Mortgage News
The Subprime Meltdown: A Hot Summer Issue

The real estate market typically heats up during the summer months. This year, however, with the subprime correction in full swing, the National Association of REALTORS® is predicting a slight pullback in speculative buyers that could lead to a downshift in the entire real estate market.

For a lot of homeowners, this just means home prices are normalizing after an amazing run up over the last few years. However, for many Adjustable Rate Mortgage (ARM) holders and borrowers with potential credit issues, this summer cool off could spell disaster.

It's all over the news: more than half of last year's top 25 mortgage companies have either reported serious losses, been sold off to other companies, or filed for bankruptcy! This has resulted in a tightening of lending standards and underwriting guidelines which has and will continue to impact the real estate market for some time. In fact, bond expert William H. Gross predicts that the fallout from the subprime collapse will likely affect the housing outlook for years to come.

When asked how many borrowers would be impacted by changing guidelines and tightening credit standards, Bill Dallas, mortgage industry icon and former CEO of Ownit Mortgage Solutions, estimated "anywhere from 10% to 40%," adding, "the coming shift in available products will be huge."

This could impact anyone seeking financing, not just throughout the summer season, but throughout the next 12 to 18 months as well.

How has this happened? And how does this affect your mortgage?

Over the last few years, credit standards were loosened considerably as home prices surged to record levels. This meant that many borrowers who normally would not have qualified to purchase or refinance their homes could suddenly and easily obtain greater financing than ever before. In addition, because home values appreciated so quickly throughout this time, even borrowers with serious credit deficiencies could obtain 100% financing without ever having to document their income.

However, as the market changed, homes prices began to contract and interest rates began to rise. This resulted in more and more subprime loans falling into default, and a wave of foreclosures exposed subprime investors to serious risk. Suddenly, the Wall Street bankers who purchased the loans sent them back, and the subprime lenders paid the price.

As a result, credit standards tightened, underwriting guidelines changed, and subprime mortgage products dwindled. Current or potential borrowers who qualify for a purchase or refinance product today may not even be able to do so in the future.

It's important to note that a certain reluctance to offer credit is a normal, and often predictable, response to changes in the real estate market. Like an economic pendulum, the availability of credit swings back and forth over time, as hot markets flame and cool markets wane. This back-and-forth "movement" is the most basic characteristic of the cyclical nature of any market.

At the height of the recent real estate boom, this pendulum clearly favored consumers, offering more credit options than ever before, thanks to lax guidelines and an inordinate increase in the use of subprime products. Today, as the market turns and the pendulum swings back to the more conservative side, it does so with a lot of force!

What should you do now?

If you or someone you know has a subprime loan, especially an ARM or a hybrid ARM about to reset to a higher rate, you need to speak with a mortgage professional right away.

With loan guidelines and credit requirements tightening so heavily, and property values still declining in many neighborhoods, you may not even qualify for a refinance if you wait too long and the pendulum passes you by.

Even if your mortgage has a pre-payment penalty, it may be less expensive to absorb the penalty now and refinance into a more affordable or stable mortgage. Fixed rate programs are approaching eighteen-month lows.

Remember, if you have an ARM, your loan will reset. When it does, can you handle a 50% or 100% increase in your monthly payment? Do you know what your margin is? If not, invest an hour with your mortgage professional and find out all of your options. Don't let foreclosure sneak up on you. Take the necessary steps this summer to protect your biggest investment.

For anyone considering purchasing a new home this summer, schedule a credit review right away. With the right credit score, buyers can take advantage of the increased inventories and lower prices available in many markets. Don't let the summer selling season pass you by.

If you have any questions, call 310 988-7260 for a free consultation. Together, we will make sure that you're taking advantage of every opportunity available to address your changing financial goals and needs!

If you know anyone who is looking to buy, sell or refinance a home, please forward their name and telephone number to us. We will happily provide the same high level of service that we have provided to you. The greatest compliment you could possibly give us is the referral of your friends and family.

Creative Cuisine

This dish is both light and elegant.

Ingredients:
- (4) 6 oz. fresh halibut filets (approx. 1" thick)
- 12 brined grape leaves, washed and patted dry
- 1 tsp Dijon mustard
- 3 tbsp fresh lemon juice
- 1/4 cup extra virgin olive oil, plus extra for drizzling
- 1 tbsp fresh thyme
- salt and pepper

Directions:
Preheat oven to 400 degrees. In a small bowl, mix together mustard, lemon juice, and about half the thyme. Continuing to whisk, slowly add 1/4 cup of olive oil. Season with salt and pepper, and set aside. On a work surface, overlap 3 grape leaves, vein-side up, to create a 7-8 inch round. Repeat this process three more times with the remaining grape leaves, creating a total of 4 rounds.

In the center of each round, drizzle a bit of olive oil, season with salt and pepper, and place one piece of halibut. Season fish with salt, pepper, and the remaining thyme, and carefully enfold within the grape leaves before placing in a lightly-greased baking dish, folded-side down. Place dish in oven and roast for 20-22 minutes; the grape leaves should just be beginning to char. Folded-side down, put on plates and unwrap. Drizzle vinaigrette onto fish, and serve.

This dish is perfect with either steamed basmati rice or cous cous.

Street Smarts
Dog Days of Summer: Pet Safety Tips

Summer is the perfect time to enjoy fun and sun with your pets. Unfortunately, summertime also presents situations and conditions that can be extremely dangerous to our furry companions. Here are a few tips to help keep your pets healthy, happy, and safe this summer.

On the Road
It's not only dangerous, but, in some states, it's now illegal to drive with an unsecured dog in the back of a pick-up truck. In warm weather, however, the interior of a truck or car can be even more dangerous, with temperatures reaching up to 120° in just a few minutes.

Even parked in the shade, cats and dogs left in the car can suffer heat stroke, brain damage, and even death. Don't let this happen! If your pet is not allowed full access to wherever you're going, leave them at home.

By the Water
Did you know that cats and dogs can become sunburned? It's true. According to the Humane Society, sunscreen may be required for some dogs and cats, especially those with light-colored noses and fur. Either way, it's important to provide plenty of water and shade for your pets. Also, keep in mind that cement, asphalt, and sand can absorb a lot of heat and severely burn the pads of their feet.

In the Yard
Finally, summer is a breeding ground for hazardous creatures that can seriously harm your pets. Fleas, ticks, and mosquitoes (a source of heartworms) are just a few of the critters you and your vet should discuss preventing.

Remember, summer is also the season for health hazards in the garden as well. Beyond hundreds of varieties of plants that can be toxic to animals, some seemingly harmless plant foods, fertilizers, and insecticides can severely threaten your beloved pet's health as well.

Our pets add so much joy, love, and happiness to our lives. In return, we owe it to them to keep them safe, healthy, and strong.