Mark Wisterman's Paradise & Lake Oroville Real Estate Blog

Over the past eighteen months or so I am sure you have seen many an article written by various real estate professionals encouraging buyers to “get off the fence” to take advantage of the low prices and low interest rates currently available.  As a regular reader of this Lake Oroville and Paradise, CA real estate blog you have also seen my views of market conditions over the past year. Many buyers have taken the advice and made some magnificent deals on their purchase of homes in the Oroville and Paradise, Ca real estate markets.

The advice has been taken so seriously in fact that a new dilemma is now facing potential Oroville and Paradise buyers: A lack of adequate inventory!

Suffering from significant loses in the value of their homes, many Oroville and Paradise potential home sellers have decided to wait for the market to get “better” before putting their homes on the market. What the definition of “better” is remains to be seen, but a look at the trend in the Oroville inventory numbers (see chart) points to a need for some sellers to get off the fence themselves and take advantage of the lower interest rates, and the increase in buyer inquiries we are beginning to experience.

Granted, home prices are not what they were in 2006, but if you are waiting for a return to those prices, you are in for a very long wait. Those prices were a result of very loose and irresponsible lending standards. They were not driven by free market demand.

So what is a seller to do? Well, that depends on your circumstances. If you do not need to sell, then DON’T. If you are considering a sell but are thinking about waiting for a year or so for the market to improve, you may be outsmarting yourself. While it is possible (isn’t anything possible) that prices may move up in the next year, it is not very probable. I continue to think that we are at the bottom of this market but that we will be bouncing along the bottom for quite some time. Maybe two to three years before we see any consistent price appreciation trends in our local markets.

Historically low interest rates, and lower prices have significantly increased the home affordability for Californians. An increase in either of these factors will exclude potential buyers from the market further delaying any meaningful recovery.

Another thing to consider when contemplating a sale is how many other homes are on the market that compete for the attention of potential buyers. With inventories at an 8 month low, now would be the best time for your home to be seen by the most buyers.

I know that many of you are upside down with your mortgages at the present time and NEED to wait for a significant turn in home values. But for those of you who owe less than the value of your home or own your homes outright, this may be a good time to think about getting off the fence.

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Through all the conversation and debate surrounding the condition of the housing market in this county, there is one thing I am sure we can all agreee on. The market has changed, is changing, and will continue to change going forward. Some of the change is good; some bad; some needed; some we could all do without.

A lot of what most of us would call “bad changes” for this market centers around the over zealous tightening of lending guidelines, and the knee jerk reaction of lawmakers and regulators that, so far, have inhibited the free market from working it’s “magic.”

Well, my friends, I can’t believe I am about to say this, but recently it seems that the government may have gotten something right with regards to assisting the market.

Today we invited Renee’ Jones from the local Mission Hills Mortgage office of the Lake Oroville real estate market to come to our office and give us an update on the new disclosure requirements that lenders must now make to borrowers during the loan process. Renee’ is a top notch loan officer who strives to stay on top of all the latest lending rules so I knew she would be up to speed on these new regulations.

The Department of Housing and Urban Development  recently mandated that as of January 1, 2010 all lenders must use the same prescribed format for disclosing the terms of a borrowers loan. Not only that, but the timing with which these Good Faith Estimates are to be  delivered to borrowers is also going to be more strictly enforced in order that terms and fees to a loan cannot be changed at the last minute. In fact some of the terms and fees, once disclosed, cannot change at all, safegaurding borrowers from the incompetent and/or dishonest acts that some lenders have used to increase their commissions on the loans they are selling. The new disclosure format will allow you, the borrower to more easily shop for the loan package that provides the most value for your money. Read the rest of this entry »

Now, before revealing my answer to kick starting this real estate market, lets do a quick review of where we are today.

Remember, in part one of this two part post I reminded you that this mortgage mess in which we find ourselves has resulted in MILLIONS of home owners (3 million this year alone) losing their homes. Also, recall that I think that a major portion of these displaced former home owners could probably qualify to buy a home today if it weren’t for the fact that their foreclosure or short sale would be reflected on their credit report for the next 3-5 years. In addition, it seems to me that it would be extremely time consuming to attempt to figure out which of these borrowers were sold a “bill of goods”, which ones had no idea what they were doing, or which ones were just plain irresponsible in handling their finances.

My request for what your ideas might be to fix this was answered by one of my most loyal readers, Steve Davis  who wrote:

“One could start the qualification on who gets help and who does not by the ones that put 20% or more down were really qualified buyers – vs the low or no down people who should have never purchased a home.”

I do agree with Steve that we could start allowing those who had originally put 20% down access to new loans. but we still have the issue of credit scores for these people too.  So what should we do? Read the rest of this entry »

With all the hoopla surrounding the extension of the first time home buyer tax credit, as well as the expansion of a smaller credit to existing home owners, I think it is time to develop a plan that actually addresses the LONG TERM needs of this market. I am talking about more than just the Lake Oroville real estate market here. We need a national solution.

As you know, I am not a big fan of using taxpayer dollars to pay people to buy homes. These handouts, in my view, are only band aid solutions where a tourniquet may be the better answer.  They do nothing to stabilize the market. In fact the tax credit is just going to delay the inevitable unless something is done soon to spur market demand for housing.

What I would like to do, over the next couple of blog posts, is to get your opinion on a plan that I think will finally put this real estate market back on the tracks, without government money.  And just so you know, it must be a great idea because I thought of it while taking a shower.  (If you have never heard of this theory before it must be because you take baths).

So let’s get started fixing this thing. Read the rest of this entry »

Bet that got your attention, huh? While, for now this is a simply an attention getting headline, the reality is that there is a chance this could actually happen.

A recent audit of the FHA loan progran recently revealed that the agency has fallen significantly short in the amount of loan reserves that it is required, by law, to have.  These loan reserves are used to pay claims from lenders when an FHA loans are foreclosed upon.

I don’t want to get overly technical about this but the law requires FHA to have an amount equal to 2% of the outstanding loans that they insure in a reserve account to pay for claims. The current reserves that the FHA has on hand is .53% . Barely a quarter of what is required.

With FHA financing being almost the only way to get a home loan these days, pressure has been mounting on the agency’s reserves.

There are a number of scenarios that, if accurate, could bring these reserves back into line. An article in a recent issue of the Washington Post goes into more details on these scenarios.

The potential impact of this on both buyers and sellers in the Lake Oroville real estate market could be dramatic. Among the solutions to the problem would be to raise the premium the FHA charges for mortgage insurance. This would help build the reserves but, at the same time, increase one’s house payment.

Another would be to raise the amount of money required as a down paymentfor the loan.  Currently an FHA loan requires a down payment of 3.5% of the purchase price, increased recently from 3%. On a $200,000 home a buyer of an Oroville home now needs to have a downpayment of $7,000. If the requirement is raised to 5% that same home will require a down payment of $10,000. A  42% increase! 

There is no doubt, should either or both of these scenarios be put in place, that it will slow the sales of homes. The end result should be that buyer’s will have to work and save a little bit more than they are now before buying a home. This, in my view is a good thing.  

The bottom line here is that the FHA is currently the lifeline to this housing market and it is vital that it stay solvent.

I don’t know about you, but I would much rather increase these requirements, even though it may temporarily sqeeze some buyer’s out of the market, than to have the whole prgram collapes under its own weight.

Oroville homes, Paradise homes, Chic properties, Butte County Listing. For sale

President Obama is expected to sign a congressional resolution that will extend, for another year, the increased conforming loan limits that were put in place in 2008 in an effort to bolster sales of higher priced homes. At the time loans for these homes became very expensive, sometimes carrying interest rates as much as 2-3 percentage points higher than those in the lower price ranges.

The extension would extend through 2010 the current loan limits of $417,000 for most of the U.S. and $729,750 for high-cost areas such as San Francisco and many areas of Southern California.

The conforming loan limit is the maximum mortgage size that Fannie Mae, and Freddie Mac can buy or guarantee.

While this affects the Oroville real estate market somewhat less than other markets in the state, it is an important step to take to keep the statewide housing recovery moving forward which will be good news for all sellers and other homeowners in our state, including the higher priced homes in the Chico real estate market, Butte Valley, as well as some homes for sale in the Paradise area.

The one piece of this puzzle that still needs to be found is the piece that increases the number of providers of Private Mortgage Insurance at an affordable price for home buyers. While the extension of these loan limits is a good piece of legislation, Freddie and Fannie are doing very little lending due to an inadequate number of insurance providers that are willing to insure these loans. When the mortgage crisis hit, many of these companies went bankrupt as they paid off on claims made on the insurance they provided for the overwhelming number of defaulted loans. As you might imagine, the remaining companies don’t want to expose themselves to unnecessary risk in this economic environment.

 For California, the extension of these loan limits is more important that the extension of the federal tax credit, and I am glad that the President seems poised to sign it.

As part of a package of 8 other real estate related bills recently signed into law by California’s Governor, AB 260 provides further protections to those borrowers who are worthy of borrowing money to buy a home, but may be a notch or two below the coveted prime borrower status.

Whether you are a borrower in the Oroville real estate market, or looking at homes for sale in Chico, or have decided that its time to start looking through property listing in Paradise or any other area of Butte County this information is important to know.

The new law places certain limits and prohibitions on what is now being called “higher-priced mortgage loans.”  Directly excerpted from the text of the new law, a higher priced mortgage is defined as:  

(a) Higher-priced mortgage loans —(1) For purposes of this section, a higher-priced mortgage loan is a consumer credit transaction secured by the consumer’s principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by 1.5 or more percentage points for loans secured by a first lien on a dwelling, or by 3.5 or more percentage points for loans secured by a subordinate lien on a dwelling.

(2) “Average prime offer rate” means an annual percentage rate that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage transactions that have low-risk pricing characteristics. The Board publishes average prime offer rates for a broad range of types of transactions in a table updated at least weekly as well as the methodology the Board uses to derive these rates.

To help with the explanation of this I did a little online research and found the published average prime offer rate for 30 year fixed rate mortgage to be 5.06% last week. Based on the newly established definition, a 30 year fixed rate loan on a first mortgage with a rate of 6.56% or more would be considered a higher priced mortgage loan.

If you find yourself in a situation where you only qualify for one of these loans here are the new resrtictions being placed on your lender:  Read the rest of this entry »

The chaos surrounding the meltdown of the mortgage markets over the past 2 years has resulted in lenders going from virtually loaning money to anyone who had a pulse or could fog a mirror, to hardly lending to anyone. As is the nature of a crisis like this, the pendulum swings from one extreme to the other extreme, until finally settling down somewhere in the middle.  It’s almost like Goldilocks and the Three Bears. “This loan is too easy, this loan is too hard, this loan is just right.”

The same thing happens when the government injects themselves into the free market. Sometimes too much, sometimes not enough, very rarely just right.

There are however, new government regulations going into effect July 30, 2009 that I think are going to be of great assistance to borrowers, provided they understand these rules and hold the lenders accountable to follow the guidelines.

Here are the highlights of the new regulations:

 - The earliest that a home purchase can now close is 7 business days after the home buyer is issued his or her initial mortgage disclosures from the lender.

- Except for a credit report fee, upfront fees cannot be collected until the initial disclosures have been received by the borrower.

- Borrowers must now be provided with a copy of the appraisal at least 3 business days before close of escrow. The borrower has a right to waive this requirement. ( I don’t advise doing this though)

- An increase of more that.125% in the Annual Percentage Rate from the initial Truth in Lending Disclosure (TIL)requires the TIL disclosure to be revised  and reissued to the borrower. The borrower must recieve the revised TIL disclosure at least 3 business days before closing providing the borrower time to determine it the borrower is comfortable with the loan choice.

Click on this link to see more details of these new regulations.

The intent of these new regulations is to help eliminate the last minute changes the unscrupulous lenders attempt to sneak into their loans, hoping the borrowers in the Oroville real estate market and beyond will either not notice or will feel pressure to go ahead with the loan because it is so close to being closed. While this is not going to totally eliminate fraudulant loan practices, it is certainly going to make the loan process more transparent to borrowers.

Borrowers, remember that you are responsible for what you agree to and sign. Don’t rely on regulations like these to keep you out of a bad loan. Above all, if you don’t understand something you are being asked to sign, or don’t feel comfortable with your loan. DON’T GO THROUGH WITH IT!!!!!!!!