Category Archives: Laguna Beach Real Estate

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Shopping for the Best Mortgage Rates

With all the changes since the mortgage crisis began about three years ago, how does a home buyer or homeowner shop for the best interest rates in today’s new world?

My answer is that it’s nearly impossible for anyone to shop accurately.  Let me explain.

Where Does Mortgage Money Come From?

First of all, let’s understand where the money comes from. Fannie Mae and Freddie Mac, the two-Government-owned agencies are responsible for most of the underwriting guidelines and are the basis for how rates are determined. These agencies account for about two-thirds of the mortgages originated in the U.S with the Federal Housing Administration (FHA) accounting for most of the rest. Their loan programs are offered through hundreds of Banks and Non-Bank Lenders throughout the U.S. In simple terms, loans are made by various lenders and immediately sold to these agencies that bundle them with other loans and re-sell them in the form of a Mortgage-Backed Security (MBS). The MBS’s are then bought and sold by institutional and governmental investors throughout the world. These MBS’s trade in the global financial markets just like stocks and bonds. And, their “price” can be just a volatile as those of stocks and bonds, changing each day and throughout the day.

So the first challenge in shopping for a loan has to do with timing. With the price of a loan changing all the time, you would almost have to get your information from every lender simultaneously – an impossible task.

How Do Lenders and Their Rates Differ?

In addition to the “timing” of when lenders set their rates, there are other factors that can influence your rate. There are various factors that also affect a Borrower’s rate. Near the time that the Government was forced to take over Fannie Mae and Freddie Mac, they introduced various “risk factors” that apply to most loans. These factors are known as Loan Level Price Adjustments. Lenders must add these price adjustments according to factors that are standard among all lenders. The most common factors FICO Score and Equity or Down Payment. Other adjustments may apply for such things as intended Occupancy use of the property, Loan Amount, Type of Property condo vs. detached) , number of units (1-unit vs. 2-4 units, and others.

And, while lenders are all given the same basic guidelines to follow, they can impose their own guidelines and pricing adjustments that are stricter than those of Fannie Mae and Freddie Mac. In the industry, these lender-imposed adjustments are called “overlays”.

So, the second challenge in shopping for a loan is that the loan officer must have enough knowledge of all the factors that apply to your particular situation. And, it would take a nearly complete loan application plus a credit report to have that information.

Other Factors that Affect Rates:

Experience: There is no substitute for “Experience”. A loan officer must have experience to know how the markets adjust to the daily economic changes that affect MBS pricing and must also know the various pricing adjustments and overlays. The experience level of the loan processors, underwriters, and closers are just as critical. And, along with experience should come honesty and integrity.

Service: Service levels vary greatly among lenders. For example, the big banks and internet lenders tend to centralize their processing functions in distant locations. And offer no interest rate advantage. Local mortgage brokers and lenders are in your marketplace, understand the local market and are more apt to provide a more personal level of service.

Rate Locks: Once a rate is locked in by your lender, it is considered a two-way commitment. The lender commits to that rate in the event that rates rise after locking and the borrower also commits to that rate in the event that rates decline. A rate lock is always for a finite period of time – typically 15, 30, 45 or 60 days. The longer the lock period the higher the cost. It should be the lenders obligation to complete the process during that rate lock period and the it’s also the borrower’s obligation to provide the requested documents in time to enable the lender to complete their process.

Not knowing the experience level of the loan officer and their staff or the service levels that they offer can also contribute to the impossible task of shopping accurately.

Best Advice:

My best advice is to shop not for rate but to shop for the best local mortgage broker or lender. A personal referral from a friend, relative co-worker, or neighbor is much safer than just trusting your local bank or an unknown internet lender. Trust the rate-shopping to a local mortgage lender that understands and follows the financial markets, has access to multiple sources to navigate through the maze of lenders and overlays, and one that provides personal service by looking out for your best interests. It has become much to complicated for a typical borrower to accurately shop on their own.

Mortgage Rates This Week:

Yesterday Ben Bernanke and the Federal Open Market Committee meeting confirmed what most had known for two months – the US economy isn’t growing much. The Fed lowered its outlook for Gross Domestic Product for the rest of this year. Confirmed weakness in the economy was mostly already factored into interest rates but we are getting a positive reaction this morning in rates.

For more information and my Daily Rate Lock Advice, please visit my website:

Mortgage Interest Rates for Fixed and Variable Rate Mortgages*

Rates as of Thursday, 23rd June, 2011:

Mortgage Interest Rates for Fixed and Variable Rate Mortgages


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How To Lower Your Laguna Beach Property Tax Bill

It’s common for the tax assessor’s office to continue charging the higher amount until the owner goes through the process of contesting the bill. Fortunately, it’s relatively easy to have your property tax assessment lowered…here’s how:

To get your property taxes reduced on the basis of the recent decline in market value:

1. Click below for a Request for Informal Assessment Review from the OC County Tax Assessor’s Office:

Informal Assessment Review from the OC County Tax Assessor

2. Choose the form for your property type. Be sure to provide accurate and complete information. Usually the request will ask you for (a) an estimate of the current market value of your home, and (b) a list of recent, comparable sales in your neighborhood supporting that estimate of value.

3. Contact me for comparables – or 949-290-5317

4. Alternatively, find a trustworthy online comparables site, like, where you can get both an estimated value and a list of the comparable sales on which it was based.

5. Keep in mind that you are trying to make the case that your property value is significantly lower now than when you bought it, so list legitimate comparable sales which support that argument or you are wasting your time! And keep in mind that if you bought your home 10 or 20 years ago, your property’s assessed value might not be out of whack with current market values, even though your home’s market value may have declined from the peak of the market.

6. Sign it and mail it! Allow several weeks, then call and check on the progress of your request. If it’s accepted, you’re golden — for this year. Most areas require you to revisit the reassessment issue every year. If it’s denied, there will be a more formal application and appeals process available to you and you can decide at that time whether it makes sense to undertake that.

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Why Housing Isn’t Better – A Lender’s Perspective

I’m frustrated! I was thinking and reading about the real estate and mortgage markets over the long weekend. Ordinarily I would have worked all weekend but I didn’t have enough to do. Interests Rates are back to their near all-time lows yet housing sales are way down too. Why is that?

There are a few big reasons why and I’ll state the obvious here. But, then I’ll go a little deeper. The main reasons:

  • A lot of negative press about home values declining
  • The jobs/employment market is not improving
  • Underwriting guidelines are too tight
  • The Government is doing nothing to help the homeowner/home buyer despite the control that they could exert.

Having been in the mortgage business for 35 years I’ll focus on what’s wrong with the tight underwriting guidelines and what the Government could/should do, at least in my opinion.

Short Sales:

The majority of home sales are short sales and foreclosures. But, so many of these transactions fall out and the reason is that the Lender that services the present owners mortgage takes much too long to respond to an offer. While the buyer waits and waits they become nervous, new listings appear that may be more attractive, additional offers appear on the same property and the buyer loses interest for any or all of these reasons. Shouldn’t there be a time limit in which the Lender must respond or be penalized?

Lack of Government Enforcement:

Despite all the complaining about tighter underwriting, Fannie Mae & Freddie Mae – the two Government-owned enterprises responsible for making the lending guidelines for all lenders – has actually created a few programs that can help homeowners and buyers. But, they allow Lenders to create their own guidelines that are often stricter than the Fannie/Freddie Guidelines. In the industry we call these tighter restrictions “Overlays”.

As an example, one of the best programs that benefit many homeowners is the one that allows homeowners that are under water to refinance up to 125% of the present value of their home if Fannie Mae or Freddie Mac already owns their mortgage. But, they allow individual lenders to modify the program and most lenders restrict the maximum loan amount to only 105% of the present value. Couldn’t the Government require Lenders to refinance to 125% in order to help millions of homeowners? Fannie and Freddie will buy the loans thereby leaving the Lenders with less risk than they currently have due to the lower/more affordable payments that the homeowner now has. What does the servicing lender have to lose?

There are numerous other overlays that Lenders are free to impose that are too numerous to mention here. The most common ones require higher FICO scores and lower Debt-to-Income limits than Fannie Mae or Freddie Mac require.

While I think everyone agrees that underwriting guidelines are too tight, the Government is spending their time right now trying to define QRM – the “Qualified Residential Mortgage” – that may require even tighter guidelines. The QRM proposal may require 20% down payments; maximum Debt-to-Income ratios of 36% (currently 50%), etc. Loans that don’t meet the definition of QRM will require lenders to set aside 5% of every loan that doesn’t meet the QRM definition. If a lender can’t sell a loan to Fannie or Freddie and has to deposit 5% of the loan balance in a reserve account, you know that Lenders will be forced to raise the cost of all non-QRM loans to offset their expense. Once again, the home buyer/homeowner bears the cost.

Can someone explain to me how this is going to help our economy? I welcome your comments.

We simply have to get back to sound, common-sense lending standards to provide mortgages to creditworthy borrowers who are buying homes well within their means. And, if programs exist to help solve the housing and economic problems of our country, why not require Lenders to offer these programs. Otherwise the big banks will only do what’s best for themselves, not the millions of homeowners that are suffering.

As a mortgage broker with multiple resources I know which lenders to use for each loan thereby avoiding the unnecessary overlays that so many lenders impose for their own benefit. The big banks can’t do this and they are the ones guiltiest of manipulating the programs that were designed to help the people.

The Positive:

I must mention that there are some very positive improvements too:

  • Jumbo Loans Are Back! Offered by many lenders with loan amounts to $2M and more at very competitive rates. A year ago there was virtually no jumbo product available.
  • Expanded Loan Limits to $729,750 for Fannie Mae, Freddie Mac & FHA loans
  • FHA program was expanded with only 3.5% Down and loan amounts to $729,750
  • 95% PMI up to $417,000. Private Mortgage Insurance is available again for Fannie/Freddie loans with down payments less than 20%.

Mortgage Rates This Week:

Mortgage rates continued their downward trend this week. The biggest catalyst was the ADP report that indicated that Unemployment claims were much higher than expected last month. Also helping were the continuing problems in Greece and a declining stock market. When negative news drives the stock market down, money managers move massive amounts of money out of stocks and into the safety of other investments such as bonds and Mortgage-Backed Securities. It’s the pricing of Mortgage-Backed Securities that dictates the daily movement in mortgage rates to the borrower.

Tomorrow morning at 5:30am the Government releases the official Employment Report for the month of May. This is without a doubt the most important report of the month and has the potential to be a real market-mover if the actual numbers are very far from expectations.

Mortgage Interest Rates for Fixed and Variable Rate Mortgages*

Rates as of Thursday, 2nd June, 2011:

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The Power of Old Real Estate Information

If you’re a consistent reader of the OC Realtor newsletter you know I always make the point that you have to have the latest information before you make an opinion of the real estate market.  Just look at the media frenzy over the ‘Double Dip’ in prices based on 3 to 4 month old information.

Here’s an article from a company that uses more up to date information:

Double Dip: Altos Says Prices Have Been Steadily Rising Since Then

While a number of closely-watched home price indices show that national readings have slipped into a double-dip, Altos Research says it’s come and gone.

According to the S&P/Case-Shiller index released earlier this week, national home prices dropped to a new recession low during the first quarter of this year as prices slipped another 4.2 percent.

Altos conducts its own analysis of price trends using active listing data to provide what the company says is more of a real-time view. The firm notes that the latest Case-Shiller findings are based on data only through the end of March. Since that time, Altos has recorded a steady uptick in prices for both major metros and mid-city markets across the country.

A separate study released this week by CoreLogic corroborates Altos’ assertion that prices have risen since the double-dip timestamp. CoreLogic says based on April sales activity, just after the Case-Shiller double-dip, it has recorded an increase in home prices nationally of 0.7 percent.

About three weeks ahead of the Case-Shiller announcement of a new cycle low, Clear Capital reported an official double-dip for its national home price gauge had hit, but in April rather than March.

Regardless of the disparities in the various home price indices, Altos says it expects to see a rising and falling pattern for several years. The firm’s VP Scott Sambucci believes the double dip is “really just the start of the next housing cycle.”

Altos has coined a colorful phrase to depict the ebb and flow of home prices – they call it the “Catfish Recovery.”

Sambucci laid it out by describing the catfish as a bottom dweller that moves slowly, feeding off the lake or river floor for a while, then heads up to the surface and back down, bobbing up and down without a distinct pattern or clear direction.

Altos says markets should plan for prices over the long term to hit a bottom, rise a bit, sink back down, rise again.

Sambucci says constant growth for home values is a myth. Charting housing cycles all the way back to 1890, he notes that the sharpest run-up by far occurred at the turn of the millennium, and the market is now in payback mode. In every other historical boom, Sambucci says the run-ups, all of which have been significantly smaller that the most recent, have always been given back.

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Your OC Realtor – Doing His Part For The Laguna Community

While the OC Realtor newsletter is usually chocked full of real estate information, every once in a while I like to show a Laguna community activity.

Especially, if it’s a community activity I’m heading up.

A few years ago I founded the Transition Laguna Food Group. The idea was to create community around growing, sharing and enjoying local organic food in light of increasing oil prices and climate change.

Well with a lot of hard work, we’ve over 60 home based gardens and 550 ‘food groupers’ and growing 50 people a month. We’ve something for everyone – cooking classes, garden installations, seed banks, harvest parties and educational meetings around pot luck food and wine. Lots of wine.

This Saturday, from 9 to 12 we’ve a bike/walk tour of the Oak Village’s gardens. If you live in OC come and join us. If you live out of the area, this is an example of the many, many events and organizations in Laguna. It’s another good reason to live here.

Thanks for indulging me. This is one of the articles from the local papers – LB Indy

Garden Tour of Edible Delights

Transition Laguna Beach Sean McCracken

From left, Elise Higley, Gloria Brooming, Jeff Higley, and Sean McCracken, Transition Laguna’d food group enthusiasts, show off their harvest to the public this Saturday. Photo by Ted Reckas

Where once water-hungry lawns grew, 11 families within a six-block radius of Laguna Beach’s Oak Street tilled and turned the earth into a cornucopia of homegrown produce and an edible garden village.

From patchwork quilts to elegant designs of wild fennel, trellised beans, trailing blackberries and potted potatoes, the public is invited to take a bicycle or walking tour of Oak Village’s vegetable and fruit gardens between 9 a.m. and noon Saturday, May 28.  A $10 donation is requested.

The tour starts at La Vida Laguna, 987 Glenneyre St., where a map with 11 garden descriptions and 50 bicycles will be available for tour guests.  The tour is hosted by Transition Laguna Beach, the local chapter of a global organization committed to promoting sustainable food, water and energy practices.  Tour guests will also be able to view rain-harvesting, gray-water irrigation and composting systems.

The first stop on the tour is Neighborhood Congregational Church, which replaced planters overtaken by ficus trees on the sun-filled patio with now abundantly growing vegetables that are regularly served at dinners for people in need.

Every Saturday, produce is exchanged among Laguna Beach gardeners at an Oak Village home and Transition Laguna’s Food Group puts on potluck parties regularly.

“Edible gardens bring neighbors together because they have something in common,” said Sean McCracken, TLB’s food group spokesman.  “Our goal with the food group is to encourage residents to grow their own organic food so we can reduce our dependence on peak oil and eat pesticide-free food.”  At the potlucks, McCracken says gardeners then share the fruits of their labor.  Information about Transition Laguna Beach and its various groups working on different modes of sustainability will also be available.

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Arch Beach Heights, Laguna Beach

For $50, an ocean view lot could have been yours

Well not really, you’d have had to buy a year subscription to the LA Times as well.


That’s right, there was a time that the developer of the area couldn’t sell the lots and gave them away for $50 as a promotion to selling the LA Times.

The reason was Arch Beach Heights, located at the top of a steep hill and named for Arch Beach which is now Woods Cove, was subdivided in 1911, when there was no paved road to the top of the hill. This made it mighty tough to sell, even when the developer put the potential sellers up at the Ye Arch Beach Tavern, he built and still exists at the corner of Catalina and Moss.

In the 1920’s a paved road, Summit, was put in a custom homes were built on the 2,500 square foot lots, which ended up as one of Laguna’s first hillside communities.


Arch Beach Heights is boarded by Balboa to the east, Nyes to the south and Summit and Del Mar streets to the North.


Custom built homes date from the 1960s to present. Architectural styles range from Craftsman to Mediterranean and Contemporary Homes built on single lots of 2,500 sq.ft.. Some are three stories, but most have two. Most residences have garages, some older ones have carports.

Popularity and Views:

Besides being one of the most reasonably priced homes in Laguna, people like the fact they can have a substantial-sized home with an ocean view. Most of the homes have big coastline views with city lights and mountains.

Furthermore, it has a real strong community feel and quite a few families with children.

They’re also attracted to Moulton Meadows Park which has tennis courts, hiking, a tot lot, soccer fields and a par training course, and is adjacent to 85 acres of Aliso and Wood Canyons Preserve land.

Map and Properties:

Arch Beach Heights, Laguna Beach

Homes for sale or lease Click Here or Image Below


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ASSET DEPLETION: A New Way of Underwriting a $2m + Home Loan?

Finally, there’s some good news amid the tighter underwriting guidelines that we’ve been given over the past few years. There’s a new method of Laguna-Village-Laguna-Beach-Californiaunderwriting among at least two “portfolio” lenders that should open the door for buyers of some higher-priced properties. It’s called “Asset Depletion” or “Asset Utilization” and it can help homebuyers that have lots of liquid assets but are unable to provide income tax returns that show enough income to qualify.

I’ve seen it advertised by several lenders and brokers lately but do you know how it works? Here’s how…

Let’s say that the Borrower has insufficient income reported on his/her tax returns to qualify for a loan but has $2.5 Million in cash and investments. Let’s also say that that borrower is 60 years old.

One lender says that in addition to the income that is used based on their tax returns, we can also take the Assets of $2.5 million and divide it by 25 years (the difference between his current age and 85). That amounts to $100,000 per year. In other words, if the borrower depleted his $2.5 Million assets over the next 25 years he would have $100,000 per year in income to help qualify for the mortgage he needs.

Another lender says that we can simply apply a 4% rate of return to client’s assets. In the example above, that also equates to $100,000 per year.

It’s important to note that this underwriting method does not apply to standard Fannie Mae, Freddie Mac or FHA loans. It is strictly for the couple of lenders that offer it. Additionally, if the borrower is using any of the assets for the down payment we have to subtract that amount.

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Valuation: Price Per Square Foot is only Part of the Answer

As many of you know who have looked at houses with me, that I’m big on using ‘price per square foot’ as a valuation tool. Many Price Per Square Foot Laguna Beachtimes too much so, since if you’re not used to looking at valuations that way, the barrage of numbers can be overwhelming at times.

But it gives me a ‘reference point’ as to whether you’re getting the deal you want. And that is what EVERYBODY wants – not just a deal but a great deal/steal. So when I see that homes that sold for less than a million are going for an average $600 a square foot I figure these buyers wanted a great deal as well and this is the number they needed to feel they got it.

However, for me the price per square foot is just a starting point because there are other factors besides the square footage of the house.  Here are some of the other factors that influence that valuation based on price per SF alone:

  • location
  • lot size
  • back yard size
  • amount of remodeling
  • care for the home
  • whether the street is a good one or full of parked cars
  • sale type – regular vs distressed
  • amount of down payment
  • whether it’s all cash, conventional financing or if the seller carries a note

The variance from “all original” to “all remodeled” alone can swing value 10% in the OC coastal area, 15% or even in rare cases 20%.  Add to that other factors and the divergence in value can be much, much greater.

Additionally in Laguna, smaller homes tend to sell for more on a per square footage basis than larger houses. The reason why is that kitchens and bathrooms are the most expensive rooms, but often there is just 1 kitchen and a similar number of baths with smaller vs larger homes.

My feeling is that the average price per square foot is the middle of the viable range between “total fixer, probably needs to be demo’d” to “completely remodeled or brand new home”.  Most of the time, the “range” is about 15% from fixer to fixed.

The bottom line is that the odds are that if you are buying in today’s market, you’re a student of the market looking at the mls information I send you, and with the numerous houses we’ve seen  you’ll develop an emotional feel of the value of the property as well.