do I tell the bank I want to go in foreclosure????

Mary, can you tell us under what circumstances the lenders are reducing loan balances?

My response:

Hi SoCalGal:

Thanks for writing!

To answer your question: Any loan balances being reduced are usually due to the property being at the highest risk of foreclosure and what that foreclosure will do to/for the investor. Where it is on the lenders' books is another factor. The number of requests for a reduction will also give the investor the current "climate" of the market.

An example:

A million dollar home that has lost 30% of its' value: a borrower who made the fixed period payments on time, who wants to remain in the home, and who has steady income.

Those factors would make it easier for a lender to write down part of the mortgage loan amount to avoid the average foreclosure costs and to avoid the loss of income on the note for a period of six to 18 months.

Any file submitted to the investor/representative of investor must "stand on it's own". The negotiator for the modification must present a clear picture of where we are today, what the cost of a "No" answer will have on the investor, and what the Borrower can live with.

This is an example of a scenario that did work for a balance reduction. A write down between 5 to 25% of the note with a borrower who is capable of performing NOW keeps a foreclosure off the lender's default list and makes the lender look better to the investor. I am not going to disclose the exact amount of the write down, but it was more than 5% of the mortgage balance. (Your mileage may vary)

This is NOT standard operating procedure. Having said that.......one could act "as if it was" when approaching the lender and being willing to wait for an answer without caving in. In my humble opinion, that is the hardest part for the property owner, which is why a representative for the owner is the best idea. A good one will pay for himself with good negotiating skills and presentation of the borrowers information which will ultimately "pay" or save the owner on his loan.

Our processing unit has been successful in the above scenario. Please remember that this is not a typical case and that each scenario for each homeowner should be reviewed by a professional with a history of mortgage and real estate expertise. This person must also represent a company history of good performance and service.

There are many Loan Modification "experts" popping up to help people with their homes. No license is required. Please check them out before you sign any contract or pay any fee. Don't give your property up to ANYONE without the advice of an attorney that has been referred to you by a trusted source. Remember, that if the homeowner has been advised by their lender with a Notice of Default, that it is a felony to accept a fee from the owner until an agreement has been obtained for a loan modification or forbearance.

Standard Disclosure: Please seek individual, professional advice in your personal situation. This article is not intended to advise or counsel any particular person. It is intended as notice of current events. The above article is authored by Mary Supinger and is protected by copyright laws. Credit Fitness is a registered trademark of www.CreditFitness.net.

This past Monday, June 9^th, was the first day's use of the new software for underwriting Fannie Mae loans. Version 7 of the Desktop Underwriting® software was upgraded with lenders over the past weekend.

This new version of the underwriting process will take a much longer and more conservative look at borrowers. By longer, I mean that additional documentation will be required in order to get an approval. Fewer approvals will be given as well.

The bar has been raised as to what makes for an approvable loan.

The entire underwriting process for mortgage loans has snapped back into the days prior to any credit scores being used.  In those days, a human being reviewed the loan application for the lender. At times, even two humans beings did the underwriting; once for the lender and again for the mortgage insurance company. Those were the days when, as a loan officer, you hoped your underwriter was having a "good" day and wouldn't hit you with a page long list of conditions for a full loan approval.

This new version of the software is crankier than previous versions. It demands more proof of what is stated in the actual loan application. The loan officer will need to be more careful that information is entered correctly onto the application because this software won't allow the loan officer to change the information repeatedly based on what one thinks the lender wants to hear. This will prevent a lot of the fraud that has caused some of the problems we are living with today.

This newer, more conservative software will look at the borrower s with a much more critical eye. More will have to be proven. Risks in the file will have to be balanced with additional "compensating factors".  As an example, fewer years in a line of work could be balanced with having substantial savings or reserves.

This new software will mean there will be fewer loan approvals.

It also means that the bar for loan officers has also been raised. The average loan officer has less than five years of experience. Many of the "newbies" have left the profession.  I recommend that you "prequalify" your loan officer at the time he or she prequalifies you.

Homeowners facing foreclosure and any shortfall of funds due to their lender were subject to tax by the Internal Revenue Service.

A person could lose their home in foreclosure and the lender could suffer of loss of say, $100,000. According to a tax law enacted in 1986, the lender was required to mail a 1099 to that ex-homeowner the dollar amount of loss suffered by the lender.

As an example:

A loss of $100,000 is reported on the foreclosed homeowner. That $100,000 would be added to their other W-2 and 1099 income. If our ex-home owner usually made $50,000, the $100,000 1099 would then increase their income to $150,000 and would be taxed at 50%. It is possible that the tax bill would be $75,000 for the tax year.

Essentially, someone in a very bad situation could go from the frying pan into the fire! The Bill H.R. 3648 relieves the homeowner from that tax liability for the owner-occupied foreclosed property.

I am several proven methods to keep homeowners in their homes, but this legislation brings a huge sigh of relief for many, many homeowners across the country.

My next installment will be regarding relief for tenants impacted by a foreclosed property. 

Please come back again soon!

Keeping your personal paperwork private is very important.

Most of identity thefts occur because of thieves going through your trash. Another trick is checking your mailbox to find outgoing checks that you may write to pay your bills.

Checks can be stolen and then "washed". The payment amount and payee can be changed and a check with your own signature can be cashed for whatever amount the thief chooses. Of course, this is very worrisome to anyone who pays their bills by check and doesn't take them to the post office.

There is one of the simple remedies that can help you avoid becoming a victim of this crime:

Frank W. Abagnale, a Secure Document Expert and reformed identity theft thief, recommended the use of Uni-ball 207 gel pens for writing checks. Mr. Abagnale was the subject of the movie Catch Me If You Can, which is about a thief and imposter who is really good at what he does.

On their package, the manufacturer states that "Many Uni-ball pens , such as the Uni-ball 207, use specially formulated inks that contain color pigments that are absorbed into the check's paper fibers, trapping it from check washing."

On his web-site, Mr. Abagnale states that being caught and convicted of identity theft is so rare that prevention is the very best course.

Do any of the readers have experience with these pens or ID theft?

Back in the day, homeowners were able to get a 2nd trust deed mortgage loan that actually covered up to 125% of the value of the property.

The cash out was convenient for home improvement, consolidating credit card date, or some other investment. Many of these loans were really helpful in getting cash out of the house to make some additional cash available for other expenses.

The rates were quite high and the interest rate was dependant on a borrower's credit score. At that time, loans were not priced according to credit scores as strongly as they are today.

The borrower had to qualify for these loans by showing their ability to repay the debt.  The back-end ratio might determine pricing. The back-end ratio on a loan is the percentage of a borrowers' debt which includes principal and interest on the first, property taxes, hazard insurance, and any long term debt payments.

Now-a-days your interest rate is determined by credit score, combined loan to value, and whether you are going with Stated Income or Full Doc financing.

I've thought about these 125% loans over the past two weeks as we have had to turn away so many borrowers who need to refinance. The turn downs were because the property was purchased in the past two years and property values have declined.

 I'm not sure if these will be brought back or not. I am sure that if an investor believes that they can make money on them, they will reappear!

FNMA (Fannie Mae) is working on methods to help consumers refinance their loans should their interest rates become unmanageable for staying in the property. As yet, there are few public details available as to what FNMA has or will come up with.

Your knowledge, comments, suggestions are very welcome! Let's blog!

For many years, parents have been adding their children to their VISA account. The title given the child is "Authorized User".

This gave their child the ability to use a credit card now and again. It also enabled the child to develop credit scores. If the parent had held the account for 15 years, an eighteen year old could actually have a 15 year credit history! In the credit score game, that gave the 18 year old the benefits of having a long credit history. Credit history is 15% of the credit score. The balances held, and paid on time for those accounts, make up another 35% of the score.

The bottom line to that statement is that the 18 year old benefits without every actually having an account in their own name. It makes the multitude of credit card offers to them quadruple if Mom and Dad have great credit.

This great trick has also been used to help borrowers the ability to generate a credit score that was good enough to meet lender standards.

Since a young adult is considered "new" to credit for the first ten years of their history, piggybacking onto a family member's credit really helped with getting no down payment loans. Among family members, it was perfectly acceptable.

Businesses have sprung up that will actually find you a "mom" or other "family member" who will allow you to become an authorized user on their credit profile. In the best circumstances, the receiver of the "authorization" never really gets the bank card, only the credit history. Many perfectly honest people are talked into going along with this scenario in order to help someone out.

At best, it's a little shady. At worst, it can be considered fraud. Paying someone to do this for you is playing with fire.

A few good credit accounts will not make up for a poor credit history. You cannot erase years of spotty credit with two or three credit accounts. In addition, Fair Isaac will be removing the Authorized User from it's computation in arriving at credit scores.

As a loan officer, people ask me all the time, "What can I do to increase my credit scores?"

The answer to that question often depends on what the details of their credit report shows and how long they have had credit. Those who have had credit for over twenty years or more will have higher scores than someone with only two years of credit history, assuming that the past two years of each person's credit contains no recent late payments.

The most recent two years are what weigh the most on credit scores, but a person's overall credit history has great bearing too.

35% of a person's score is determined by their track record. The payment history shows how you have handled your credit. Have you paid your bills when they were due or before? This part of the score will reflect if there are any judgements, tax liens, collections, or wage attachments.

30% of a person's score is based on how much is owed. If all of your eight credit cards are up to their maximum levels, then your scores are dramatically lower than they could be.

15% of a person's score is based on how long they have credit history. As was stated before, 20 years of good credit will help a person to bear a few dings than someone who has a short credit history.

10% of a credit score is based on the recent activity  and new accounts. Inquiries occur if new accounts have been added, if a person has applied for lots of credit, and/or if you are "shopping" for various lenders.

Lastly, 10% of the score reflects the types of credit that exist on the credit report. A healthy mix of credit would be a real estate loan, car loan, and a few credit cards with 75% of their limits available.

People who know the rules of credit will get better rates and service. Most of us need to perform regular maintenance on our credit reports. Check out my website at www.CreditFitness.net for information on improving your credit scores. Everyone needs this: if you have great credit, you need to protect it. If you have not-so-great credit, we can help with that!