In an effort to cut down on fraud by borrowers and tighten underwriting criteria, lenders will require a second full credit report just prior to closing escrow. This is part of Fannie Mae’s “loan quality initiative” (LQI) which takes effect June 1st.

Lenders are concerned that  mortgage borrowers shop for things they need for their anticipated new home – often furniture or even a car – possibly thousands of dollars worth of purchases . The home buyer often will open up a new credit account, thus affecting the borrower’s debt-to-income ratio.

What should a home buyer do? The rule of thumb is – abstinence, resist the spending until after escrow closes! Read Fannie Mae’s FAQs on this topic.

Each Thursday, the California Franchise Tax Board updates the numbers for credit availability. Escrow must have closed before a home buyer can submit for the credit. Here are this week’s numbers!

The Treasury Department released data this week on the Home Affordable Modification Program that shows 3.2 million homeowners are eligible for the HAMP program but that only 295,000 have actually gotten a permanent modification.

The Wall Street Journal yesterday also reported that some homeowners, trying to get a loan mod but often having to wait 6-12 months for their bank to determine eligibility, continue making payments but deplete their savings, putting them into worse financial straits.

For many homeowners who can’t get a loan mod through the HAMP program and want to avoid foreclosure, the Administration has begun the Home Affordable Foreclosure Alternatives (HAFA) program – basically, a “pre-packaged” short sale that provides a $3,000 relocation allowance for the homeowner plus financial incentives for the lenders to do a short sale.

OPM means Other People’s Money and it’s a great scam if you can figure out how to do it. You get the glory and someone else pays for it – sweet! Well, a number of developers figured it out. When a developer builds out their homes or condos, they can insert into the covenants and/or deeds a requirement that when the property is sold, a fee must be paid to the  developer’s charitable foundation.

The Lennar complex of condos (between Telephone Rd and Thille, a couple of blocks west of Victoria) has such a deal. Looking at a previous deal we did there, $202.50 went to the Lennar Charitable Housing Foundation. This scam is getting so prevalent that the Residential Purchase Agreement we Realtors use in submitting an offer just added a line item under “Other Costs” called a “private transer fee” for just this sort of thing.

Wanna start your own foundation? Just build some homes!

Morgan Stanley made a business decision to walk away from  5 office buildings in San Francisco they bought at the height of the market in 2007. It’s estimated their value dropped by almost 50%. They were not in foreclosure and were making the payments. It’s called a ‘strategic default‘ – a purely business decision. If Morgan Stanley can walk away, why not you?

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I’ve recently had two excellent escrows bomb because the appraisals came in lower than the offered price – and for two different reasons. A lower appraisal means that if the buyer can’t come up with the difference in cash between the appraised value and the offered value, the deal bombs, much to the dismay and discouragement of all parties.

A common factor for the entry level market is many of the homes being bought and sold have been distressed foreclosure homes that investors have bought for cash, fixed up and “flipped” for $100,000 more several months later. These flipped properties skew the sold comparables for appraisers. In looking for sold comps within the last 4 – 6 months, the appraiser will often see that the home has sold twice – once at the foreclosure auction for cash, and later fixed up and sold for $100k more. Consequently, the higher priced,  flipped homes don’t appraise for the neighborhood of dated, original homes with the much lower price point.

So one of my deals bombed because the property was a “flip”. The investor paid $242k for the REO (bank owned), put about $50k in renovations, then marketed the property at $379k. The appraisal came in at $320k. This is very common in today’s market for entry level homes. There are, in many ways, two market levels today – one level is the price investors pay (all cash!) for their acquisitions and the second level is the price home owners pay. It makes it tough for appraisers to figure out what a property is “worth”.

My second deal bombed because the appraiser was from out of the area, used comparable sales from the investor acquisition side (not the home buyer side) and one comp was used from another condo complex that has a failing HOA and was an inappropriate comp for this deal.

It used to be, if you had a “breath on a mirror” – you could get a loan. Consequently, we’ve gotten ourselves into the mess we’re in, but now the pendulum has swung the other way. As a result of new regulations in the industry, lenders are “skittish”, appraisals are tough, and a deal can bomb at the eleventh hour from the smallest hiccup!

I recently received a phone call from a seller wanting to know if she should disclose a particular piece of information regarding some neighborhood activity.

The answer?? Yes!

If you know it – disclose it. Complete transparency benefits the buyer and you as the seller.

The number of homes in escrow in Ventura for April 2009 is similar to April 2007, while 2010 jumped markedly from 2009.

This data is taken from the Ventura MLS.

The number of homes in escrow in April 2007 to April 2008 more than doubled; while 2008 to 2009 increased about 30%; and 2009 to 2010 is back to the April 2008 level.

This data is taken from the Oxnard MLS.

The number of homes going into escrow in Camarillo for the month of April 2010 is the same as for April 2009 while both are way up from 2008 and 2007.

This data is taken from the Camarillo MLS.