Margin loans and Reverse Mortgages

Margin loans and Reverse mortgages are two topics I have found interesting and would like to share some information with you.

Margin loans

Margin loans are loans backed by buyer’s investments, typically not more than 50% of the portfolio’s value.  In this hot real estate market with high competition from cash buyers, many buyers have found margin loans a great tool.  The advantages using margin loans are no closing costs, no prepayment penalty, no appraisal, tax benefits and etc.  There is a downside: a maintenance margin.  Please go to the following link to read the details.

http://online.wsj.com/article/SB10001424127887323936404578581991623331764.html

Reverse mortgages

What I found remarkable about reverse mortgages is the statistics:” nearly 1 in 10 federally backed reverse mortgages is in default” according to this article,

latimes.com/business/realestate/la-fi-harney-20130721,0,111605.story

The horror of reverse mortgage is well illustrated in the case of Havemeyer of New York against OneWest (whose subsidiary Financial Freedom Acquisition owns the reverse mortgage note).  A mortgage with 9.95% interest, plus a 50% share of increased value by lender, plus a 2% “maturity fee”, plus a $33,000 mandatory purchase of an annuity by the homeowner is unconscionably an insult to homeownership.

A consolidated class-action suit in the late 1990s by a series of California lawsuits had settled $8 millions from the defendants – Transamerica Corp. Transamerica HomeFirst Inc., Metropolitan Life Insurance Co. and Financial Freedom Senior Funding Corp.  However, even today’s friendlier versions of reverse mortgages are made too complicated for the elderly borrowers and their heirs to understand the possible consequences.  Opinions from legal, financial and tax experts are strongly advised before anyone would take a reverse mortgage.

Wall Street investors are also buying houses...

June 12, 2013 I would like to share with readers of my blog an article on June 8th from Wall Street Journal titled “Corporate Buyers Boosting Prices in House-Sales Boom". It mentions that “the Wall Street investors are scooping up homes in bulk…” San Jose-Sunnyvale-Santa Clara area ranks #4 and San Francisco-San Mateo-Redwood City area #12 in the top 20 hottest real estate markets, according to Federal Housing Finance Agency. This is echoing what we realtors in Bay Area have witnessed: many times individual home buyers are competing with institutional investors for the same houses. These institutional buyers are not only purchasing distressed homes, but also non-distressed homes, typically probate/trust sales that they can fix up or build a new development. http://online.wsj.com/article/SB10001424127887324299104578531132265680630.html

A new development on the Estate and Gift Taxes

On New Year Eve and New Year day (2013), to avert the Fiscal Cliff temporarily, the Senate and the House had made this permanent: the estate and gift tax exemptions are set at the same $5 million level, indexed for inflation, and the estate tax rate above that exemption rose to 40 percent, up from 35 percent. With indexing, the exemption is already about $5.25 million per person — double for a couple. For more details, please check out the following links from New York Times and the Forbes: http://www.nytimes.com/2013/01/05/your-money/fiscal-deal-ends-decade-of-uncertainty-over-gift-and-estate-taxes.html?pagewanted=all http://www.forbes.com/sites/deborahljacobs/2013/01/02/after-the-fiscal-cliff-deal-estate-and-gift-tax-explained/ Please consult a Probate and Estate Planning Attorney if you like to discuss your concerns on this. You’re welcome to email me for a recommendation of attorney with such expertise and practice.

Energy saving ideas for the New Year

Happy New Year! I hope you all had a great holiday season. I would like to start the new year by offering the energy saving ideas from National Association of Realtors(NAR): In short, the 9 Unexpected Energy (and Money) Savers are Putting lamps in the corners; Switching to a laptop; Choosing an LCD TV;Giving your water heater a blanket;Turning off the burner before you're done cooking; Adding motion sensors; Spinning laundry faster; Using an ice tray; Using the dishwasher. May we have peace, joy and health in the year 2013 and beyond!

Housing affordability for Santa Clara County

How is the housing affordability for Santa Clara Valley? Please see the following chart. Santa Clara County is high in the second tier for housing cost, slightly behind the first tier of Marin, San Francisco and San Mateo Counties. This helps explain why the (national) housing market reported by the media many times does not apply to our area’s housing market.

Silicon Valley Association of Realtors recently issued a consumer alert on Fraudulent rental advertisements.  Some realtors have reported that their listings became the targets of this type of scam.

Some con artists using various websites advertise a house for rent, when the vacant property is actually for sale.  Prospective tenants who called the con artists are asked to provide an application fee and rental deposit immediately if they wanted to lease the property. 

The Department of Real Estate has issued similar warning in the past about the Impostor Landlords.  However, such scam is getting rampant in the Bay Area.  Here are the tips to protect the prospective tenants from this type of scam: (below are from SILVAR, Silicon Valley Association of Realtors.)

• Ask anyone offering a house for rent to provide you with proof that they own the house, and to show you their government issued picture identification. Then scrutinize the proof of ownership, as well as the identifications since there is also the risk that their identifications can be false.

• If you think that you are dealing with an owner’s/landlord’s representative, you should check with the DRE to see if that representative or agent is licensed. This is because a real estate license is required, with some narrow exceptions, for a person to offer a house for rent as an agent of the owner. Check the license records on the DRE website (www.dre.ca.gov) and make sure you are working with legitimate licensees.

• If you are an existing tenant, you should check with the County Recorder’s office to verify the property’s owner of record. If the house has been foreclosed upon, you should contact the new owner and verify with the current owner the person to whom you should be forwarding your rental payments.

If you feel you have dealt with a scammer in the area of a housing rental or have been defrauded in connection with rental of a house, please contact the DRE at the following numbers: For Spanish-speaking consumers, call 1-877-DRE-4321; for consumers in the Bay Area, call (510) 622-2552.

The West Side story

Here is some national news:

• ·         Consumer confidence is up in February;

• ·         Foreclosure starts – or when a lender files paperwork to begin the foreclosure process – jumped 28% in January compared with December.  And foreclosure sales jumped 29% in January; and

• ·         The number of “underwater” borrowers has increased from 10.7 million to 11.1 million.

However, if you are the fortunate prospective buyers for the west side of Silicon Valley, like Saratoga, Palo Alto and Los Altos areas, you could be dumbfounded to find a very different phenomenon in the real estate market.  The local market condition of these areas is extremely low with housing inventory (supply) while the demand is going up fast, especially with Facebook’s IPO and some foreign cash buyers.

Since the turn of the year 2012, these areas have seen many multiple offers and offers higher than listing price.  A recent house in Palo Alto was sold with $500K over the asking price!

Again, the Silicon Valley real estate market is definitely not synchronized with that of the rest of the nation.