Big Sur

Spring arrives in California.

Some photographs of road trip with my

daughter. At  Big Sur Inn the wisteria is in full bloom.

Northern California Real Estate markets have heated up.

Oakland, San Jose, and San Francisco are seller's markets.

Racing behind are San Mateo, Newport Beach and Laguna Beach.

Today the bond market saw a rally, it's a good day to lock down

your mortgage loan.

Meanwhile- the 50-day moving average crosses throuth

the 200-day moving average,

suggesting a loss of momentum in the market.

Also known as a death cross to bond traders.

Enjoy the photographs and the ride.

 

Wisteria at the entrance

Pretty blue and white dishes




A bird house in the woods

 A bird house? A house for cats? LOL

Birdhouses I bought on sale ( a dollar each at Target)

I wonder if my morning doves will like them.

Zillow Scam

Zillow Go Sit in the Corner

 Time Out For Zillow

Millions use Zillow to search for home listings and real estate valuations but Zillow doesn’t care if their listings are incorrect or two years old. Zillow profits from selling leads and advertisements, not on providing consumers information.

Now Zillow the online aggregator of Real Estate old and outdated information has found new pockets for revenue source. Before 2009 it was the Title Representatives paying referral fees for leads, or gifts to encourage business from Real Estate agents. That is gone. Now after reforms Title Reps offer a ten dollar plastic or paper item with their company logo.

Zillow sales agents in the Irvine and Seattle offices push a scam on lenders and consumers. Here is how it works:

Real Estate Agents need leads. Realtors want to be seen on Zillow. To be ranked high (visible first) on Zillow one must pay for advertisements. Even the reviews and ratings of agents on zillow.com are known in the industry to be fakes. Real Estate business is highly competitive and the market has been tough. Most agents can’t afford the $200- 500 per zip code monthly fees to be ranked.

Sales staff of Zillow in Irvine and Seattle pitch to real estate agents that they can team up with a lender and “split” the cost of the advertisement (wink wink). The Real Estate agent invites every lender to be their partner in Zillow ads. To the ears of a hungry loan officer who needs leads this sounds great.

A discussion begins about what area, zip code, and monthly costs are to be listed. Emails and calls from Zillow sales representative and the Realtor instruct the lender they must make the first payment directly to the Realtor. Lender goes ahead and writes a check to the Realtor and gives credit card or bank account routing number and account number to Zillow sales person to be billed monthly going forward. Savvy Realtors hit up many lenders offering a variety of locations to potential lending partners.

The problem is: After a month or so: no, none, zero leads and no business develops from the partnership. Zillow leads are not loyal buyers. Zillow provides wrong emails, wrong phone numbers that customers entered into Zillow’s sign up. Zillow customers don’t want to be hounded with phone calls and emails so they provide wrong number or an email they never open. The lender begins to complain and checks around to discover they are paying not half but one hundred percent of advertising that features the Realtor at the top left of the page but buries the lender scrolled down to a dungeon where no consumer will ever read.

Why does the consumer care?

Some agents steer business to their lender of choice, as in the one who pays the most advertisements for them. They put the lender in the counteroffer as “must cross approval with my lender at imortgage.” Borrower is forced to apply with the Listing agent’s lender. Buyer’s agent plays along to close the deal. Listing agent’s lender is never the cheapest or best choice. I have seen five transactions this month where listing agent put their lender in the forced cross approval position. The lender first offers verbally unbelievable rates, tells scare tactic tales, and in the end closes with a higher rate.

Borrowers pay for that advertisement that the Lender ran with the agent. The Borrower pays in the form of hidden overage, higher rates and fees. It is a scam.

Zillow has drawn more real estate consumers since 2004 to their site. They have grown the business to a profitable stock. American real estate consumers want information to find bargains and deals. New platforms are arising that compete with Zillow. I have mobile software that offers Consumers access the MLS in real time rather than Zillow’s old listings and errors. There are nine new contenders for online Real Estate shopping, and more in beta trials.

 Shame Zillow, go sit in the corner.

Is Richard Cordray is investigating Zillow’s advertising practices? The Consumer Financial Protection Bureau takes its job seriously to protect individuals from unfair business practices.

Zillow and its media staff made no comment or response to my request for their take on this story.

 

Laguna Niguel Bird Houses

 

Some photographs I took with my iphone of birdhouses in Laguna Niguel and

San Clemente California this week as a treat for the eyes.

Reminder for spring:

If you have birdhouses clean them out for new nests in the coming months!

Niche Mortgage Birdhouse or Castle

How to Close your Problem Mortgage?

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Not all houses are the same. Bird houses are each special as well.

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Freddie Tightens Underwriting AGAIN

Freddie Mac rules for conversion of a property to investment or second home revised. More reserves for the property conversion are now required , and you will have to qualify with both payments and extra appraisals needed.

 

Borrower converting Primary Residence to second home:

 

If the Borrower is converting a Primary Residence to a second home, and purchasing a new Primary Residence, the following requirements apply:

 
The monthly payment amount for the property being converted to a second home and the monthly housing expense for the subject property must be included in the monthly debt payment-to-income ratio in accordance with the requirements • The reserves requirements must be met.

 

Borrower converting 1-unit Primary Residence to an Investment Property:

 If the Borrower is converting their 1-unit Primary Residence to an Investment Property and purchasing a new Primary Residence, the following requirements apply:

The Seller can use rental income from the property being converted to qualify the Borrower, provided that:

The loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit TLTV (HTLTV) ratios of the property being converted are less than or equal to 70%, as evidenced by an appraisal with at least an exterior-only inspection that meets Freddie Mac requirements

 

And the Borrower's federal income tax returns must reflect a two-year history of managing investment properties when a signed lease is used to determine the net rental income

The rental income is documented with a copy of the fully executed lease and, in addition, the receipt of a security deposit from the tenant with evidence of the deposit into the Borrower's designated account

 

Borrower converting 2- to 4-unit Primary Residence to an Investment Property:

 

If the Borrower is converting their 2- to 4-unit Primary Residence to an Investment Property and purchasing a new Primary Residence, the following requirements apply:

• The Seller can use a maximum of 75% of the gross rental income from the unit previously occupied by the Borrower to qualify the Borrower, provided that:

o The LTV/TLTV/HTLTV ratios of the 2-to 4-unit property being converted are less than or equal to 70%, as evidenced by an appraisal with at least an exterior-only inspection that meets Freddie Mac requirements, and o The rental income is documented with a copy of the fully executed lease and the receipt of a security deposit from the tenant with evidence of the deposit into the Borrower's designated account • Rental income for the units not previously occupied by the Borrower may be used to qualify the Borrower

 

Additional reserves required for Mortgages secured by Primary Residence when Borrower's current Primary Residence is pending sale or being converted to a second home or Investment Property:

Pending sale or conversion of 1- to 4-unit Primary Residence to second home or Investment Property - Additional required reserves:

• Six months for the subject property, and • Six months for property pending sale or being converted

 When loan-to-value (LTV)/total LTV (TLTV)/ Home Equity Line of Credit TLTV (HTLTV) ratios are <=70% for property pending sale or being converted:

• Two months for the subject property, and • Two months for the property pending sale or being converted

Translation:
You are buying another home and not selling your current residence.
You must have rental properties on your past two years taxes to be able to use any rents.
If you do not own any rentals, you will need to qualify with both principle interest taxes insurance and Home Owner Association fees.
Freddie Mac is tightening up once more for the millionth time. Fannie will follow suit on conventional loans.
Tighten that belt on the American Home Buyer again Freddie.

 

 

California State Tax After Short Sale?

 

Hang your hat on if you owe on a short sale

Former President George W. Bush's "Mortgage Forgiveness Debt Relief Act and Debt Cancellation" of 2007, changed Federal laws. Before this date, all debt forgiven in a short sale was taxed as ordinary income.

To translate:
 the difference between what you owed a lender and what the house sold for was treated as income for the tax year.  Before 2007 you would receive a 1099 for the gain of forgiveness of debt. The Mortgage Forgiveness Debt Relief Act ended the claiming this as additional income on your Federal income tax return. MFDRA allows taxpayers to exclude debt forgiven from the short sale of a principal residence from 2007 extended through 2013 year end.

Cancelled mortgage debt through a short sale of up to two million dollars for couples filing jointly is excluded on your federal IRS returns. Or one million dollars if you are married filing a separate tax return from your spouse. This rule was extended until the end of 2013 and has not been extended into 2014, yet.

States are dealing with this separately. California has no law in place that allows you to file this April 2014 with an exclusion. If you live and work in California and sold your primary residence short last year how will your accountant show the income on your State income tax filing due in just twelve days?
 

There are some ins and outs to this law.  Acquisition debt, or purchase money loans are treated differently than home equity debt or cash out refinances. Acquisition debt and home equity debt are not the same under the law. It is important to know what you can file, and hopefully you received advice from your Realtor and tax advisor if you closed a short sale in 2013. Acquisition debt is debt or a mortgage loan used to buy, build, or improve a principal residence. Home equity debt is any loan whose proceeds were not used to buy, build, or improve the residence. Note this is  ONLY for a primary residence.

Acquisition debt can be excluded from tax under the Mortgage Forgiveness Debt Relief Act. Home equity debt cannot be excluded under this new law. Instead, home equity debt may qualify under the insolvency or bankruptcy exclusions. In order to qualify under this exclusion assume you will have to show you have close to zero assets.

For divorced couples, the rules on canceled mortgage debt are uniform but applied differently. Using that same example, if $350,000 of the value of the debt is canceled, both homeowners will get the 1099-C. How will you decide how to will split the responsibility? Hopefully your divorce attorney is aware of this pickle. The easiest, of course, is a simple 50-50 cut, which means each will report $175,000 in canceled debt.

If you've used a home-equity line of credit for home improvements and the like, that too is spared of tax consideration if canceled. Be prepared to show documentation supporting those claims. You will need to save any construction receipts, Home Depot bills, breakdowns of major landscaping or a pool, plus cancelled checks. Save these for seven years with your tax returns, in case you are audited. Assume is you are paying Alternative Minimum tax, you will be audited for this exclusion (they will be looking for deeper pockets).

Home-equity lines of credit used to pay off credit cards or buy a new car, boat, toys... are taxable if canceled via a short sale or foreclosure.

This is not tax advice, it is a call to Jerry Brown...