John Occhi's Blog

Is our Current Economic Situation our Berlin Wall?

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sat, 27 Sep 2008 19:49:00 -0500

Wow, what an amazing concept. Is it possible that this great nation of ours could fall as easily as the Berlin Wall and the Soviet Block did? Certainly the former USSR never thought they would crumble into oblivion as quickly as they did, did they?

How about the Roman Empire? Everyone pretty much thought they were indestructible, didn’t they? And look what happened when they started pampering themselves and living large…that’s right they ceased to exist. And so the story goes with every other major power that history has recorded throughout the history of mankind.

So why is it that the United States of America believes we are so indestructible?

First, don’t get me wrong – I am born and bred American. Served 10 years in the US Army as a Cold War Warrior of the 1970’s – serving 6 years near the East-West border, poised for action waiting for “the balloon to go up”. I love this country – heck the only tattoo I got was when I was 17 and first joined the army – yes it is a very patriotic tattoo. So, please don’t think I am an outsider advocating self destruction or any other acts of terrorism, because that just ain’t me! I refuse to bury my head in the sand or be afraid to speak my mind in this FREE COUNTRY (While it is Still Free) All I am doing is expressing my own personal opinion as I am still protected by the First Amendment…or has Homeland Security and the Patriot Act trumped this right yet?

Neither am I a student of Economics or Political Science – I am just a REALTOR trying to survive like everyone else. What I can tell you that what I see from where I sit is not a pretty picture. I still think that most of my fellow countrymen are in total denial and have absolutely no idea how this is going to shake down and personally affect them. Certainly those who have been able to hang on to their homes so far are proud of that – yet still they worry.

WORST CASE SCENARIO

Unless we really get our act together and solve this problem, as I know America can; then I do believe that the end of this once great nation, as we know it will soon be revealed. Now I am not going to pretend that I understand the current Economic Bailout – not do I even know anyone who really does. Sure, like everyone else, I have my opinions – but what I am basing them on – sound bites, headlines and video clips; just like everyone else.

What I do believe is that the ‘Powers to Be” have two choices – one of them is self serving and the other is for the best interest of everyone I know. This is scary, because typically these ‘Powers’ – whoever they are, hiding behind the scenes pulling the strings of the front men (and women) politicians, are going to look out for their own selfish interests.

What will happen if there is a natural disaster right now? Say a Katrina times five, or a fire that sweeps across 10 states, maybe a 9.0 earthquake devastating an entire region or God forbid a terrorist attach that dwarfs 9/11 just to send President Bush out the way he came in?

Is it possible that we are in the last days of America as we know it? What will happen if there is a total economic collapse? Will the forces of Homeland Security become the Gestapo of our new president? Will we as Americans accept that this is our lot in life and we have to endure for the ‘greater good’ or will we revolt and overthrow the government? Would those ‘Powers’ allow a full our revolution or would they take steps to minimize the losses and divide the ‘Former USA’ into a series of regional countries with a loose connection to one another?

I’ve had conversations similar to this with several of my clients and the consensus is always the same – that anything right now is possible. The consensus is also that there are two place to put money today – gold coins and real estate. My guess the makers of high end safes and vaults are doing a good business these days.

All I know is that life as we know it today scares the dickens out of me.

WATCH THE VIDEO

Click on the link above for a very fast passed video posted on YouTube that reveals exactly what some of the problems are. I would highly recommend you take a few minutes and watch.

What Happened to Our Economy?

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sat, 27 Sep 2008 14:00:56 -0500

I just finished watching a fast paced 10 minute video on the topic of the current economic condition our country is in.

Not only did it educate me and make me think, it made me MAD!

Check it out

Please leave your comments and feel free to repost this anywhere you like.

What Did Cheech and Chong Teach Us About the Current Housing Market?

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Tue, 23 Sep 2008 09:01:19 -0500

What Did Cheech and Chong Teach Us About the Current Housing Market?

Those of us old enough to remember the comedy duo of the 1970's, Cheech and Chong will no doubt remember the bit they did about dog droppings. As I ponder the routine, I can still here it in the echoes and deep recesses of my mind.

The act started with one character of authority asking the other what something is on the ground; to which the other grunted and responded that it looks like dog sh*t. The leader then instructed the subordinate to touch, smell and ultimately taste the substance, to which the conclusion was always that it's nothing more than dog sh*t. OK, Maybe it was a bit sick, looking back - you had to be there - and yes it was rolling on the floor funny!

As funny as the routine was, what really made it hilarious was the punch line, when the authority figure declares, "It's a good thing we didn't step in it!"

Well, who ever thought that Cheech and Chong could have had more sense than has been displayed by the economic powers that have us in the mess we are in now?

How many years ago was the writing on the wall that is only now being read. Wasn't good enough, was it?

How many banks had to collapse before we realized we had a problem?

How many homeowners had to have their credit and lives ruined by losing their homes before it affected someone we knew and it became a personal problem?

It's unfortunate that there really isn't too much that be doe at this point - no matter what course of action is taken the next few years promise to be ugly. I imagine we are going to see a society even more divided between the ‘Haves' and ‘Have Not's'

The bailout plans are just going too fast for my blood - heck we are talking about hundreds of trillions of dollars and decisions being made in a week or two that will have a major impact on this nation for at least a generation. We took more time to go to war. Heck we take more time trying to figure out the realignment of a stupid road than we are the financial future of what was once the world's most powerful economy. Boy, did we screw that up, or what?

I think a big problem is that most of us can't get our heads around a number like a TRILLION, let alone HUNDREDS of TRILLIONS. Several months ago when I changed companies to a firm that claims to have sold over One Billion Dollars in REO Sales I posted a blog article about what a BILLION is. Some of the highlights say that

A billion seconds ago it was 1959.
A billion minutes ago Jesus was alive.
A billion hours ago our ancestors were
living in the Stone Age.

Now realize that a TRILLION is a THOUSAND BILLIONS and a BILLION is THOUSAND MILLIONS. Most of us can imagine a MILLION which is a THOUSAND THOUSANDS.

Call me a simpleton if you must, but I can't imagine what a TRILLION of anything would look like.

Unlike our heroes fro Cheech and Chong, I guess we really stepped in it this time, didn't we?

Hemet Market Snapshot: June 1st through September 21st - 2007 Compared to 2008

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sun, 21 Sep 2008 18:38:48 -0500

I was very disturbed when I red an article earlier this month that my local market had dropped in value by a full 9% in just one month.

Hello, I live here and work this market full time - every day and yes, I have seen a drop month after month - it has never been 9% in a single month, despite what the local newspaper, "The Press Enterprise" reporter Leslie Berkman reported on August 30^th, 2008.

Now, I agree with most of what the article reports - but come on, lets be responsible and not add fuel to the fire. I agree with Ms. Berkman when she said, "Economists and real estate insiders agree that the biggest price drops are behind in Inland Southern California. But they say prices could fall another 15 percent or so, bottoming in mid- to late 2009 or 2010."

When asked, I have often voiced my opinion that the market had another 10% left to bottom in the next 12 months which will probably be followed by still another 5% decrease in the following 12 months before we actually bottom out and start an incline for a couple of additional years before the California public gets tired of waiting and starts a new buying frenzy fueled by the principals of Supply and Demand. My guess is the population of California will be significantly higher in 4 or 5 years than it is today.

I do not believe it is in anyone's best interest to wait on the market. First off, we won't actually know we hit the very bottom for at least 3 months after it happens as real estate value is all about trends and trends take time to reveal themselves.

If I was in the market to purchase real estate I would be more concerned with rising interest rates than I would dropping prices. The way I see it, anyone who buys a home now and plans on living in it for at least 5 years cannot get burned - impossible. The reason being is many newer homes are selling for $60 to $65 a square foot today - about half the cost of building a new home. Hello - can anyone say bargain???

If the interest rates climb to 9% or 10% like they did in the 1990's...or how about 18% to 21% like they did in the 1980's, then the price will be an point if insignificance. For example a 30 year fixed loan at 6% will have a $599.95 monthly principal and interest (P&I) loan payment. Increase that by just 1% and the monthly payment is increased by over $65 a month. So a $250,000 mortgage today at 6% would have P&I payment of $1498.88. At 10% that payment would jump to $2,193.93; at 18% that same home would now require a $3,767.71 monthly mortgage payment.

PERSONAL EXPERIENCE

And yes, 18% really did happen in my lifetime. When I was in the Army, returning from a 6 year tour in Europe, we had a democrat president in 1980. I had a down payment on a home for around $50,000 at the time but ended up losing my deposit (which I could not afford) when the rates jumped to 21%. This was in the days before Rate Locks became common.

So, my point is that interest rates are much more significant to the buyer than the actual purchase price - especially since prices are so low right now.

To buy a home today makes pretty good sense to a lot of people. The California Association of REALTORS® reported that 177% more Californians bought a home in July 2008 over July 2007. In Hemet, 74 homes closed escrow in August 2007 and then this year in August, 208 escrows closed, reflecting a 284% increase in the number of transactions for over $100,000 less than the homes were just a year earlier. In August 2007 the Median price of a home that sold in Hemet, California was down to $267,000. In August of 2007, the Median price of a home in Hemet, CA was only $159,900 - approximately a 41% drop in a single year.

Here is some data that I collected using the Alliance MLS - which is a compilation of the local SoCalMLS that is used by the local Hemet - San Jacinto Association of REALTORS (HSJAOR) and the Matrix MLS used by most other REALTOR boards in South West Riverside County and throughout the Inland Empire region of Southern California.

The downside to this compilation is that there are duplicate entries as some REALTORS will list the same home in both MLS's so that they can gain maximum exposure It is also very difficult to search and sort by all but the very basic search criteria.

SOLD HOMES BY PERIOD

PERIOD	SOLD	MEDIAN $	Sold $ From	Sold $ To
Sep-08*	121	$145,000	$49,900	$99,725
Sep-07*	56	$263,990	$99,725	$777,000

Aug-08	208	$159,900	$30,000	$450,000
Aug-07	74	$268,000	$81,000	$565,000

Jul-08	172	$165,500	$41,500	$624,000
Jul-07	118	$281,000	$128,000	$739,000

Jun-08	177	$179,500	$49,900	$560,000
Jun-07	93	$287,500	$125,000	$720,000

This chart shows how many homes actually closed escrow each month, the Median Price for each months well as the range of sales prices for closed transactions in Hemet, CA.

LISTINGS BY PERIOD

PERIOD	NEW	MEDIAN $	List $ From	LIST $ TO	Cur ACT	Cur SOLD	Cur PEND
Sep-08*	253		$45,000	$1,100,000	223	2	19
Sep-07*	287	$267,500	$41,500	$1,149,000	12	69	1

Aug-08	389	$193,000	$37,000	$750,000	258	12	91
Aug-07	416	$297,000	$800	$749,000	10	87	2

Jul-08	423	$224,900	$49,900	$895,000	205	76	92
Jul-07	443	$299,900	$68,250	$969,000	7	95	0

Jun-08	388	$199,900	$65,000	$419,000	169	99	65
Jun-07	451	$225,000	$2,000	$1,870,000	5	87	1

* September 1-21 Only - Data gathered 9/21/2008.

This chart is similar, covering the identical periods but instead of looking at the activity of closed files this chart examines how many properties were listed each month and again looking at the total number of new listings, the Median Price and the List Price homes came on the market with

The difference is this chart looks to see what has happened with the properties by examining how many are still Active, how many Closed escrow and how many (if any) are currently in the Pending status. I find it amazing that there are as many active listings still on the books from over a year ago. My guess is that right offer could get a ‘smokin' deal on one of these properties, as the seller wants out.

Collectively these charts point out the trend of a year ago as we were early in the rapidly declining market and how it continue today. These charts show that there are some great opportunities in the current real estate market and with interest rates still in the realm of historically low, makes this an excellent time for the investor, first time or move up home buyer to make their move and secure their financial futures with real estate today.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
Over $1 Billion in Closed REO Sales
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Servicing THE REO Needs of Asset Managers, Servicers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above phone number.

REO – Agent Training and Marketing – Necessary Expenses

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sun, 21 Sep 2008 17:28:22 -0500

When a property is taken back by a lender through the foreclosure process they not only have to deal with the loss of the monthly payments for the better part of the last year – or n some cases even longer. They not only have to provide the financial resources for the legal process to take the home back. In fact the lenders losses are just starting to add up and the real money could be forthcoming.

Once the property has been secured and back “in the hands’ of the lender / owner the process begins to minimize the loss incurred. Of course the best way to minimize any future expense is to sell the home quickly.

The local South West Riverside County in Southern California is experiencing a rapidly declining market and no area is hit harder than my local Hemet – San Jacinto Valley. When I perform a BPO I always try to emphasize a 30 day price as the most realistic. I believe that if a REO property is priced to sell for the maximum return at a 90 to 120 day price then the gains that are hoped to be realized will be eaten up with a decline in value that has averaged at least 3% per month since the beginning of the year.

In addition to the decline in market value, the seller must take the season of the year into consideration. Here it is September 21^st as I write this article and the market has already dramatically slowed down over the past several months.

The lender will have to spend hard earned money in necessary sales cost and write it off as the cost of doing business. Money is spent on the following:

Occupancy Check – A report is generated informing the owner if the property is still occupied or if it is vacant.

Winterization – An expense that may not seem to be necessary in the Hemet – San Jacinto Valley or elsewhere in the South West Riverside County region of the Inland Empire, but all it takes is one cold night to cause an old pipe to burst – and that can create major havoc that the REO REALTOR® will be responsible for if they advised the Asset Manager that this task would not be necessary.

Maintenance – When a property is secured, there are often tasks that must be accomplished to ensure that the property is both safe and secure, to local standards. Once the REO property has been cleaned and secured it must be maintained until it is sold and escrow closes. Ongoing maintenance will include such tasks as monthly lawn care, pool maintenance and general supervision and maintenance of the property.

Valuation / BPOs – As far as I can tell, every lender / owner will have a full appraisal performed on each property they take back through the foreclosure process and now carry on their books as REO. If there is more than a 10% discrepancy between the REALTORS opinion and the opinion of the Appraiser than the Asset Manager will typically order a 2^nd BPO.

Listing Price – This may be one of the biggest expenses of the Owner / Investor in the sale of the REO. If a property is under-priced then the Owner will not receive the most they could have for the asset. On the other hand if the property is overpriced and sits on the market while the competition sells all around it – they will loses additional funds as the REO Asset ages in the MLS, often making it undesirable to agents in addition to the loss incurred by depreciation in this rapidly declining market.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest – CrestREO
Over $1 Billion in Closed REO Sales
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

This article is part of a series based on my own experience and the lessons taught by the prestigious Five Star Institute in their “REO from A To Z” class that is necessary in order to obtain the coveted Five Star Designation, by far the most respected professional designation a REALTOR can earn in the specialty niche of listing and selling REO properties.

REO – Agent Training and Marketing –What’s the Difference?

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sun, 21 Sep 2008 14:05:30 -0500

There is of course a huge difference between the traditional sale of a home compared to the sale of a home that has gone through the foreclosure process and is now owned by a bank / investor.

EMOTION

To sum it up in one word it would have to be emotion. That’s right the traditional homeowner who wants to sell their home is emotionally attached to it. They know of the blood, sweat and tears that went into making it the home it is today and they want to be compensated for their efforts.

The traditional real estate transaction is all about the personality of the seller, which has been invested into the home being offered for sale. It is the most prized possession of the homeowner. Many times, the homeowner will want more for their home than what the market says it is worth – because of all the “little things” that add up to a lot and make it “the best home in the neighborhood”.

Of course, the homeowner has the flexibility to change their mind at any time, for any reason. They have been known to raise the price, lower the price and even pull it from the market if they feel they are not getting any respect.

In addition to the whims of the traditional home seller, situations can change. Job transfers may not happen. Marriages may not happen. There may be a death, divorce or even a bankruptcy that can change the motivation of a seller in a traditional transaction. There are so many different scenarios that can take place that changes a traditional home seller’s motivation to either sell quicker or to stay put.

REO LISTING

The REO home for sale is the complete opposite. It is on the market for one reason – to sell and it will remain on the market until it does sell – Period.

The lender who owns the property has already lost a substantial amount of money and they need to cut their losses. The only way the new owner will recoup any of their investment is to sell the REO home. The owner / lender wants to minimize those losses that have already taken place. Where the traditional seller may spend money on beautifying a property for the prospective buyer the REO property is typically sold “AS-IS” and will only complete repairs that will be required for safety and code compliance. Ongoing monthly maintenance is typically minimal.

THE PROCESS

In a typical real estate listing, the property owner will interview multiple agents and select the one that best meets their needs and personality. The criteria that the seller may use can include factors pertaining to the marketing the real estate agent will use, the price the real estate agent believe they can sell the home for or perhaps the local real estate agents reputation in the community.

REO properties go through a completely different process. First the Owner tasks the Servicer to liquidate the REO property and then the processor will select one or more Asset Management companies. Once assigned to an Asset Manager, the portfolio will be divided between multiple real estate agents in each market place, so as to not put all of their “eggs in one basket”.

The process is started by finding a local real estate agent who presumably has expertise in the local neighborhood of the REO property for sale. Unfortunately, there are many agents who will just add as many zip codes as they can to their profiles and resumes in an effort to attract as much business as they possibly can – regardless of their knowledge of the local area. In my area of the Inland Empire of the Hemet – San Jacinto Valley in Riverside County it is not unusual to have REO agents from San Diego County, Orange County, Los Angeles count and San Bernardino County representing themselves as local experts. Many do not even have local MLS access. However, this is a pet peeve of mine and worthy of a rant all on it’s own. I addressed a very similar issue back in January 2007 – and it is very relevant today – just the players are different.

Back on topic… As the “eyes and ears” for the owner/ lender of the property the REO Agent is ‘tasked’ with multiple functions that must be addressed in a timely manner. By completing these task on a timely manner, the REO Agent keeps the Asset Manager informed who can now provide the necessary information to the Servicer, throughout the life span of the REO listing.

It is imperative that a successful REO Agent complete all tasks on time in an efficient manner. After all, it is the Seller who is out considerable money through the REO process and is counting on a streamlined sale without spending any unnecessary time or money on the transaction.

This is a simple overview of the differences between a traditional home for sale and an REO home for sale in any market.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest – CrestREO
Over $1 Billion in Closed REO Sales
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

REO – Agent Training and Marketing – Who’s Who?

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sun, 21 Sep 2008 12:30:00 -0500

The REO Agent is the player on the front line – the one who comes in direct contact with the public and other real estate agents representing buyers of the REO properties that the listing agent has listed in the MLS and is marketing for sale.

The question is who does this agent work for?

The REO Agent is just that – an agent which means he or she works for a principal. So who is the principal and what role does the REO Agent actually play in the disposition of the property.

THE OWNER

First, the reader needs to understand that the actual REO home for sale is owned by an Investor who originally funded the loan to the borrower who lot the home for non-payment of the home loan (or mortgage as it is often referred to – even though we do not have ‘mortgages’ in California). As the owner of the property, the lender has the final word on whatever happens.

Foreclosure homes are on a very tight schedule to liquidate and cut their losses. From the moment the gavel drops and ownership is transferred to the original investor, there is a tight schedule in the life of an REO property. Every activity is on a tight time schedule as one often determines what will take place next. You must realize that not only has the lender/investor taken the loss of months of non-payment of monthly loan payments, legal costs, delinquent property taxes and HOA fees (if applicable) but now they have to pay all of the costs associated with selling the property that may include but not be limited to Title, Escrow, Commissions and the other ‘normal’ closing costs in addition to any rehab and concessions negotiated by the buyer. Remember, no one is making any monthly payments on this REO property!

As the owner of the property, the Investor is the one who sets the guidelines that are enforced by the Asset Managers and carried out by the Real Estate Agents. These guidelines are established to minimize additional losses through the sale process of selling REO real estate, after the significant losses that have already been incurred through the time consuming process of obtaining the REO.

THE SERVICER

The Servicer is is the entity that often appears to have control over the REO real estate. In many cases the Servicer is one of the large banks, such as Countrywide, Wells Fargo, Bank of America, Wachovia, Washington Mutual or any one of a number of financial institutions that may or may not be familiar to you.

The Servicer is typically tasked with the day-today operations of managing a loan portfolio for the investor which is often an anonymous entity from a private individual to a large pension fund.

In REO transactions, it is often the Servicer who is calling all of the shots, within the guidelines established by the Owner of the property. As the Five Star Institute teaches in their “REO From A to Z” course, the Servicer “arranges for servicing of the REO. A ‘loss and turn’ Servicer must rid the REO while minimizing losses to lessen loss severity.”

With rare exceptions, the Servicer will not directly handle the disposition of a REO Asset but will refer, or assign it to an Asset Manager.

ASSET MANAGER

The Asset Manager will manage the portfolio of defaulted properties for the Servicer. Many times, a Servicer will divide the portfolio among several Asset Management firms so as to not “put all their eggs in one basket”.

The Asset Manager is given direction and responsibilities with the authority to carry out the instructions and guidelines of the Servicer as provided by the Owner / Investor. The Asset Manager provides a variety of services that would include (but never limited to) valuation services that will include Broker Price Opinions (BPO’s), appraisals and limited reconciliation reports.

With the level of technology available today, most Asset Managers work on one of several industry recognized platforms that allow the Asset Managers to communicate in real time in both directions – up to the Servicer’s and down to the REO Agents as well as vendors along the lines of escrow and tile companies, attorneys, property preservation vendors and others involved in the default asset disposition process.

REO AGENTS

The REO Agent is the ‘eyes and ears’ in the entire operation. They are the font line troops that are responsible for ALL of the activity that takes place where the ‘rubber meets the road’.

I have already discussed in this series of articles that the REO REALTOR has a dual responsibility to not only sell the REO Property for it’s highest possible price but just as important to minimize any additional losses to the seller.

As I continue with this series, the focus of my article will be on those responsibilities that I am charged with and how to best perform my responsibilities, on behalf of my client.

THIRD PARTY VENDORS

Perhaps the final level of participant in the disposition of REO properties are the third party vendors who physically tend to the needs of the property charged to the REO Agent..

There are two types of Third Party Vendors. One are the national firms that are required by certain Servicers. These vendors typically contract with local contractors to perform a variety of tasks and report back to the national company who then reports back to the Asset Manager.

Personally I am not a large fan of these national property preservation companies. I prefer the control of hiring and managing my own team of property preservation specialists. Although it is more time consuming on my part, I have more control over when the jobs are done and to what standards they are carried out. By maintaining this control, I am able to market my REO assignments with pride and can typically sell them much quicker than my competition – averaging less than 7 days on market!

So, you can see there are a lot of moving parts in the sale of REO properties – parts that when coordinated make for a smooth running machine and allow for the quick disposition of these foreclosed assets that we are charged with.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
Over $1 BILLION in Closed REO's
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Servicing THE REO Needs of Asset Managers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun Valley, Perris, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above website or phone number.

This article is part of a series based on my own experience and the lessons taught by the prestigious Five Star Institute in their “REO from A To Z” class that is necessary in order to obtain the coveted Five Star Designation, by far the most respected professional designation a REALTOR can earn in the specialty niche of listing and selling REO properties.

REO – Agent Training and Marketing –Redemption

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sun, 21 Sep 2008 10:52:06 -0500

With so much information available on the Internet it is no reason that consumers are often confused on any number of topics. Well, the amount of information published about REO’s is no exception.

Nearly 40% of the States in America DO NOT provide for the defaulted home borrower to redeem their homes, once it has been foreclosed on. This means that majority of the state have some sort of redemption process.

However, for everything that I write about, I always look at the situation through the eyes of a California licensed REO REALTOR®. I am not an attorney, but I can share my opinion of laws, s I understand them. Of course, you should always consult with your own legal counsel to verify the peculiarities of your own personal situation.

California is one of the states that do not have any sort of redemption period. In essence, this means that once the gavel falls and a home is reverted back to the lender who foreclosed the former homeowner has no rights to redeem the loan and reclaim the foreclosed property.

FIVE STAR INSTITUTE

In the training manual published for the REO From A to Z class required to obtain the coveted Five Star Certification, they provide a chart of all 50 states that provide a “general illustration of redemption and confirmation”. Furthermore, the Five Star Institute claims, “not all states practice redemption, it is a good idea to research each state’s laws for current information about redemption and confirmation.”

For now at least, this makes it a bit easier in California, in spite of the recent legislation signed into law this July.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
Over $1 BILLION in Closed REO's
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

REO – Agent Training and Marketing – The Life Cycle of a Defaulted Loan

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sun, 21 Sep 2008 10:14:10 -0500

To understand what a property that is owned by the bank is really all about, you must first understand the process that the real estate has gone through to end up on the lenders balance sheet as REO – or Real Estate Owned.

You see, banks are not in the business of selling real estate – as a matter of fact they are banned by federal banking regulations from engaging in the sale of real estate – banks make loans. Active performing loans are on their balance sheet as an asset while the repossessed, or foreclosed real estate show up as a liability (ironically, we often refer to these homes as ‘Assets’, in the industry).

The process of selling REO property is a complex process that is very different from selling real estate through traditional channels. Unlike a retail seller who typically is looking to gain the most money possible during a sale, the lender/owner has already forfeited a considerable sum of money on a defaulted property during the foreclosure process and must take a tactical initiative to now sell the property in an REO status.

As a successful REO Agent, my job may appear to be to sell the property for the highest amount possible – and yes it’s true that is what the banks want. However; the real value I bring to the table is to minimize any additional loss to the seller.

FIVE STAR INSTITUTE TRAINING

The Five Star Institute offers what many in the industry recognize as the premier and most highly regarded professional designation for REALTORS who specialize in the sale of REO properties. I am currently enrolled in this program so that I can further expand my own skills and showcase my commitment the asset managers who control the flow of REO assignments and therefore my business.

This series of articles is a summary of what I have learned in the Five Star Institute Training seeking the coveted Five Star Certification. The first course is an excellent overview of the REO industry, called “REO From A to Z”. Having nearly two years worth of direct experience in the field of distressed properties, I must admit that most of what I studied in this course was refresher information – information that I had to gather one bit at a time. There were of course, certain nuggets that have already helped me streamline my business and grow with. I highly recommend this course and program to anyone who considers themselves professionals in this very competitive field that only promises to get more competitive as 2008 winds down and we enter the 2009 selling season.

LOAN LIFE CYCLE

When a homeowner becomes delinquent in their home loan (California does not have Mortgage’s – we have loans secured with a Trust Deed) the lender will often start with the COLLECTION process. During the first 60 days of delinquency, the lender will typically get very aggressive and do what they can to bring the loan current.

It should be noted that there are difference between every lender – just as there are differences between every department store chain or every supermarket chain. In the case of the retail stores – they all sell basically the same stuff and in many cases even the same brand. The differences are in how they promote the product, the price point they sell it for and the level of service they provide to their customers. Well lenders are the same way – they all offer U.S. Dollars to buy real estate. What they charge, how they market and the service they provide is different with every lender. They are all bound by the same laws and regulations – but how they implement can be as different as night and day. So, please understand as I address what the lenders do in this series of articles – it is always a typical scenario for a typical lender…whatever that it.

As the loan progresses through the collection department the timeline will usually move the loan into the DEFAULT department. California Governor Arnold Schwarzenegger signed California SB 1137 into law that adds additional requirements for lenders to foreclose on a home that was signed into law on July 8, 2008 for loans made between 2003 and 2007.

Between the law and the new California Civil Code §2923.5. requires that the lender contact or can document their due diligence at contacting the borrower to assess the borrowers financial scenario and explore options at avoiding foreclosure. Although there is no hard number, it is generally seen as adding an additional 30 to 45 days onto the 111 day foreclosure process that had previously been the norm in California.

During this extended foreclosure process, the lender is now required to explore Loss Mitigation options.

Once all of the legal requirements have been met the real estate is sold at a TRUSTEE’S SALE – or Courthouse Auction (not to be confused with public auctions of foreclosed homes held by private companies – typically held in a hotel ballroom). Without a new buyer, the property is then transferred to the foreclosing lender.

Once the lender has the property back, they start the liquidation process – typically by assigning the ‘Asset’ (found in the liabilities column of their balance sheet) to a Servicer or Asset Manager who then picks and assigns the Asset to a Listing Agent, like myself.

So, you can see from the date that the first payment is missed it is very easy for a California homeowner to continue living in the home for 8 or 9 months, perhaps even longer without paying any mortgage, property taxes, HOA fees and only minimal maintenance – if any at all. Not only is the lender taking the property back and selling it at a loss, they have continued carrying costs, rehab costs, legal fees on top of an extended non-performing loan that is already thousands of dollars in arrears.

Now, perhaps you can understand why my primary responsibility to the owners of REO property is to minimize any additional losses and exposure to expensive legal issues.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
Over $1 BILLION in Closed REO Sales
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

REO – Agent Training and Marketing...An Overview

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sat, 20 Sep 2008 20:05:36 -0500

As a Real Estate professional I find it critical to a successful career path to invest in my continuing education. After all, what other professional would anyone ever want to use if they did not keep up-to-date on the latest laws, trends and acceptable ways of performing their duties?

Certainly none that I would ever want to pay money for.

So, as a REALTOR® who specializes in the listing and sale of REO, or bank owned homes, in the Hemet – San Jacinto it is important that I continue my education – not only for my benefit, but so that my client is getting the very best listing agent of their bank-owned asset.

FORMAL TRAINING

The National Foreclosure Sales Training Institute (NFSTI) offers a certification program that provided the basic backbone education of this REO specialty. After completing their training, I was awarded the professional designation of NFSTI Certified REO Specialist.

The concept of NFSTI is based on developmental adult higher education techniques. They are members of the American Society of Training & Development, so they take their role as information providers with the utmost care.

A statement on their website really sums these guys up when they claim, “dedicated to providing the most current and useful material available to assist the default industry in Elevating The Standards Of Operation".

INDUSTRY EVENTS

Staying on top of the trends of the REO industry calls for attending numerous industry conferences, trade shows and educational events. In addition to attending the California Association of REALTORS® (CAR) Annual Expo every October, I have attended two major events that are very pertinent to the REO sector. These events provide the opportunity an REO REALTOR® to keep up with any changes in the industry, gather fresh knowledge as well as networking with other professionals from across the country.

In April, 2008, I attended REOMAC Spring Conference in Indian Wells, California where there were many educational sessions that allowed me to look at new innovative ways of conducting my business and serving the needs of my asset manager clients and ultimately the investors who own the properties I have been charged with liquidating.

The second event of major consequence was held just last month in Las Vegas when the California Mortgage Bankers Association (CMBA) gathered to examine the current market and collectively prepare for the events that are shaping and changing the real estate market and economy as we know it.

The event I regret not being able to attend this year is the Annual Five Star Default Servicing Conference and Expo in Dallas, Texas. This event is all about training the REO Agent.

The Five Star Institute offers it’s industry respected certification program – perhaps the most respected designation a REALTOR can earn to show their proficiency in the field of REO real estate.

Fortunately, the Five Star Institute offers their certification through their website, online and I am in pursuit of the prestigious Five Star Certification.

Since one of the ways that I learn a topic is to write about what I have learned, I have decided to create a series of articles based on my quest and the courses that I enroll in. In no way will my articles be as thorough as the information that has painstakingly been presented in an extremely professional manner by the Five Star Institute, and of course my information will not lead to any type of recognized designation. However, I know that I will learn by sharing and am hoping that I may be able to answer some of the basic questions REALTORS ask about selling REO real estate.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
Over $1 BILLION in Closed REO Sales
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

HEY - THAT'S ME ON MSNBC

Help Wanted: Not for the Faint at Heart

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Thu, 14 Aug 2008 10:05:21 -0500

As a local REO REALTOR servicing South West Riverside County from offices in the Hemet-San Jacinto Valley, John Occhi has went and done it again – grown faster than his team of seasoned REALTORS can keep up with.

John and his Inland Empire REO Team is currently averaging less than 7 days on market for all REO homes that are listed and sold – many are pre-sold even before they are released on the MLS to the local REALTOR population and the general public through syndicated sites like REALTOR.Com (where all of the teams listings are showcased), Zillow, Trulia, Yahoo and many others.

This certainly gives team members a cutting edge advantage in servicing their own clients if they know a price for a home 2 to 3 days before the mass population knows about the property’s price.

Imagine the type of activity this can generate when over 100 bona-fide leads are generated and captured using a state-of-the-art call capture system to find motivated and un-represented buyers in today’s REO market, throughout the Hemet – San Jacinto Market.

Because of this growth, as the Team Leader, I have decided to once again start my search for the latest team member. This position though, will be unique in that it will not be a commission only position.

What Am I Looking For in a Team Member?

My preference is for a licensed individual who has strong administrative skills to work the front end of the business.

The front end of a REO team includes marketing and tracking our REO inventory from areas as far away as Temecula and Murrieta up the 215 freeway through Menifee, Wildomar, Sun City, Perris and Moreno Valley as well as the Hemet San Jacinto Valley. Other property locations include Lake Ellsinore and the Pass area along Interstate 10, including Banning, Beaumont, Cherry Valley, Yucaipa. There is planned chaos, er I mean growth for the Coachella Valley as well.

This new staff position will truly have the inside scoop as she or he will be working in the office, learning first hand exactly what it takes to run an REO business as well as getting the skinny before other team members ever have a chance. This will allow the new person to not only earn a fair wage for their work in the office it will allow them to earn a commission on proprietary information that is held very close.

The position will require regular hours in the office and will have general office administrative responsibilities in addition to the very specialized training that will be given that will transcend the REO market and back to a normal market, as soon as that happens.

As a licensee, there will be certain tasks that will require the use of the license – that will provide the team member with higher earning abilities.

The nice thing about working REO business is there is very limited after hours work – meaning most of it is conducted during normal business hours of 8 to 5.

How to Apply

If you or anyone you know of may be interested in taking advantage of this unique opportunity then please email a brief bio of your experience – both real estate related and non-real estate related. Make sure you add your first and last name to the subject line (if you don’t use the link – or it doesn’t work use the subject line “”Inside REO Team Position” followed by your full name.)

Please let me know of your availability and earning expectations.

Thank you for your interest.

Blessings to all who read this,

John Occhi, REO REALTOR®
Century 21 Crest - CrestREO
Over $1Billion in Closed REO's
www.CrestREO.Com
951-443-6259 - Direct
951-927-9473 - Office

Before You Buy a Bank Owned Home At Auction Read This

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sun, 03 Aug 2008 15:18:04 -0500

Lenders are doing whatever they can to sell their inventory of REO homes. There are entire portfolios being sold wholesale for 60 to 70 cents on the dollar of the BPO price-which can be a great deal if you have $10 million or more to invest.

Most homes are being assigned to REALTORS® like myself to list, market, maintain and sell the assets on the retail real estate market. In the Hemet-San Jacinto Valley we saw the number of closed REO sales during the month of June 2008 exceed 70% of all the sales in this local market. I am sure many other Inland Empire areas have very similar results to report.

Banks though need to sell their homes quickly and many are trying to do that through the auction process. We have all heard the stories of a savvy shopper who picked up some great home for mere pennies on the dollar. Now is this an urban legend or do the auction companies play the odds like a Las Vegas casino, knowing they have to let someone win big, every now and then, to bring in the masses.

If you are drawn to the auction circuit, I have several suggestions for you to best prepare yourself for the experience...and yes, it is an experience.

First, you will need to preview homes before they go to auction. The auction companies will publish their inventory in advance and hold a series of "Open Houses". Preview as many of these properties as you can, and take dubious notes. Study your results and create a "Short List" of homes that would be acceptable to you.

These short list homes should be viewed a second time. This time though take someone with you. Preferably you would like to take a home inspector or a contractor buddy-someone who has a good knowledge of homes, building standards and the various systems that work together making a home functional. This may cost you a few hundred dollars, but will be well worth the investment of both time and money if it prevents you from buying a home that is nothing more than a money pit.

Second is get your financial house in order. It is best for you to go through the pre-qualification process with the lender of your choice well before the auction date arrives. Make sure your lender has all of the documentation they need for a quick closing, so everyone will be ready to move if and when you buy your auction home.

Yes the auction company will have their own lender available and they may become very competitive with your pre-approval...which can only be good for you. The bottom line is you need to arrive at the auction ready to borrow and not speculate as to what is and will be involved.

The Third consideration you must adhere to for a successful auction is experience is to not get caught up in the roller-coaster adrenaline packed auction experience. If you have followed the lead on the first tow points, you already know which house you like, how much you can and will spend for them-max. So there is no sense in playing their game with them-because you will lose.

When the bidding starts, everyone .jumps in thinking they can steal the home. The auctioneer is rambling in his mile-a-minute monotone voice, raising the price as quick as he can talk. Wait until the action gets down to the last couple of bidders and if the home is still in your range, jump in as the new player. You are sure to break the spirit of some, thinking they are ‘that close' to a deal. These players have been worn out by the emotion of the emotion of the process and are no match for the cool cucumber who enters the bid at the very end.

This leads me to the FOURTH point that you must be aware of. This is actually double point that concerns pricing at the auction. Every home that is put on the block will receive bids-but not every home will sell. The reason is there is ALWAYS a RESERVE. Meaning if the bids don't reach the reserve the house doesn't sell.

You also need to be aware of the BUYERS PREMIUM which is clearly spelled out, but often forgotten. If there is a 5% Buyers Premium and you bid $200,000 for a home you actually agreed to spend $210,000. So, please be careful and make your adjustments in writing and not rely on your brain working when you need it the most

Finally, if you are an investor realize that if you plan on flipping the property there is a better than good chance that your end buyer will want to bring you an FHA loan. The FHA guidelines dictate that a minimum of 90 days must pass between your closing and the new buyers closing. So, take this time into consideration as you plan your rehab and marketing efforts-you must be able to factor in at lest 3 monthly payments.

I hope you have found this both useful and interesting. Please let me know if I can be of service.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Servicing THE REO Needs of Asset Managers, Banks and Lending Institutions in the Hemet - San Jacinto Valley, Temecula, Murrieta, Winchester, Wildomar, Menifee, Sun City, Perris, Lake Ellsinore, Moreno Valley, Romoland, Homeland, Nuevo, Banning, Beaumont, Cherry Valley, Yucaipa, Redlands, Mentone, Loma Linda and throughout South West Riverside County and The Pass Areas of The Inland Empire in Southern California. If you are a buyer, investor, first time home buyer or are just interested in REO real estate, please contact us at the above website or phone number.

This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance. This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0. Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions. I am proud to be a full time REALTOR® with Century 21 Crest and the CrestREO Division who is proud to be a contributing member of the ActiveRain community.

What is the Future of Real Estate... Or, What Have We Learned Since 9/11?

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sun, 03 Aug 2008 00:21:02 -0500

There is no debate that the Real Estate market took off after 9/11. We were at a very rough cross roads in our history and I guess anything could have happened. One way or the other we, as a country got motivated and there are too many factors to get into here as to everything that contributed to our financial rise and fall of the last 6 years.

This is not about blame. Yes there were crooks on wall street just as there were crooked lenders and crooked real estate agents and crooked politicians and crooked everything else. We sensationalize them minority and blame the majority. Truth is most of us did what we were told-pieces in the machine; expendable pieces at that.

Rather the purpose of this article is to look at the results-the trends that were started and look at whether or not they will continue or not. Yes, I know we are at a standstill, taking two step backwards before they cycle allows us to take our 3 or 4 forward. But when we do reverse the current cycle, where will we go, as a society? That's the question I want to explore-as it relates to real estate and the housing market only.

First money got cheap and we decided to trade our money for more space instead of time. Common everyday houses in common everyday neighborhoods were built exceeding 3,000 sq feet as the norm. Before you knew it, the average new home being built was rapidly approaching 4,000 sq feet with many exceeding that. 5,000 sq feet may not have been common, but then again it was not unheard of, either.

We bought into the need for crown molding and granite counter tops-as every day common amenities. Heck, one builder even showcased their model homes and sold them as ‘Everything Included' - and then we wanted more.

Our homes got so big-we had so much space that a single family room was not enough. No, we had to have a loft or bonus room as a second place to get away and watch some TV...or whatever we did. Of course we need a retreat in our master suite with the dual walk-in closets...just so mom and dad could watch TV in the privacy of their "own space".

Our Homes Were Suppose to Make Us Feel Secure

We traded our time and security for space and stuff. Sure we have 3 or 4 flat screen TV's, a couple of car payments until the kids start to drive and then they each amount to yet another new car payment. Boy, do we look good as a society...

What about our time and our sence of security. Instead of having more time or a quantity to spend with our families we thought we would trade it for "quality time". We wanted to be home and sheltered from the evils of society, especially financial worries. Instead we work more to earn more to support our lifestyles.

As baby boomers, we thought that we would be an empty nester like our parents were who got to enjoy which really should be the very best years of our lives. Instead, our kids are refusing to move out and start their own lives. And why should they? With the economy the way it is and the uncertainty of the job market, who can blame them for wanting to stay close.

So now we are seeing multi-generation families living under the same roof. Unlike previous generations and cultures where this is common, in our society we have so much space in our homes and such demands on our individual lives that there really is very little time for ‘family'.

So look at the demand that is being built up. As the market continues to cool and in anticipation of the new economy tht has yet to emerge, there is a demand for housing that will go bonkers, once it is released. So, will the builders be prepared? Are they going to continue to build castles and mansions.

Or, will society demand smaller homes and demand to be able to take back their time for the space they have started to become accustomed to? If anyone asked me, we would see a lot of smaller homes with smaller garages for economical cars-not big enough for 3 oversized SUV's. Housing has to make sense-I don't think anyone in Southern California really wants a condo-they want houses-but make it small enough for the family of the future-1300-to 1500 sq ft. Pack in value and lifestyle into the communities, similar to a condo, but houses. Do this and we may be able to get the 30 something kids out of the bedroom they grew up in and into their own place...finally.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Hemet San Jacinto Valley Market Snapshot: June, 2008

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sat, 02 Aug 2008 23:27:28 -0500

The Hemet San Jacinto Valley is actually a very difficult market to analyze effectively. The problem is our local board, The Hemet San Jacinto Association of REALTORS® (HSJAOR) belongs to the second largest MLS in the country-TEMPO.

Unfortunately it seems like every other board within a 50 mile radius belongs to IMRMLS. Therefore, the data entered into IMRMLS never appears in TEMPO. The two do share a common platform known as ALLIANCE.

ALLIANCE is very simple in it's search criteria and functionality. It is OK, at best when searching for a home based on it's minimum standards-but don't think you can look for stuff like lot size or number of garages. It's not happening.

Unfortunately, there is roughly 60% of listings in our area that are listed by agents who only use the IMRMLS. It is nearly impossible to pull data from ALLIANCE in an efficient manner. To really crunch the numbers, you have to download your search results into a spreadsheet from both MLS's and then cross reference the headings-a daunting task, at best.

So, for the purpose of this report, the data is down and dirty collected from TEMPO exclusively. Realize it represents roughly 40% of our market-but who has the time to do it right?

JUNE 2008-HEMET SAN JACINTO VALLEY a la TEMPO

92 Closed Sales-Total

64 REO Closed Sales-70%

From this point I am only analyzing the REO Sales and the percentages are based on the 64 REO's as being 100%. These statistics are 100% Single Family Residences and do not knowingly include any mobile homes.

Average Sale Price: $169,799

Price Range: $49,900 to $370,000

Average Price per Square Foot: $99.27

Average Home = 3.1 Bedrooms, 2 Baths and 1749 square feet of living space

16 Homes (25%) Sold within 1 Week of being entered on the MLS.

41 Homes (64%) Sold for OVER List Price

14 Homes (22%) Sold for UNDER List Price

All of the homes sold in June were built between 1900 and 2006

23 Homes (36%) were built since the year 2000

22 Homes (34%) were built prior to the year 1980

The Hemet-San Jacinto Valley real estate market has always been a Southern California haven for the real estate investor since it is undisputedly one of the most affordable markets in all of California.

With today's declining market nearly every home on the market will generate a positive cash flow, taking tax benefits as well as vacancy, rehab, and maintenance into consideration.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

FHA Down Payment Assistance Ready to Go Away

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sat, 02 Aug 2008 22:17:41 -0500

When President Bush signed HR 3221 into law on July 30th, 2008, he took what may be the most damaging step to actually hurt the housing market. I say this because he has completely done away with the FHA Down Payment Assistance program and raised the minimum percentage of funds that the borrower must contribute towards the purchase of the home.

Until September 30th, 2008, homebuyers will be able to take advantage of the current program-but if they are not in escrow by then-they can kiss the 3% seller contribution good bye, unless there is some sort of reprieve in the courts.

Prior to the departure, homebuyers could obtain a 97% loan to value for the purchase of a home and then if the seller agreed to participate, the FHA would allow a 3% seller contribution towards the buyers down payment. There were several entities administrating these programs in accordance with the FHA guidelines. Two of the most common in Southern California real estate market is the HART Program and the Nehemiah Program. These programs are referred to as "Down Payment Assistance" or DPA.

Well, in October, 2008 they will be gone, under the provisions of the law.

In addition, the 3% requirement has been raised to 3.5% required down payment for a buyer to qualify for a Federally Insured FHA loan..

The FHA had just initiated a program on July 14th that would save better qualified borrowers money and pass on the cost of riskier loans to the borrowers at risk.

Because FHA loans are for such a high percentage of the value of the real estate it collects a Mortgage Insurance premium on all of it's loans with an loan to value ratio of 80% is exceeded. Under the original program the FHA collected 1.5% premium from all borrowers and then 0.5% premium per month added to the mortgage payment. The new rule was more generous to those who were not as high a credit risk. With risk-based pricing initial premiums ranged from 1.25% to 2.25%. The difference between these rates on $150,000 loan is approximately $7 per month.

The President was for the risk based guidelines, but Congress got their way. The President also wanted to lower or even eliminate the 3% down payment requirement and instead Congress raised it by half a point to 3.5%.

According to HUD, 35% of all new home purchases in 2007 included the DPA whereas seven years ago, less than 2% of similar loans included down payment assistance.

What Does This Mean?

Bottom line if you are in the market for an owner occupied home-or even think about getting into the market in the next few months now is the time to jump.

First you need to get yourself pre-qualified with a lender like Joey Aszterbaum or John Severino and make sure that you can get into a FHA loan. Believe me, anyone who is qualified to do an FHA program is seeing a big spike in activity right now-so don't delay and get yourself on the bottom of the pile.

Once you have been pre-qualified have the lender continue to work on pre-approval and obtain underwriter approval. In the meantime, work with your local REALTOR® to find that great home you have wanted-and get ready to write an offer and then start packing, because you will be moving very soon.

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Who is Freddie and Fannie and What do they Do?

John Occhi Hemet CA Real Estate (Century 21 Crest - Crest REO) — Sat, 02 Aug 2008 21:37:30 -0500

There has been a lot of buzz in the air with Congress passing and the President signing the new housing bill into law on July 30^th, 2008.

I have not read the bill itself, but have seen numerous analytical articles - both pro and con on the topic. One of the big provisions has to do with the government guaranteeing an amount of up to three hundred billion dollars to help Fannie Mae and Freddie Mac. These two entities guarantee roughly half the loans in the United States.

Being in the real estate industry it is easy to forget that everyone doesn't have the same knowledge and understanding of what I consider to be basic knowledge. Truth is, only those of us in the real estate industry really have a need to know as much as we do on the topic. (What really amazes me is how little some of my peers actually understand on this and other topics - but that's another discussion all together.)

Since the signing of the new bill, I have been stopped several times in conversation to clarify just who these two household names are and how they affect the everyday homeowner.

In 1938, Congress created the Federal National Mortgage Association which became known as Fannie Mae. In 1968 Fannie Mae became a shareholder owned company that is financed with private money. At that point, Congress created a competitor known as Freddie Mac, or the Federal Home Loan Mortgage Association.

Both companies buy loans directly from the banks and other lenders who make the loans. They package them in bundles with different grades of loans, based on credit worthiness, debt-to-income ratios, loan to value ratios and just about every other aspect of a loan.

Bundles are created with both strong and weak loans together and sold on Wall Street and other financial exchanges to investors, freeing up money to purchase additional loans. These bundles of loans are known as mortgage backed securities. In the current real estate market there are very few investors who are willing to buy loans without some sort of government guarantee.

The new law puts the United States Treasury on a big white horse coming to the rescue, allowing the government to offer Fannie and Freddie unlimited credit and even has provisions for the Treasury to buy the stock of these companies, if need be.

Critics have been loud claiming that both Fannie Mae and Freddie Mac should be replaced by private companies. Because Fannie and Freddie are backed by the government, their operating costs are lower than they would be as true private entities. There is very little evidence that these savings are passed on to the end consumer, according to the critics.. The claims is that both companies spend much too much money on political campaigns, executive salaries and bonuses, and lobbying activities.

The jury is still out on how this plan will unfold. The Congressional Budget Office reports that the rescue plan might cost the American taxpayer twenty-five billion dollars. Talking out of both sides of their mouth, the same budget office also says there is a 50/50 chance the plan might not cost us a cent

Blessings to all who read,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473