Matt Battiata - Battiata Real Estate Group

Important FHA Loan Information

admin — Wed, 28 Jul 2010 23:04:39 +0000

With over 40% of purchase loans now being FHA, FHA loans have become a huge part of the US real estate market.

The following outlines some important points about FHA loans:

1. FHA loans are not only for lower-income borrowers. FHA loans are available to everyone. There is no maximum income restriction associated with FHA loans, but borrowers do need to substantiate income and assets by submitting proper documentation. This requirement ensures that borrowers are well-vetted and truly able to afford their future homes.

2. FHA loans are not only for first-time buyers. Many people believe FHA loans are available only to first-time home buyers, but this is not the case. Whether borrowers are making their first home purchase or their fifth, they can look to FHA loans as a home financing option.

3. FHA loans are not just small loans; in fact, loan amounts can be as high as almost $800,000. The government recently raised the maximum loan amount from its original cap of $362,790 to $793,750 as a way to help stabilize the housing market. The amount a buyer can borrow varies from county to county.

In San Diego County, the 2010 FHA loan limit is $697,500, in Riverside County it is $500,000, and in Orange County and Los Angeles County it is $729,750. Condo buyers interested in FHA loans can visit www.hud.gov to instantly identify FHA-approved condo associations.

4. FHA loans are not affiliated with the section 8 housing program. While both programs are administered by the U.S. Department of Housing and Urban Development (HUD), FHA loans have nothing to do with low-income subsidized housing. FHA loans are simply mortgages insured by FHA. This insurance provided by the federal government allows lenders to lend more freely by assuring them that they will be repaid in the event of default. Most traditional lenders, including Wells Fargo & Co., JP Morgan Chase and Citigroup are able to provide FHA loans to their customers.

5. FHA loans are often more affordable than conventional loans. While FHA loans typically offer the same interest rates as other loans, borrowers benefit from a much lower down payment of as low as 3.5%.

6. FHA-approved condo developments are more desirable to buyers. With 87% of home buyers indicating that they plan to use FHA loans, condo associations that are not FHA approved are missing out on a significant pool of prospective buyers. Under rules in place since February 2010, an entire condominium development must now apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.

Due to the general unwillingness of today’s lenders to extend credit with respect to conventional loans, many borrowers find that FHA is their best bet. Lenders don’t mind lending when the federal government (FHA) assures them of repayment.

Homeowners associations (HOAs) should note that although FHA-insured mortgages might be easier to obtain, they are not “risky” loans, due in large part to the strict “full documentation” requirements placed on borrowers. Individual buyers or sellers can initiate the approval process or current owners can encourage their HOA to apply.

7. FHA loans are assumable. In addition to lower down-payment and credit-qualifying requirements as compared to conventional loans, FHA loans are assumable. This means that when a seller with an FHA loan sells his or her property, the loan and its financing terms (interest rate) can be transferred to the new buyer. This unique feature will certainly make a property more valuable in times of rising interest rates.

Source RIS Media (“7 things all borrowers should know about FHA Loans”).

San Diego Real Estate Market Statistical Update July 2010

admin — Thu, 08 Jul 2010 17:18:59 +0000

Updated Real Estate Statistics, July 2010*

Avg time it takes for a homeowner in default to lose their home has gone from 251 days in Jan 2008 to 438 days in April 2010 – a 75% increase.

40% of all mortgages issued in 2010 are FHA (gov insured) – up from 20% in 2009, and 2% in 2005 & 2006

Because FHA loans only require a 3.5% down payment (“a subprime loan in sheep’s clothing”), 25% of 2007 & 2008 FHA loans have defaulted.

David Stevens, current FHA Commissioner, “This is a real estate market purely on life support, sustained by the federal government. Having FHA do this much volume is a sign of a very sick system.”

New Home Building Permits fell 10.9% in April & 5.9% in May, to its lowest level in over 50 years. Historically, new home building permits are the best leading indicator for the overall US economy.

New Home Sales dropped by 33% from April to May to their lowest point since WWII

As of mid June, mortgage purchase applications are down 42% since the April 30 end of tax credits (a 13 yr low).

The Pending Home Sales Index, a forward looking indicator, dropped 30% in May compared to April, the worst decline in 9 years.

The Bottom Line

Now that federal and state government tax credits have expired, the real estate market is beginning to face reality. The only saving grace is that 1) The US government is still insuring FHA loans and will likely continue to do so for the foreseeable future & 2) Lenders have learned that they are better off doing short sales vs. foreclosing, and thus are postponing foreclosure sales in favor of short sales.

As I said in my January 2010 San Diego Union Tribune Op-Ed Piece, and contrary to what realtors, newspaper columnists, real estate “experts” and economists have claimed over the past year, the San Diego real estate market has not “hit bottom” and is unfortunately not on the road to recovery. Far from it.

We are a solid 24 months from the bottom of this market. We still have a veritable tidal wave of defaults coming, both in the form of foreclosures (worst case) and short sales (best case). We still have a huge number of homeowners who owe more than their home is worth. And we have a huge number of people who will not be able to afford their payments once mortgage rates go back up to “normal” levels (i.e. not at the historic lows we are at now).

To quote my aforementioned January 17 2010 SDUT Op-Ed piece:

“The truth, unpopular as it may be to say it, is that the market in San Diego County is not ‘at the bottom’ as many would like to believe. There are an unprecedented number of foreclosures and short sales that will be hitting the market here and in other parts of the country over the next few years. Until banks take action to modify mortgages, facilitate short sales, prevent foreclosures and start lending again, these homes will continue to hang over the market, preventing any meaningful improvement.

The public looks to real estate industry experts to evaluate the data and advise them in order to make informed decisions. Speaking in platitudes and ignoring the realities of the market doesn’t do anyone any favors.”

*Real estate statistics source Robert Campbell Real Estate Timing Newsletter July 2010

Luxury Property Short Sales & Strategic Defaults

admin — Thu, 24 Jun 2010 00:47:58 +0000

The upper end, luxury real estate market in San Diego & Orange County has finally taken a significant hit in property values. Prices in the upper end (here defined as properties that were worth at least $1,750,000 or more at the peak of the market), have dropped by as much as 50%, and in some cases more.

Properties that listed and sold in the mid to high $3,000,000′s a few years ago, are now selling in the low $2,000,000′s and even lower. As more and more of these sales close escrow, and the comps get lower and lower, more and more homeowners are questioning the wisdom and business sense of making large monthly payments on properties that they may not have equity in for years to come.

Thus arises the luxury or upper end short sale and strategic default.

$1,000,000+ short sales are truly a different animal than short sales in lower price ranges.

Many high dollar short sales involve “recourse loans” – loans which have been refinanced, and in many cases, where borrowers have pulled out substantial amounts of cash on 2nd’s or equity lines. This means that we need to negotiate a “full and final satisfaction” in order to prevent the seller from being pursued for the deficiency, or remaining balance, by their lender.

We have been extremely successful of late in negotiating high dollar short sales for our clients. A recent deal in the Rancho Santa Fe area resulted in Bank of America accepting a short payoff of $2,200,000 on a loan amount of over $3,200,000. The short sale was negotiated in less than 30 days and was negotiated without the lender requiring any cash contribution by the seller.

In this case, the sellers got out from under the debt of the property and paid absolutely nothing to sell their home.

We have done similar deals with Chase, Wells Fargo, Citi, IndyMac etc.

Every short sale, and especially every high dollar short sale, is unique and requires a unique strategy and approach. One size does not fit all.

In my experience, perhaps the biggest mistake any homeowner can make when considering a short sale is assuming that all agents are the same, and that any agent, (i.e. their neighborhood realtor), can effectively negotiate a short sale.

High dollar short sales are handled differently than lower priced short sales by the banks, and they require a different approach.

Unlike many realtors and attorneys, we do not subcontract out any of our short sale negotiations – we do it all in-house. We have negotiated several hundred short sales and have a documented 90+% success rate.

If you are considering doing a short sale on your home, and have a loan amount of $800,000 or more, do yourself a favor and call me. I am more than happy to answer any questions over the phone, and describe in detail the short sale process I have developed over the past 4-5 years for doing high dollar short sales.

There is no obligation when you call, and whether or not you list with me or not, I guarantee I will give you information that will make the call well worth your time.

I can be reached at 760 930 9898 or 760 390 3895 or via email at matt@battiata.com.

While other agents are blaming the market,

admin — Tue, 15 Jun 2010 16:38:15 +0000

the Battiata Real Estate Group is adapting to it and generating even more buyers for both our Short Sale and non Short Sale property listings by increasing our marketing through TV commercials, radio, the internet, direct mail, flyers, unique signage and placement in San Diego real estate magazines. In fact, we’re generating multiple offers on the majority of our San Diego property listings in less than 30 days.

Sell Your Home Fast & For Top Market Value

admin — Tue, 15 Jun 2010 16:37:54 +0000

Sell your San Diego home fast with San Diego’s premier real estate agent Matt Battiata and his team of real estate professionals at the Battiata Real Estate Group. The Battiata Real Estate Group offers a guaranteed home selling system which includes an aggressive marketing plan customized to each of our property listings, our Move-For-Free program, our Trade-up Program, free staging, concierge service and our No Risk-No Obligation Program.

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admin — Tue, 15 Jun 2010 16:36:28 +0000

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Home Affordable Foreclosure Alternative (HAFA) program and San Diego California

admin — Sat, 15 May 2010 05:32:00 +0000

HAFA & The Year of the Short Sale

At the end of 2008, I predicted 2009 would be the “Year of the Short Sale” because lenders would finally come to the realization that short sales save them a tremendous amount of money versus foreclosing. They did and it was.

I made the same prediction this past December about 2010 – that it would be a repeat of 2009, but with an even higher ratio of short sales to foreclosures, and again be the “Year of the Short Sale”. It is.

For this reason, the New Obama HAFA Short Sale program, which went into effect about a month ago (April 5 2010), is already making a significant impact on the San Diego real estate market.

Short sales, which currently represent roughly 30% of the inventory and sales in San Diego County, can be a notoriously difficult and lengthy process. They take place when a homeowner needs to sell a property that they are upside down on – in other words, a property on which they owe more than is currently worth. In a short sale, the lender agrees to take a loss on the property and accept the proceeds from the sale at current market value instead of foreclosing.

The problem with short sales has been that banks are not real estate companies. They’re banks – they specialize in lending money and collecting interest. They are not good, it turns out, at doing real estate and processing and negotiating short sales. In fact they are really, really bad at it and they do not have the necessary staff to handle the volume of short sales they are faced with.

The result is that banks can often take anywhere from 30 days to 6 months, and in sometimes longer, to respond to offers on short sales and approve them so the sale can close escrow, causing buyers to drop off in frustration.

This process, aside from being incredibly frustrating, is also a very expensive one for banks because it causes many properties to needlessly go to foreclosure.

The reason for this is that a short sale is a race against time – specifically the foreclosure timeline – because the foreclosure process goes on in tandem with the short sale process.

One arm of the bank – the loss mitigation department – is working toward a short sale while the other is moving toward foreclosure. At most lending institutions, these departments have no communication whatsoever, so the left hand literally has no idea what the right hand is doing. When the short sale process drags on, sometimes time expires and the bank forecloses despite the fact that a ready and willing buyer is waiting to purchase the property.

The HAFA program addresses these problems by requiring banks to streamline their short sale approval process.

Once an offer is submitted, the bank must evaluate and respond to the offer within 10 business days. The bank may not foreclose on the property during the short sale process and must agree to waive any rights to pursue a deficiency against the seller after the short sale. Finally, the HAFA program requires lenders to credit sellers $3,000 at closing for moving expenses.

This is good news because short sales are a win-win for lenders, homeowners and the real estate market in general. Banks net significantly more out of a short sale than they do out of a foreclosure. They learn this in every real estate downturn but for some reason forget it in every real estate recovery and then have to learn it all over again.

Homeowners benefit from a short sale versus a foreclosure as well: they preserve their credit, avoid having a foreclosure on their record, get out from under the debt owed on the property (it becomes a settled debt), avoid federal and state taxes on the debt forgiveness and can buy again in 24 months or less.

For many San Diego homeowners who are hopelessly underwater on their homes and are saddled with huge payments, a short sale simply represents a wise business decision – getting out from under a property that may take years to ever appreciate back to what they owe on it, and buying again in a year or two at current market value.

Wall Street giant Morgan Stanley did exactly this on over $2 billion dollars of commercial real estate in the financial district of downtown San Francisco though they were careful to refer to it as an “orderly transfer of assets back to the lender” as opposed to a foreclosure.

Fannie Mae & Freddie Mac stipulate a 24 month seasoning period after a short sale before a borrower can be approved for a home purchase with a government insured loan. However many lenders and credit unions will approve buyers for home loans within less than 24 months of a short sale, and in some cases in a year or less on non government insured loan programs.

Finally, the market benefits because banks typically dramatically under price foreclosures at fire sale prices, causing values to plummet in the areas around a bank owned sale. Less foreclosures means higher comparable sales and a faster recovery for the San Diego market.

The HAFA program, combined with the banks just naturally refining their approval process and getting better and faster at processing short sales after 4 years of practice, means that short sales are actually starting to live up to their name.

The Growing Phenomenon of The Strategic Default

admin — Mon, 10 May 2010 13:46:47 +0000

60 minutes ran a story tonight about the growing phenomenon of “strategic defaults” – people who are walking away from their homes and letting them go to foreclosure, not because they cannot afford them, but because it makes the most business sense in light of how upside down they are on their homes.

The story was based in Arizona, where state law prohibits banks from pursuing a deficiency against a seller after a foreclosure.

In California however, state law does not prohibit banks from pursuing deficiencies against sellers, unless the loans are original purchase money loans. If a seller has refinanced their loans at any point, regardless of whether they have pulled out cash or not, their loans are considered “recourse” loans in California, which means their lender can pursue the seller for the deficiency after a foreclosure.

California is also a “one action state”, which means the lender can only pursue one action to recoup their losses. If the first lien holder forecloses in the typical way it is done in California (a Trustee Sale Auction), that counts as their one action, and they cannot pursue the seller for any losses. The second lien however, which gets nothing in a foreclosure, can and will pursue the seller for 100% of the balance owed on the second loan.

It is for this reason that a short sale represents a much better business decision than a “strategic default” or foreclosure. I have written several blog posts about the fact that, in my opinion, a “strategic default” is a business decision, plain and simple, not a moral or ethical one. Yes, you signed on the dotted line, but the contract on which that dotted line was printed stated that the home was the collateral for the loan and that if the seller defaulted on their payments, the bank could foreclose.

The point is that a short sale makes infinitely more sense than a “strategic” foreclosure primarily because it settles the debt on the first and second liens so the seller walks away without any debt. It also dramatically lessens the impact on the seller’s credit.

For more information on this topic, see my related posts on this blog or visit the short sale page of www.Battiata.com.

HAFA Short Sale San Diego

admin — Fri, 07 May 2010 23:50:19 +0000

Matt Battiata, Broker & CEO of The Battiata Real Estate Group in San Diego, California discusses the California Home Buyers Tax Credit and the new Obama Making Home Affordable HAFA Short Sale Program, which went into effect on April 5th 2010.

The HAFA program requires banks to streamline their short sale approval process.

The HAFA Short Sale Program requires banks to evaluate and respond to offers on short sales within 10 business days, prohibits banks from foreclosing on properties during the short sale process and requires banks to agree to waive any rights to pursue a deficiency against the seller after the short sale.

The HAFA Short Sale program also requires lenders to credit sellers $3,000 at closing for moving expenses.

More information can be found at www.Battiata.com

San Diego Home Prices Fluctuate, Sales Still Down 2/18/10 – KPBS

admin — Fri, 07 May 2010 17:20:09 +0000

Date: 02.18.10
Title: San Diego Home Prices Fluctuate, Sales Still Down
Duration: 33min 02sec
Station: KPBS These Days