Michael Bloch

Wachovia (aka World Savings and Golden West) currently has the most aggressive program to help homeowners avoid foreclosure. Today I attended training at the Santa Cruz Board of Realtors put on by a Wachovia Short Sale Manger from Santa Clara In the current world of processing nightmares for short sales and loan modifications, there is finally one lender is "getting it". It's not rocket science. When lenders have to foreclose on a home they lose a tremendous amount of money. However, if they work with the homeowner to keep them in the home with a loan modification or allow them to sell short, they are saving huge amounts of money from the bottom line. Wachovia has streamlined their loan modification process and short sale process, making it a quicker and smoother process. They are calling this the FAST TRACK. This means that if you know anyone with a World Savings, Golden West or Wachovia loan that is underwater or having some kind of hardship, we can help them get answers relatively quickly. This also means that if you are buying a short sale, and the seller's lender is Wachovia, you will most likely have an answer sooner than later. Wachovia says they will have it approved in 45 days or less.

What is also very exciting to actually have a direct contact with a Short Sale Manager at Wachovia. (Wachovia took over World Savings and Golden West so this applies to those loans as well) We have all been transferred through the never ending maze of a customer service phone tree, only to become increasingly disgruntled. Multiply that frustration tenfold when dealing with a large bank like B of A on a short sale. I know have the name, phone number, email, and physical address of an actual person that can make actual decisions on short sales!

Unlike most lenders, Wachovia is not requiring extensive documentation from the property owner to do a short sale. They only require a hard ship letter from the seller and a phone interview. If it is for a loan modification they will also want to see proof that the owner has the ability to pay. This is smart as many other modifications end up in back in default because they can't afford their modified terms.

Wachovia is also sending out letters to certain homeowners letting them know that their home was "pre-approved" for a short sale. If you get one of these letters, please contact me I can help you understand what it means.

If you or anyone you know would like help with getting qualified for a loan modification or short sale, please contact me and I will be happy to assist you at no cost to you.

I have just finished setting up a new website at www.ShortSalesInSantaCruz.com . It is also listed as a link on the bottom, right-hand-side of this webiste. The purpose of this website is to give home owners who are dealing with some kind of hardship or distress information on all of their options in lieu of Foreclosure.

Some of the possible options may include:

• Loan Modification
• Refinancing Home Loan
• Deed in Lieu of Foreclosure
• Short Sale

The stats show that 7 out of 10 homeowners, who go through foreclosure, never contacted their lender. There is help out there. If you know anyone who is experiencing difficulties in making their mortgage payments please refer them to my website for information and let me know so I can contact them, and offer my assistance.

As a former second grade teacher in Watsonville, one of my goals in Real Estate has always been to help teachers buy homes. One of the upsides of the drop in home prices has been that I have been able to help more teachers and other local buyers purchase their first home. Along with the reduction in prices there has also been an extreme tightening of lending guidelines, which has made it difficult to qualify for a loan. To get conventional financing buyers now need 20% down. However, there are several programs that can help teachers and other first time buyers. Here are some examples with brief descriptions. If you would like more information or have specific questions about any of these programs, please let me know.

1. CALSTRS- This is a program which works with the California State Teacher Retirement System (CALSTRS) to provide fixed rate loans with 3% down. The buyer gets two loans. One for 80% of the value of the home, and another for 17% of the value of the home. Both of the loans are fixed rates for the life of the loan. In addition, the second loan of 17% has no payments due for the first 5 years of the loan. Many refer to this as a "silent second". This gives buyers 5 years to get used making mortgage payments while getting ready for a higher payment in five years. The increased payment is defined from day one, so there are no surprises. The interest rate is fixed at today's competitive and historically low rates.
2. FHA- These are government insured loans through the Federal Housing Administration. You do not need to be a teacher or first time buyer to qualify. The main advantages are the low down payment (3.5%) and looser credit restrictions. However, they do collect quite a bit of prepaid interest, insurance, taxes and there is often a high onetime fee, which all makes closing costs high relative to the size of the loan. There is also mortgage insurance required for these loans, which adds to the monthly expense. I will often negotiate the deal so that the seller is paying the majority of the closings costs since many buyers need their savings for the down payment as well as reserves funds and extra money for any repairs or improvements that the property needs.
3. CALHFA- The California Housing Finance Agency is also offering the CAL-30 loan. This loan only requires 5% down, and is also a 30 year amortized, fixed loan. I recently received a bulletin saying that through monies from the Federal Government and approval from Governor Schwarzenegger there should be funds available for first time buyers. I had stopped recommending this program awhile ago because they had run out of funds to loan money. It appears that they will be funded again, and I am having a local lender look into the pros and cons of the loan with today's underwriting standards.
   If you have any questions or know anyone interested in more information on fixed rate loans with low down payments, please let me know.

Is it too early to say that the local real estate market has started to recover? There are a lot of indicators pointing in that direction. What else can you call it when you see a decrease in supply alongside an increase in demand? I am no economist, but then again, it does not take an expert to understand the basic principles of supply vs. demand.

Here is a comparison between September sales for single family homes in 2009 and 2008:

2009 2008

# Of homes for sale 947 1251

Days on market 86 100

# of sales 151 143

Months of Inventory 6.6 9

% of list price received 98.01% 95.66%

Median sales price $535,000 $475,000

Prime interest rate 3.25% 5.0%

Again, the data shows a decrease in homes available and an increase in numbers of sales. This is a trend that we have been seeing for most of 2009. Currently we have a supply of 6.6 months of inventory vs. 9 months a year ago. This is considered by most to signal "normal" market conditions, with little pressure on prices to go up or down. If the trend continues we will see the current supply decrease, which will put upward pressure on prices. There is still an increasingly smaller segment of the population that believes prices will have another significant drop. At this point in time, for that to happen we would need to see a significant number of buyers leave the market and/or a sharp increase in inventory.

Much depends on what potential buyers can qualify for based on interest rates and underwriting guidelines. Rates have continued to stay near historic lows, helping to keep payments affordable. The challenge for buyers is to qualify for the loan with today's very strict guidelines. If guidelines loosen up then more buyers will be able to purchase, which would increase demand. On the flip side, if guidelines continue to tighten up, or interest rates spike upward, this could decrease demand by limiting the number of qualified buyers in the market place.

Another factor has been the tax credit for first time buyers of up to $8,000. This has just about run out (end of November) and congress is debating whether they will extend the tax credit. There is even talk of extending the credit for all home buyers, not just first time buyers. The question is whether it is really enough to stimulate the market. I have observed from my own clientele this past year, that the credit was one of the motivating factors to get them off the fence and buy if they were first time buyers. There will also be the delayed stimulus to the local economy when they file their taxes in 2010 and either owe $8,000 less or get a refund. This may make the difference in purchasing new furniture, or doing minor remodeling.

"Should I make my mortgage payment?" This is question that I have been asked many times by property owners considering doing a short sale. My first answer is always the same. I let them know that I am not qualified to give that kind of advise and that they should consult their financial planner, tax advisor and/or attorney for this kind of advice.

The type of home owner asking this question is often the honest, hard working, responsible citizen type of person that really just wants to do what is right. They are not trying to rip-off the the lender, or re-nig on their financial obligations. Usually, they are experiencing some kind of hardship, and go no longer afford their mortgage payment. They may be making the payment on time, but struggle each month to do so. I have seen owners start using credit cards to make the payment. They may also be pulling from retirement accounts.

I do let the struggling home owner know, that from my experience, most lenders will not even review your file, let alone approve a short sale, unless the home owner is delinquent on payments. I do also let them know, that most likely those missed payments will be reported to the credit bureaus and show up on the credit report. Whatever a struggling homeowner decides to do, they should consider all options before missing payments deciding to miss a payment. If after reviewing all options, the owner decides that attempting a short sale will be their best option, then they should check with the lender to see if they will consider a short sale if they payment is current.

Intentionally missing a payment is a hard thing to do for a person who is trying to do the "right thing" and trying to do what is best for their own financial future.