The details have not been officially announced yet so it is hard to say who will qualify for help and how much. What we can say,  the banks that agreed to this settlement will have 3 years to get this done. 

Key Components on a National Level

1. $17 Billion to borrowers who intend to stay in their property and have the ability to repay the loan. $10.2 Billion of this must be allocated to reduce the principal balance of loan  for borrowers who are in default or are in risk of default. Another 5.2 Billion will go to homeowver assistance. This includes short sales, deferring payments for homeowners who are unemployed, waving defieciency balances and other options.

2. Refinancing Underwater Homes- If you are current on your payments but can’t refinance because of negative equity there will be a $3 billion pool of funds available to help. To qualify you must have a loan to value ratio in excess of 100% and a current interest rate that exceeds 5.25%.

Analysis-  What about  homeowners who have a LTV of 90% ? If their loan isn’t owned by Fannie Mae or Freddie Mac they don’t have any options to refinance. I don’t think it is equitable to penalize someone who may have put down 20-30-40%, they may not have negative equity since they were financially responsible. However they won’t be able to refinance to lower rates ? This hardly makes sense.

What is in it for California Homeowners ?

 On February 9, Attorney General Kamala D. Harris announced that California secured up to $18 billion for its distressed homeowners as part of a $25 billion national multistate settlement with the country’s five largest loan servicers. More than $12 billion will be used to offer short sales or write down loans over the next three years for about 250,000 underwater homeowners in California, according to the attorney general. Relief will go to areas hardest hit by the foreclosure crisis within the first year of the settlement.

Although the actual settlement has not yet been released, the attorney general has stated that other financial benefits for California include $849 million for refinancing 28,000 borrowers who are underwater but current on their payments; $279 million restitution for 140,000 homeowners who were foreclosed upon between 2008 and 2011; $1.1 billion for unemployed homeowners, transitional assistance, and repairing blight; $3.5 billion to extinguish unpaid loans that remain after foreclosure for 32,000 homeowners; and $430 million to the state attorney general’s office for costs and fees. As part of a California guarantee, if the lenders fail to reduce principal balances by a minimum of $12 billion, they will be required to pay fines up to $800 million to the state.

The loans involved in this settlement are those owned or serviced by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial Inc. The settlement releases the five named lenders from certain federal and state claims pertaining to robo-signing and other foreclosure misconduct by the lenders. It does not affect any individual’s rights to bring legal action against a lender. It also does not apply to the majority of mortgage loans, which are those owned by Fannie Mae or Freddie Mac.

This mortgage settlement does not change any homeowner’s existing financial relationship with a settling lender. It does not relieve homeowners from any obligation. It does not require a settling lender to stop any foreclosure.¹

^{Download a Copy of – National Mortgage Settlement Executive Summary}

^{For More Information Visit the Following Websites}

^{California Attorney General}

^{National Mortgage Settlement Agrement Website}

 ^{Source : California Association Of Realtors}

What is a Homeowners Association (HOA )?

In simple terms a HOA is a non-profit corporation comprised of all the property owners in a development(s). The owners typically higher a property management company to manage the association. The HOA elects a board of directors who works with the management company. The developer of the project typically creates the association documents, by-laws, and CC& R’s before the project is built and will manage and run the association until the development is a certain percent complete. The Board is the voice of the association and will work to follow the association governing documents. Often I hear people talk of the association in an adversarial way. Based on my experience, it seems a lot of property owners have an, us against them mentality. Where in reality all the homeowners are part of the association and can and should have a voice. In most cases people do not have the time to get involved they leave it up to the board to make all the decisions. Individuals on the board are elected volunteers and typically have other full time jobs. They will vote on key items and conduct the business of the HOA, typically acting on the advice of the management company. The key here is the management company. The board has a duty to its members to make the sure the management company is doing its job.  HOA’s govern various types of developments and are not limited to condo and townhome developments.

What Does The HOA Pay For?

Typically the association provides some insurance coverage, maintenance of a property’s exterior, green areas, pool and community areas and more. It really depends on the type of community and amenities. Single Family Home Associations (PUD’s) may not provide any exterior maintenance but only maintaining the community common areas. A common area is a space that is shared by all owners. Some associations are very complex and it is important for homebuyers to understand these complexities when purchasing a property in a development with an HOA. It is not something that should be ignored. How well an association is run can and will affect the value of the property.

Financial Componenet

HOA dues can be as high as $400 per month is some communities. If you are considering buying a property with an HOA consider this. With today’s interest rates around 4% for 30 year fixed rate loan it costs about $477 per month for every $100,000 you borrow. If your HOA dues are $350 per month you could spend $70,0000 more to  purchase a property without an HOA.  This means the property in the community with an HOA needs to be priced about $50,000 lower than a property without an HOA assuming the HOA is paying for the Hazard Insurance on the property.  

Most loans today are underwritten to Fannie Mae/Freddie Mac guidelines. If you co-sign on a mortgage, this debt will show up on your credit report. Why does this matter? A key figure in the mortgage lending world is the Debt to Income Ratio (DTI), calculated by totaling all monthly debts/ gross monthly income. In the past, underwriting guidelines treated this scenario differently. If you were a co-signer, but someone else made the payments and they could show proof of this, this payment would be omitted in your DTI calculation. Most lenders today will add this payment regardless of who makes the payment. The rationale behind this, if one party did not make the payment, you as a co-signer would be obligated to make the payment. I have seen multiple scenarios where potential borrowers have been unable to refinance or purchase a property because their DTI ratio exceeds the 50% limit imposed by most lenders.

On another note most lenders will allow you to finance up to at least 4 properties before they will exclude you from conventional financing. You can also be on the loan, but not on title to the property and vice versa in many cases. Sometimes this is a good strategy to use. If you run into financial difficulties it doesn’t ruin both parties credit. Holding title via the DEED in California is more about how property is eventually transferred. This can be critical as I have seen many people run into costly probate issues simple because they did not fill out the vesting information correctly. I hope this helps.

Download a Guide to Understanding Vesting Click Here: Vesting_Descriptions_CA_LT1

As 2011 comes to a close it is a good time to start thinking about the litlle things that may help you as an investment property owner save a few extra tax dollars. If you own rental property and have the ability to deduct some of the expenses related to it. Here are a few things to think about. Please consult with your tax advisor on any tax related issues. We think owning rental property in 2012 is a great idea.

Rental Property Repairs

Is your property in need of some repairs that you have been putting off ? Get them done before the end of the year.  Replace a water heater, install new windows, fix those nagging little problems. Repair expenses can help offset any rental income you may have. You can also purchase goods and services needed for the rental property business, and pay the bills early. Repairs and Improvements are different. Improvements are depreciated over the life of the property while repairs are treated as an expense.

Claim Your Automobile Expenses

Automobile expenses paid exclusively for your rental business can be fully deductible. You can select either the actual expenses method or take the standard mileage deduction. If you made 10 trips to the property and each trip was 100 miles, you can expense 1000 miles at .55 per mile.

Make an Extra Mortgage Payment

The additional interest you pay will help reduce your income. If you have an operating  loss and are able to deduct this, you may save on the amount of income tax you pay on monies earned elsewhere. You may also be able to pay your property tax bill that is due in Feb 2012 early.

Rental Property Asset Depreciation Expense

What are your property’s  short life assets ? They can be depreciated faster.  Assets like air conditioners, refrigerator, carpets, clothes dryer, etc can be depreciated over a five year  life while fences, patio, sidewalk, etc can be depreciated over 15 years. By separating assets and depreciating them separately, deductions are taken sooner.

Energy Saving Home Improvements

Replace old appliances, windows etc to qualify for tax rebates. To find out what applies to your property visit the Energy Star Website. Tax rebates that were offered in 2010 were changed in 2011. However there are some great rebates to take advantage of. Check the list of items here.

If you have any Tax related questions please consult our preferred tax advisors, Smith & Wooten CPA at  (805) 585-3800 or visit their website

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It is always interesting to compare our local market information to the information many of us are bombarded with in the national news media. Let’s see how we stack up. The median home price fell  9%, from  $585,000 to $530,000 and the number of properties for sale also fell off rather dramatically, falling  from 852 units in Oct 2010 to 658 in October 2011. It is taking homeowners on avg. 112 days to sell their property.

Thousand Oaks and Newbury Park Home Sales

If we remove Westlake Village from our data set, the median price in Thousand Oaks and Newbury Park  was $510,000 up from from ($497,000) in Oct. 2010.  This headline could read home prices increase 3% year over year.  That news might make homeowners feel better. One reason for this increase is the limited supply of homes for sale.  The months supply of inventory is at is lowest level in 18 months, with just over a 4.5 months supply of housing. Low inventory has helped prop up prices.

Home Sales Activity By Price

Affordability

The Conejo Valley Housing Market is holding up fairly well. The most popular properties are homes priced between $ 450,000 – 650,000. Low interest rates continue to make properties more affordable. Assuming you purchased a property for $500,000 with 20% down payment your monthly payment including taxes and insurance would be roughly $2504 based on today’s interest rates. If you had no other debt,  it would take a minimum gross monthly  income of $5568 per month and a credit score of over 620 to qualify to purchase this $500,000 home.  I have to say we are getting close to a bottom. All the figures and statistics are lining up to make purchasing a home a smart decision. Please remember a home is not an investment. It is a place to live. If it goes up in value great. Your home is an investment in your lifestyle. If you want an investment, let’s talk and we’ll show you how to buy investment real estate.  

Download Charts and Tables Here:  Conejo Valley Housing Data Oct 2011

Source: Ventura County Regional Datashare

Source: Ventura County Regional Datashare 

 A 92-year-old, well-poised and proud man, who is fully dressed each morning by eight o’clock, with his hair fashionably combed
and shaved perfectly, even though he is legally blind, moved to a nursing home today.   His wife of 70 years recently passed away, making the move necessary. After many hours of waiting patiently in the lobby of the nursing home, he smiled sweetly when told his room was ready. 
  As he maneuvered his walker to the elevator, I provided a visual  description of his tiny room, including the eyelet sheets that had been
hung on his window. “I love it”,he stated with the enthusiasm of an eight-year-old having just been presented with a new puppy. 
    Mr. Jones, you haven’t seen the room; just wait.’      “That doesn’t have anything to do with it,” he replied.  “Happiness is something you decide on ahead of time.  Whether I like my room or not doesn’t depend on how the furniture is arranged … it’s how I arrange my mind. I already decided
to love it. ‘It’s a decision I make every morning when I wake up. I have  a choice; I can spend the day in bed recounting the difficulty I have
with the parts of my body that no longer work, or get out of bed and be  thankful for the ones that do.”   “Each day is a gift, and as long as my eyes open, I’ll focus on  the new day and all the happy memories I’ve stored away.. Just for this time in my life. “ ”Old age is like a bank account. You withdraw from what you’ve put in.”   “So, my advice to you would be to deposit a lot of happiness in the bank account of memories! “ ”Thank you for your part in filling my Memory Bank. I am still depositing.”

    Remember the five simple rules to be happy: 
    1. Free your heart from hatred. 
    2. Free your mind from worries. 
    3. Live simply. 
    4. Give more. 
    5. Expect less.

Tenant Tips

1. When you move out have the home professionally cleaned. Hire a crew to do the windows, carpets, and all other areas of the home. Keep all the receipts and provide them to the owner at move out.

2. If there are any items that are damaged or not in the best working order, let the property owner know before you move out. If it is something you broke, try to get an estimate or have it repaired before you leave.

3. Close your utility accounts and pay all your utility bills.

4. Be honest with the owner or property manager.

5. Make sure you document the condition of the property at move-in and keep a copy for when you move out. Take pictures when you move in and when you leave. If you need to dispute something pictures can come in handy.

6. Return all keys, door openers, and any other items the morning of your last day at the property.

When you are renting a home from a private individual the security deposit is usually a substantial sum of money. Sometimes as much as two months rent. It would make sense for tenants to try an protect this by returning the property in a condition better than when they received it. This is also a common courtesy.