The Street View!

Check this out...

Find a location... Maybe something like the middle of the Golden Gate Bridge?

Then click on the Street View Button.

A window will pop up showing the view from the street from that vantage point!

You can then drag the picture around and see behind you, to the side, move up the road or back the other way!

As you view a map - the blue highlighted roads are available for Street Viewing!

One of my other favorite spots is along the Cabrillo Hwy near Devil's Slide.

Google has catalogued only certain metropolitan areas of the country so far (denoted by the camera)

• San Francisco
• Las Vegas
• Denver
• Miami
• New York
  

They even have a video!

Let me know if you see me "On the Road!"

As I watch my list of Notice of Defaults / Foreclosures rise and rise each month, I have to wonder just how devastating the effect of this will be on surrounding homes.

Here is a quick overall picture on what usually happens.

As a homeowner starts to struggle the first thing that happens is sometimes what is called "deferred maintainence".  We can call it neglect for lack of a better word.

As they continue down the spiral path towards foreclosure the yard goes unkept, the lawn unmowed, the weeds grow high, the garbage piles up, the windows go uncleaned.

They say the first thing that happens when you fall behind is you lose that "Pride of Ownership". 

No matter what, one of three things are going to happen with with this house:

1. They might be able to refinance and catch up - maybe.
2. They might put the property up for sale - maybe a short sale?
3. They might let the property go to Foreclosure at which it will either be bought by a bidder or retained by the bank (REO).
   

OPTION 1,  REFINANCE:

If they can refinance, perhaps they can also catch up on the Pride of Ownership items they've been neglecting.

OPTION 2,  LISTED: 

If the property is listed for sale, it's under duress, it's not because the owners feel the time is right and they want to move up to a larger home with better schools.  It's a fire sale.   They are looking at getting out as quick and cleanly as they can without spending another dime.

• It isn't going to have new paint and carpets is it?
• It isn't going to be neat and clean is it?
• And it certainly isn't going to be staged!
  

We all know, a staged home will generally sell faster and for more than a similar home - Right?

"Mr. and Mrs. Homeowner... I know you can't afford to pay your mortgage but I believe your home will sell faster if you pay $x,xxx and have it professionally staged".  Yeah, that's a likely conversation that'll never happen! 

OPTION 3,  FORECLOSED:

Now what?  Either the bank owns the property and lists it with a local broker or an investor type now owns it.  While the Broker may pay to have the lawn mowed they are not going to spend the big bucks to bring the property up to snuff with the regular homes around it.  

In Options 2 & 3 above - the home will be sold to someone eventually,  but it will also be sold at something below it's true market value potential. 

The home next door, the home down the street and the home a 1/4 mile away all will be unintentional and innocent bystanders. 

The Sales Comparison Approach of Appraisal has to take into account the recent transactions in the surrounding areas.  While a certain amount of explanation on the appraisers part may help shift the blame of declining values in the neighborhood to foreclosure activity, it's temporary at best!

The Truth is - your home's value is determined by and and can be positively or negatively effected by, the homes and homeowners around you.  And unfortunately that is something you have absolutely no control over!

For related reading see: The Foreclosure Crunch

The National Association of Realtors just released the data for the existing home sales nationwide.

I have a bias towards the "Existing" figures as opposed to the "New" home sales which were reported yesterday.

The Existing numbers are based on facts. Sales that have closed. They also account for 85% of all sales.

The New sales figures are based on contracts that have been signed. It's a fuzzy number as an estimated 40% of those contracts do not go to fruition. Read more about the difference here: LINK

Here's a quick view of the numbers:

• Overall Existing Home Sales for April were down 2.6%
• This represents a year over year decline of 10.7%!
• Median Price for a home sold was $220,900 which is down marginally
• But that decline in value is also the 9th straight on a row!
• Inventory is up 10.4% (the number of homes for sale)
• Inventory sits at an 8.4 month supply (the highest since 8/92)
• The Northeast absorbed the biggest hit (8.8)
• The West declined only 1.7%

Overall the report was negative and lower than what the experts were predicting.

While this is not always true, the general rule to remember is that:

• Weaker than expected economic data lowers rates,
  
• contrast this to better than expected generally causes rates to rise.

I had a phone call the other day from a borrower who was approved for an ACORN Loan.  His problem was that the loan they were offering him was questionable at best.

He has credit issues but he also has some money saved for the down payment ($10,000). Oh, and he's self employed.  He has marginally squeaked into a loan approval - (but that doesn't mean they still won't decline him).  His approval was with someone else.  This is the first time I've talked to him.

His Agent had him call me.  He was now looking at a Lease Option and she wanted me to advise him.  The home is out of our area (Tracy, CA) so she couldn't provide either of us quality information without MLS access.

The story goes like this:

He finds this Lease Option on Craigslist.   The home is being represented by a licensed Agent.  He detailed some of the terms required in this lease.

• $10,000 Down.
• $1,600 a month rent.
• 1 year term.
• The Agent told him the property is valued at $536,000.
  

At the end of 12 Months he can purchase the property for $519,000.

Sound OK?

But the property is Tracy, and area of enormous concern.  Is the property really worth $536,000 now?  I doubt it. For all I know the home could be worth $400,000 right now.  Home values in Tracy have certainly declined and they are not showing any signs of slowing.  Was the property previous listed?  We think it may have been. For how much?  They didn't tell him and in truth, we didn't even get to that part of the conversation.

Foreclosure rates are also very high.  How about a year over year increase of 193% this past quarter!  In past years the housing boom in the Bay Area funneled many new home buyers to Tracy.  Tracy was "more affordable".  Those buyers have questionable loans now and as the recasting hits, more and more will be forced into default.

On a loan-by-loan basis, mortgages were least likely to go into default in Marin, San Francisco and San Mateo counties. The likelihood was highest in Sacramento, Riverside and San Joaquin counties.

And then here is a newspaper story on the local economy in the central valley, from the Sacramento Bee

Because of low incomes, the Valley is especially vulnerable to the downturn. Nearly 22 percent of all Merced home mortgages as of December were subprime loans, the highest in California and seventh highest in the nation, according to First American LoanPerformance. The U.S. average was 15 percent.

Many of these loans are ticketed for disaster: The nonprofit Center for Responsible Lending predicted 25 percent of the subprime loans taken out in Merced during the first nine months of 2006 will result in foreclosure. Bakersfield, Stockton, Fresno and Visalia won't be far behind, the center predicted.

Two paths will happen in a year...

1. He'll rent and walk away, he'll be out $10,000 in savings and have spent $19,200 in rent.
2. Or, he will buy the property.  If he decides to buy his "Rent to Own", they'll sell it at $519,000 and give him $29,200 (his deposit + 12 rental payments) towards closing.

My Crystal Ball is in the shop for a tune up, but I have to wonder...

• What will rates be like in June 2008?
• Will his credit be any better then?
• What will underwriting guidelines be like in June 2008?
• Will he be able to qualify for anything at all?

My initial thought, and my advise to him was to not consider a Lease Option especially in a declining area / declining market.  He's taking on all the risk, not the seller.  If at all, the seller is hedging their position while looking at a very questionable future.

I was thinking this isn't a bad idea for those who have listings that won't sell.   Looking at it from the Seller's perspective, if the cash flow is neutral at best, they can wait out a year of market correction.  In a year if the renter walks, and the market goes up - they took his $10,000 and now get to list in a better market.

If the market goes down, and the buyer buys - they really make out!

Of course the market could also drop and the buyer could walk, but then they still have the $10,000 to offset a loss.

I don't see this as a Win - Win anyway it turns out. 

What would you do? 

I wanted to show an interesting chart as of today.

If you are familiar with stocks and stock charts you know that the prices of those stocks tend to fluctuate between specific ranges.

Over a period of time it is easy to see what traders call a Floor or a Ceiling.

For a stock to break through the Floor or push above Ceiling it generally needs Volume.
It's the Volume that is the sustaining fuel for the stock in continuing into uncharted territory.

I grabbed a 3 month chart of the Ten Year T-Note.
You can see that it has tested breaking through the floor numerous times.

You can also see that it tested the waters above 4.75% a couple of times but just couldn't hold it.

Well it's now gathered enough steam and has pushed above to 4.79%.

The question is - Does it have the steam to continue on - or will it drop back down into range?

Well here's some fuel...
Last Friday, we saw the University of Michigan Consumer Confidence Index numbers released. For the first time in four months, the index is telling us that consumers are more confident than previously expected. That's one pile of logs on the fire.

And then, here's another...
We have the Builder Confidence Survey numbers and you can guess how they tend to feel.
They are less than positive.
There's another log for the fire!

While the 10 yr. doesn't determine the long term interest rates - it does mirror them.
Be prepared for rates to resettle into another, albeit perhaps higher range in the new future.

The Only Free Credit Report

If you wanted a copy of your credit report do you know where to go?

There is a commercial running constantly on TV.
It starts with a nice looking guy, smiling at the camera,
He says, "I'm thinking of a number..."
His number happens to be 720

You know the commercial - right?
It's for a website called FreeCreditReport.com

That sounds like an excellent place to get a copy of your credit report doesn't it?
It's not.
And surprise, it's also not free!
While it is owned by one of the three credit bureaus, Experian.
It is really a marketing gimmick design to sign you up for their "Triple Advantage" service.

Let's Google "Free Credit Report"
- which of the 35 Million pages is the best?

I'll tell you.
The site you DO want to use is www.annualcreditreport.com

It's the only site,
Let me repeat that again for emphasis...
It's the ONLY SITE that allows for a truly free annual credit report.


Here's the FTC's page on credit reports,
http://www.ftc.gov/bcp/conline/pubs/credit/freereports.shtm

That's the good part.
You have access to your credit. You can see what you have and how you have paid.
Errors? You can now address them and fix them.

The not so good part...
No matter who pulls your credit, you using any of the free services, or the lender next door,
(which happened to go out of business first of this month).
I cannot use that credit report. I have to pull my own credit report.
Why? It's all about Fraud.

I am bonded, I am licensed, I am regulated.
When I submit a loan application the lender MUST be confident that the credit report truly represents the borrower, they trust me to make sure it does.

You see, most fraud starts at the credit report.

The borrower should not have a problem with this. The few that do are the same who complain when they use a credit card at checkout and the checker asks to see their ID.

On a related issue - What's your FICO?
The correct answer would be, "Which one?"
I'm not talking about the three scores each from the three different credit reporting companies.
You may not know this but your FICO score at the car dealer is different from the one I get.
The difference is how the computer algorithm weighs the various aspects of your credit profile.
Listen to the car commercials on TV – Listen for the words, "Auto FICO".
Now that I told you, you'll start noticing it!

By The Way:
Next week, I'll be giving away FREE MONEY!
Sign up for my "Lifetime of Nothing Plan" * for a one time membership fee of $500 and I'll give you Two Hundred and Fifty Dollars - Absolutely FREE!

* The Lifetime of Nothing Plan includes absolutely nothing, but membership is guaranteed for life.

• Are you one of the unlucky ones who have seen the value of their home drop significantly?

• Did you purchase your home or been re-assessed in the last couple of years?
• Are you set to ride this "correction" out?

If you answered Yes to these three questions you may be able to do something that will cost you nothing - yet could save you plenty of cash now and in the future?

Lower you Property Tax Bill !

Intrigued?

Each county is different but in general terms all you need to do is ask to be re-assessed.
You may be surprised to find your county is proactive and is already planning on reassessing your area!

In 1978, we in California passed Prop. 8, allowing homeowners to request an re-assesment of their homes.
When values are on the upswing - this obviously isn't something you want to do.
However, if prices have declined since you were last assessed it could save you some serious cash.

How much? 
Let's look at the numbers...
Let's take a home purchased a couple of years ago for $650,000.
With a current tax bill of $7,312 a year.
Let's assume that the current value has dropped 15% or so making the current value around $550,000.
The tax bill on a property of that value would be $6,187 or $1,125 less!

Get started by contacting your County Assessors Office.
Your Assessor may have their own department or be a part of the Recorders / Clerks Office

In Contra Costa County it is here:  http://www.co.contra-costa.ca.us/depart/assr/assr.htm
In Alameda:  http://www.acgov.org/assessor/index.htm
In Marin: http://www.co.marin.ca.us/default1024.asp
In Napa: http://www.co.napa.ca.us/
In Orange: http://www.oc.ca.gov/assessor/
In Sacramento: http://www.assessor.saccounty.net/
In San Francisco Call 415-554-5596 (there website seems to be down)
In San Mateo: http://www.smcare.org/
In Santa Clara: http://www.scc-assessor.org/portal/site/asr/
In Solano: http://www.co.solano.ca.us/
In Sonoma: http://www.sonoma-county.org/

The more value you have lost since the last assessment, the greater you may be able to save!

I came across what might be a very valuable site for homeowners in trouble.

It's called WorkItOut.com

I did a little background checking and although the site is in "beta" it is NOT an start up.

From the outside it appears to be on the up and up.

It was originally registered with Network Solutions back in 1998 by a legal firm in Irvine, The Wolf Firm, and specifically Alan Wolf.

I did a little further digging and found that this isn't an "open to all" type of club.
To join, you have to be referred by your lender.

There is a limited amount of content on the site available for all to see including what I believe may be the most important two features;

• The FAQ, which gives the reader brutally honest answers to many of the common questions they may want to ask. It's here: LINK

• The List of Lenders and the contact information for that lender's Loss Mitigation Department.
  

What is that?
Let's say you are in trouble. You know it. So who do you call?
You call your Trusted Mortgage Professional!
Good call - so to speak.
But unfortunately, after running numbers and scenarios, they said there was nothing they could do for you.

Now who do you call? Your Lender - that's who!

There's a problem here too. You start with the toll free number and spend the rest of the day on hold and then finally explaining in great detail why you are calling, only to be transfered to the next representative or department who may be able to help you. This goes on with 17 different departments until finally you either hang up or get lucky and get the right department.

The people you really need to talk to within your lenders spiderweb of phone banks is the Loss Mitigation Department.

Luckily for you they are all listed right here. http://www.workitout.com/mod/glossary/view.php?id=98

I noticed it also has answers to a few questions not specifically Foreclosure related.

If you want a copy of your credit report do you know where to go?

NOT www.FreeCreditReport.com - right?
It's not free.
It is a marketing gimmick design to sign you up for their "Triple Advantage" service.

The site you DO want to use is www.annualcreditreport.com
It's the only site,

Let me repeat that again for emphasis...

It's the ONLY SITE, that allows for a truly free annual credit report

But you already knew that right?

This is part Three in a Four part series of articles detailing the changing mortgage market.

The Foreclosure Crunch

The Foreclosure Crunch is closely related to the LTV Crunch.

In fact, both crunches fuel on each other.

I would suggest you first read the LTV Crunch before you dive into this easy concept.

Now where to start?
Hmmmmmm .....

Let's start with the 3 TRILLION in Adjustable Rate Mortgages that we know are just about ready to change, or recast in the next year. That's a huge number! And yes, it is a national number but it is going to have an enormous impact of home loans in here in Contra Costa. I mentioned we know these loans are set to change but what does that mean?

As an example, let's say you financed a couple of years ago. The best rate and term your broker found you was 5.625% fixed for 3 years (or 5, 7, or perhaps 10). It was fixed at a time in history where the rates were the lowest. That's the good part. the bad part is that the loan now is set to adjust to the current rate environment. And rates are higher now than they were then. That means the monthly mortgage payment is going to go up. How much? On a POA it could be as much as double or triple! Other loans might be a bit more manageable.

Like explained in the LTV Crunch, and the Credit Crunch, these borrowers may not be able to refinance into anything! When that happens they can either:

• Live with it and try to meet their obligations,
• List their home for sale,
• or fall behind and go into Foreclosure
  

1. Go to google maps and pull up your property.
2. Now draw a circle 1/4 mile around your home.
3. Now count the number of homes in that circle.

• Live in a single family home (no condos)
  
• In the Lafayette, Orinda, Moraga, Walnut Creek, Alamo, Danville, Pleasant Hill and Concord area.
• Who have an Adjustable Rate Mortgage at least 3 years old with A Paper lenders.
• I also limited the search to the first 1,500 names.
  

Surprise!
My list started in upscale Lafayette (just because that's what I listed first) and never left!

WOW!

So if you think your neighborhood is safe, if you think you are safe, consider yourself now informed.

It's not all bad news though.

I've said it before and I'll say it again,
"If homeowners are proactive now, they can navigate a soft landing. If they are not, they could find themselves in situations outside their control that could lead to personal financial disasters like bankruptcy and foreclosure."

If you do not know what kind of a mortgage you have, if there is any chance at all, I urge you to seek out a professional review ASAP. Only a True Mortgage Professional will be able to give you an objective opinion on where you stand

.

I came in to the office yesterday to find a gaggle of movers in my elevator.

They had to be accompanied by my favorite security guard, Don.  I asked him, "Who's moving in?"

He replied, "It's not moving in - it's moving out.  Suite 880 is out of business."

"Suite 880? Hey, that's right next to me!  They just moved in a couple of months ago, what happened?"

Don, "I don't know, they just went out of business.  they were one of those mortgage brokers you know... The building management is not too happy about it."

The truth is - they were not really one of "those" mortgage brokers - they were a closing office for mass mailed loan offers - the kind you and I get everyday in our mail box, as well as the Phone Dialers and Spam Emailers.  They did it all!

Their biggest product seller was the Payment Option ARM (they closed 20+ a month).

They had just switched to selling the Money Merge Loans but then I guess the Sub Prime collapse took a bite out of their pipeline.

Well, I can't say I'm sorry to see them go.

Easy come - easy go!