California: Golden Dream Or Foreclosures By The Sea?

SAN FRANCISCO (Reuters) - “The golden dream by the sea” is how Gov. Arnold Schwarzenegger has fancifully described California. Yet for thousands who bought homes during the Golden State’s latest housing boom, foreclosures have turned recent months into a nightmare.

Economists disagree whether soaring foreclosures in California suggest the world’s eighth-largest economy is poised to slump or if it is just seeing its share of disarray from the subprime segment of the mortgage lending industry.

Whatever experts call it, Dorothy Hicks, 74, a retired federal employee in Oakland, California, is seeing her American dream of owning a home teetering on the edge of collapse. After refinancing into an adjustable-rate mortgage last year, she faces possible foreclosure on her home of nearly 40 years.

Hicks says she was told the mortgage was a fixed-rate loan, but was soon overwhelmed by soaring payments when its interest rates rose. “By the time you pay (utility) PG&E, the telephone and the mortgage, you don’t have any money,” she said.

Christopher Thornberg of Beacon Economics in Los Angeles says California’s economic outlook will darken as a growing number of households slash consumer spending to meet rising mortgage payments, especially on adjustable-rate and subprime loans that became popular for those with weak credit.

“We have a lot more of these shady mortgages out here, so that doesn’t bode well,” he said. “We’re due for a very traditional consumer-led downturn.”

RECESSION OR RESILIENCY?

Analysts had expected California’s economy to cool because its housing market has slowed from the torrid pace of recent years. Prices, long far above the national average, are flat or slipping as sales decline.

A report last week by DataQuick Information Systems pointed to additional trouble. The real estate trend tracking service tallied a record 17,408 homes in the state falling to foreclosure in the second quarter.

While a fraction of California’s 8.4 million residential properties, the foreclosures marked a jump of nearly 800 percent from a year earlier, propelled by markets awash in subprime loans.

Countrywide Financial Corp., the largest U.S. mortgage lender, last week slashed its 2007 forecast, suggesting that rising delinquencies and defaults may spread beyond subprime borrowers to borrowers with stronger credit.

“Business is picking up and I think it’s going to continue,” said Patrick McGilvray, president of TheHomeBuyingCenter.com, a Sacramento firm that matches distressed homeowners with investors and home buyers.

Other experts say California’s mortgage troubles will be largely contained to risky borrowers who bought houses more expensive than they could afford, as well as their lenders. But they see no signs of a slowdown in consumer spending or recession.

Howard Roth, chief economist for the state Department of Finance, said the economy of California, the most populous U.S. state, is fundamentally solid. Its current housing troubles pale compared with the beating the housing market suffered in the early 1990s from gutted aerospace payrolls, he said.

The state’s unemployment rate was 5.2 percent in June, compared with nearly 10 percent in late 1992 and early 1993, when Californians desperate to leave the state were parting with their homes at fire-sale prices.

“In the early 1990s we were losing a major industry and losing it for good. Now we’re paying the price for a housing bubble, but housing will come back,” Roth said. “We really haven’t lost jobs yet. That may happen. But in the early 1990s we lost over 500,000 jobs.”

California: Golden Dream Or Foreclosures By The Sea?  “The golden dream by the sea” is how Gov. Arnold Schwarzenegger has fancifully described California. Yet for thousands who bought homes during the Golden State’s latest housing boom, foreclosures have turned recent months into a nightmare.Economists disagree whether soaring foreclosures in California suggest the world’s eighth-largest economy is poised to slump or if it is just seeing its share of disarray from the subprime segment of the mortgage lending industry.Whatever experts call it, Dorothy Hicks, 74, a retired federal employee in Oakland, California, is seeing her American dream of owning a home teetering on the edge of collapse. After refinancing into an adjustable-rate mortgage last year, she faces possible foreclosure on her home of nearly 40 years.Hicks says she was told the mortgage was a fixed-rate loan, but was soon overwhelmed by soaring payments when its interest rates rose. “By the time you pay (utility) PG&E, the telephone and the mortgage, you don’t have any money,” she said.

Sacramento, CA  -  The foreclosure crisis and subprime mortgage meltdown that is wreaking havoc across the country’s housing markets may have a silver lining for some home buyers who utilize owner-carry financing and government down-payment assistance programs.  As single-family home prices come down from their stratospheric levels of recent years most parts of the country are in what is known as a ‘buyer’s market.’

In recent years it was easy for people selling a home to merely list their house for sale with a real estate agent and wait for a flood of ever-increasing offers.  Competing buyers of days past often felt as though they had better get into the housing market before they were priced out forever.  Alas, for them, and for people who want to sell a house fast today, buyers have many more options and can afford to be choosy as home prices continue to tumble across the nation.

The Bright Side

For those buyers with good jobs and income, but who did not buy a house because of poor credit or other reasons, now may be the time to start looking for a house, especially for first-time homebuyers.  The reasons for this upsurge in optimism boil down to creative yet responsible financing programs in the public and private sectors.

First off, government programs, such as below-market interest rate loans, and down-payment assistance programs are plentiful, even if little known.  These programs have been around for years, but they have not been extensively publicized by the majority of loan brokers and officers because they offer smaller commissions and fees than many loans in the commercial sector.

“We put people who want to buy a home in contact with non-profit organizations and loan officers who specialize in free government money programs and below-market rate loans,” said Patrick McGilvray, J.D., CFP®, President of Sacrament, CA-based http://www.TheHomeBuyingCenter.com. 

Mr. McGilvray continued, “We are a nationwide company and we are able to help people who find us on the internet sell their house fast.  We make this supply of houses available to first-time homebuyers and encourage them to pursue government grant programs and work with lenders and loan brokers who know their local, state, and federal programs inside and out.” 

When asked if these brokers recommended the types of adjustable rate mortgages and subprime mortgages that are gaining notoriety in the news of late Mr. McGilvray said definitely not and added that the vast majority of people in contact with his company were urged to get 30 and 40 year fixed rate loans.”

Seller’s Money In The Game
 

Many home sellers are looking to sell their houses and are finding that if they offer to carry back part or all of the financing they might discover a buyer that might otherwise not appear.  As equity rapidly erodes from the market and home builders are offering rich incentives to purchase newly built homes, sellers must use every option to attract willing buyers.

One route is to sell a house to a buyer and take back a second mortgage on part of the purchase price.  Essentially, a buyer gets qualified for a loan for the bulk of the purchase price, and the owner takes back a promissory note secured by a second deed of trust on the remaining purchase.

The owner who carries back this obligation does assume some risks in the event that the homeowner cannot make their primary and secondary mortgage payments, but many home sellers are willing to take their chances, especially as they look to escape partially or totally from a real estate market that continues to go down.

Whatever route home sellers choose to follow these days, it is clear that people are still buying and selling homes and will continue to do so.  Creativity, it seems, is the difference between some companies in the mortgage lending and single family home industries who are making a profit, or just staying afloat, and those who leave the business altogether.

SACRAMENTO, CA – Fourth-generation Sacramento native Patrick McGilvray, J.D., CFP® recently completed a long journey by achieving his Certified Financial Planner™ designation after many years of study.“Education has always been a family tradition, and the fact that the CFP® designation is all about education that is actually applied in the field makes it all the more special,” said McGilvray.Mr. McGilvray, who earned his Juris Doctor degree from the University of California at Davis School of Law, is also a licensed California Real Estate Broker. He has narrowed his financial planning focus to estate planning with an emphasis on charitable giving while he builds his company, http://www.TheHomeBuyingCenter.com, America’s Most Trusted Home Buyer. McGilvray saw, during the course of his financial planning activities over the last five years, an alarming trend in the use of interest-only adjustable rate mortgages by homeowners who he figured would not be able to make their payments once their loans readjusted after the initial period. Because of this situation he and team created an internet-based lead generation business designed to help people sell their houses fast to real estate investors across the nation and avoid foreclosure. Mr. McGilvray is very active in philanthropic giving and is currently the Secretary of the Planned Giving Forum of Sacramento and is the Chairman of Leave A Legacy® in the Sacramento area. He is a graduate Jesuit High School in Sacramento and the University of California at Berkeley. He is also an Eagle Scout.

The 28-year-old state worker said she cannot afford her mortgage because its interest rate is at 11 percent, up from a 5 percent rate that expired late last year. She said losing the three-bedroom house will mark a personal defeat as she put $40,000 from the sale of an inherited house as a down payment.

“I’m tapped out,” Perez said. “There’s no hope.”

Her case does not surprise Patrick McGilvray, president of www.TheHomeBuyingCenter.com, a Sacramento company matching distressed homeowners with individual investors and prospective home buyers. Some lenders were sloppy during the housing boom because of the volume of business they received, he said.

“There was a record number of originations of loans,” he said. “Facing explosive growth, balls get dropped.”

Little thought was given in recent years to the future costs of easy money, Olrich added: “A lot of loan brokers were out there and I’m not sure they told the whole story,” he said. “Maybe, they (borrowers) didn’t know all the questions to ask.”

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20070318&ID=6628796

SACRAMENTO, CALIF — Sacramento has recently been ranked among the most at-risk real estate markets in the country, according to The Center for Responsible Lending.  The reason that so many individual homeowners face tremendous risk of losing their homes to foreclosure in 2007 and 2008 is mainly because of the problems with sub-prime loans. 

More than 2 million American families are using these types of loans and an estimated twenty percent, or 400,000, of these borrowers will likely face foreclosure.  These loans tend to predominate in areas where people are heavily African-American and Latino.  Across the country, fifty percent of African-Americans and forty percent of Latinos who purchased homes in the last five years used one of these sub-prime loans.

The problems with these loans are numerous and can hurt people with higher than average incomes as well as those with more modest incomes.  Some of these features include low teaser interest rates and the option to pay interest only which can result in a borrower owing more than a home is worth.  Another problem with sub-prime mortgages is that they often have no impound account for taxes and insurance.

All of our neighborhoods in Sacramento are at risk of further property devaluation as investors and homeowners abandon their properties to the foreclosure process.  Vacancies, blight, and graffiti or vandalism often plague neighborhoods where properties are in the process of being foreclosed upon. 

This effect is counteracted somewhat when real investors, such as Patrick McGilvray, J.D. of www.TheHomeBuyingCenter.com, Sacramento’s #1 Home Buyer, and his team of investors, buy homes before they are in the official foreclosure process.  He commented, “It’s a tragedy for our entire community that the banking industry has created such a ticking time bomb of poorly understood mortgages that will result in thousands of foreclosures in Sacramento.  Truly, many sub-prime mortgages were pitched in a way that seemed too-good-to-be-true.  Unfortunately, the consumers who purchased these products were not sufficiently informed and will end up suffering.  Sometimes we help people sell a house fast and avoid foreclosure but only if they contact us early enough.”

In Sacramento alone, the number of foreclosures has quadrupled when compared with early 2002.  The study by The Center for Responsible Lending predicts that things will get worse before they get better, especially for Latinos and African-Americans.

SACRAMENTO, Calif.-As the new year begins thousands of local homeowners will find it difficult to shape up their finances because they will see their adjustable rate mortgage payments increase dramatically. “Imagine what people living paycheck-to-paycheck or on a fixed income are going to do when their mortgage payments jump by hundreds of dollars,” said Patrick McGilvray, J.D., President of www.TheHomeBuyingCenter.com, Sacramento’s #1 Home Buyer. “We are a network of local real estate investors and short sale experts who help people who need to sell their homes faster than the traditional way of using a real estate agent. We help them avoid the risk of letting of their houses sit on the market for months.”

www.TheHomeBuyingCenter.com predicts that thousands of Sacramento homeowners will be facing foreclosure in 2007 because of higher mortgage payments, declining home sale prices and longer times on the market due to a large inventory of homes for sale. This combination can make it difficult for sellers to sell their house if they are behind on their payments.

“We have a unique business model,” says McGilvray. “There is no publicly available information to track homeowners who fall behind in payments when no foreclosure proceeding has started on their home. The Home Buying Center team is known for having a finger on the pulse of the pre-foreclosure market because hundreds of people are calling us at 916-920-FAST when they’re about to miss a payment on their home.”

The forecast of declining home values is supported by many national and local experts such as Sacramento broker Mike Lyon, of Lyon Real Estate, who, in response to a question about area home values, said recently, “We still think there’s so many homes that prices are going to decline in most areas by 10%.”

William Longbrake, a senior policy adviser to the Financial Services Roundtable, an industry group, said he is among those who believe “the worst is still ahead in the housing market” and home prices will continue to fall. Homeowners are not the only ones feeling the pain as builders scale back their plans to construct new homes, and many people in the mortgage and title industries are joining real estate agents in looking for new lines of work.