Category Archives: Laguna Beach Real Estate

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Are Underwriting Guidelines Too Strict? Or are Loan Originators Too Dumb?

It’s been estimated that an average one-third of all home sales fall out. Mortgages being declined or unreasonable conditions of approval are where most real estate agents and borrowers place the blame. Is that blame fairly placed or are the Loan Originators to blame for not knowing the guidelines of the loans for which they were hired to originate?  Read on for a different point of view…..

A few years ago when the mortgage and housing markets and the overall economy started to tumble, the underwriting guidelines were changing almost daily. Lenders couldn’t keep up with all the changes made by Fannie Mae, Freddie Mac and FHA – the three housing agencies that are now part of our federal government and account for more than 90% of all mortgage money. Loan Originators, Processors & Underwriters were trying to figure out what could be approved, what should be declined and how to properly document a loan file.

But more recently the guidelines have stabilized with relatively few changes in the past year or more. So, if the guidelines aren’t changing any more, shouldn’t we as loan originators be expected to know what can be approved and what shouldn’t? And shouldn’t we know what documentation is required to properly assemble a loan that will be approved when it reaches the underwriting department?

The mortgage process starts with the loan originator. And as the saying goes, “the buck stops here”. A good loan originator should know by the completion of a loan application and immediate review of the borrower’s income, assets and credit whether a loan can be approved. And he/she should also anticipate what documentation an underwriter will require to issue a loan approval without a list of conditions a mile long.

Why Do So Many Loan Applications Get Rejected?

In today’s mortgage climate where “no-doc” loans no longer exist, a loan originator should possess the following qualities:

  • Knowledge of underwriting guidelines
  • Expertise in knowing what documentation needs to go into a file and what doesn’t
  • Control of the file during the loan process

Knowledge and expertise come from experience. An experienced loan originator should know how to review and analyze the borrower’s tax returns, credit report, and other financial information. If the originator merely takes the application and hands it off to a processor never to look at it again, that loan has a lower probability of being approved. The necessary loan documentation should be gathered from the borrower within the first few days and analyzed upon receipt. If it is, then there’s no reason to be surprised by an underwriters request for more documentation and explanations later. A pro-active loan originator will have already identified the potential weaknesses in a file and addressed it long before it gets to the underwriter.

By keeping control of the file the loan originator can monitor the documentation as it is received. Constant review helps to identify a potential problem earlier in the process and allows time to request any additional documentation to overcome the issue. Larger companies that utilize centralized processing located in another part of the country (or in some cases in another country) lose the ability to monitor the file as it develops.

The loan originator in today’s mortgage market needs to be more than just an “order-taker”. Knowledge, understanding, expertise and control of the file will all serve to mitigate problems that will otherwise arise in a later stage of the loan process. Too many loan files that are declined could have been easily approved if only the loan officer had just taken the time to review the file upfront; scrutinized the documentation; and, identified and addressed the concerns with the borrowers, loan processor or underwriter.

Relying only on an experienced knowledgeable, professional and local loan originator will help to improve the likelihood of your loan closing.

Mortgage Rates This Week:

Rates held steady this week. The financial markets were calm but with a close eye on the progress (or lack thereof) of Greece and Europe to come to any kind of resolution to their debt problems. The most important report of the month is Friday morning when the Labor Department releases the Employment Report for the month of December. Without a doubt, Employment and Housing are the two most important components missing from our economic recovery. If actual numbers are far off from projections it could move the markets/interest rates.

For a day to day update on the factors influencing mortgage rates, be sure to read the Daily Rate Lock Advisory on my website:

Daily Rate Lock Advisory

Laguna Beach residents will enjoy watching this YouTube video about Laguna in the old days…..

Those Were The Days – Laguna Beach

Mortgage Interest Rates*
Rates as of Thursday, 2nd February, 2012:

Mortgage Interest Rates as of Thursday, 2nd February, 2012

 


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Free Dana Point Electronic Waste Recycling Drop off old TVs, Computers, Printers, Batteries, Shred Paper Files..

The eWaste drop-off (and paper shredding) Surterre Properties conducted last month was so popular I thought you all would like to hear about this weekend’s drop-off in Dana Point (a 15 minute drive).

Our average car count over the last couple of years has been around 250 through each event.   At last month’s pickup we had 408!  Sign of the times?

This is a great opportunity to get rid of your old TVs, computers, printers, batteries and shred your paper files..and to have them recycled. It is free and easy.

Surterre Properties Electronic Waste Recycling

Surterre has expanded with offices in Dana Point and San Clemente. We were the ‘king of the hill’ in Laguna this last year. Check out the numbers below.

Laguna Beach Real Estate for Sale


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A Snap Shot and Videos of Properties for Sale Under a Million in Laguna Beach

Before going into the detail of the properties under $1m, I’d like to put it in context of where the Laguna market ended up in 2011.

Year End Highlights: 32 sales in the month of December, the highest month for all of 2011; 90 sales in the 4th quarter, best quarter of 2011; only 228 Active Listings at the end of the year, the lowest number of Actives since December of 2007 (four years ago).

Secondly, it is pre spring, which is when the homes for sales usually sustainably increase.

Thirdly, a client shared with me the following graph on homes for sale under $1m for the last 10 years. Pretty interesting that from 2004 to 2007 there were hardly any properties for sale under a million. Spiked up to over a 100 in April 2011 and now is at 49 properties.

We need to keep an eye on what happens this spring, which starts next month.

There are currently 49 properties for sale for less than a $1 Million

That’s about a 3 month inventory based on 15 sales a month, which has been the average amount of sales in this price range.

34 are single family residences – Client Brief Report + Photos

15 are condos – Client Brief Report + Photos

Breakdown by areas of Laguna

10 are in South Laguna – Client Brief Report + Photos
Printable Map

10 are in North Laguna (8 are condos) – Client Brief Report + Photos
Printable Map

8 are in Laguna Canyon – Client Brief Report + Photos
Printable Map

22 are in Laguna Village (includes Arch Beach Heights and Top of the World) – Client Brief Report + Photos
Printable Map

Breakdown of Distressed Properties for less than a Million

53% of properties for less than $1m are distressed properties (short or foreclosed)

4 are foreclosures – Client Brief Report + Photos
Printable Map

11 are short sales – Client Brief Report + Photos
Printable Map

Spotlight on Two new ones that came on the market today (one $500k and the other $615k) – Client Brief Report + Photos

Videos of 2 properties for less than a million in the Oak Street Village Area – Sorry if they are a little hoj pod but that happens when you have to work around people that are in the residence. Better than nothing.

The year in Review in Graphs:


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Mortgage Rates Hit All Time Lows (Again)!

It’s all about rates this week as they have retreated back to their all-time low point that was also touched in September. Another strong Treasury auction and lack of any real solution to the European debt crisis helped, among other things.

While mortgage rates are not based on US Treasuries, the Mortgage-Backed-Securities (MBS) that do influence rates are similar to Treasuries and tend to trade in the same direction. Read on for a better understanding………….

Can Rates Go Any Lower?

A huge factor in how low mortgage rates can go is the underlying Mortgage-Backed-Securities (MBS) market.  Nearly all loan products offered by lenders are sold to Fannie Mae and Freddie Mac and end up as part of MBS pools or securities.  These MBS securities are then purchased by institutional investors.

In general, the lender that services the loan will receive .375% of the rate on a 30-year fixed rate loan. The ultimate investor in the MBS will receive the rest, except for the remaining .125% that gets eaten up by a variety of fees. So, on a 4% loan, the servicing lender gets 0.375% and the investor receives 3.5% as their rate of return.  Lenders can pool loans +/- .25 of the MBS rate. So, if the MBS security being sold into is at 4%, lenders can deliver loans with rates between 3.75% and 4.25% into that pool.

If rates go any lower, there will be a need to create a 3% MBS pool with a 3.5% interest rate. But, in order for lenders, Fannie and Freddie, to create MBS’s with a lower rate, there has to be investors willing to buy these MBS’s at a lower rate. With rates so low already, there likely isn’t much, if any, demand for lower rates on Mortgage-Backed Securities.

Therefore, the nature of supply and demand for Mortgage-Backed Securities will probably prevent rates from going lower. Unless economic factors force them down even more. And, any positive signs in the economy or in Europe can make rates pop back up again in no time.

The Fed

The Fed, officially known as the Federal Reserve, had one of their regularly scheduled Federal Open Market Committee meetings this week too. Although their comments were generally non-committal, Many observers believe the Fed will step in to take steps to stimulate growth in 2012, first through communications measures that drive home their expectation that interest rates will not rise for a long time, and then through more bond buying. Some have said the central bank should resume purchases of mortgage-backed securities to help revive the depressed housing market; others would prefer to stick with purchases of U.S. government debt, i.e., Treasury securities.

In the meantime, ‘tis the season…………

To track the factors that influence mortgage rates on any given day or week, you can always click on the following link to my Daily Rate Lock Advisory:

http://www.rtcmortgage.com/DailyRateLockAdvisory

Mortgage Interest Rates*
Rates as of Thursday, 15th December, 2011:


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What did the Laguna Foreclosed Beachfront go for?

Foreclosed Beach Front Property

Boy, things surely got steamed up last week with the Laguna foreclosed beach front property offer for $2 million. The video was seen by over 150 people and I got lots of calls of interest.

While the listing agent won’t give me the exact amount since it’s in escrow, he did tell me it was $3+ million, which is an awesome price.

A lessoned learned though is that most of the people who were interested did not have the loan approval letter that was required on the offer submission. Great opportunities happen fast and you need to have your powder dry and loaded, so get those pre-approvals.

Call Rick Cirelli at RTC Mortgage at 949-494-4701

I thought you’d get a kick out of this – Attached is a 1977 purchase agreement – 1 PAGE – that’s it. I especially like Paragraph #16 wherein it states that should the buyer default; the buyer’s deposit is given half to the agent and half to the seller

Click Here to View the 1977 Agreement

Interesting Quote – I get asked all the time ‘when is the real estate market going to turn around?’ and thought this quote from John Burns, a real estate consultant to builders, is as good as any. “With the general view that prices and mortgage rates are more likely to get better than worse, many buyers are staying on the sidelines. When they can say, “We should have bought 6 months ago,” we expect the pent-up demand to begin to unleash”

In other words, many will see the bottom in the rear view mirror.


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Sign of the Times – Laguna Beach Oceanfront Foreclosure for Less than $2 Million

Many buyers have been waiting for this.

A relatively affordable ‘on the beach’ oceanfront home for less than $2 million.

Client Brief Report + Photos

It’s got some serious neighbors


Offers must be in by Dec. 11 and the seller will let you know the highest offer and everyone can make a ‘best and final’ offer.

The next least expensive sfr is $3.5 million.

Check out the 28 Laguna homes for sale on the oceanfront. Client Brief Report + PhotosPrintable Map

Click here to see the 13 Laguna oceanfront condos – Client Brief Report + Photos


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5 Ways to Course-Correct When Your House Hunt Takes Too Long

Some people have home-finding stories that are the real estate equivalent of the skywritten marriage proposal tales. They drove by their dream home, knocked on the front door and the elderly owner offered it to them for a song. However, most recent home buyers have tales on the other end of the charming-and-easy spectrum; tales of year-long house hunts and fruitless offer after fruitless offer, followed by a nerve-wracking, hair-pulling, interminable negotiation with the bank are much more typical.

If you’ve been in the market for a home for what seems like a very long time to no avail, here are five strategies for getting things back on track.

1.  Know how long is (truly) too long. If you’ve been saving up, primping your credit and fantasizing about your dream home for 5 years, then waiting for exact right moment in your life and the market to pull the trigger for 4, viewing 15 houses over 3 weeks might seem like an interminable amount of time.

And if you make an offer that is rejected? The agony of that defeat is outweighed only by the pain of your dream (home) being deferred.

Be aware that today’s market is a very slow-moving one. It’s completely normal in some areas for buyers to view dozens of homes over as many months, and have several offers rejected before getting into contract. Talk with your agent about how long local buyers normally have to prowl today’s market before getting some home buying satisfaction.

2.  Identify where your process is breaking down. In order to course-correct your wayward house hunt, you first have to figure out what the problem actually is. If you’re looking at lots of homes, but not finding anything that suits you, you might have an expectation issue. These range from having champagne tastes on a beer budget to being part of a pair of buyers with conflicting expectations that no home will ever be able to satisfy (e.g., husband wants a fixer, wife wants move-in ready).

If you’re finding places you like, but your offers are consistently being shot down, you might need to work on bringing your home picks into alignment with your budget by increasing your price range, decreasing your wish list, or looking at a lower price range and making higher, more competitive offers.

Fact: an experienced buyer’s agent is an expert diagnostician of house hunt ailments. If your agent told you 7 months, 43 prospective homes and 9 offers ago that your expectations are out of whack or that you need to consider some compromises, you might circle back to that advice – and consider taking it.

3.  Remember how many houses are in the world, but don’t try to see them all. It’s easy – but unproductive – to get upset about “the one that got away;” counter that frustration by reminding yourself that you are house hunting in a market relatively flooded with housing inventory.  On the other end of the getting-out-of-your-own-way spectrum, if you do find a home that really works for you in your price range, get over the idea that you have to see everything in town before you make an offer.

One more mindset reset along these lines: understand that the *perfect* house does not exist – at any price range. Petra Ecclestone just dropped $80 million in cash to buy Candy Spelling’s Hollywood home and reportedly had the whole place gutted because the decor was not to her taste. In the same way people with curly hair wish they had straight and vice versa, people who have hilltop vistas wish they lived nearer to the grocery store and people who can walk to the store wish they had better views. No single home will ever satisfy every single one of your preferences, so don’t hold out waiting for one that will.

4.  Rethink your deal-breakers. The greater the number of absolute deal-breakers you’ve communicated to your agent, the fewer prospective homes you’ll see. And the more flexible you can be about which listings you’ll look at, the higher the chances you’ll find something you like.  I recently read an article in an architectural magazine about a woman who house hunted ad nauseum in a very small neighborhood she needed to be in, only finding success when her agent showed her a fourplex she could convert into the single family home she was looking for.

If you think your agent simply doesn’t understand what you want, ask them to remove all pricing filters and send you homes that reflect what they think your dream house really is.  Alternatively, drive around and find homes for sale or visit Open Houses that you think are closer to what you want – then investigate their list prices, or send the addresses of “suitable” homes that aren’t for sale to your agent to find out what that house would go for today.

These exercises will get you and your agent communicating on the same page; will help you understand tradeoffs, wants and needs more concretely; and will very likely flick some of your mental switches around what you can expect from a property at various price ranges.  This strategy is especially useful for reality-checking the expectation of home buyers relocating to a town with a higher cost of living than their current hometown.

5.  Ignore the peanut gallery. People who have not bought a home in your town, your desired neighborhood and your price range at the same moment in time you find yourself house hunting are not authorities on any of the following:
(a) how dirt cheap ‘those foreclosures’ are,
(b) how much of a discount you should be able to negotiate,
(c) how much is too much for you to pay, or
(d) how desperate the banks or sellers are to sell.

That lack of authority, though, will not stop your family members, friends and neighbors from chiming in and offering their own critiques, exasperation, suggestions, or “what I would do if I were you is. . .”-style analyses of your own home buying strategies. Many a would-be homeowner has remained just that – a would-be homeowner – by following the advice or suggestions of someone who read a headline but has no idea of the real market dynamics you face.

Depending on where you’re buying, those dynamics might include:

  • banks that refuse to do repairs and may take 6 months to green-light a short sale,
  • sellers who are so upside down they can barely afford to sell for the list price — and certainly can’t afford to sell for less, and
  • areas in which the norm is for foreclosed homes to sell above asking after receiving multiple offers.

So, check your own references – double and triple check where you are getting your information about what homes should cost and what you should offer, and make sure that the sources are expert and up-to-date, like the experienced local agents