Aaron Cullen - Brokers Inc.

Ok, so the guys over at ThinkBigWorkSmall put together a five minute video outlining how the assets of IndyMac bank were purchased from the FDIC and are now being used to rip-off the taxpayers and home owners, all at the same time.

If what these guys have put together is true, our country and government have sunk to some pretty low lows...  Watch the video and share it with anyone who has an interest.  This is really hard to believe!

IndyMac and the FDIC, killing home owners!

This was written by RoburtHerzong.  I have posted this for anyone who has an Indymac loan and can't make their payments.

Is The FDIC Killing Short Sales?

As some of you already know, I blogged recently about being interviewed recently by our local NBC news affiliate.  To read the blog, click here.  Basically, IndyMac Bank (now OneWest Bank), is holding one of my clients hostage, demanding a $75k promissory note, or they will proceed to foreclosure.  For the life of me, I couldn't figure out why they were doing this.  The BPO came in at the contract price of $275k, with a net to IndyMac of $241k.  What advantage could there possibly be for them to proceed to foreclosure?

Yesterday, I figured it out.  You see, IndyMac was taken over by the FDIC and sold to OneWest Bank in March/2009.  Guess who the investors are behind OneWest?  George Soros, Michael Dell, Steve Mnuchin (former Goldman Sachs executive), and John Paulson (hedge-fund billionaire).  

Now, listen to the deal they got from the FDIC....

Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts).  They purchased all current HELOCS at 58% of Par Value!!!

Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following:  For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss.  The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan.  Let's use my clients situation as an example:

Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200

OneWest pays $334,600 for the loan

We have an all cash offer of $241,000, net to OneWest.

So, let's do the math, shall we?  The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer.  In this case, $485,200-$241,000, or $244,200.  Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called "net loss".  So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).

Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360.  Remember, OneWest paid $334,600 for the loan.  So, OneWest puts $101,760 in their pocket, thanks to the FDIC.  Folks, that is over $100k of our hard-earned tax dollars!

So, you ask...Why does this program hurt short sales?  Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES!  The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure?  And we wonder why nobody can get a Loan Modification?  Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k?  And, to add injury to insult, they have held this loan for 6 months!  Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE!  Imagine if they could make $100k, then get a deficiency judgement!  Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC.  Some of them include:  Bank of America (go figure), CitiMortgage, Wells Fargo, etc.  

This entire agreement between the FDIC and OneWest can be found here, on the FDIC website.  It's all there, for the world to see!  They have it all layed out.  All of the formulas, worksheets, etc.  

Now, it's up to us to bring it to the attention of our elected officials and the media.  Enough is Enough!

UPDATE 9/18/09:  I JUST READ AN AWESOME ARTICLE ON THIS, THAT GOES INTO WAY MORE DETAIL THAN MY BLOG ABOVE.  TAKE THE TIME TO READ IT WHEN YOU GET A CHANCE! CLICK HERE TO READ IT.

Wait, it gets better...The FDIC just announced that it needs to start borrowing money from the U.S. Treasure in order to replenish it's deposit insurance fund (the same fund being used to pay all of these banks in the Loss Share Agreements).  Go Figure!  Click Here to read it.

Robert G. Hertzog

Phoenix Real Estate Consultant

The real estate market has its ups and downs.  Whether in a seller's market or a buyer's market, human nature plays a role with home buyers.  Over 18 years in the business, I have learned that "fear of loss" is one of, if not the strongest, emotions and motivating factors a home buyer will face.  

In a seller's market, where homes go pending in a week, or three days, or in one, buyers run around submitting offers left and right and often bid over the asking price, due to their "fear" of losing that home to another buyer.  It those markets, it is a great time to be a seller, and it may be some time before we see a market like that again.

In a buyer's market, such as the one we are in now, there is not a lot of "fear," particularly with buyers who have been sitting on the fence and hoping to catch the maket bottom.  To those buyers I say: "The bottom is at hand, or near by, and it is time to listen to your Realtor and pay attention to the market data."  If you are looking to buy a home in the price-point that consists of 50% or more of the sales in your area, and you are looking to "steal" a home that is already under-priced, please think again.  I know the "fear of loss" is not the first thing entering your mind in this market, but when the market does turn and the home buyer credits are gone, and interest rates have gone up, if you are still looking for a home, "fear of loss" will return, and you may well end up paying a lot more in the form of purchase price, or monthly payment, as a result of thinking this down market would go on forever.  Believe it or not, the best homes in the lower price points are selling with multiple offers today.  You can ignore the market data and your Realtor as many buyers do, but in the end, the school of hard-knocks (in the form of losing several homes you really wanted) will be your eventual educator... 

If you are going to hire a Realtor to serve as your Expert Guide, to assist you with achieving your homeownership dreams, ask them what they think once in a while...  Home shopping is fun, but unless you are getting paid to do it, eventually, you have to stop looking and move in to one.  If you have decided you need a place to live, and you want a great deal, and a great interest rate, and a tax credit, be realistic, and buy your dream home today, move in and enjoy your life!    Happy home buying to all of you...  Drop me a line if I can help you out!

On the horizon for home buyers?  FHA Loan costs are rising in the spring (these loans are getting more expensive for buyers), the Treasury Department is going to ease up or stop buying Treasuries (causing interest rates and mortgage rates to rise, the First Time Home Buyer and Repeat Buyer tax credits are expiring on 4/30/2010.

Happy New Year!  Turning the page on 2009 marks my 5^th year as a Folsom resident and my 18^th year as a real estate brokerage owner.  2010 will hold many opportunities for home buyers and sellers in the local real estate market.  Housing affordability continues to rise and the chance for the growing family to upsize in to a roomier home has never been better.  I wish you all a happy and prosperous 2010!

Recent Folsom Housing Stastics:  We closed out December of 2009 with a total of 69 home sales in Folsom, CA.  Of the sales, 19 were foreclosure / bank owned, 15 were short sales and 35 were non-distressed home sales.  The average dollars per square foot was $176, the aveage home sales price was $387k, the number of available homes stood at 220 and there was a three month supply of inventory on the Multiple Listing Service.

Recent El Dorado Hills Housing Stastics:  We closed out December of 2009 with a total of 58 home sales in Folsom, CA.  Of the sales, 21 were foreclosure / bank owned, 13 were short sales and 24 were non-distressed home sales.  The average dollars per square foot was $165, the aveage home sales price was $473k, the number of available homes stood at 286 and there was a five month supply of inventory on the Multiple Listing Service.

The year in review:

Sacramento Area housing prices drop less than 1% in 2009

The year ahead:

Welcome to 2010 - "The Year of the Short Sale"

Short sales are on the rise 

Completing a short sale is getting easier

Who should consider a short sale? 

Are short sales too good to be true? What's the catch? 

Should home buyers attempt to purchase a short sale? 

Short sale tips for sellers and buyers

Mortgage watch:           

Its official... FHA loan costs are on the rise 

January 2010 Mortgage Rate Watch - Western Region

Home buyer tax credit:   

$8,000 Home Buyer Tax Credit Extended & Expanded

Home Sellers:                 

Pay a commission as low as 1% of the sales price

Home Buyers:                  

Brokers Inc. will give you up to $2,500 when you buy a home

Aaron Cullen is a Realtor, Real Estate Broker, and Owner of Brokers Incorporated Residential Real Estate.  Aaron lives in Folsom, CA and specializes in representing home buyers and sellers in Folsom, El Dorado Hills and the Greater Sacramento Region.  Having relocated from the Bay Area in 2004, Aaron continues to work with home buyers in all cities lying between the Bay Area and Sacramento Area.

Here is the monthly update on mortgage rates in the Western US for January 2010. 

Average Western Rates 12/03/09:  30 Yr. fixed - 4.91%,  15 Yr. fixed - 4.37%,  5 Yr. ARM - 4.19% 

Average Western Rates 01/07/10:  30 Yr. fixed - 5.02%,  15 Yr. fixed - 4.48%,  5 Yr. ARM - 4.38%

If you would like to see the weekly compilations for the US and each region individually, visit freddiemac.com.

Need a loan?  Looking to buy a home?  Give me a call or send an email and I'll give you a hand. 

Published by the Sacramento Bee on 1/21/10

Sacramento area homeowners closed 40,534 escrows during 2009, falling just shy of the region's 2008 total, researcher MDA DataQuick reported Thursday.

In 2008 the region saw 41,030 closed escrows. Analysts say sales fell slightly in 2009 as cheap bank repos became a smaller part of the sales mix.

The year 2009 also ended with sales prices having fallen less than 1 percent in Sacramento County. The number represents a dramatic ending to the traumatic free falls that frightened area homeowners throughout 2007 and 2008.

Prices for new and existing homes combined fell just 0.6 percent in the county in 2009, DataQuick reported. That compared to a 36.8 percent plunge in 2008 and a 20 percent drop in 2007.

For the second straight month, DataQuick reported that median sales prices for existing homes in Sacramento County - the largest sector of the area real estate market - finished higher than the same time a year earlier. December sales prices were 2.4 percent higher than December 2008.

Altogether, 3,450 new and existing homes changed hands in December in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That compared to 3,183 sales in November. December sales normally rise from November, DataQuick said.

New home sales accounted for 9 percent of total sales in the eight-county region. That's a steep decline from their 25 percent market share during the housing boom that spanned 2002 to 2006.

The sales and pricing numbers paint a definitive picture of a 2009 market prodded by government stimulus and an abundance of bank repos in its earliest months. Spring brought an $8,000 first-time homebuyer federal tax credit and several months of a similar $10,000 state tax credit for buyers of new unoccupied homes.

Analysts believe the new year may proceed with less artificial stimulus. The federal tax credit expires at the end of April. And Wednesday, the Federal Home Administration, which insures many first-time buyer loans, announced it will charge higher fees and require higher downpayments from buyers with credit scores below 580. At least 40 percent of Sacramento-area loans the past year have been FHA loans.

On December 19, 2009, I published my monthly newsletter and warned my clients that FHA Loans were going to get more expensive in 2010.  Today, the FHA formally announced the cost of the loans they insure will be increasing very soon.  Here are the changes:

• The current Up Front Mortgage Insurance Premium is rising from 1.75% of the loan amount to 2.25%
• The annual mortgage insurance premium is being increased from .55% of the loan amount to a higher percentage.
• The down payment for borrowers with sub-580 Fico scores is rising from 3.50% of the purchase price to 10%.
• Credits from the seller to the buyer to help with closing costs is being cut from 6% down to 3% of the purchase price.

It has been reported that some of the changes will be effective in the spring and other changes will be implemented in the summer.  A press release is scheduled for 1/20/10 to further detail the effective dates of these changes. 

Word to the wise.  If you are looking to buy a home and you are using an FHA Loan, get a move on!  The longer you wait, the more it will cost you.  Not to mention, interest rates have been on the rise....

Client Testimonials

Aaron Cullen is a Realtor , Real Estate Broker , and Owner of Brokers Inc. Residential Real Estate.  Aaron lives in Folsom, CA and specializes in representing home buyers and sellers in Folsom, El Dorado Hills and the Greater Sacramento Region.  Having located from the Bay Area in 2004, Aaron continues to work with home buyers in all cities lying between the Bay Area and Sacramento Area.

Happy New Year!  Welcome to 2010 - "The Year of the Short Sale"   For nearly four years, various elements of a perfect storm have been brewing and gaining strength as they have swept across the real estate landscape, leaving the hopes and dreams of home owners in their wake.  Entering the New Year, these forces will continue to swirl and intertwine, while the market players continue to react.  Look to 2010 to be "The Year of the Short Sale."

• Since the market's retreat began in 2006, lenders were in denial as to the depth and severity of the housing crisis.  Foreclosure was used as a threat and a weapon to gain leverage with home owners.  Foreclosures are now being pursued only as a means of last resort, and short sales are being encouraged by the lender(s).
• Lenders in second, third and fourth position used their worthless debt as a way to hold up the short sale by not giving their approval.  If they were not going to get some money out of the deal, they'd rather hurt everyone else and force the home in to foreclosure.  This type of negotiating caused many deals to take months and months to gain approval (I had one take 7 months) before someone caved or the home was foreclosed on.  Bigger lenders are now creating policy which defines what they will pay and accept when considering a short sale.
• Home buyers looking for financing found that half the sources of funds had gone out of business, the underwriting guidelines and requirements for obtaining a mortgage had gone old-school and now they would have to do more than "fog a mirror" to get a loan.  Home buyer qualifications are now better defined and government insured loans and low interest rates have helped bouy the market.
• For home buyers, and their agents, attempting to buy a short sale was not an attractive option.  As the lender(s) dragged their feet, they typically took four-plus months to gain approval and close escrow. As a result, one attempt to buy a short sale was typically enough to deter even the most interested and patient home buyer.  "Hurry up and wait" is still the short sale mantra, but there is hope for the future.
• Many home sellers, not fully understanding their options, sat idly by, waiting for their day of reckoning and for the lender(s) to foreclose and remove them from their homes.  Now agents such as myself are extending a helping hand to distressed home owners and acting as their advocate to make the best of their bad situation.
• More and more home sellers, who were not in a distressed situation, decided to pull their homes from the markets as they were not willing to compete with the foreclosures and short sales and sell their homes at what they perceived to be give-away prices.  Home prices have fallen to a point where home sellers do not casually enter the market and do so only if they HAVE to sell, or have decided to UPSIZE in this down market.

The above elements, and many more, have swirled out of control and have pressured home prices lower and lower for the past four years.  Currently, it is not uncommon for 50% or more of the active listings on the MLS to be short sale listings.  Time will tell, but analysis suggests the percentage of short sale offerings is likely to continue to grow.  Our government is now implementing regulations and attempting to rein in the past challenges by establishing some form of standardization to the process.  In the mean-time, 2010 will become the year of the short sale and all participants in the real estate business, buyers, sellers, agents, lenders and closing servicers will be forced to come together, adapt and participate.  

What is a Short Sale?  A "short sale" is a home sale transaction where a home is sold for less money than what is owed on the mortgage.  When the circumstances are right and your real estate agent possesses the expertise, your home can be sold and the lender(s) will agree to accept less money than you owe. (ie., you paid $550k for your home, you owe $495k and your home is worth $400k). A short sale, when properly handled, will not cost you any money, will relieve you from additional mortgage payments, will settle your debt with the lender(s), will help preserve your credit rating and the forgiven debt will not be taxed by the Internal Revenue Service.

A short sale cannot be performed by all agents and requires specialized knowledge and experience.  In 2009, 100% of my short sale listings closed escrow and spared my clients from a foreclosure.  Short sales can often provide lucrative opportunities for home buyers as well...

Want to learn more?  Read Part #2 of this article, then visit http://www.BrokersCorp.com.

Client Testimonials

Aaron Cullen is a Realtor , Real Estate Broker , and Owner of Brokers Inc. Residential Real Estate.
Aaron lives in Folsom, CA and specializes in representing home buyers and sellers in Folsom,
El Dorado Hills and the Greater Sacramento Region.  Having relocated from the Bay Area in 2004,
Aaron continues to work with home buyers in all cities lying between the Bay Area and Sacramento Area.

This is the 2nd of 8 postings in a series about "short sales."  If you are a home seller or buyer that is thinking of pursuing a short sale, please read the following, then give me a call if I can be of further assistance.

Why is the number of Short Sales rising?  Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.  On November 30^th, 2009, the Treasury Department released guidelines for its new Home Affordable Foreclosure Alternatives Program (HAFA).  Under these new guidelines, lenders and borrowers are encouraged, with financial incentives and cash payments, to opt for short sales and avoid foreclosures.

Locally, in Sacramento County, Folsom and El Dorado Hills, the real estate market offerings are dominated by short sale listings, equaling 61%, 46% and 45% respectively.  In 2010, expect the number of short sale listings and the number of closed short sale transactions to increase.

Want to learn more?  Read Part #3 of this article, then visit http://www.BrokersCorp.com.

Client Testimonials

Aaron Cullen is a Realtor , Real Estate Broker , and Owner of Brokers Inc. Residential Real Estate.
Aaron lives in Folsom, CA and specializes in representing home buyers and sellers in Folsom,
El Dorado Hills and the Greater Sacramento Region.  Having relocated from the Bay Area in 2004,
Aaron continues to work with home buyers in all cities lying between the Bay Area and Sacramento Area.

This is the 3rd of 8 postings in a series about "short sales."  If you are a home seller or buyer that is thinking of pursuing a short sale, please read the following, then give me a call if I can be of further assistance.

Why is it difficult to sell a short sale listing?  Since the peak of the housing market in 2006, the number of attempted short sales has grown exponentially.  The challenges with successfully selling a short sale listing (they are numerous) has ranged from lenders not understanding the depths of the housing collapse and not properly valuing homes, lenders not being educated or staffed to handle short sale requests, sellers and listing agents not knowing how to properly prepare a short sale request, listing agents not understanding how to negotiate a short sale approval, buyers not being willing to wait for a short sale approval, second lien holders not understanding what was a reasonable return on the bad debt they were holding, and so on.  In brief, there has been a lack of standardized processes, procedures or regulations governing the handling of short sales. 

Over the past 3 to 4 years, the successful handling of short sales has taken place in spite of a rudderless system that has largely undermined its success.  As the old saying goes, "it takes time to turn a battleship," which has been the story with short sale policies and procedures.  To further complicate matters, and to the detriment of their clients, many, many real estate agents have taken listings while lacking the experience and expertise to properly negotiate and close a short sale. 

Is there a light at the end of the Short Sale tunnel?  Yes, in late 2009, government mandates introduced new standardized procedures that will help streamline the short sale process.  See part #4 of this series for further details.

Want to learn more?  Read Part #4 of this article, then visit http://www.BrokersCorp.com.

Client Testimonials

Aaron Cullen is a Realtor , Real Estate Broker , and Owner of Brokers Inc. Residential Real Estate.
Aaron lives in Folsom, CA and specializes in representing home buyers and sellers in Folsom,
El Dorado Hills and the Greater Sacramento Region.  Having relocated from the Bay Area in 2004,
Aaron continues to work with home buyers in all cities lying between the Bay Area and Sacramento Area.