Thursday, August 13, 2015

Reverse Mortgages: How To Protect Yourself

The Consumer Financial Protection Bureau says reverse mortgage borrowers are frustrated with their loan terms, service runarounds and foreclosure problems.

A reverse mortgage is a special type of home loan that allows older homeowners to access the equity they have built up in their homes and defer payment of the loan until they pass away, sell or move out.

The loan proceeds are generally provided to the borrowers as lump-sum payments, monthly payments or as lines of credit.

The Bureau studied 1,200 reverse mortgage complaints it got over the past three years and found:

Distress about the inability to add new borrowers to an existing loan.

Reverse mortgages prohibit spouses, heirs and dependents from taking over the loan. This is because loan amounts are, in part, calculated using a borrower’s age and the loan repayment is triggered when the last borrower moves out or dies.

Frustration with runarounds when trying to pay off the debt.

When the borrower dies, heirs can sell the home, repay the loan balance or pay 95 percent of the property’s assessed value.

Consumers complained that the loan servicer didn’t provide a clear process to allow them to settle the debt, used inaccurate appraisals and didn’t respond to written requests for payoff information.

If you need a quick property value estimate, call me and I’ll pull comparable sales for you to help you judge the validity of the reverse mortgage lender’s estimate.

Struggles with foreclosure due to issues with property taxes and homeowners’ insurance.

Reverse mortgages require no monthly mortgage payments but borrowers are still responsible for property taxes and homeowners insurance. Nearly 10 percent of reverse mortgage borrowers are at risk of foreclosure because they can’t pay these expenses.

Consumers who complained to the Bureau described unsuccessful attempts to halt foreclosure proceedings by paying overdue taxes. Others insisted that their loan servicers had determined incorrectly that their taxes were overdue. Sometimes these inaccuracies were due to a failure by loan servicers to keep accurate records.

If your or your loved ones are struggling to pay property taxes and insurance, contact me. I can help you sort through the options.

Protect Your Loved Ones From Financial Hardship

The Bureau suggests doing three things to help make sure your surviving heirs aren’t harmed by a reverse mortgage that you take out:

1. Verify who is on the loan.

If two borrowers take out the reverse mortgage, check with the reverse mortgage company to make sure its loan records show two borrowers on the loan.

2. Plan ahead for the non-borrowing spouse.

If you got a HECM reverse mortgage in the name of only one spouse before Aug. 4, 2014, contact your loan servicer now to find out if the non-borrowing spouse may qualify for a repayment deferral in the future. If not, decide how you’re going to manage if the borrowing spouse passes away first.

If you have enough remaining equity, the surviving spouse could take out a new reverse mortgage, but they will incur new loan fees. Some surviving spouses may also be able to pay off the reverse mortgage, or take out a traditional mortgage, perhaps with another family member.

Many will need to plan for where they will live after the home is sold to repay the loan, the Bureau warns.

If you got your reverse mortgage after Aug. 4, 2014, chances are your non-borrowing spouse, subject to meeting certain conditions, will be able to remain in the home. Check with your lender to be sure.

3. Plan ahead for other family members living in the home.

Make sure your children or other family members living in the home know what will happen when the reverse mortgage is due. If those members want to keep the home, you can contact your reverse mortgage company and ask them to send information explaining the options family members will have.

Tuesday, March 24, 2015

Rent vs Own Calculator

Rent vs Buy Calculator gives Home Buyers an economic breakdown of buying a home in the current Los Angeles and Orange County Real Estate Market.

Monthly rent
Monthly renter’s insurance
Yearly rent increase
Purchase price
Appreciation (Depreciation) rate
Your savings rate
Your state + federal tax rate
Years before sell/pay off loan
Loan amount
Term (years)
Interest rate
Origination Charge
Charge For Specific Interest Rate
Other settlement services
Yearly property tax
Yearly maintenance
Yearly property insurance
Selling costs (% of selling price)
Owning will save you $11,940 compared to renting over the 7 years, in today’s dollars.
Regarding ownership for the 7 years
Total tax savings
Total maintenance
Selling price
Selling costs
Total payments
Principal and interest
Taxes and insurance
Mortgage insurance

Total initial payment
There has never been a better time to buy a home in Los Angeles with interest rates at an all time low, making this an opportunity of a life time to lock in a 30 year fixed rate loan. Home affordability levels display that in fact it is cheaper to buy a home versus Renting now in certain parts of the country.
Los Angeles homes for Sale are affordable in most parts of the county mainly because home values were negatively impacted on a large scale and drove thousands of home owners in to foreclosure and short sales. Now renting is in high demand because many families were uprooted and must now rent, driving demand up!

Southern California Home Sales Decline; Median Sale Price Still Up Year Over Year

February 17, 2015
CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled services provider, today released its January 2015 Southern California housing market report. Home sales in January fell sharply from December, as they normally do, and dipped modestly from a year earlier, marking the 14th month in the last 16 to post a year-over-year sales decline. The median price paid for a home in the six-county region also dropped month over month but rose year over year for the 34th consecutive month, although that increase was less than half the gain of a year earlier.
A total of 13,560 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in January 2015. That was down month over month 29.4 percent from 19,205 sales in December 2014, and down year over year 6.3 percent from 14,471 sales in January 2014, according to CoreLogic DataQuick data.
On average, Southern California sales have fallen 27.6 percent between December and January since 1988, when CoreLogic DataQuick data began.
January home sales have ranged from a low of 9,983 in 2008 to a high of 26,083 in 2004. January 2015 sales were 21.7 percent below the January average of 17,322 sales since 1988.
"The January and February statistics are always interesting, and sometimes a bit strange, but they're not necessarily a good indication of what's to come," said Andrew LePage, data analyst for CoreLogic DataQuick. "That's largely because many traditional buyers and sellers drop out of the housing market during the holidays and mid winter, and therefore don’t close deals during those months. In recent years that's led to somewhat higher concentrations of investor activity for January and February, and we saw that again last month. Heading into spring it will be interesting to see whether price appreciation and other factors will finally release a lot of the pent-up supply of homes out there. More owners have gained enough equity to sell and buy another home and more will be satisfied with how much their homes can fetch. At the same time, recent gains in job and income growth, coupled with low mortgage rates, could stoke demand and put significant pressure on prices unless we see a meaningful jump in inventory.”
The median price paid for all new and resale houses and condos sold in the six-county region in January 2015 was $409,000, down 1.4 percent month over month from $415,000 in December 2014 and up 7.6 percent year over year from $380,000 in January 2014. The median hasn't changed significantly since September 2014, when it was $413,000. The median's peak for 2014 was $420,000 in August.
Southern California's median sale price has risen on a year-over-year basis each month since April 2012. In the 22 months between August 2012 and May 2014 those annual gains were double digit, as high as 28.3 percent in June 2013. Since then, the year-over-year increases in the median sale price have been single-digit. In January 2014 the median rose 18.4 percent compared with January 2013 – more than twice the 7.6 percent gain when comparing January 2015 with January 2014.
The January 2015 median sale price was 19.0 percent below the peak median price of $505,000 reached in March, April, May and July of 2007. Among the region’s six counties, the January 2015 median in Orange County ($562,500) was the closest – within 12.8 percent – to its peak of $645,000 in June 2007.
Home prices in Southern California have been rising at different rates depending on price segment. In January 2015, the lowest-cost third of the region's housing stock experienced a 9.0 percent year-over-year increase in the median price paid per square foot for resale single-family detached houses. The annual gain was 5.7 percent for the middle third of the market and 3.2 percent for the top, most-expensive third.
The number of homes that sold for $500,000 or more in January 2015 rose 2.0 percent compared with January 2014. Sales below $500,000 fell 13.8 percent year over year, and sales below $200,000 dropped 30.3 percent.

Other Southern California housing market highlights from January 2015 include the following:

  • Foreclosure resales represented 5.7 percent of the resale market in January. That was up from a revised 5.3 percent in December 2014 and down from 6.6 percent in January 2014. In recent months the foreclosure resale rate has been the lowest since early 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009. Foreclosure resales are purchased homes that have been previously foreclosed upon in the prior 12 months.
  • Short sales made up an estimated 6.5 percent of resales in January, up from a revised 6.2 in December 2014 and down from 10.7 percent in January 2014. Short sales are transactions in which the sale price fell short of what was owed on the property.
  • Absentee buyers – mostly investors – bought 25.0 percent of the homes sold in January. That was up from a revised 23.6 percent in December 2014 and down from 27.6 percent in January 2014. The December 2014 absentee level tied the October 2014 level as the lowest for any month since October 2010, when 22.1 percent of homes were sold to absentee buyers. The peak absentee share was 32.4 percent in January 2013, and the monthly average since 2000, when CoreLogic DataQuick absentee data began, is about 19 percent. Absentee buyers include those who purchase vacation homes or other properties that public property records suggest are not used as primary residences.
  • Cash buyers accounted for 24.6 percent of January home sales, up from a revised 22.2 percent in December 2014 and down from 29.9 percent in January 2014. The December 2014 cash share was the lowest for any month since January 2009, when 22.0 percent of homes were bought with cash. The peak was 36.9 percent in February 2013, and the monthly average since 1988 is about 17 percent.
  • Jumbo loans, or mortgages above the old conforming limit of $417,000, accounted for 30.7 percent of purchase lending in January, down from a revised 32.1 percent in December 2014 and up from 26.6 percent in January 2014. The July/August 2014 level of 32.3 percent was the highest since the credit crunch struck in August 2007. Prior to August 2007, jumbo loans accounted for around 40 percent of the home-loan market. The jumbo level dropped to as low as 9.3 percent in January 2009.
  • Adjustable-rate mortgages (ARMs) represented 11.3 percent of home purchase loans in January, down from 12.3 percent in December 2014 and down from 13.5 percent in January 2014. The ARM share dropped to as low as 1.9 percent of home purchase loans in May 2009. Since 2000, a monthly average of about 30 percent of purchase loans have been ARMs.
  • The typical monthly mortgage payment for Southern California home buyers in January was $1,501, down from $1,558 in December 2014 and down from $1,528 in January 2014. Adjusted for inflation, the January 2015 typical payment was 37.7 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was also 48.9 percent below the current cycle’s peak in July 2007.

Total January Home Sales
in Selected Southern California Counties

Homes SoldMedian Sale Prices
All homesJan-14Jan-15Percent ChangeJan-14Jan-15Percent Change
Los Angeles4,9134,738-3.60%$410,000$460,00012.20%
San Bernardino1,9101,712-10.40%$220,000$236,0007.30%
San Diego2,3382,233-4.50%$405,000$435,0007.40%

Source: CoreLogic DataQuick. Data available at

Wednesday, March 11, 2015

Interesting Information how to hold a title

Very Interesting Information:
 Majority of my clients ask me how they should register and keep their title. This is simple explanation about it, but you really want to get legal counsel for that question 
When a husband and wife hunt for a home, they consider factors such as the neighborhood, the quality of the school district, curb appeal, or the condition of the house. However, they frequently overlook something else that is perhaps just as important: how they take title to their new home. It's a fact that most married couples choose joint tenancy.
 However, joint tenancy will create future tax liabilities if one of the spouse dies and the property is sold. A married couple can escape this tax liability by simply taking title as Community Property (CP) or Community Property With Right Of Survivorship (CPWROS). The only time the IRS will forgive you for the capital gains on your home is if you vested title as CP or CPWROS. So you should take advantage of it!In California, most married couples will hold title to their homes in Joint Tenancy because they don't seek legal counsel, they are not well informed, or because someone told them that holding title in joint tenancy escapes probate. However, holding title in joint tenancy escapes probate only after the first spouse's death and creates tax liabilities if the property is sold by the surviving spouse.
How is it that joint tenancy creates future unnecessary tax liability?
Look at an example. John and Jane, a married couple, bought a home in California for $100,000 in 1980 and in 2015 it is worth $ 1 million dollars. John dies in 2015. Jane sells the property for $1 million dollars following his death. What is Jane's cost basis in computing how much income tax she will owe? The couple originally bought their home for $100,000 and Jane is still alive; therefore, her cost basis is $50,000 or half of the original price. When John dies, Jane receives John's 50% share of the house AND John's stepped up cost basis as well. Because Jane is receiving John's 50% after his death, she is receiving John's stepped up cost basis, which includes half of all the appreciation in the value of the house. When John died, the house was worth $1 million dollars; therefore, John's 50% cost basis would be stepped up to $500,000. When Jane sells the property for $1 million dollars minus her cost basis of $50,000 and John's stepped up basis of $500,000, her taxable proceeds would now be $450,000 ($1,000,000 minus $50,000 minus $500,000 = $450,000). The bottom line here is that in joint tenancy, there is ONLY a 50% or half stepped up in cost basis, whereas if John and Jane held title of their home as CP or CPWROS, then the stepped up tax basis would be 100% and Jane will have to pay ZERO in taxes!
Holding title as CP or CPWROS is a good method for paying NO income tax for your surviving spouse in the future. Lets look at the same example. Instead of taking title in joint tenancy to their home, they took title as CP or CPWROS. When John dies the house is worth $1 million dollars. Jane sells the house for $1 million. How much tax does Jane now need to pay? The answer is ZERO tax liability! Why? Because, when Jane sells the house for $1 million dollars, her cost basis is also $1 million dollars. This is because Jane received a 100% or full stepped up cost basis since the home was vested as CP or CPWROS and not held in joint tenancy.
Therefore, a husband and wife should strongly consider holding title to their home as CP or CPWROS because after the death of the first spouse, the surviving spouse can sell the house and not pay any taxes on the appreciated value of the home.
However, the best method in vesting title is a Living Trust if you have a family.

Realtor Jolanta,