For A+ BBB San Diego Mortgage Loan Modification Services CLICK HERE

The year-end report from RealtyTrac.com shows that 2009 had a substantial increase of new foreclosures from 2008, and a 120 percent increase from 2007. This means that there were almost four million reported foreclosure filings in 2009! California had the fourth highest foreclosure rate in the United States, with over 630,000 homes receiving a foreclosure filing in 2009. San Diego County is one of the areas to be hit the hardest, with the city of San Diego reporting 2,435 new foreclosure filings in December of 2009. If you are one of the many people to be affected by the housing crisis, don’t hesitate to contact HomeStart to find out if you qualify for a loan modification.

A loan modification is a change in one or more of the terms in your loan. This could mean a lower interest rate, lower monthly mortgage payments, and a lower principal balance.  The purpose is to allow the borrower to meet the new terms of the loan, in hopes of avoiding foreclosure. With the current declining home prices and competitive real estate environment it’s become even more difficult to re-sell your home after foreclosure. Lenders would prefer any solution where they can receive some payment. Therefore, the cost of foreclosure is actually more expensive to the lender than the cost of new loan modification terms, making a loan modification beneficial for everyone involved.

HomeStart offers nationwide residential, investment and commercial property loan modifications, and can also provide foreclosure prevention information and pre-foreclosure consultation. HomeStart is the only business in California with an A+ rating from the Better Business Bureau in both loan modification and real estate loan modification. While the California DRE reported approximately 495,000 registered Real Estate and Mortgage Brokers in California in August 2009, only a mere 300 were licensed to perform mortgage loan modifications. The A+ score that HomeStart received represents the BBB’s degree of confidence that the business is operating in a trustworthy manner and will provide excellent contracted services, while also providing a high degree of customer service. If you are unsure if you qualify for a loan modification or simply would like more information about the loan modification process, don’t hesitate to visit our website or call HomeStart for a free consultation.

Here is one recent example of a loan modification performed by HomeStart:

Property in San Diego, CA
Total monthly savings of $1,132.38/month

• Primary Residence:
  Loan amount of $298,819 with an interest rate of 5.875% and monthly mortgage payments of$2,445.30.
• Modified to:
  Interest Rate of 3.875% and new monthly mortgage payments of $1,312.92 fixed for 5 years; final interest rate of 5.375% and $1,481.94 monthly payments.

For more information please visit www.YourHomestart.com

Jim’s Secret to real estate investing success. 10 rules that will help you retire in 20-25 years.

Jim had a secret.

The funny thing was that he didn’t keep it a secret. If you were willing to ask him and really listen to his answers, he was happy to share it with you. But you had to be paying attention. Because if you weren’t, you wouldn’t even know that he HAD a secret.

We worked together in a non-profit/volunteer organization. He was an adviser, a counselor if you will. I was a rookie volunteer. And over a few years of working on projects together, I came to realize that he always had time to work on things with us. He always had enough money to help out when needed. He wasn’t flashy about it. And he was certainly frugal. But when there was a good reason, he was willing to take care of things for others. Quietly. In the background. No limelight, no publicity.

He lived in a modest home in a nice, quiet, suburban neighborhood. Nothing fancy or pretentious. A typical California style 3 or 4 bedroom rambler with 2 bathrooms and an attached 2 car garage. Maybe 1200-1400 square foot. Probably built in the 1960’s. He drove an older car. Again, nothing fancy, just a good quality car that was well maintained.

And in his early 50’s he was preparing to retire. I wanted to know how.

One day I started asking him questions and he opened up and told me about himself. What he told me has provided the basics of what I’ve shared with  people who wanted to invest in Real Estate ever since.

Jim worked as an engineer. He made good money, not a ton, just a little more than the average for the area at the time. He had a steady paycheck, with good benefits. He had a good education from a good school. While in school, his father had strong armed him into buying a duplex rather than renting a room or living in the dorms.  This was a key in Jim’s future success. He became a landlord rather than a tenant. And paid for much of his schooling in the process.

At the time we talked (in the early 1980’s), Jim owned 23 rental properties and was worth over $3,000,000!

I wanted to know his secret. And he was happy to share.

Jim’s secret was really quite simple, but a stroke of genius nevertheless. Simply put, Jim bought an average of two homes per year. Some years he bought more and some years he bought less depending on the market and his own circumstances at the time. But on average it worked out to two homes per year.

Some of the homes he re-sold. Some of them he kept as rentals. Once in a great while he refinanced one. But most of the time he just paid them off as quickly as he could. And his secret, or system if you will, will work for almost anyone who is serious about having a comfortable retirement. It’s not easy. It’s NOT a get rich quick scheme! It takes a lot of hard work and some risk over the years. But it works. And almost anyone can retire in 20 to 25 years a multi-millionare by using Jim’s secret.

1. Have a good job that provides enough to take care of your family and has decent benefits.

2. Do your investing activities on the side. Richard Paul Evans calls this “Winning in the Margins.”

3. Plan on buying two properties per year. One you’ll keep as a long term rental. The other you re-sell.

4. Buy them right. You make most of your profit when you buy, and lose most of it when you sell.

5. Use the profits from those you sell to fund your purchases and repairs. Don’t try to live on it.

6. Every property must cash flow. If it can’t pay for itself, sell it.

7. Only refinance a property if the interest rate is 2% or more less than what you are currently paying.

8. Put excess cash flow into paying off the oldest mortgage first. When you’ve paid it off, roll that money into paying off the next oldest. And so on. DON’T increase your standard of living to eat up the extra income.

9. Manage the properties yourself. Do as much of the repairs yourself as possible.

10. Make sure that your rentals are better maintained than other rentals in the area. Better properties equals better tenants.

May you find peace and happiness in your life and eternal life in the hereafter.

Cleve

ps: Check out Richard Paul Evans book “The Five Lessons a Millionaire Taught Me”. It’s an easy book to read and has some good insights in it. His website is http://richardpaulevans.com/

The housing market isn’t yet in the clear, but it’s also not as weak as Monday’s home-sales report might suggest.

The National Association of Realtors is expected to announce an 11.6% drop in December existing-home sales to a seasonally adjusted annual rate of 5.78 million, according to economists polled by Dow Jones.

The large drop is exaggerated by the initial Nov. 30 expiration of the government’s first-time home buyer tax credit, which previously boosted sales by some 28% from August through November to an annualized rate of 6.5 million units, the most since early 2007.

The tax credit has been extended through June, but most analysts don’t expect sales growth to resume until February or March. In the meantime, further declines in existing-home sales, which make up nearly 90% of the market, are sure to raise concerns about the recovery in housing and the broader economy.

But there are scattered signs of improvement. Home-price declines have slowed; the S&P/Case-Shiller index out Tuesday is expected to show prices in 20 major cities down about 5.4% in November from a year ago, compared with a trough of nearly 20%.

Inventories of new homes are down to their lowest level in nearly 40 years. New home sales, which the Commerce Department reports Wednesday, are expected to rise 4.2% to an annualized pace of 370,000 units after a sharp decline the prior month.

Residential construction added to gross domestic product in the third quarter for the first time since 2005, and is expected to provide additional support to GDP this year and next. Meanwhile, one of the sector’s most reliable leading indicators, building permits, have risen for two straight months, including a 10.9% surge in December, and are up about 15% from a year ago.

In California, a bellwether state for housing, inventories of existing homes hit a five-year low in December of 3.8 months’ supply, according to the California Association of Realtors, from a high of 16.6 months in 2008.

“We think recovery is underway, but there will be bumps in the road,” said Barclays Capital economist Michelle Meyer. In other word, bumps don’t portend a double downward dip.

By M.P. MCQUEEN

As buyers ease back into the battered real-estate market, they’re often hitting a stumbling block: fibbing by home sellers.

Eager to unload their abodes, some sellers exaggerate the size of their lots or their houses. Others minimize their property-tax or utility bills, conveniently forget about pests, or downplay flooding problems or noise.

Real-estate experts say that while such misrepresentations aren’t new, the tough market of the past few years has made buyers more wary, partly because they can’t expect rising home prices to bail them out of costly mistakes. As a result, deals are taking longer, and more of them are falling apart as buyers find properties sometimes aren’t all they’re supposed to be.

More than 30 states have disclosure laws requiring sellers to tell prospective buyers and agents about leaky roofs and other problems, according to the National Association of Realtors. But there’s often a gray area involving the disclosure of problems the seller may not know about, such as a long-ago flood or hidden mold.

States are also increasingly passing laws requiring homeowners to disclose environmental issues, such as the presence of radon gas, a contaminant linked to lung cancer, and underground fuel tanks. In California, the checklist of required disclosures is so long that a cottage industry has sprung up of firms that help sellers prepare the forms.

Given the complexity of disclosure laws, it’s not surprising that potential buyers don’t hear about every problem in a house. Besides the issue of fibbing, sellers may genuinely not know about problems. And even if they do, the laws generally don’t apply to bank-owned homes transferred in foreclosures, which now constitute a larger share of sales.

Buyers need to do their own due diligence and not rely exclusively on what sellers and agents say. They should hire an independent home inspector or home-inspection engineer, one not referred by the seller—and be aware that real-estate agents typically represent the seller.

Here are some of the common misrepresentations and white lies that buyers may hear as they shop for a house, according to real-estate experts and state regulators:

• “This house is on two acres.” Disputes about property dimensions—how many square feet in a house or condo, or its exact boundaries—are common. Sometimes buyers don’t learn the exact dimensions until the lender’s appraisal. 

Listing agents usually accept a seller’s word on property dimensions, says Diane Saatchi, a senior vice president at Saunders & Associates, a real-estate firm in Bridgehampton, N.Y. “We tell everyone to verify,” she says. Smaller dimensions also can cause an appraisal to come in lower than the agreed-upon purchase price. Low appraisals are a leading cause of ruined deals in today’s market. A properly worded appraisal contingency in the purchase contract would allow you to scuttle the deal or find other financing if the appraisal comes in low, says New York real-estate attorney Michael Xylas.

• “We don’t have pests.” A basic home inspection generally doesn’t include a peek inside walls or underground for termites and mold, which are among the top complaints. Inspections for mold and radon gas also generally aren’t included; usually buyers must order these inspections separately. Other inside-the-wall problems include faulty wiring and old plumbing, which also may require specialists.

James Holtzman, a financial adviser at Legend Financial Advisors Inc. in Pittsburgh, says sellers of the 1901 house he bought in August 2006 said its electrical wiring was completely upgraded, yet an electrical inspection revealed only one of three floors had been totally upgraded. The seller then knocked $6,000 off the sales price before they went to contract so Mr. Holtzman, 35 years old, could pay for the necessary work.

• “This place never floods.” Even arid states such as Arizona and New Mexico have occasional flash floods, and water and drainage problems aren’t always obvious. June Walbert, 52, a certified financial planner at USAA, a financial-services company, says her San Antonio house received a clean bill of health from a home inspector before she bought it six years ago. But 10 days after she moved in, the sewer backed up, flooding the house, and she had to fork over $2,800 for repairs. “It was a rude surprise,” says Ms. Walbert, who adds she asked her home inspector and the seller for compensation, but didn’t get it.

Bill Richardson, outgoing president of the American Society of Home Inspectors, says a general home inspection wouldn’t catch that unless the sewer line was visible from the basement or water backed up into sinks and tubs or toilets.

• “Taxes and maintenance costs are low.” Home buyers often gripe about tax and utilities bills that are higher than sellers said they were. Homeowner association and condo dues and assessments are also common complaints. Sometimes sellers simply underestimate the bills, or forget to include recent or expected increases, agents and brokers say. Taxes can also be deceptively low because of unrecorded improvements like decks and finished basements. Ask to see recent bills, and check with the tax assessor’s office for up-to-date information.

• “This is a quiet neighborhood.” Sellers may play down distractions that could drive you crazy, such as barking dogs or idling buses. A charming park by day could be a teen hangout at night. Your best bet is to view a property at different times of the day. “I can’t tell you how many times in my career buyers didn’t go there in the night time, even though I told them to. You spend more time in the house at night than during the day,” says Ms. Saatchi, the New York real-estate agent. Talk to neighbors and peruse the local newspapers and blogs to get a feel for a place, and check with police for crime.

• “There’s going to be a golf course, a pool and a party room.” Builders of many developments that broke ground during the housing boom ran out of money before the project was completed. Many homeowner and condo associations also are strapped because of delinquencies and defaults. Some states require upfront disclosures about this, but you should also ask neighbors, not just sellers, about any promised facilities. Also, check titles to be sure that specific parking spaces, storage units or other facilities are included in a property sale

Federal Housing Administration (FHA) should be announcing a tightening in credit standards this week. How will this affect the housing market?

FHA Director David Stevens says, “”Overcorrecting in either direction would be a terrible thing to do right now.”

Yet, it seems that Congress is pressuring him to tighten the easy money standards–standards that once gave home buyers the opportunity to get a home, when there would have been little-to-no-chance of doing so. Even though creating harder credit standards are going to threaten the agencies finances.

The FHA stands behind about half of every new home loans, but if the FHA is forced to raise the bar, the economy might become further endangered (as if it isn’t in enough trouble)!

Stevens is making some alterations to the credit standards for potential buyers which might consist of the following:

* Raising the minimum down payment
* Setting a minimum credit score
* Raising the minimum that borrowers have to pay for mortgage insurance
* Reduce the amount a seller can kick in for covering closing costs

Interestingly, the FHA was created to help mend the housing market in 1934 after The Great Depression, and this has been a great program to help first-time home buyers. Until now, this program has been yielding a profit for taxpayers.

David Stevens bought his first home almost 25 years ago, paying just 3% down with a loan backed by the Federal Housing Administration. “I had no money in the bank,” he says. “If it weren’t for the FHA, I wouldn’t have gotten that home.”

Now, as FHA commissioner, Mr. Stevens has to decide how many others to let through that door. Souring FHA-insured mortgages are threatening the agency’s finances. Congress is pressuring him to tighten the easy-money standards that once helped people like him, and he is expected to announce revisions as early as this week.
[FHAJmpPic] Bloomberg News

FHA chief David Stevens is likely to announce tightened credit standards as early as this week.

But raising the credit bar could have a dangerous side effect. In many of the nation’s hardest-hit housing markets, the FHA backs around half of all new home loans. If the agency pulls back too quickly, the nascent housing recovery could fizzle, endangering the economy.

The dilemma puts the 52-year-old former mortgage banker squarely in the middle of the debate over how much the government should do to prop up the housing market, and how much risk taxpayers should take on to do it.

“How big a role do we need to play to keep the housing system functioning?” says Mr. Stevens, referring to the FHA. “Overcorrecting in either direction would be a terrible thing to do right now.”

Mr. Stevens is finalizing possible revisions to credit standards. Options include raising the minimum down payment, establishing a minimum credit score, increasing the amount that borrowers have to pay for mortgage insurance, and reducing the amount of money sellers can kick in for closing costs.

The FHA, created in 1934 to heal the U.S. housing market during the Great Depression, traditionally has helped first-time home buyers and underserved segments of the market. It doesn’t lend money to home buyers, but insures lenders against default on loans that meet FHA criteria, collecting fees for that backing. For decades, thanks to a stable housing market, it turned a profit for taxpayers.
[FHA]

When the housing market was booming, subprime lenders drew away many of the borrowers who traditionally used FHA-backed loans by offering even more favorable terms. Unlike the FHA, subprime lenders didn’t require borrowers to document their incomes. The FHA saw its share of the mortgage market fall to 2% in 2006.

But when the subprime market collapsed, mortgage brokers began steering borrowers into FHA-backed loans. Politicians and policy makers encouraged the FHA to refinance at-risk borrowers into fixed-rate loans. Suddenly, the FHA had an enormous chunk of the market. Average credit scores of FHA borrowers dropped sharply at first. In last year’s third quarter, the FHA insured 25% of mortgages, according to Inside Mortgage Finance, a trade publication.

“We should not play this large a role,” Mr. Stevens says. “It’s not healthy for the mortgage-finance system, it’s not healthy for the economy, and it’s certainly not sustainable for the long term.”

The FHA, which is part of the Department of Housing and Urban Development, isn’t as nimble as private mortgage insurers. It must get approval from Congress for some major decisions. “They don’t have the horsepower that they should, especially given the size of their operations,” says Ann Schnare, a mortgage-industry consultant.

In testimony before Congress last month, HUD Secretary Shaun Donovan acknowledged that the FHA “we inherited” was “not properly managing or monitoring its risk. Credit and risk controls were antiquated. Enforcement was weak. And our personnel resources and IT systems were inadequate.”

Mr. Stevens knows the industry well. He is the first FHA commissioner in nearly two decades to bring extensive private-sector experience to the job. During the 1980s, he was a top salesman of complex adjustable-rate mortgages for World Savings Bank, a California thrift. He went on to hold senior jobs at housing-finance giant Freddie Mac and at Wells Fargo & Co.
[FHAjump]

In his off time, he plays guitar, rides his BMW motorcycle and skis the backcountry. On the job, he gets his way through sheer “force of personality,” says Eugene McQuade, once Mr. Stevens’s boss when they worked at Freddie and now chief executive of Citigroup Inc.’s Citibank unit.

When Mr. Stevens arrived in July 2009, the FHA didn’t have anyone in charge of monitoring risk, including whether certain loan products or lenders were exposing the agency to excessive losses.

In his second week on the job, Mr. Stevens suspended the FHA license for Taylor, Bean & Whitaker Mortgage Corp., one of the nation’s top lenders, amid concerns that the company was originating too many bad loans. Taylor Bean closed its doors the next day. In November, he hired the agency’s first chief risk officer and five Ph.D. economists to help evaluate risk. That same month, FHA cut off Lend America, another major lender, which also closed.

But there are still signs of trouble. At about 30 FHA-approved lenders with at least 1,000 loan originations, more than 12% of loans are in default two years after origination, nearly double the national average at the end of November. Last Tuesday, HUD’s inspector general served subpoenas on 15 of those lenders as part of an examination of the practices of lenders with high default rates.

The percentage of FHA-backed loans that defaulted after borrowers made just one payment—typically an indication of poor underwriting or fraud—has started to fall, but not as fast as needed to avoid future loan losses. FHA-insured mortgages made in 2007 and 2008 are largely responsible for the agency’s precarious position, with default rates approaching 24%.

FHA officials concede that the agency offers today’s easiest underwriting standards.

Mr. Stevens, nevertheless, lashes out at critics who say the FHA is repeating the mistakes of subprime lenders. At a conference in November, Robert Toll, chief executive of luxury-home builder Toll Brothers Inc., referred to the FHA as “the new subprime” and “a definite train wreck” that will soon need a bailout, according to a transcript of his remarks.

Mr. Stevens, in an interview, called the comparison “ludicrous,” and said Mr. Toll has “no clue” about the agency’s finances.

The agency is required by Congress to hold enough capital in reserve to cover 30 years of projected losses. An independent audit said reserves at the end of September exceeded projected losses by just $3.6 billion, about 0.5% of the $685 billion in loans outstanding, down from 3% a year earlier. Congress requires the agency to maintain a 2% capital-reserve ratio.

FHA officials say they have enough cash to cover the current level of losses, and that the agency risks running out of money only if home prices take another big dive. “We’ve learned from recent history that the market is fragile, and we have to plan for the unexpected,” Mr. Donovan, the HUD secretary, said last month.

But some analysts say the agency’s assumptions about home prices and foreclosures are too optimistic.

“FHA is, at best, running on empty, and probably is facing a negative capital situation,” Ms. Schnare, the industry consultant, told a congressional panel last month. If the agency were to run short of cash to cover projected losses, it likely would have to ask Congress for money for the first time ever.

The bad-loan problem stems, in part, from controversial programs that allowed home builders and other sellers to fund down payments for home buyers through nonprofit groups. After a lengthy effort, the FHA prevailed on Congress to shut the programs down in October 2008, but the damage already was done. The FHA’s independent audit concluded that were it not for such programs, the agency’s capital-reserve ratio would have stayed above the 2% mandated by law.

In another troubling practice, by late 2007, institutional investors were identifying at-risk mortgages in their portfolios and refinancing the borrowers into FHA-backed loans, thereby offloading their risk onto the agency. “It was an unintentional bailout of financial institutions,” says David Lykken, a partner at Mortgage Banking Solutions, an Austin, Texas, consulting firm.

One of the raft of measures Mr. Stevens is considering to protect and replenish the agency’s reserves is raising the minimum down payment. The current minimum of 3.5% is far lower than what private lenders offer, making FHA-backed loans one of the last low-down-payment options left. Last year, through August, nearly seven in eight new FHA-backed loans carried down payments of less than 5%.

Home builders are worried. “It would be a game changer for the industry” if down payments were raised, says Eric Lipar, chief executive of LGI Homes, a Texas-based builder of entry-level homes.

Not everyone believes that such low down payments are good. In markets where home values are still falling, buyers who put little money down could see their equity wiped out quickly. The FHA is “just manufacturing more upside-down homeowners by the truckload in Arizona, California, and Nevada,” says Brett Barry, a Phoenix real-estate agent who specializes in selling foreclosed homes.

If the agency were to raise down payments sharply in those markets, price declines would become a “self-fulfilling prophecy,” says Mr. Stevens. “If you stop lending, you’re going to perpetuate the declines.”

Mr. Stevens says first-time buyers are key to clearing inventory in markets such as Las Vegas. James Smith, a 42-year-old air-conditioning repairman, might not have been able to buy a $188,000 home out of foreclosure recently in Henderson, Nev., were it not for the low FHA down payments. To make the 3.5% payment, he used around $4,300 of his own money and borrowed the rest from this father-in-law.

“It was actually a great thing,” he says. He repaid his father-in-law after receiving an $8,000 tax credit for first-time home buyers. Mr. Smith, who earns around $50,000 annually, makes monthly payments of $1,466.

Mr. Stevens says he expects to get heat from industry and consumer groups no matter what he decides to do to tighten credit standards.

Even as the FHA considers how to scale back, some members of Congress are pushing it to expand its role. In 2008, in the midst of the credit crisis, Congress temporarily raised the maximum FHA loan from $362,790 to as high as $729,750 for the most expensive housing markets. Lawmakers have introduced a bill to make that increase permanent.

“A $500,000 loan in Massachusetts is like a $300,000 loan in Nebraska,” says Massachusetts Democratic Rep. Barney Frank, who favors raising limits to $800,000 in the most expensive markets. “All we’re trying to do is control for geography.”

Mr. Stevens argues the expanded limits should stay temporary, in keeping with the FHA’s traditional focus on first-time buyers.

The FHA says the loans it is guaranteeing these days will turn a profit because the credit profile of its borrowers has improved. The average credit score for FHA borrowers has risen to 681, from 630 two years ago. The median U.S. score is about 720. Much of the improvement came as the FHA’s lenders raised their own credit standards.

Mr. Stevens, for his part, is painfully aware of how far the housing market is from recovery. He listed his Northern Virginia home for sale last fall and already has slashed the asking price by $100,000, to $1.4 million. Before Christmas, he pulled the five-bedroom colonial off the market with plans to relist it later this year. He says he wants to live closer to Washington. “The commute is very hard,” he says, “and the hours are very long.”

Write to Nick Timiraos at nick.timiraos@wsj.com