Growth Continues for Palmdale and Lancaster
Article #1
Antelope Valley Press
September 20, 2007
Mayor touts growth in State of the City address
By BOB WILSON
Valley Press Staff Writer
PALMDALE – Growth, growth and more growth were the topics of a State of the City address given Wednesday by Mayor Jim Ledford.
More shopping centers, restaurants, businesses, homes, recreation amenities, entertainment venues, education facilities, highways and airplane service, plus more efforts to keep residents safe were some of the numerous issues Ledford touched on during a lengthy, video-enhanced presentation to members and guests of the Palmdale Chamber of Commerce.
Ledford’s address prompted chamber Chairman Chuck Church to say, “I thought I saw a lot of growth in the last 14 years, but this new growth map that you’ve laid out for us gives a whole new meaning to the phrase, ‘You ain’t seen nothin’ yet.’ ”
In opening his presentation, Ledford reiterated that public safety is the top priority for the city’s leadership. That contention is borne out by the fact that the city spends $22 million, or 26% of its General Fund budget, on law enforcement, the mayor noted.
Community safety, quality education, strong infrastructure and abundant amenities are some of the factors for attracting new industries and shopping outlets, and the city is working to improve all of them, he said.
Ledford spent considerable time promoting community involvement in the city’s Partners for a Better Palmdale anti-crime program before focusing on city efforts to promote business.
Toward that end, the city is running television commercials in the greater Los Angeles market that tout Palmdale to new businesses, the mayor said.
Those commercials “have created some concern in the community” because the belief is the city is seeking new homebuyers, Ledford said.
“We don’t need to stimulate that, ladies and gentlemen. That’s coming already. But what it does do is show businesses looking to relocate to a place in Los Angeles County that not only is very affordable but has a great work force and excellent quality of life, some things that can’t be found in the L.A. basin,” he said.
To further promote business development, the city is working toward installing a new sewer line that will open the door for new construction along 10th Street West between avenues M and O, Ledford said.
Because of continued development along that roadway, 10th Street West is going to transform into the primary connector between Palmdale and Lancaster, he said.
Meanwhile, the city is laying the groundwork for a new power plant to lower electricity costs for companies doing business at U.S. Air Force Plant 42, which is “the economic engine” that has been powering the city for decades, the mayor continued.
To fuel that engine, the city has created the AERO Institute, an engineering school that is adding classes from Pepperdine University to those of six other nationally renowned institutions, Ledford said.
The institute “is an economic-development program” that helps contractors educate its future work force, he said.
Another aerospace-support project in the works is the development of a new freeway intended to connect Plant 42 – the site of L.A./Palmdale Regional Airport – with the Southern California Logistics Airport in Victorville, Ledford noted.
Construction of that connector could pave the way for the creation of an inland port, a hub for the distribution of goods entering and leaving the country, he said.
“There’s lots of great things going on in Palmdale, and there’s lots of opportunity for business,” Ledford said, pointing to the new stores, restaurants and hotels being constructed in and around the Antelope Valley Mall, 10th Street West, Rancho Vista Boulevard and The Place, 47th Street East and Avenue S.
Some of the newcomers will be a Ginza steak house, a Romy’s Cafe, a Taco del Mar, a Souplantation and a Claim Jumper restaurant, which will be one of several new eateries filling space in the mall left by the relocation of its Cinemark theater.
The old theater area will be remodeled to add an outdoor courtyard for the mall’s new restaurants, Ledford said.
Soon to fill a long-empty hangar at Plant 42 will be a contingent of NASA employees who now work at Edwards Air Force Base on the agency’s Stratospheric Observatory for Infrared Astronomy program.
SOFIA is an airborne observatory that promises to provide clues to the origin of the universe. The program’s new home under a 25-year lease will be the vacant Site 9 hangar near 30th Street East and Avenue P, the mayor announced.
Across town, new developers are rapidly filling up vacant land around the construction site of the Palmdale Regional Medical Center, 10th Street West and Palmdale Boulevard, Ledford continued.
More than 1 million square feet of buildings are rising in response to the hospital’s construction, he said.
The mayor also reviewed the construction of the city’s new outdoor amphitheater and water-park facilities, offering information on how they will be expanded and improved.
The city is investing millions in new recreation amenities, libraries, parks, ball fields, swimming pools, theater productions, festivals, concerts, rodeos and equestrian events, Ledford noted.
“There is something in this community for everyone,” but one of the most important things is participating in efforts to fight crime, the mayor said, returning to the subject of Partners for a Better Palmdale.
“Our success really depends on you, how you get involved, how you engage, how you participate. Neighborhood Watch, Business Watch: You need to be in one of those,” he said. “Join with us to support law enforcement, and make Palmdale a great place to feel safe.”
Article #2
Antelope Valley Press
September 20, 2007
It’s Supercenter summer in AV
Wal-mart Supercenter Store features wide aisles, low shelves
By TINA FORDE
Valley Press Business Editor
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RON SIDDLE/Valley Press |
LANCASTER – Employees and managers of Wal-Mart store No. 2951 at 1731 East Avenue J whooped and hollered Wednesday at the official “reopening” of the site as a Supercenter – the third Wal-Mart Supercenter opening in the Antelope Valley this summer and the 30th such opening in the state.
Antelope Valley Board of Trade Executive Director Josh Mann and Lancaster Mayor Henry Hearns hailed the transformation of the 222,000-square-foot store from a Wal-Mart discount store into a Supercenter. The store opened in 2001, providing an economic driving force for the east side, and never closed during the 18-month-long remodeling process.
The store now offers a complete line of groceries, fresh produce, a deli, a hair salon, a cellular phone center, a vision center, a McDonald’s, a branch of Banco Popular, a Mirastar gas station, a pharmacy, an expanded lawn and garden center and a tire and lube center. The roof is in the classic Greek style, and prepared stone blocks add an Old World ambience to the facade and to a wall that hides the rows of shopping carts.
The store has 34 registers and is open 24 hours a day, seven days a week.
Store Manager Boake Terry , a 23-year veteran of Wal-Mart now managing his eighth store, said he has hired 120 additional employees, for a total of 421.
Sixty-one of the current employees, or associates, have worked at the store since it opened in 2001, said Human Relations Manager Art Bock.
“Thank you for continuing to do an outstanding job,” Bock said. “It was the associates who enabled us to expand to a Supercenter. That’s the sign of professionalism – to make things look easy. During construction, you made it look seamless, and you were keeping the store clean and neat for the customers. I thank you for that.”
Elizabeth Winn said, “I have been a Wal-Mart associate for 16 years. I grew up on the east side. I want you to know how excited the eastsiders are to have a Supercenter in our community. We are proud to be a store of the community.”
Article #3
Antelope Valley Press
September 20, 2007
Commission gives go-ahead to new Lancaster shopping center
By BOB WILSON
Valley Press Staff Writer
LANCASTER – In a unanimous decision, the city’s five planning commissioners voted Monday to award a conditional use permit for the construction of a new shopping center west of Jane Reynolds Park.
The center will consist of four buildings on three acres of vacant land on the northeast corner of Avenue J and Genoa Avenue.
One of the center’s buildings will have two levels, with 12,000 square feet of retail space on the first floor and 12,000 square feet of office space on the second floor, according to a report prepared for the commission’s review.
One of three one-story buildings at the center will have 4,000 square feet of space that will be used by a bank with a drive-through.
Another one-story building will have 2,500 square feet of space for a fast-food restaurant with a drive-through and 1,500 square feet of space for offices or retail sales.
The third one-story building would have 2,045 square feet of space for another fast-food outlet with a drive-through plus 1,700 square feet of space for offices or retail sales.
The center as a whole would have parking for 185 vehicles even though 189 are required. The other four spaces would be sacrificed in return for enhanced landscaping and an outdoor eating area, according to the report.
The center is expected to generate an average of 2,919 vehicle trips per day. Deliveries, trash pickups and parking lot sweeping would be limited to the hours between 7 a.m. and 10 p.m.
No conditions were adopted that placed limits on the hours of operation for the center’s tenants.
Foreclosures are up again
California foreclosures are at the highest since 1997- up 800% since last year. The state reported 5,705 foreclosure filings during the month of June, a foreclosure rate of one foreclosure filing for every 317 households — still more than twice the national average.
LA County Records show over 200 foreclosures A DAY!
Because of loose credit, risky lending practices, fraudulent appraisals, and Wall Street greed, borrowers were able to combine a number of features; 100% financing and no-doc loans to buy property for investment or to live in that is way beyond their means. Then they used these houses like ATM machines sucking out every bit of equity.
The rise of these liar loans combined with other factors such as higher debt levels and changed bankruptcy laws, are causing foreclosures to rise dramatically.
In addition, 27 subprime lenders have gone out of business in the last few months. Credit is tightening like a vise in ALL sections of lending- even for A borrowers.
There are $800 BILLION of adjustable rate mortgages that have just started to adjust and are putting thousands of home owners at risk for losing their properties because they can’t afford the higher payments. Add in stiff pre-payment penalties and you have the recipe for disaster.
The latest lending situation
This is an article about how so many people got into trouble by thinking they knew what they were doing.
As in everything, education is the key to success. People who just decided to jump in without getting any kind of serious education are learning from the school of hard knocks.
Guess what, you can lose money in real estate. I have always said that there are 2 kinds of people in this world: the ones who want to learn from their own mistakes, and the people who want to learn from other people’s mistakes.
I am proud to say that I fit into the 2nd class. When I started, I went to numerous seminars and spent a lot of money on books and tapes. In addition, I had a mentor. Because of this I have never lost money on any deal. True some of them proved to be more trouble than the profit I made, but nothing was a loss.
So which kind are you?
Don’t let others foolishness turn you away from making serious money in real estate. Learn what to do and how to avoid disaster. There is a lot of money to be made in the next years. You can do this the right way and the safe way – but NOT BY YOURSELF!!!
The article follows:
Upside down: Homeowners share lessons in foreclosure
Navigating today’s real estate market
Monday, September 10, 2007
By Glenn Roberts Jr.
Inman News
Editor’s note: Sometimes it pays to learn from others, and in today’s real estate market lessons can come at a high price. This three-part series examines hurdles for homeowners facing foreclosure, buyers who are interested in buying those foreclosed homes, as well as options for standard borrowers looking to purchase a home. (Read Part 2, “Buyer beware: Foreclosure sales not for everyone,” and Part 3, “Lenders still finding ways to finance home purchases, refis.”)
Wendy had a plan to sell off one investment property a year in the Sacramento, Calif., area to help pay for her daughter’s college education. Kassondra, a painting contractor in Santa Cruz, Calif., put a lot of work into renovating the home she bought six years ago. Jeff, a single parent, bought an investment property in Des Moines that he planned to rent out. And Dave bought several properties in downtown Atlanta that he fixed up, with plans to sell or rent.
They share a predicament — all of them got in over their heads in the real estate market, and they are trying to find a way out. This journey toward foreclosure can be fraught with Catch-22s and tough decisions, they say.
A housing market slowdown, coupled with a credit crunch, have put the brakes on home sales in some market areas, which has led to an increase in foreclosures nationwide. Data company RealtyTrac reported this month that U.S. foreclosure activity grew 93.4 percent in July compared to the same month last year, to a rate of one foreclosure filing for every 693 households.
Dave Hafner, who had owned a blueprinting company in Atlanta, decided to try his hand at fixing and flipping homes in the Atlanta area. His first project was a home he purchased directly from a man he knew who got behind on mortgage payments. “That first one was a good experience,” he said.
And then he met up with a man who specialized in buying abandoned houses and selling to others as fixer-uppers.
“I learned a lesson. There are certain areas of town you just don’t want to be in,” Hafner said. While the homes seemed like a good deal at first, he hasn’t been able to sell them for the price he paid or rent them out for profit.
He purchased one of the homes for $125,000, and it sat on the market at $109,000 for six months. “I haven’t had a nibble on it,” he said. He paid $150,000 for the other home but hasn’t been able to sell it for $136,000. “I can’t get anyone to even look at it,” he said.
While the homes are not in a foreclosure process yet, Hafner said that he has been “making house payments with the bank’s money,” using credit cards and borrowing to help pay the bills. “I’m trying to protect my credit as long as I can.” He has also put his primary residence on the market.
Hafner said he believes there is a problem with inflated appraisals, as the properties he purchased appraised “for way more than they’re worth.”
While he is investigating whether he could convert the properties for use as Section 8 rental housing, that will likely not pay the mortgage bills either and would only be a temporary fix, he said.
“I’ve got to get out from under the ones I’ve got. That’s the last thing I wanted to be was a landlord,” he said. Hopefully the market will change and he’ll be able to sell the homes, he said.
Hafner said he realizes now the importance of knowing the neighborhood. He said other owners are also in a similar situation of trying to sell their investment properties. “You go up and down the street — there are for-sale signs and these houses are all empty.”
He plans to continue to work in rehabbing and selling homes. “Hopefully I’ll be able to survive (this) and put what I’ve learned to use.”
In Des Moines, Iowa, Jeff Madsen is trying to hold onto his primary residence and get out from under an investment property that is in foreclosure. “What I owe on the house is more than what the property value is worth,” he said. “Everyone has told me there isn’t anything I can do unless I have money to pay the difference (in the value of the property),” he said.
Like Hafner, Madsen said he believes he overpaid for the investment property but didn’t realize it at the time. “I found out a lot of things since then,” he said. “I got into something I didn’t really, truly know what was going on.” He said he purchased the home from a then-licensed real estate professional who is no longer licensed in the state, and the man referred him to a California-based lender.
The troubles with the investment property could spill over to his primary residence, Hafner said. “My primary is on an ARM loan, and with that (investment) property going into foreclosure, I have to get this refinanced. But now my credit’s going to be messed up so nobody’s going to want to touch me. I’m just really stressed out on that. I was taking money from (my home) to try to save that one. Now, in turn, I’m getting into trouble with both of them.”
He added, “My credit has dropped over 200 points since the beginning of the year. Not only is this affecting me, it’s going to affect my daughter.” As a single parent, Hafner is worried about where he is going to live if both properties are foreclosed.
“I’m basically going to be financially destroyed. I don’t know where I and my daughter will be in the next six months,” he said. “I’m caught between a rock and a hard place, trying to do everything I can to stop this from happening.”
Hafner said he has exhausted all of his options, and he worries about how many others are facing foreclosure, too. “I know there are a lot of people here, too, who are experiencing it,” he said. “I just don’t know where it’s going to go. The government is going to have to step in and make some adjustments. How can you stop someone from the ability to live somewhere and what’s stopping them is their credit?”
Kossandra Knight said she would like to keep her home that she bought six years ago in the Santa Cruz, Calif., area. But that is just wishful thinking. A painting contractor, Knight has worked to sell off several investment properties at a loss and is working with a real estate agent to complete a short sale on her primary residence. Job troubles and high monthly payments have put her into a foreclosure process.
“What are your choices?” she said. “The first thing you try to do when you start to go south is to use your credit cards to pay for things.”
Knight, who has filed for Chapter 13 bankruptcy, said she ended up with a negative-amortization loan on her home and the payments quickly got out of control. She was drawn in by a “teaser” rate, she said, and a job loss wiped out her reserve.
“This was my very first purchase — my very first house. I put all kinds of capital improvements in it. I remodeled the kitchen, bathroom, (and) I landscaped. When you have to do a refi to save your butt, there’s no butt to save — my equity of $175,000 is gone now because of the market.”
She said that a short sale on her home is her only option. Her home has been on the market, off and on, since October. She has owned two other investment properties, one of which she sold at a loss and the other through a short sale.
While Knight said she has had some good experiences with mortgage professionals, she also blames some of her current problems on lending practices. “Not every single lender out there that does creative financing is a predatory lender,” she said. “I wouldn’t have been able to have a house if there wasn’t a creative way of getting me a house. All it takes is for one to go south and it messes with everybody else.”
“You could easily call it the quiet poverty,” she said of the rush of nationwide foreclosures. “It affects everybody. Nobody is coming out of this unscathed. It’s wiping out the market.” She said she believes government intervention will ultimately be necessary to fix the financial mess.
“My entire savings was in my house — my future was in my house and now it’s gone,” she said.
Knight recommends that homeowners build up a substantial reserve that can sustain them during times of hardship, such as the loss of a job or a death in the family. She also said that people should research their loans thoroughly.
“The bottom line is: Make sure you know the facts. Ask all of the questions until you’re well informed,” she said. Knight also recommends purchasing mortgage insurance.
Wendy Shapiro, a resident in Roseville, Calif., said she purchased multiple investment properties after selling her home in San Francisco and moving out to the Sacramento area.
“I bought a fourplex in Red Bluff; I had $500,000 in the bank and a 700-plus credit score,” she said. But her real estate investments have become a money pit. “Unfortunately, I put all my eggs in one basket. Now my daughter is going to college and I don’t know if I’ll be able to keep her there.”
Shapiro, a nurse, said she had planned to gradually sell off the properties for a profit, but now she is faced with a decision on which properties to “walk away from,” she said. “I am a single mom here working my butt off, and I thought I was doing the right thing.”
Rental prices have dropped substantially in areas where she owns property, Shapiro said, as many investment properties are competing for rental income. “Rents have dropped everywhere because people who couldn’t sell houses are now trying to rent them. I can’t even sell one house,” she said. Buyers are on the fence these days, she said, and the credit crunch isn’t helping out with sales.
“It’s just hell. Will I be able to sleep at night knowing I just walked away from $400,000 to $500,000 … and all my time?” she said.
Mortgage Market Woes Takes Toll on Jobs
People say that we won’t go into recession because jobs drive the economy. Well anyone who does not understand that many jobs related to the housing industry are going away is in La La land. Add to that some of the jobs that are associated with the finance industry (hedge funds workers, bond fund managers, etc) and you can see where we are headed.
Here is a quote from the LA Times about the job market report recently:
“Part of what made the report particularly unnerving was that Federal Reserve officials, including Chairman Ben S. Bernanke, had said the country’s financial problems, which began this summer in the sub-prime mortgage market, were largely confined to Wall Street and that the broader economy, though not robust, remained substantially unaffected.
“First, Bernanke said the sub-prime problem was going to remain sub-prime. Then he said it was going to remain in the credit markets,” said David M. Jones, a Denver economic consultant and longtime Fed watcher. “Now you’re seeing that the credit crisis has spread to Main Street.”
DUH!!!!! You didn’t have to be an economist to see what was going to happen.
To read an article from realty times on this topic click here.
Lenders still finding ways to finance home purchases, refis
Thursday, September 13, 2007
By Matt Carter
Inman News
Editor’s note: Sometimes it pays to learn from others, and in today’s real estate market lessons can come at a high price. This three-part series examines hurdles for homeowners facing foreclosure, buyers who are interested in buying those foreclosed homes, as well as options for standard borrowers looking to purchase a home. (Read Part 1, “Upside down: Homeowners share lessons in foreclosure,” and Part 2, “Buyer beware: Foreclosure sales not for everyone.”)
Despite the relentless onslaught of alarming headlines in recent weeks, there are still plenty of mortgage lenders willing to extend credit to subprime borrowers.
Although you might be hard-pressed to find subprime or Alt-A lenders offering 2/28 hybrid adjustable-rate mortgages (ARMs),100 percent financing or “piggyback” second loans, an informal survey of loan officers and mortgage brokers around the nation finds they’re still able to help clients from all walks of life buy or refinance a home.
Those clients have diminished in number, and thanks to tighter underwriting standards often have less buying power. In the short term, that could translate into fewer sales and more downward pressure on prices in some markets.
But in the long run, lenders say they’re ready to fund more loans if and when buyers return to the market in force — as long as they are willing to get their credit scores up and scrape together down payments.
Joyce Windschitl, a branch manager for Cherry Creek Mortgage in Chanhassen, Minn., said that for the most part, stated-income, negative-amortization and pay-option ARM loans are a thing of the past.
But there are several options available for borrowers with FICO scores of 620 or below. Depending on the borrower’s debt-to-income ratio, down payment and savings in reserve, a subpar credit score doesn’t automatically preclude families from home ownership.
For borrowers looking to make minimal or no down payments, Windschitl suggested Fannie Mae’s MyCommunityMortgage program (Freddie Mac offers a similar Home Possible program).
Also, Windschitl noted, the FHA will guarantee loans with as little as 3 percent down, and Congress is considering lowering the down payment requirement and raising loan limits.
Windschitl also cited Bank of America’s Neighborhood Advantage Credit Flex and Zero Down programs for borrowers with good credit but limited cash to bring to the closing table.
She said Cherry Creek Mortgage can help clients obtain reduced-documentation loans with 12 months of bank statements or depletion of assets to prove income. Jumbo loans at up to 95 percent loan-to-value ratios are still available to borrowers with credit scores of 680 or better, Windschitl said, or up to 100 percent CLTV “if we can find the second mortgage.”
Rates on jumbo loans have “gone up quite a bit,” said Las Vegas-based mortgage consultant Esko Kiuru, because investors who buy such loans on the secondary market “feel they are too risky, so they want more yield to buy them.”
Kiuru said business is “rather slow” in Las Vegas, as “a lot of people are sitting on the fence,” waiting for something to happen with prices.
“Sellers here, and in other markets that are soft, they have to be very flexible,” Kiuru said. “A carry-back is one option, or they may pick up (a portion of) closing costs or provide incentives like new carpets.”
Seller carry-backs — in which sellers agree to finance part of a sale through a second loan — are acceptable to lenders, as long as the first mortgage is 80 percent or less of the property value, he said.
Interest-rate buy-downs are another incentive sellers can offer buyers who are “a little tight,” Kiuru said, but not all lenders offer such programs.
Prices, Kiuru said, “got out of hand during the boom years, and they are retreating now. Those who can qualify (for a mortgage) are hoping the prices will go even lower. You can understand that, in a way, because nobody knows for sure when the bottom will hit. Right now, I would say it’s a good buyer’s market.”
The self-employed borrower
East of San Francisco, Janet Guilbault, a loan officer with Peregrine Lending Co., said she serves clients who have excellent credit but prefer stated-income loans because they are self-employed.
Because of the San Francisco Bay Area’s high housing costs, most of the loans Guilbault handles are jumbo loans that aren’t repurchased or guaranteed by mortgage repurchasers Fannie Mae and Freddie Mac.
While there are still plenty of jumbo loans for prime borrowers who can document their incomes, “the mortgage crisis has hit self-employed borrowers in a big way,” Guilbault said.
“Lenders simply do not like the combination of a high loan to value and an income that is not documented,” Guilbault said. “Even if on paper the loan appears as if it will fly, lenders still cut appraisals, and refuse to believe the stated income. No loan is a sure thing anymore until the day it is funded.”
Guilbault said her clients make plenty of money and generally have good credit but prefer stated-income loans because they write off much of their income for tax purposes.
“They have complicated financial lives and often own multiple investment properties, as well as a second home,” she said. “Going stated enabled these borrowers the ability to show via credit score and equity in the property that they are a good risk, and will pay their mortgage, without explaining tax returns.”
It’s no small task, for example, to provide a lender with rental agreements for all the apartments or commercial properties they own.
“The people in our society that use stated-income loans make the world go round,” Guilbault said. “They own businesses; they are out there spending money, and employing people, and they have been painted with the same brush as someone with a low credit score doing a 100-percent loan with stated income.”
Guilbault said in a quest for the better rates, she’s moved her jumbo loan business from “big ticket” lenders like Bank of America and Washington Mutual to portfolio lenders like ING. But portfolio lenders are tightening their guidelines, too — in what can sometimes seem like arbitrary ways, she said.
One of Guilbault’s clients with a credit score of 763 had $100,000 in deposits at the bank where he applied for an 85 percent cumulative loan-to-value ratio loan. He was turned down because, even though the application fell within the lender’s guidelines, the bank “didn’t like” the income her client was claiming, Guilbault said.
“My observation is that whenever you have fewer and fewer people offering what you need to buy, they have the ability to make the rules, because there isn’t as much competition,” she said.
In the past, lenders might have been willing to grant an exception if a borrower fell two points shy of the required credit score for a stated-income loan. Those days are gone, Guilbault said, and lenders are also more apt to question an appraisal — another potential deal killer.
“You can have a perfect buyer with a great credit score, and have the loan blown to smithereens because they’re going to cut the appraisal by $100,000,” Guilbault said.
Another new rule that’s made it tougher to refinance: a requirement that a home be off the market for a specified period of time before refinancing is permitted.
As a result of the changes in jumbo lending, “cash and credit score are king,” Guilbault said. To get the best rates, “the only solution that I see for (jumbo) borrowers is to start adjusting their financial lives in a way that will allow them to fully document their income.”
Mortgage advisors navigate new roads
Gainesville, Ga.-based mortgage advisor Jefferson Otwell of Homestar Financial Corp. said subprime is still around, but is “a bit tighter.”
“Alt-A has taken it on the nose,” Otwell said, echoing Guilbault’s experience in California. “I can find bank-statement-only loans, but very few true stated programs. Those that are around are greatly curtailed.”
Otwell said lender’s Alt-A rate sheets are getting shorter.
“I recently lost a deal to someone who either talks a good game or still has access to a high LTV no-doc loans,” he said.
On any given day, Otwell said, interest rates are “twitching up and down.”
He’ll price out a jumbo loan on a Tuesday and lock it in on Thursday at what had originally been the higher-rate lender, he said.
An even bigger surprise to Otwell has been the decision by many big lenders to stop funding second mortgages.
“Even if the borrower is approved at a 780 credit score, some big lenders simply will not fund a 15 percent second after an 80 percent first,” Otwell said.
With lenders “craving an equity buffer,” high LTVs are a bigger obstacle than low FICO scores, Otwell said.
Staying under 90 percent LTV is good, Otwell said, and staying under 80 percent “is even better.”
Otwell sees no reason to make drastic changes to the programs offered by Fannie, Freddie and FHA. He feels the Bush administration’s new FHASecure program “isn’t too invasive,” but called proposals by some lawmakers to raise Fannie and Freddie’s limits “obscene.”
If Fannie and Freddie are allowed to expand, “we shouldn’t do it at the high end but through something more like MyCommunity and Home Possible refinances of subprime ARMs,” Otwell said. “The rich can ride out financial difficulties better than the poor.”
In Chicago, residential mortgage advisor Russ Martin of Perl Mortgage said subprime borrowers are “out of the market” unless they qualify for an FHA program.
“Being able to document income is a must,” Martin said. “Stated-income programs have been severely curtailed, and you will probably need 20 percent down to get decent rates in most scenarios”
Most loan products are still available for borrowers on the higher end of the credit scale, Martin said, but “rates have increased quite a bit.”
“Overall, nothing has really changed dramatically for my (high-end) clients,” Martin said. “One hundred percent financing is still available, but not from as many lenders as before.”
Martin, author of the blog SmartMortgageAdvice.com, said most of his jumbo buyers are opting for ARMs. Perl Mortgage, he said, has portfolio lenders with ARM rates that are “dramatically better” than those offered by most major retail banks.
“I can do a 7/1 (jumbo) ARM in the low sixes right now for a $1 million loan versus the mid sevens for a 30-year (fixed),” Martin said.
Martin said he would support some type of national licensing if it applied to all loan originators regardless of whether they worked at a bank, brokerage or credit union.
“As a (mortgage) broker, I am concerned because most of the laws only seem to apply to brokers as we have been made out to be the villain … in this mess,” Martin said.
“The bottom line is that if you are calling yourself a loan officer and originating mortgage loans, you should be licensed to show a basic level of competence,” he said. “Right now, we have a patchwork of state laws and federally chartered banks skirting any kind of requirements to actually license their loan officers.”
Mortgage brokers and loan officers who score clients using automated loan-origination systems and using private mortgage insurance can still find loans for borrowers with credit scores down to 580, said Michael Byrne, a loan counselor with Gateway Funding in Hillsborough, N.J.
“It depends on a little more than simply a credit score,” Byrne said. “However, I have recently closed a 95 percent loan-to-value (LTV) cash-out debt consolidation FHA loan for a client with a credit score below 620.”
What has gone away, he said, is stated-income, stated-asset, 100 percent financing for borrowers with a 620 score or lower — “and rightfully so.”
Also gone from the marketplace are many of the high-LTV pay-option ARMs, Alt-A products for borrowers providing reduced documentation, 100 percent loans for investors, and 80-20 “piggyback” loans, Byrne said.
Gateway Funding is still offering 90 percent financing to reduced-documentation borrowers with good credit scores through Fannie Mae’s Quick and Simple program, but to a limited extent. No-documentation loans are available, “but with stricter guidelines and more pricing hits,” Byrne said.
Some lawmakers are calling for the $1.4 trillion cap on Fannie Mae’s and Freddie Mac’s loan portfolios to be raised so the government-sponsored entities can buy up more mortgages in the secondary market. There have also been calls for boosting the conforming loan limit above the current $417,000, so the GSEs can play a greater role in the jumbo loan market.
Byrne said he thinks Fannie and Freddie are “fine the way they are,” but advocates an increase in the maximum loan size that the Federal Housing Administration (FHA) can guarantee.
“This is a great product that has been underused in many markets,” including California, Byrne said, because the median home price often exceeds the upper limit for loans to be eligible for FHA guarantees.
Byrne would also welcome a national licensing requirement for loan officers.
A mortgage banker, Byrne said mortgage brokers have, to an extent, “been singled out unjustly for many of the current problems. Many lenders who opened huge call centers and ‘churned’ out huge amounts of subprime loans were in fact mortgage banking firms, rather than small brokers.
The problem with subprime loans involves mortgage brokers, but is not limited to just them, Byrne said. Wholesale lenders, mortgage bankers, Wall Street — “everyone involved in a real estate transaction, and ultimately the consumer — all should share some culpability,” he said.
In Los Angeles, Wilshire Financial Inc. mortgage advisor Ricardo Bueno said he’s working with an out-of-state client with a 617 FICO who wants to refinance out of an adjustable-rate mortgage. Bueno said that with a 65 percent loan-to-value ratio, the best rate she can hope for on a 30-year fixed mortgage is 10 percent.
“Is it better than what she currently has? Only slightly,” Bueno said. “It’s an investment home, and she hasn’t decided whether to keep it or not.”
Bueno said that in the year and a half he’s been originating mortgage loans, he’s moved from subprime to a more upscale clientele.
“I started out last year farming my neighborhood, and did well with the Spanish-speaking market I was targeting,” Bueno said. When business slowed down in January and February, “I began to realize the market I was working was the subprime market. I couldn’t get certain deals funded.”
Bueno said he began seeking more business online, speaking to a different client base, “and that did fairly well until August. This month shook me up.”
Clients come to him with “these preconceived notions that the market is what it was a couple months ago,” Bueno said. “I will always sit down with a client and say this isn’t possible now, but we can work toward a program that will save you money down the line.”
Often clients are too embarrassed to come back, he said.
“I would love to maintain some sort of relationship with all the files we put a red stamp on, but our conversion rates aren’t the greatest on that,” Bueno lamented.
In Las Vegas, lenders have become especially tight about loaning money to investors, Kiuru said.
“You need to document everything, and have a very solid credit background, or you are not going to get any money,” Kiuru said of the Las Vegas market. Lenders “got burned during the boom years. You not only had a lot of investors, but speculators and flippers who came into town. They were probably the main reason this market got so overheated.”
Lenders aren’t hesitating to finance buyers with decent credit scores who are willing to put some money down on a home that will be their primary residence.
“Your credit score has to be pretty good if you want to get some kind of subprime loan,” Kiuru said. “You don’t get nothing-down loans with a 600 FICO anymore. But if you have a good credit score, there are still plenty of programs available.”
For subprime borrowers with FICO scores of 620 or below, “You would need at least 10 percent down,” Kiuru said. “I don’t recall seeing anything less than 10 percent (down) for that kind of FICO score.”
Lenders prefer that borrowers be able to document six months of reserves, compared with three months before tightening got underway, Kiuru said.
Kiuru said prospective buyers shouldn’t give up if they can’t qualify right away.
“Even if they don’t have enough down-payment money, they should still call a lender and explore whether there are creative ways to get a down payment,” he said. “Relatives can help, or maybe there is a program we can find. The important thing is not to give up, but to call a professional lender and discuss their personal situation.”
Jeff Tumbarello, a loan originator for Union Savings Bank in Columbus, Ohio, said the bank’s business model has “survived the crisis because we do common sense loans. There’s always a margin of safety. We’re not very aggressive, although we’re aggressive for the right people.”
For borrowers with FICO scores of 620 or below, the bank offers FHA, VA and Ohio Housing Finance Agency programs.
“We’re on track to having a pretty good month, Tumbarello said at the end of August. “The office is quite busy. We’re closing 25 to 30 loans tomorrow, and picking up business where a lot of the other lenders have fallen off.”
Although Ohio has one of the highest foreclosure rates in the nation, Tumbarello said Columbus offers opportunities for investors who concentrate on generating monthly cash flows from rentals, rather than generating profits buying and selling property.
“Columbus is a great market,” said Tumbarello, who recently relocated from Florida. “There’s a ton of industry, you have Ohio State University, major banks and insurance companies — it’s a stable, bell-curve-type market, without the peaks and valleys of a market like Florida. It’s steady Eddie.”
Orlando, Fla.-based mortgage broker Eli Magen said that lenders are “closing down almost on a daily basis,” including some of his personal favorites such as American Brokers Conduit, First Magnus and GreenPoint Mortgage.
Right now, Florida is a buyer’s market, with a ratio of 15 sellers for every buyer, Magen estimated.
But if borrowers don’t qualify for FHA loans, tightened underwriting standards have “denied many customers from their desired home purchase.”
“Even though fixed interest rates are still good … there are not too many customers out there,” Magen said. “I think the market has reached its bottom, it will keep adjusting itself just a few more months, than maybe in one year it will start to come back again.”
In Las Vegas, Kiuru said he isn’t sorry to see some lenders go.
“I think it’s just a cleaning process, and the market is taking care of itself by letting (lenders who funded too many risky loans) go bankrupt,” Kiuru said.
“In the future, I think the government should regulate the mortgage business a little bit more strictly,” Kiuru said, including a national licensing system for brokers. While Nevada has its own licensing, other states have weak or no license provisions, meaning “just about anyone can enter the business.”
National licensing, along with continuing education requirements like those for Realtors, “would eliminate some of these problems that came up with the subprime thing,” Kiuru said.
Kiuru said investors can also use their interest in other properties to improve their chances of qualifying for a loan.
“If you have a couple properties with equity, you can play with that,” he said.
Kiuru said he works with about eight lenders, with the only recent changes in the lineup the addition of Countrywide Financial Corp. a month ago and the loss of Aegis Mortgage Corp. Aegis, citing ore than $600 million in debts to creditors, filed for Chapter 11 bankruptcy protection in August.
With lenders more reluctant to make piggyback loans, private mortgage insurance — usually required on first mortgages with down payments less than 20 percent — is making a comeback, Kiuru said.
“It’s funny how the market shifts and certain things roar back,” he said. “That’s what the market economy is all about.”
CALIFORNIA – An Even Bigger Economic Powerhouse according to Kiplinger CA Report
Here is an awesome message from my friend Paul Tucson about the opportuities we have in California.
HERE’S LOOKING TO THE FUTURE: People often ask me why I tell them to invest in prime, developable land in the future growth areas of California and what makes me so sure? The answer is always simple: Just use the trends, forecast, and daily information that is in the news and use this with what has historically happened in the past along with proven planning guidelines and tools used to prepare for the future such as the State, County, and City’s General Plan and zoning maps. By using population forecast by the state’s planning agency, Southern California Association of Governments and the federal government’s Bureau of Census. In addition, you can study major transportation agency plans by Los Angeles Metropolitan Transportation and Caltrans (California Transportation Department). These are just a few of the many details that needs to be tracked and considered and then implemented in my “landbanking” strategy.
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I was in a real estate conference yesterday learning about a new retirement strategy that was implemented just last year 2006 about Self-directed Real Estate Solo Roth 401k plans and I realize that most CPAs and Financial Planners/advisors don’t even know about this nor do have they incorporated it into their business.  What a shame because this strategy along with “landbanking” as the investment vehicle coupled with a self-directed real estate Roth IRA (for individual workers) and a Solo Roth 401k plan (for entrepreuners/small business owners) is the most powerful wealth-building strategy that exist today that can help secure someone’s financial future in the next 10 years.
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However, as I sat in the back during the introductions of the attendees, I realize that a certain number of people there promoted landbanking as well. It’s a great idea until I ask about where they are landbanking. Quickly I find out what I suspected all along: They are selling land just to sell land – they are selling CHEAP land. What’s the difference between CHEAP LAND vs. PRIME, DEVELOPABLE LAND? In the future, it’s millions of dollars. The key is that “land that’s not developable and is not in path of major population and job growth IS NOT worth much in the future”. You want to buy land that you know will be developable in the future because IT IS ALREADY ZONED for future housing, commercial and industrial development projects. How can you ensure this? By looking to make sure that the land is in the CITY LIMITS or their SPHERE OF INFLUENCE (LAND THAT WILL BE ANNEXED INTO THE CITY LIMITS IN THE FUTURE AS THEY GROW) and then checking in the city’s GENERAL PLAN MAP for zoning.
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QUESTION: From my last e-mail, in the Antelope Valley in North Los Angeles County, they have plans to build 5 Wal-mart Supercenters. And in the Victor Valley area of San Bernardino County, they have plans to build 6 Wal-mart Supercenters. What if you bought a 5-acre piece of land 1/2 mile from where they are planning to build one of these Wal-mart Supercenters – would this have been a good move?  I think so and thank you because I just found out yesterday that one of the locations that Wal-mart is planning to build is 1/2 mile away from my 5-acre parcel that I bought 7 years ago. Surely, the price of my land will at least quadruple once this major shopping center 1/2 mile away gets built with the Wal-mart Supercenter as the anchor retailer. Was this lucky? Sure but even in the beginnning, me and my partners knew that this 5 acre was in a great future location. Most importantly, we acted on it and bought it and paid a premium price knowing that it’s in a future growth area according to the City of Lancaster’s General Plan map (after studying all of the approved and planned major housing subdivisions planned for the surrounding area). The rest is “lucky” as some may call it.Â
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As a current Planning Commissioner for the City of Corona for the past 5 years, I have learned a lot about the value of prime, developable “DIRT” in a booming city. In Corona, those who own prime, developable ”DIRT” are sitting on a ”GOLDMINE”.   I like to say that every other Monday, when our Planning Commission meets to go over development items to approve, I make millionaires of landowners. How? Each time a project gets approved for rezoning, subdividing and development, it makes a landowner of these PRIME, DEVELOPABLE land very wealthy because it turns their land to million dollar estate homes, industrial warehouse buildings, shopping centers and hotels.   Landbanking the right way (BY BUYING PRIME, DEVELOPABLE LAND ONLY) can make a BIG difference on whether you can RETIRE RICH AND RETIRE EARLY or not retire at all.
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My advice for people that I consult with is to START SAVING & INVESTING if they’re not doing anything, if they are investing “TO STOP INVESTING NOT TO LOSE (i.e., their 401ks, CDs, mutual funds and annuities) and instead having the courage to INVEST TO WIN and WIN BIG. Knowing all of these current trends that is poised to build the next power region of Southern California, now is not the time to be afraid to make your move but to find the courage to secure a better financial future for you and your family – I’m doing it for mine.
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Think Big & Win,
High Desert must plan for 30,000 units by 2008
By Ryan Orr
If Adelanto, Apple Valley, Victorville and Hesperia don’t collectively plan to add 30,000 housing units by 2014, they could lose their housing certification, subsequently losing the chance to get any state or federal transportation funds.
The Regional Housing Needs Assessment was released last week for the planning period of 2006 to 2014.
The report acknowledged the future construction need of 707,219 units in all 187 cities and six counties that make up the Southern California Association of Governments.
Each city must submit plans for meeting the goals by June 30, 2008, to comply with California state law and remain eligible for state transportation funds.
Measure N, which passed in Apple Valley in June 2006 set a guidline of two houses per acre in Apple Valley.
The measure also left general plan amendments in the hands of the Apple Valley Town Council that can make the necessary zoning changes to comply with the regional housing needs. If measure N didn’t pass, each amendment would go to a vote of the people.
If it wasn’t for the passage of Measure N, the town could have lost its housing certification, said Councilman Tim Jasper.
“The people did the right thing,†he added.
The housing needs report breaks down the construction needs of each city into four different income groups. The needs were assessed based on the population numbers from the 2000 census.
Hesperia will have to plan for the most units in the Victor Valley at 9,094 including 2,135 units for very low-income households. One unit doesn’t have to be an actual house, it can be an apartment or townhouse.
Apple Valley must submit plans for 3,887 units; Victorville must plan for 8,618 units; and Adelanto must plan for 8,422 units. All needs are for the planning period between 2006 and 2014. The next assessment won’t be done until 2013.
“Zoning practices are very significant in determining those demands,†said Carlos Rodriguez, director of public affairs at the Building Industry Association, Baldy View chapter.
“We urge all cities to comply with the state guidelines so that we can work with local governments to provide a place for families to live in the Victor Valley,†Rodriguez added.
Ryan Orr may be reached at 951-6277 or rorr@vvdailypress.com.
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Article #2
The Kiplinger California
Trends in Business, Government and Real Estate
July 18, 2007Â Monthly Newsletter
Where to Rent Cheap
Came across a great writeup on business week that covers
Biggest Metro Areas with the Lowest Rents
If you cant afford to buy a house, maybe is a good time to rent in these cities.
Andy
Buying Pre Foreclosures
Pre foreclosures are known as properties that have reached the final stages before they get repossessed or taken back by the lender or bank. The owner is still in complete control of the property or home, although the bank or lender will repossess the home if the owner doesn’t attempt to rectify the situation. Normally, if the owner makes things right with payment, the pre foreclosure will settle and things will go back to normal.
When buying real estate, there are several benefits to pre foreclosures. Although there are several ways that you can buy a home, pre foreclosure is one of the best. Even though it is one of the best ways to buy property, many people miss out simply because they aren’t familiar with pre foreclosures and all of the benefits that come with them.
The best thing about pre foreclosures is the prices that are associated with them. In most cases, the owner has no choice but the sell the house, and therefore will listen to just about any offer that he receives. Due to this very reason, you can find pre foreclosures for sale at nearly 50% off market value. This is an ideal time to purchase, especially if you are looking to save a lot of money.
Along with the great prices you can get with pre foreclosures, you’ll also have the luxury of dealing directly with the owner – no third parties involved. This is a great advantage, with buyers being in total control of pre foreclosure sales. In the event that the home owner decides to turn down your offer and cannot find another buyer, he will lose everything. Even if you offer the owner a small price, he will be able to make a little bit of money selling the home.
You can find pre foreclosures that up for sale pretty much the same way that you can find homes in which the bank already has control of. You can look in the local newspaper, on the Internet, or by calling the lender directly. There are several options that you have in terms of finding pre foreclosures, giving you plenty of options. Once you have found a pre foreclosure for sale, it’s up to you to seal the deal and get the home of your dreams at a very affordable price.
When you compare foreclosed properties with pre foreclosed properties, you’ll find that there is less competition involved with pre foreclosures. Pre foreclosed homes are a great purchase, as they will normally come at a very affordable price. Those of you who have been looking for a new home shouldn’t hesitate to check out pre foreclosed properties. They are a great investment – and can indeed be very profitable in the long run.
To your continual success!
Andy Huang
