Subprime Reality

Let’s face it, a lot of people screwed up. It’s become a tremendous mess and no one wants to take the blame. There are some who can’t avoid the blame. There are others who are looking for a plate full of pitty. And of course, there’s the Govt. Watch Dogs who came in a tad too late, pointing the finger and raising hell like they knew about the scenario all along and are just now doing something about it. Like, who cares?

Subprime Loans, Predatory Lending et al...Why don’t consumers know better than to get involved with misleading mortgage programs? They should know better? Right.

When a subprime fixed rate initial offer has a future configuration with an Adjustable Rate (ARM) which is not explained at the outset, what does the unaware consumer do when new payments are dumped on his head as simply a surprise? And with no warning, as if that could help.

This is the situation the feds are fineally attacking, as if they knew nothing about this procedure for some time. There are even realtors who ask the question, ‘Why didn’t they know better?’ Yeah, that would have been ideal. But look at the frenzy of sales activity, and the equity growth and constant flipping that took place. A call concerning a slump of any kind in the market was for nay sayers that were avoided as were any other negative fist wavers.

Unfortunately, the victims are multiple, and include not only the consumers, but the lenders as well. Both sides are feeling the effects of uncontrolled lending. The momentum of the housing boom created a bizzarre market catering to high-risk borrowers who were only able to qualify for loans with unreal standards. When the offer was made, the consumer signed up without examining the potential downfall.

Lenders are now tightening their standards, with adjustments even with prime standards. Borrowers might do well to work more closely with Realtors in locatiing good lenders.

Subprime, a Result of Predatory Lending

The ad said, “Easy Financing. Low FICO scores no problem. Stated Income only.” What a deal.

It doesn’t take much imagination to picture the chain of events leading to the ultimate conclusion...Foreclosure, based on Predatory Lending. There has been a landslide of financing in a spectacular unprecedented market. Everyone was willing to take any steps necessary to capitalize on a spectacular scenario.

And finally...a new headline:

"All predictions are that we are facing a tsunami of default and foreclosures in the subprime market as homeowners face steep increases in their monthly payments and housing values remain flat, making refinancing virtually impossible," said Rep. Carolyn Maloney, D-N.Y.. Maloney is vice chairman of the Joint Economic Committee and chairs the House Financial Services Subcommittee on Financial Institutions.

Hearings are being held by the Financial Services Committee, examining predictions by the Center for Responsible Lending , concerning default and foreclosure results, which have been extremely negative. It is thought that these findings are based on ‘unrealistic, worst-case assumption,’ said Mortgage Bankers Association Chairman John Robbins. Robbins contends that RealtyTrac is a company that specializes in marketing foreclosed properties, and overestimates the number of foreclosures by roughly 30 percent.

Well, it’s not as bad as it seemed after all. But tell that to the individuals who’s homes are facing bankruptcy. And tell the ‘good news’ to the once greedy, profitable lenders, many of whom are suddenly out of business.
Some sleigh ride. The effects are still being reviewed by the feds, as the real estate market of yore, settles into a degree of normalcy once again. No more flipping. No huge overnight equity gathering. Just average real estate sales, with average real estate profits. And loans based on good FICOs and income. No surprises.

A 2nd Home in Wine Country?

Yes, that wine country...Burgundy. What a wonderful idea.

A client in the process of investing in the neighborhood of 2 million euros ($2,724,202, the euro/dollar exchange being the only negative) for a 2nd home in Burgundy, made the observation, “I can remember a couple of years ago in Paris, it was common for non-French speaking Americans to be taken advantage of. There has been a noticeable change in the last two years. French waiters, taxi drivers and people on the street, go out of their way to be friendly with Americans. I have yet to learn their language, but this is something I plan to change. After all, I’m about to become a home owner and have every intention of becoming articulate in the local language”.

This gentleman has spent every year for many years, at the same hotel in the 7ème arrondissement, and loves Paris. The positive change he has noticed in Paris, has been a common attitude in areas throughout the countryside. Much of the shared attitude goes back to the mutual support during WWII. It’s a healthy environment in which to settle down in a 2nd home.

The current election can only improve this relationship.

Traveling from Auvergne or Burgundy to Paris, is comparable to a trip from Los Angeles to San Diego. Think of it, the museums, theaters and marvelous restaurants in Paris would be that available. And to the south, Corsica, the island paradise on the Mediterranean, is a short flight from Clarmont-Ferrand Airport to Figari near the Bonifacio Coast.

Cordialement,

Robert

Foreclosure! A Dreaded Term

...‘All those years ago, that torture victim kept moving his lips, trying to articulate an explanation, muttering the same words over and over. "It was a mistake," he repeated, and in the next few days I pieced together his sad and foolish tale.’

(From article c.c. “The Torture Debate” by Ariel Dorfman, a Chilean American writer and professor at Duke University)
————

I’ve contacted numerous people who were experiencing everything from the beginning stages of foreclosure, to owners about to loose their homes to auction. The one reaction they had in common, was a lack of willingness to address the problem. They either where not aware of the possibilities, or were not willing to address the most appropriate step outlined. Sad, but true, they dreaded the subject; they dreaded that it was about themselves and it was about to become a reality.
And the reality is, THEY LIVED IN FEAR.

After offering the following information as a solution to consumers for their mortgage problems, there was very little reply. - rk

————

Foreclosure Options - There are eight actions you can take when a home is in foreclosure:

1- Reinstatement: Make up payments and any incidental charges.
2- Redemption: Pay off loan in full.
3- Deed in Lieu of Foreclosure: Turn ownership of property over to bank to avoid
trauma of foreclosure.
4- Legal Delay: If owner can prove amount in default is inaccurate.
5- File Bankruptcy: Not a permanent cure, but can temporarily halt the foreclosure process.
6- Renegotiate with Lender: Generally the current months payment plus a portion of the past due amount. Lender does not want property back.
7- Sell Property: If there is no other choice, selling property is the smartest move,
even at a bargain price. This will avoid losing entire equity and damaging credit at the same time.
8- Do Nothing: This will result in the loss of hard-earned equity and damaged credit, and the lack of ability to purchase another home in the foreseeable future.

————

For those who are able to take advantage of someones misfortune, possibly coming to their aid, the following are simple procedures.

How to Buy a Foreclosure
On RealtyTrac, you can select by county, city, or zip code.
You can also choose by status:
1- Select Pre-Foreclosure for Default Notices, or Lis Pendens
2- Select Auction for Trustee Sales, or Foreclosure Sales.
3- Select Bank Owned for REOs (foreclosures).

...and then,

= Find the best neighborhood for investing in foreclosures.
= Get an ojective neighborhood profile.
= Find neighborhoods that appreciate the most.
= Find neighborhoods that combine educated neighbors, safety from crime, excellent public schools, and a high proportion of larger, owner-occupied single-family detached homes in the price range and location you are seeking.

Foreclosures are rare in more affluent areas such as the South Bay.

Hermosa Beach Living

Why do I feel so close to Hermosa Beach? After all, I come from the other end of the bay — Santa Monica. There was a time when they were considered as one, at opposite ends of the same bay; before zip codes designated subtle area differences.

But living in Hermosa Beach is not the same as living in LA neighborhoods to the east. Being a native, I always considered the beach communities to be a world apart. Born and raised on the beach in Santa Monica, with time shared in the Beach Cities to the south, I always had a special connection with the South Bay. My family belonged to the Santa Monica Paddleboard Club, with mom making the Catalina Race every year on her 90-pound hollow-board, with many of her friends from Hermosa Beach. The first Catalina crossing, running from Santa Monica Pier, was won in 1932 by Tom Blake, beating out Pete Peterson in just under 6 hours. Jon Hall from Hollywood was a popular surfer in the Paddleboard Club in those days.

Between Volleyball on the beach at the foot of Santa Monica Canyon — “The Canyon,” and Hermosa Beach to the south, was a special lifestyle. Making the trip from Santa Monica to the South Bay, was more time consuming via road or public transportation, than even with today’s traffic. Owner operated burger restaurants and breakfast diners were limited...fastfood did not exist. Pier Avenue, as an international restaurant and saloon center, was in its inception.

Some of the bungalow homes and income properties of the 40s still exist, with nouveaux residences along the Strand, and pricing that would send original owners into a state of shock, possibly cardiac arrest. Who in their right mind could ever foresee a sale price in the range of $million plus?

While much has not changed in the area — glorious beaches, nostalgic reflections of beach bungalows and lifestyles of a past generation — fabulous architectural creations now exist; top quality, creative restaurants and extensive business opportunities abound.

Sound financing, good FICO scores and in many cases, impressive home equity, have resulted in almost non-existant South Bay subprime loans and foreclosures, as compared to less affluent LA neighborhoods. South Bay lifestyles are based on solid finances and pride of ownership.

Hermosa Beach is still a special neighborhood, a great place to call home.

Negative Amortization Loan Disclosure.

Borderline consumers with low FICOs, No Doc Stated Income Loans etc, who are in need of a loan to make a mortgage loan work, are likely to be approached with a negative amortization loan.

Why? It’s simple: the lender is about to make a huge profit from higher interest rates, while the consumer makes payments that are doing nothing to reduce the debt. The rate payed to the bank can be 2-3 percent higher than a conservative 30-year fixed-rate loan at 6 percent. The consumer is allowed to make a lower payment due to the higher interest rate. As the consumer continues on the road into more debt, the banks pile up the profit.

Assemblyman Alberto Torrico from San Francisco, earlier this year has proposed bill AB 941, which would require loan advertisements to include a disclosure c.c. the actual interest rates vis-a-vis the payment rates. It will state that should the borrower choose to pay the advertised rate, the principle balance of the loan will increase. Also, the disclosure will not be in fine print, and ‘not smaller than the prevailing font in the printed advertisement.

The commission to brokers on these loans comes from the higher interest rate being charged, typically between 7.5-9 percent. In the meantime, the banks only pay taxes on the minimum portion of the gross assets received. Billions of dollars of these loans are generated by banks.

Consumers often do not see, realize or quite often, even care about this higher interest rate. And all the while, these over-market interest rates are what cause debt to multiply.

These loan practices have created losses and foreclosures. The economy has been dependant on a booming real estate market, with unfortunately some loan procedures creating false benefits.

If the new law passess, consumers will have valuable disclosures to keep them from
the pitfalls of short-term benefits that leave them with long-term headaches. Real estate is in the process of stabilizing and becoming a healthier, more realistic market environment.

In Addition: Interagency Guidance on High Loan-to-Value Residential Real Estate Lending

A 2nd Home in Paradise? Why not?

I was born a few miles from the beach in Santa Monica, and much to the despair of my mother, I spent most of my time on the beach, including evenings sleeping under the lifeguard tower. We hit the surf early in the a.m. So it’s no wonder that you might wonder what I have in mind posting a blog c.c. property in France?

Well, the answer is complex I suppose. France has been under fire by many in the US in recent years, and for understandable reasons. Disagreement over a war can have a negative effect on relationships. The interesting thing that so many here don’t realize is the close feeling that remains with most of the French I’ve come in contact with out in the country. Their world is so different than that in the center of government in Paris.

A friend in Souvigny—a 10th century town near Moulins in Auvergne in the center of the Bourbonnais—educated his young son in the respect he has for the US, and the wondrous events that transpired during the frenzy of WWII. Our countries shared a common cause. We were as one. This feeling has not faded for most in the area who can recall those trying days.

Souvigny attracts a few from the outside, an example of whom is a famous screen writer from Hollywood, a friend of my local real estate broker(l'immobilier). Souvigny is a marvelous retreat offering peace to such people. The past is always present in Souvigny. A small park in the center of this small village from time to time has medieval and renaissance fairs. Local attire, including the childeren, fits the period. Surrounded by the local architecture, a magical sense of transposition takes place; the modern world ceases to exist.

As you spend time in the French countryside, these feelings will be felt time and time again. No great change has taken place over the years—the wondrous beauty of architectural marvels, unsurpassed cheeses, food, and wine; people who share their friendships and lifestyle without question and without ego or guile.

The properties I represent are in Auvergne and Burgundy. For those who appreciate the finest cheeses in the world, you will be aware of Auvergne in the Bourbonnais. And the fine wines of Burgundy are well known worldwide.

As I post info c.c. these fabulous properties in Auvergne and Burgundy, I will include the changing aspects of government, increasing positive trends in US/French relations, taxes, lifestyles and medical programs etc.

There is a terrific potential for 2nd homes, time share programs with friends and retirement investments. As an intro to the concept, I’d like to suggest the wonderfully entertaining novels by Peter Mayle—”A Year in Provence,” and “Toujours Provence”.

Bienvenue!


www.RKChateau-Estates.com
www.KissigRealEstate.com

The Hermosa Beach Fire Dept—Since 1907

What is more symbolic of a community and the courageous men who look after its citizens, than the fire department? The Hermosa Beach Fire Department comprised of volunteers, was incorporated in 1907. The small community grew, along with it its fire department which became better equipped and were referred to as “fathers of the city”. Full-time positions replaced volunteers in 1964.

Organization and Structure

The HBFD Station and Apparatus are symbols of pride. This has become a well equipped department with a staff of proud, highly trained professionals.

Home Safety

Paramedic Program

Reserve Firefighter Program

CPR

Annual Pancake Breakfast

This is a fine time to purchase a home if you are qualified. Interest rates are low, and pricing is moderating.

Hermosa Beach Homes for Sale: Total 100
Single Family Residences: 54
Median: $1,344,000; Low: $759,000; High: $11,000,000
Townhome/Condos: 46
Median: $1,349,000; Low: $515,000; High: $2,499,000

Feel free to contact me if you need help locating property in So. California's beautiful, balmy South Bay: Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo.

Prime Rates: The Way to Go

Until recently, subprimes were the answer for unqualified buyers to sign up for a home loan.

As a result of this alleged panacea, one of the nation’s largerst providers of mortgages to high-risk borrowers, has filed for bankruptcy. There has been a surge of defaults in subprimes. More than two dozen subprime lenders have subsequently shut down.

People are attracted to subprime’s initially low payments, which are more attractive than the higher prime rate loans. What is overlooked is the likelyhood that there will be prepayment penalties, a balloon payment, or both.

Adjustable rate mortgages (ARMs) are another insideaous factor. ARMs often make up a large portion of the subprime market. As a result, payments balloon, and suddenly as in a nightmare, are beyond the means of the borrower. Foreclosures are the blossoming result. The borrower has been exposed to a potential fraud.

Only the positive features of mortgage loans are used in advertising. The only means of identifying “subprime” loans is by the interest rates. If they are above market rate, this indicates a risky loan..

So make sure you are ready to buy a house. Don’t enter home ownership with a subprime loan. Make sure you have a good credit rating and are not in debt.

This is a fine time to purchase a home if you are qualified. Interest rates are low, and pricing is moderating. With a reasonable prime rate loan, the fraud nighmare of subprime loans can be avoided.

Today...

Currently, in the South Bay, there are 304 properties available comprising:

El Segundo: Total 24
Single Family Residences: 15
Median: $1,280,000; Low: $575,000; High: $1,790,000,000
Townhome/Condos: 9
Median: $659,000; Low: $450,000; High: $789,000

Manhattan Beach: Total 117
Single Family Residences: 89
Median: $1,611,750; Low: $969,900; High: $2,495,000
Townhome/Condos: 28
Median: $1,797,000; Low: $700,000; High: $4,950,000

Hermosa Beach: Total 100
Single Family Residences: 54
Median: $1,344,000; Low: $759,000; High: $11,000,000
Townhome/Condos: 46
Median: $1,349,000; Low: $515,000; High: $2,499,000

Redondo Beach South: Total 63
Single Family Residences: 26
Median: $1,144,000; Low: $695,000; High: $2,199,000
Townhome/Condos: 37
Median: $875,000; Low: $369,000; High: $1,625,000

Feel free to contact me if you need help locating property in So. California's beautiful, balmy South Bay: Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo

A Unique Hermosa Beach Hotel and Beach Volleyball

I had an e-mail the other day from someone expressing an interest in purchasing a unit in The Beach House, in Hermosa Beach—a hotel with individually owned units available for rent, and managed by the hotel. There has been nothing available for sale here for over a year, which comes as no surprise. It’s a good location to park one’s money and take a share of the rental fee etc.

Anyway, what has been developed here a few years ago is mighty pleasing aesthetically. The space has stood fallow for a number of years, ever since the old Surf And Sand Beach Club/Biltmore Hotel was torn down. The Beach House was designed and built with excellent taste. Each unit and the amenities reflect the same degree of attention.

My contact was interested in an investment property, and one close to beach volleyball activity. Apparently, beach volleyball has become a factor in locating an investment property in the area.

Interestingly enough, beach volleyball began in Santa Monica around 1926 at, and near the Deauville Beach Club, a swank chateau-like edifice sprawling across the sand on the north end of Santa Monica Pier. We had a depression going on at the time, not a lot of big spenders. No BMWs or Benzs cruising around. There were a few Buick and Cadillac touring-cars belonging primarily to the Hollywood celebrities that dropped in.

At the other end of Santa Monica Bay, a group of South Bay businessmen opened membership and began construction and operation of an exclusive professional men’s club—The Surf And Sand Beach Club on the Strand in Hermosa Beach. At the beginning of World War II the by then-named Hermosa Biltmore Hotel was converted into a 120-room hotel. Each room contained a toilet and wash bowl, over half the rooms a private bath, several with connecting baths. Every room completely renovated and new bed, springs, mattress and furniture and numerous new rugs in the first half of 1955. A decade or so later the Biltmore was no more, and the property lay vacant.

In recent years The Beach House has filled the empty space nicely and made a comfortably elegant hotel very adjacent to beach volleyball and all the other local attractions.

Today...

Currently, there are 100 properties available comprising:
Single Family Residences: 53
Median: $1,299,000,000; Low: $759,000; High: $11,000,000
Townhome/Condos: 50
Median: $1,362,000; Low: $515,000; High: $2,499,900

Of these properties, 26 SFRs are in the Sand Section, west of Valley Drive.
Median: $1,899,500; High: $11,000,000
And, there are 29 Townhome/Condos available in the Sand Section.
Median: $1,174,000; High: $1,325,000

Feel free to contact me if you need help locating property in So. California's beautiful, balmy South Bay: Manhattan Beach, Hermosa Beach, Redondo Beach, El Segundo, Palos Verdes.