MeredithMortgageTeam's Blog

With the deflation of the real estate “bubble,” the collapse of major financial institutions, and bad mortgage lending policies and processes, we’re in the midst of the perfect economic storm. The problem is that the storm isn’t over yet.

The oldest of baby boomers — people born in the United States between 1946-1964 — are starting to retire. Many boomers own more than one home. As boomers leave the workforce and want to divest themselves of some of their properties, and as they die and pass along those homes to children who already have houses of their own, we’re going to see an increase in the total available inventory. We’re just at the beginning of this stage; it will unfold over the next 10-20 years.

In many markets, we already have a glut of housing inventory due to the mass foreclosures that have happened in recent years. This is not good. Too much supply and not enough demand is a recipe for further drops in prices. And declines in housing values will make many properties good investment properties — meaning an open market for foreign investors — one property at a time.

But there is a largely untapped market in the United States: the Latinos. This demographic makes up 15.8 percent of the U.S. population but only 1 percent of the home owner market. If cultivated, this group could balance out supply and demand in housing during the next decade.

Why Aren’t They Buying Now?

Hispanic ownership is low for a variety of reasons:

• Lack of education within the Hispanic community regarding mortgage loans and home ownership.
• Lack of education within the real estate industry on how to approach and engage the marketplace. (No, you don’t have to speak Spanish, but it doesn’t hurt!)
• A need to broaden the cultural concept of the “family home” to include more than just the nuclear family.

The Benefits of Working With Latino Buyers
 found out through personal experience that working with Latino buyers can be really rewarding — both emotionally and financially. What you have to understand about the Latino market is that they decide if they like you first. If they do, then they’ll talk business. It’s a relationship issue. You have to talk about family, personal activities, and matters of the heart before matters of business become relevant. But once you are accepted, you are like family to them. You will be invited to social gatherings and referred to everyone they know.

But the flip side of that is you must honor the relationship or risk losing it. This means that you have to truly be interested in building relationships over the long term in order to operate effectively in this market. So if you’re like the practitioners who have come by my booth at the NAR Conference & Expo and said, “I don’t want to get to know them better; I just want to sell them a house,” when I talked to you about relationships — well, this probably isn’t the market for you.

Ahead of the Game

There are organizations that have seen this trend coming and are ahead of the curve. You may be able to find support and information from them. For instance, the National Association of Hispanic Real Estate Professionals has advice for practitioners of all nationalities about working with the Latino market. You also might look into getting your At Home With Diversity certification to understand this underserved market even more. Here are some additional resources:

• NAR offers grants to local boards and associations to help promote diversity. You might consider creating a seminar program or a home owner fair in the area to promote awareness and education on home ownership for the Hispanic community.
• NAR also offers a Diversity Toolkit that can help your association get a diversity program in place.
• Kiss, Bow or Shake Hands: The Bestselling Guide to Doing Business in More than 60 Countries, by Terri Morrison and Wayne Conaway. This book can give you some basics to understanding the differences in culture that you’ll need to know to work in this market.

The market is in trouble, and it could continue to falter. But we, as a group, can influence it for the better. If each of us could make a few families from this group home owners this year who otherwise might not have considered it, we could collectively create millions of home sales. This would go a long way towards solving the housing crisis. The key question here is: What will you do to help yourself, your industry, and consumers?

Watch Before You E-mail, Court Says

E-mails are just as binding in real estate negotiations as traditional ink-on-paper contracts, according to a state court ruling in New York regarding a real estate dispute.

“Given the vast growth in the last decade and a half in the number of people and entities regularly using e-mail,” handwriting and e-mail should now basically be considered one and the same, ruled the Appellate Division, First Department of State Supreme Court in Manhattan, N.Y.–which handed down its ruling on Oct. 5, but it mostly went unnoticed by the public. The ruling was appealed this week to New York’s highest court, the Court of Appeals.

The case–Naldi v. Grunberg–stems from accusations of a breach of contract in a commercial real estate transaction. The court’s ruling, which also applies to residential transactions, is expected to bring some clarity to how legally binding e-mail is in real estate.

“As much as communication originally written or typed on paper, an e-mail retrievable from computer storage” is proof of a deal, the court said.

Robert J. Braverman, a Manhattan real estate lawyer, told The New York Times, “you need to be mindful of what it is you are saying in electronic communications.” For example, a broker or seller who uses a phrase such as “$700,000 was more of what I had in mind” in an e-mail “might have a problem,” Braverman says.

Mario J. Suarez, a lawyer at Thompson Hine, says adding a disclaimer on e-mails may help. The e-mail disclaimer may read something like the communications “shall not be deemed an offer, as no documents are binding unless and until executed.”

Source: “E-mail May Be Binding, State Court Rules,” The New York Times (Feb. 17, 2011)

Wells Fargo Refunds $10 Million to Vets
 

Wells Fargo & Co. has agreed to refund up to $10 million in fees to eligible military veterans who refinanced their mortgage with the bank, in settling a lawsuit that alleges the bank harmed veterans by charging improperly high fees on mortgages.

The lawsuit filed in the State Court of Troup County, Ga., claimed the bank failed to use “reasonable care” in assessing attorney fees when complying with the Veterans Administration’s Interest Rate Reduction Refinancing Loan rules.

Veterans who refinanced with Wells Fargo between Jan. 20, 2004, and Oct. 7, 2010, are eligible for the refunds from the settlement.

“Since the lawsuit allegation was raised, we have diligently worked with our veteran customers who inquired about their fees and we refunded them if there was an error in the third-party charges that were assessed,” says Cara Heiden, co-president of Wells Fargo Home Mortgage. “We hope that by settling this matter, we can demonstrate to veterans our steadfast commitment to doing right by them.”

Banks have been fighting off a number of allegations in recent weeks that they’ve mishandled many mortgages for military families and vets.

J.P. Morgan Chase & Co. recently has apologized for overcharging at least 4,500 active service members and wrongly foreclosing on 18 military families.

Laws are in place for veterans and active duty military members to limit their interest rates and fees with mortgages and protect them from foreclosure.

Source: “Wells Fargo Settles Veteran-Related Suit for About $10 Million,” Dow Jones (Feb. 18, 2011)

Is Luxury Making a Comeback?

Uber-rich Americans are spending again, on everything from fancy cars to second homes.

“Personal embracement of luxury is now back to (pre-recession) 2007 levels,” marketing specialist Jim Taylor, author of “Selling to the New Elite,” told USA Today. “We’re seeing that in cars, private jet usage and finally, in high-end real estate. There’s a real change in the way people feel about money. They’re making purchases they put off during the recession.”

For example, second-home markets are on the rise: Vacation homes in Cape Cod, Mass., for example, increased 9 percent in 2010. In Palm Beach, Fla., home sales increased nearly 40 percent, and in Hilton Head, S.C., home sales were up nearly 14 percent. Luxury home sales in Southern California are also beginning to pick up, analysts say.

“We’re starting to see movement,” says Madison Hildebrand, a real estate professional who specializes in selling homes in Southern California, and also star of the Bravo’s “Million Dollar Listing” reality show. “People are more confident.”

Analysts also note that when the wealthy start buying, it often has a trickle down effect among middle and upper-income shoppers too.

Source: “For the Wealthy, Luxury is Back,” USA Today (Feb. 20, 2011)

Boomers Expected to Change Housing Priorities
 

Developers and builders expect baby boomers to re-emerge in the real estate market soon, but they say boomers likely will come with a simpler agenda when it comes to what they’re looking for in a home.

“We have an opportunity to rethink a lot of the things we’ve done” in designing communities and homes that are intended for that age group, says Douglas Van Lerberghe, a land planner in Denver, who spoke during the National Association of Home Builders conference in Orlando, Fla., last month.

Housing experts predict retiring boomers will want a greater variety of housing styles, smaller homes, and developments that are restricted to older buyers.

Other high priorities they expect from this age group:

▪ Younger boomers will want to continue to work so homes close to job hubs will be important and home offices in floor plans.
▪ Walking trails are a No. 1 amenity desired by this age group.
▪ Gated access to communities and security is important.
▪ Expanded storage into garages.

Source: “Boomers Set to Reshape Housing Market, Again,” Chicago Tribune (Feb. 13, 2011)

Read more:Living Big in a Small Home

$1 Million Home Sales Boost California Market

While overall home sales in California declined in 2010, one bright spot emerged: Sales in homes costing more than $1 million increased last year for the first time since 2005, reports DataQuick Information Systems.

The company reported that 22,529 homes sold for $1 million or more in 2010 in California, up 21 percent from 2009. In fact, sales of $1 million or more homes are at their highest levels since 2008, when 24,436 homes sold for $1 million-plus. Million-dollar home sales peaked in 2005 at 54,773, but have steadily declined every year through 2009.

“Prestige home buyers respond to a different set of motivations than the rest of us,” says DataQuick President John Walsh. “Their decisions are less dependent on jobs, prices and interest rates, and more on how their portfolio is doing.”

The most expensive home sold in the state last year: A 35,378-square-foot, 15-bedroom, 7-bathroom Bel Air home on 2.2 acres, which sold for $50 million in June.

The California cities that boasted the highest number of $1 million or more home sales last year included San Marino in Los Angeles County, Los Altos in Santa Clara County, Atherton and Hillsborough in San Mateo County, and Rancho Santa Fe in San Diego County.

Source: “Sales of $1 Million-Plus Homes Increased in California Last Year Amid ‘Top-Down’ Recovery,” Associated Press (Feb. 11, 2011)

Read more:

Marketing Top-Line Features for Luxury Buyers

4 Tips to Avoid Foreclosure Scams

More home owners are falling prey to scams that promise to “stop the foreclosure” and “save your home.”

The Federal Trade Commission has released a report to help borrowers avoid falling victim to such scams, here are a few of its tips:

1. Watch for outlandish claims. “Eliminate your debt!” and “We guarantee to stop the auction” are too good to be true. If it sounds like an easy way out, don’t believe it, the FTC warns.

2. Don’t pay up-front costs. Consumer investigator Dale Cardwell warns home owners to beware of any deal that requires you to pay up-front fees. Cardwell says you shouldn’t pay any business or person who promises to modify your loan because only your lender can do that.

3. Beware of those imitating government agencies. Watch out for scammers who may capture logos, names, photos, and Web sites to make it look like they are part of a government agency.

4. Make payments only to your lender, no one else. Never write a check to someone else instead of your lender for your mortgage. Scammers may present an official looking reinstatement package and tell you to pay everything to them. Send payments only to your loan servicer, experts recommend.

Source: “In Saving Home, Steer Clear of Scams,” The Atlanta Journal-Constitution (Feb. 13, 2011)

Read more:
Quiz: Mortgage Fraud

30-Year Rates Drop Slightly, But Still 5%

The 30-year fixed rate mortgage averaged 5 percent this week, after breaking the 5 percent mark last week for the first time in nearly a year, according to the Freddie Mac weekly mortgage market survey. Last week, the 30-year mortgage rate averaged 5.05 percent.

“Fixed mortgage rates eased slightly this week and continue to be very affordable,” says Frank Nothaft, Freddie Mac chief economist. “Prior to 2009, interest rates for 30-year fixed rate mortgages had never been at 5 percent since our survey began in April 1971. In both 1981 and 1982, the rates were over three times as high as they are today. … The housing market is struggling to regain traction despite still historically low rates.”

Here’s how other rates fared for the week:

• 15-year fixed-rate mortgage averaged 4.27 percent, down from last week’s 4.29 percent.
• 5-year adjustable-rate mortgage averaged 3.87 percent, down from last week’s 3.92 percent.
• 1-year adjustable-rate mortgage averaged 3.39 percent, up slightly from last week’s 3.35 percent.

Source: “30-Year Fixed-Rate Mortgage Drops to 5 Percent,” Freddie Mac (Feb. 17, 2011)

New Fed Rule May Lower Costs for Borrowers

A new Federal Reserve rule that takes effect April 1 is expected to lead to lower costs for borrowers, but some experts say it’s going to hurt the mortgage industry.

Under the new rule, borrowers who get their mortgages through brokers likely will pay less for services and brokers will be required to offer borrowers the lowest possible interest rate and fees that they qualify for. Most banks and other direct lenders, including some mortgage companies that operate like banks, are exempt from the rule.

The new Federal Reserve rule–the “Loan Originator Compensation amendment to Regulation Z”–is to help prevent borrowers from being steered into high-cost or risky loans.

Mortgage brokers used to earn more money on a loan the higher the interest rate and points. But the new rule covers how a loan originator is paid, setting a fixed commission and no longer tying the amount to the loan terms.

Some in the mortgage industry aren’t happy with the new rule, saying it makes mortgage brokers less competitive against the big banks.

“I will now get paid the same amount to process a plain-vanilla loan as I will a complex loan of equal size that requires more work,” says Mark Yecies, an owner of SunQuest Funding, a mortgage broker and lender in Cranford, N.J.

Officials with the National Association of Mortgage Brokers also have expressed concerns, saying the rule would likely put a lot of independent brokers out of business.

Source: “New Fed Rule for Mortgage Brokers,” The New York Times (Feb. 17, 2011)

Borrowers May Still Owe Even After Foreclosure

In Michigan, foreclosing on a home or selling it in a short sale doesn’t necessarily erase the home owner from paying back the debt. They still may owe thousands of dollars in debt on the home, and lenders are now collecting — even years or decades later.

The state law mostly has gone unenforced, until recently. But with plummeting property values pummeling the state, lenders are now finding it a solution to curtail their mounting debt. As such, lenders are going after borrowers for unpaid balances on home loans in what is called “mortgage deficiency,” plus adding legal fees and interest too.

Lenders can pursue the home owners to pay the difference between what the property is eventually sold for and what was owed on the home. Lenders have up to six years to sue the home owners to reclaim the bad debt. If granted, they can pursue the borrower to recover the debt for a decade, and even renew that judgment for another decade or indefinitely until they collect.

The only way borrowers can avoid being held liable for the outstanding debt is by getting a release from their lender in a short sale or in foreclosure cases if they file for Chapter 7 bankruptcy, the debt will be completely erased.

“There are a lot of folks walking around now who don’t understand that in three or four years they’re going to wake up and have letters coming in from debt collectors,” Dan Lievois, a short-sale expert and chief executive of Devon Title Agency in Troy, Mich., told The Detroit News. “That’s what’s sad.”

Michigan foreclosures have skyrocketed since 2006, and home prices in the state have dropped 34 percent in the past decade.

Source: “Even After Foreclosure, Debt Collectors Still Pursue Borrowers for Repayment,” The Detroit News (Feb. 16, 2011)