In the Depression of the 1930's, the jobless father of 4 asked the farmer if he could work on the farm for a day in exchange for food to feed his family.
In the Depression of 2010 do we just take the food from the farmer because, after all, you and your family are entitled to eat?
Are we:
Entitled to a life better than our parents had?
Entitled to own real estate?
Entitled to dis-own real estate?
Entitled to be bailed out?
Entitled to a job?
Entitled to health care? And to social security when we grow old?
You would sure think so by what surrounds us.
Why work? Why pay your bills? Why take care of your health and your finances? Why respect what others have earned?
Do we take the course that will help us? Or do we just help ourselves to what others have produced?
When did we start to believe that America owed us more thanlife, liberty, and the pursuit of happiness?
Is it because the government has redefined the word "rights" to include never needing to suffer?
Is it because a generation came of age when stock market wealth and real estate equity made it seem like real work was obsolete?
Did 100% stated income loans with a few years of teaser rates train us to believe the American Dream was what every American deserved?
Did plastic in our wallets make it seem like our rights included unlimited gratification?
Somehow, we have lost our way.
Let us hope to sprout fresh green grass across America we do not need to completely kill the roots.
Written by Janet Guilbault, Mortgage Banker/Broker and Direct Lender Based out of the San Francisco Bay Area
Move up buyers are becoming extinct in California.
With an epidemic of negative equity sweeping the state, we must ask ourselves this question:
Do we really believe that there are enough first time homebuyers out there to turn this market around?
In the bubble years of 2005-2007, buying a house in California was often a "closing cost only" affair.
Buyers used an 80% first loan with a 20% HELOC right behind it, for a neat and tidy 100% loan.
Then they promptly spent their savings "fixing up the house" because after all, they could refinance a year later and the house would belch out another hundred grand.
They also gladly paid $500,000 for a starter home (inland) and $700,000 (coastal).
This, my friends, is the sorry state of our "MOVE UP" buyer market. Clearly they're not MOVING anywhere anytime soon.
Most of us believe the negative equity tipping point (going upside down) is when you owe one dollar more on your house than the value of your house.
Not so.
If the homeowner cannot pay enough to extract a real estate commission, a down payment on the MOVE UP house, AND moving expenses, then the tipping point of negative equity is probably closer to 90%, 80% or even less.
A homeowner with 10% equity knows they are trapped. If you lower the negative equity bar, then this changes everything.
There are far more "trapped" homeowners than most of us believe.
Can they save their way out? You might think so based on how little consumer spending is going on.
Or will they just walk out as another "strategic foreclosure" goes on the books? (Strategic foreclosure = you can afford the payment but decide to dump the house because you are so far underwater)
Either way, it's a LOSE-LOSE for the economy.
Without these existing homeowners active in the real estate market, home prices will not find a bottom.
Here is a death spiral scenario:
Mid to high end house become illiquid assets.
Prices plummet as supply far exceeds demand, and "strategic foreclosures" continue
Banks (to protect themselves from declining values) tighten lending standards further and demand larger down payments.
30% down becomes the norm moving the bar even further away for the trapped
Baby boomers dump the grand houses that characterized their materialistic phase to raise capital and lower expenses.
In previous posts, I have already asked this: "Who will want all of the big houses that baby boomers will be dumping?"
Revision: "that BANKS will be dumping."
Here are my predictions:
Prices will continue to decline for markets that are out of reach for first time buyers.
Smaller houses will cost more than larger houses as low operating expenses and lower property taxes trump outdated mcmansion style living, and the only buyers out there are investors and first timers.
More foreclosures at the upper end of the market.
Written by Janet Guilbault, Mortgage Banker/Broker based out of the San Francisco Bay Area.
This comment, which appeared over the weekend on a featured post made me extremely uncomfortable:
"One of my nasty little tricks is to coach Realtors to ask my competition to explain APR as a knowledge test."
Okay, everyone, let's not use hidden agendas when we connect. Why not? Because "nasty little tricks" are not the foundation for great relationships.
Trust is.
We owe it to our mutual clients to bring trust to the table when we handle the most important transaction of their lives.
If you are a Realtor who would like to connect with a great mortgage person, just say what is important to you and and ask for some feedback.
Be open. Be honest. Be transparent.
If that isn't enough, ask for referrals or testimonials. From other Realtors. From past clients.
Read their blog. Have coffee together. Ask their advice on transactions. Ask if they publish a newsletter.
Take your time, there's a lot on the line. Being proactive when you select a mortgage person is one of the best things you can do for your real estate practice.
But please, don't administer "tests".
Don't give a mortgage person your worst file, the one turned down by 5 other lenders, to "test" how hard she will work on a difficult file. (This would be like the mortgage person "testing" you by referring a client she knows will not qualify for a loan).
Don't leave a message at 9:30 on Saturday night to "test" how responsive she will be with calling you back.
And please don't give a "knowledge test" on any mortgage subject. Chances are, you are not qualified to administer such a test (acknowledging there are exceptions to this.....).
You need to evaluate any potential referral partner. I respect that.
I want to respect you, TOO.
But how can I when you're not being straight up?
Written by Janet Guilbault, Mortgage Banker/Broker Based Out of the San Francisco Bay Area
As a mortgage person in the current wild and wacky real estate market, I sometimes get clients who want to buy and bail. So what's a buy and bail?
The call goes something like this:
"Hello, lovely mortgage person? This is Babs ( Buy and Bail Soon). My house is worth $175,000, but I owe $300,000. Since I will never be able to repay this, I am going to walk away."
"But first, most lovely mortgage person, you will get me a loan to buy a house just like mine, which is only down the street, and selling for $175,000...?"
"You can get me this loan while my credit is still good, before I walk away. My payment will go way down, and we can just tell the bank we are going to RENT my old house."
"Wow. Am I brilliant or WHAT? Buy the same house cheaper, bail out of the old one afterwards"
(I love the way they believe they are the first person EVER to think of this)
Okay, this has created a new mortgagespeak term: The departing house. And there are RULES in place so banks don't get stuck in schemes like this:
If your home is in a negative equity position, the lender would
•1) Force you to qualify for the new home without using the rental income from the old home
•2) If the loan on the old home is adjustable, the underwriter has the ability to caluclate the payment on that house at the highest possible amount after adjustment (even if the loan is not adjusting in the near future)
•3) If there is an equityline on the old house, the payment will be calculated at 1% of the amount of the equity line....even if the real payment is far less.
Even if these stiff requirements are met, without at least 25% to 30% equity in the old house, most lenders will decline the loan.
Why would they do that even if people really do plan to rent their departing house out and can prove it????
Because in the current lending environment, everyone is considered guilty (whether proven innocent or not).
Everyone is considered a potential foreclosure. And can we blame them?
Written by Janet Guilbault, Mortgage Banker/Broker Based Out of the San Francisco Bay Area
A story for anyone who has ever lost an animal they loved.
I had always thought of it as a sort of arranged marriage. I didn't expect love.
You had always lived inside, sitting on a window ledge, tail twitching, staring longingly at the world beyond.
I had always lived outside, tending the big garden in my pajamas at dawn, and fighting off the invaders.
And so you arrived in June, a gift from the apartment dweller who felt sorry for you.
We had a simple arrangement, you and I:
You, brown tiger, could live in my jungle. In return, you would guard it from invaders.
As the sun rose each day, you would stealth among the giant zucchini leaves, leaping high into the air when a finch landed on the sunflowers. You would stare at the gopher hole with unwavering attention for hours on end.
In the evenings, you would pretend to sleep under the cool redwoods while I drank my wine nearby. You were always there, a few steps ahead of me as we watered and fertilized.
You thought it was your job to de-tail every lizard. You thought the weeds were cat salad. You thought sharing your kingdom with the wolf-dog was a small price to pay for the delicious freedom from apartment living.
You thought the compost pile was your litter box.
You got braver by the day, taunting the wolf dog, lounging on the rooftops, and exploring ever farther away.
You dragged yourself home once after a nasty fight, and didn't get up for three days.
All we did was laugh...(nine lives and all of that).
One morning as I was bent over picking tomatoes, you rubbed against me. You purred for the first time. At that very moment, I knew it was no longer an arrangement.
Because we had fallen in love.
Summer sped by, as it always does. I started preparing the garden for the winter by pulling out the spent plants.
Maybe you thought your job was over. Maybe you thought it was just a summer fling. Because one night you left, and never came back.
They say if you love something, let it go free. But what if granting freedom means you lose what you love?
Little brown tiger, friend and companion, I thought you would be purring on my lap as we watched the blaze in the fireplace and the lights twinkling. I figured you and I were more than just a summer fling.
And outside, the garden is nearly barren.
Because you are gone.
Written by Janet Guilbault, Mortgage Banker/Broker based out of the San Francisco Bay Area.
You are a first time buyer who has a sore butt. Why? Because you have been sitting on the fence all year long.
Could you be the smartest first time homebuyer out there?
Consider what happened when CASH for CLUNKERS overheated the demand for cars (just like the FIRST TIME HOME BUYER TAX CREDIT overheated demand for entry level houses).
Before Cash for Clunkers, dealers had huge rebates on cars. They were willing to discount the cars by several thousand dollars just to get someone, ANYONE, onto that empty showroom floor.
The car market was in the toilet and cars were dirt cheap.
Along comes a $4500 handout from Washington to manipulate stimulate car buyers.
And that's when things started to get twisted.
Rebates disappeared almost overnight.
Dealers were no longer willing to discount the cars.
As supply shrunk, a frenzy of buyers lost their heads, bought anything on the lot, and paid over sticker for the car...just to get their clunker cash.
The real price of buying a car went up.
Is the real estate market a little twisted right now? What do you think?
Agents everywhere talk about extreme lack of inventory for entry level houses.
Multiple offers are the norm for lower priced properties.
Across the country, stories about prices going up and the market turning around (even though it is well accepted that there is a foreclosure wave right around the corner).
So you. Yes you, the one with the sore butt. Keep sitting and watch what happens.
You could get a much better price on a house by letting the first time homebuyer tax credit JUST DIE while you continue to JUST SIT on that fence.
Picture this: Its a rainy cold day in December and everyone else is focused on the holidays. But not you. You're finally off the fence, you sly fox you, and the world is your oyster.
You can take advantage of all this:
Sellers are desperate.
The competition has disappeared.
Prices drop.
You have no pressure to buy and can be choosy about properties
If you save $20,000 on your house, do you care if you sacrifice an $8000 tax credit?
Probably not. (But don't expect anyone in the real estate industry to talk about this until AFTER the rebate ends).
Written by Janet Guilbault, Mortgage Banker/Broker Based Out of the San Francisco Bay Area
My husband and I were moving back to California in one month and I was desperate.
I was not a real estate agent or a mortgage person in those days. I was just somebody who had sold her Dallas house, and was R-E-A-D-Y to buy.
No one "researched properties" in those days. How could you? You did what I did. You got on a plane and flew into town. Then you found yourself an agent.
Every buyer had to rely on information that was kept under lock and key by the real estate profession in those days. The list of properties for sale only appeared in a big fat book.
The MLS book. And if you were a buyer? ACCESS DENIED.
It looked like a telephone book and featured little black and white pictures of houses. You got in the car with your agent (who had the book with her). She had already selected the 3 houses that she thought were the best for you, and had called the owners to make appointments.
If those 3 houses didn't suit you, you started the whole process over the next day.
Can you see how hopelessly SLOW and how HIT and MISS this process was by today's standards? Today's buyers have cruised through 3 houses in 5 minutes via the Internet.
By the time my agent and I had rolled around for 3 days, and looked at exactly 9 houses, nothing struck my fancy. I was so desperate that my father begged, borrowed, (stole?) one of those old fashioned multiple listing books from a non-practicing real estate agent who was his friend.
My own Realtor would not allow me to look at hers. It was "against the rules".
I poured over it, only slightly guilty for viewing what was notmeant for my eyes.
And then I saw it. "MY" house. Was it anything like what I had told my Realtor I wanted? Well....actually no.
Yes, I was one of those buyers who was also a liar. Or was I a buyer who just needed WAY more information to know WHAT I wanted?
I couldn't wait to unfold the old paper map (pre Mapquest), find the house, and drive by it. When I got there, I was so sure I wanted to buy it that I would have called the Realtor on the spot.........
But wait. There were no cell phones, so I had to drive back to my parents' house to make the call.
There was no voice mail so I left a long message with the secretary of the Realtor's office. She carefully wrote it on a piece of paper. Nervously, I waited. And I waited.
When the Realtor called me back she told me she would not show me the house because:
It did not suit what I needed (what????)
It was too much of a fixer
There was some kind of financing issue
No one could figure out why there was no electricity to the house
Someone told her there was a rattlesnake cruising around the yard.
But she would show me 3 more houses. Tomorrow.
I hung up and called the listing agent. What else was I supposed to do? I could not convince her to show me the house and she could not convince me the house was a loser.
And I was desperate.
But when I met the listing agent at the property, he had a man and a woman with him and they were walking around the property having a quiet conversation.
I sat in my car for ages, steaming mad that he would make an appointment at the same time to show another couple "my" house. I almost drove away.
Luckily, I didn't. (To be continued tomorrow.)
Written by Janet Guilbault Mortgage Banker/Broker Based Out of the San Francisco Bay Area
Okay, the name for this new bill may not be as catchy as "Cash for Clunkers" but you gotta love it:
Home Ownership Moves the Economy(HOME) Act of 2009. HR 2801 was introduced by Howard Coble (R-NC).
It would continue the current tax credit for first time homebuyers set to expire on December 1, 2009, with a couple of notable changes:
Income restrictions would be removed
Buyers do not need to be first time buyers
Okay, everybody, all together now "SHHHHHHHHHHHHHHHHHH". For those of us who decided not to take a vacation in October and November to handle the "rush" of people trying to beat the deadline, this will squash that idea.
Who will rush to buy if they are going to extend the credit anyway?
People like my kid.
She is a potential first time buyer who makes way too much money to qualify and gets KILLED each year paying income tax. She may be jumping off the fence when she reads this.
And people like her are much more likely to help the economy (they have more disposable income).
Wait a second, didn't I suggest this very same idea in this post?
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
In the Depression of 2010 do we just take the food from the farmer because, after all, you and your family are entitled to eat?
Is it because a generation came of age when stock market wealth and real estate equity made it seem like real work was obsolete? 
Move up buyers are becoming extinct in California.
If the homeowner cannot pay enough to extract a real estate commission, a down payment on the MOVE UP house, AND moving expenses, then the tipping point of negative equity is probably closer to 90%, 80% or even less.
Posted by 
This comment, which appeared over the weekend on a featured post made me extremely uncomfortable: 
As a mortgage person in the current wild and wacky real estate market, I sometimes get clients who want to buy and bail. So what's a buy and bail?
Okay, this has created a new mortgagespeak term: The departing house. And there are RULES in place so banks don't get stuck in schemes like this:
A story for anyone who has ever lost an animal they loved.
You thought the compost pile was your litter box.
You are a first time buyer who has a sore butt. Why? Because you have been sitting on the fence all year long.
So you. Yes you, the one with the sore butt. Keep sitting and watch what happens.
I was not a real estate agent or a mortgage person in those days. I was just somebody who had sold her Dallas house, and was R-E-A-D-Y to buy.
I am buying a laptop and need your help.
;)
;)
