Prices of previously owned single-family homes rose 4.6% in May compared with May 2009, according to the Standard & Poor’s/Case-Shiller index of 20 metropolitan areas, a closely watched index of home prices. The 20-city index was also up 1.3% from April.

Experts warned that the jump in prices is not likely to last given that what was driving much of the market in the spring were tax credits offering up to $8,000 for certain buyers. They expired April 30. Because the index combines data from three months’ worth of sales, including May, it probably captured the run-up in homebuyer demand.

“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. “Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level.”

Prices in California cities continued to appreciate on a month-over-month basis, the non-seasonally adjusted index shows, with Los Angeles up 1.7%, San Diego up 1.1% and San Francisco up 1.7%.

Other cities that gained in May included Atlanta, 2%; Boston, 1.6% and Dallas, 1.5%. Las Vegas fell 0.5%.

Adjusted for seasonal variations, the 20-city Case-Shiller index was up 0.5%. But Standard & Poor’s has warned that the index’s adjusted version is no longer a reliable gauge of prices because of distortions caused by the economic crisis.

From L.A. Times

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.

“There’s no question, the tax credit has had a significant impact on this market,” said RE/MAX CEO Margaret Kelly. “No one can predict the future, and we may still see a slight pull back, but for right now it appears that housing is holding its own, hopefully on the road to a sustainable recovery.”

Transactions – Year-Over-Year Change
Buyers trying to make the closing deadline for the tax credit may have pushed sales higher for June with a 7.2% rise from May in addition to the 5.6% gain over last year. Sales were especially strong in the Northeast—Boston and Hartford saw 23% more sales than last year, Providence was up 21% and Philadelphia was higher by 27%. An equal number of metro areas, 27, had increases and decreases in closed transactions year over year.

Median Sales Price – Year-Over-Year Change
Responding to demand, home prices appear to be stabilizing and slowly inching higher. In the survey’s 54 metro areas, the year-over-year change in median sales price was 3.5%, with 27 metros headed up, 25 lower and 2 unchanged. The weighted average of all median sales prices for June was $211, 530.

California experienced the most dramatic increase in prices—median prices in San Francisco rose almost 18% higher than June 2009 levels, Los Angeles prices were 10% higher and San Diego prices were 9% above the same time last year.

Days on Market – Average of 54 Metro Areas
Besides price, most home owners are concerned about how long it will take to sell their home. For the homes that sold in the survey’s 54 metro areas, the average number of days it took from listing to signed contract was 81, slightly lower than the 83 day average in May and the 89 day average in June 2009.

Months Supply of Inventory – Average of 54 Metro Areas
The inventory of homes on the market in June rose slightly from May, up only 1.2%, but down 5.8% from June 2009. In the survey’s 54 cities, the average months supply of Inventory was 8.5 months, which remains unchanged from May. This means that at the current rate of sales, the average metro would eliminate its inventory of homes for sale in eight and a half months. However, a six month supply is considered a market balanced equally between buyers and sellers.

From RIS Media

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.

It’s time to add the ‘social media talk’ to your list.

Have the conversation with your clients
With online connectivity virtually blanketing the entire world and the expansion of the savvy buyer, it’s important you have a conversation with your clients about disclosure of information regarding their listing on social media sites and communities, like Facebook and Twitter.

First, take their social media temperature. Ask them a few questions to gauge their social media engagement and overall understanding of the medium. There are several camps of the types of people, as well as mind sets who engage in social media. Those who participate all the time, those who keep their feet wet and those who don’t while holding up a large closed sign with big locks on their door.

Don’t disclose the sales or escrow process online
Make sure your clients keep the marketing and pending sale information of their home close to their chest. Be sure they don’t discuss pending offers, the inspection process, or escrow particulars in the social media communities in which they belong.

Many of your clients may find this activity harmless and just friendly chat amongst their friends and family, but in some instances, it could derail a sale. For example, if your client’s Facebook pages are set to share with everyone, the information they post is ‘open’ for the world to read. Twitter is also open for everyone to read—even if your client has protected tweets, individuals within their community have access to their posts.

Savvy buyers can find your clients in social media communities
Potential buyers can find out the names of property owners through county assessor website information and run a search through various social media tools to locate a property’s owner. Any information your clients post in open social media communities can disclose the type of people the owners are, and potentially, the progress of the property’s advancement through the sales process, pending offers and the home inspection.

Remember to add the ‘social media talk’ to your new client presentations or have the discussion with your current clients. In the end, it may save the deal.

From RISMedia

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.

For many of us our mortgage payment is the most important financial decision we’ll ever make. Doesn’t it make sense to know as much as possible about the financing of our home? Take the time to thoroughly investigate all of your options!Unbelievably, many of us sign the first mortgage placed in front of us. Typically the excitement of the new home purchase reduces the mortgage to not much more than an afterthought. What you read here could save you hundreds or even thousands of dollars.

Your real estate professional has established relationships with the top lenders in your area. By aligning yourself with a professional agent you ensure that all the financial steps are taken care of properly and economically. Utilize a Lender With Established Ties to an Agent – Lenders are much more flexible with the real estate agents who have done business with them previously. This relationship then establishes them as a team. The lender and agent work effectively together, referring each other business.

That’s why a good agent can make substantial difference in setting up the most economical financing. And the right financing can, literally, save you tens of thousands of dollars over the life of your loan!Don’t Attempt Paperwork Alone – All the paperwork required to complete the purchase of a home can be quite intimidating and frustrating for a home buyer. Make sure you have your lenders help you with all the paperwork. Get help from your team, your lender and agent. Their expertise will help alleviate the stress and it will prove to be invaluable before you sign your mortgage.

Look at All Your Options - Make sure you see at least 5 loan programs for your mortgage. Lenders have at least 10 programs and should work with you and your agent on deciding what is best for your circumstances. Evaluate all your options. After all it’s your money you’re spending – not theirs!

Demand Service - There is little difference between a bank, savings and loan, or a mortgage broker when it comes to the competitiveness of their loan rates. The difference is in the service they provide. It is their job to serve you! You want to get the loan approved and move into your new home as quickly as possible, but don’t overlook the fact that you are the one spending the money and they are the ones who should cater to your needs. Don’t let the process become so intimidating that you lose that understanding.

Stay in Complete Touch – You should receive a written report from your lender about every step. This will ensure that no details are overlooked and there will be no surprises.

Negotiate a Flexible Loan - Don’t just accept the terms they lay down in front of you. Lenders are in the business of loaning money and they want your business. Make sure you examine every option available to you. If you negotiate a variable rate loan, many lenders have the ability to move you into a fixed loan if rates start going up. Make sure that you understand whether or not that is an option in the package you are looking at.

Don’t Give Up on the First No - Initial decisions are not always final decisions. Going to a higher authority can sometimes get you the loan, but do so with the assistance and compliance of your lender and agent. Many times special circumstances when explained properly to the person in charge, will win you the loan.

Don’t Wait for the Bottom of the Market - The odds of you hitting the bottom of your market are about like the odds of you hitting your state lotto! You will almost never hit the bottom of a market. And trying to time it exactly right is often costly. It usually causes a person or family to miss out on the opportunity to purchase a very nice property. You’re better off simply negotiating the best rate and terms you can at the time you find a property. If interest rates go down, you can refinance. This is a much better approach because you won’t miss out on the property you’ve spent so much time locating.

Be Honest With Your Lender - Your lender wants to help you with your loan. The only time they get paid is when you get approved. The more information (good or bad) you provide your lender, the easier it will be for them to get an approval. It helps them present the loan in the best light. This in turn helps the loan get the highest approval rating.

Become Completely Educated – Pick your lender’s brain. Lenders will teach you all about your various options, even if you haven’t found the right property yet. They will be very patient with you while you are looking, especially if you have aligned yourself with the right agent. They understand all the up-front work will pay off in future business. Your agent will then continue to refer people to the courteous and service-minded lender on down the line.

Get Prequalified - Lenders will provide you with a certificate of pre-qualification. By getting prequalified you know exactly what financial parameters to stay within. Your agent and lender will consult with you and help you get qualified for the loan that best fits your needs. Many times they are able to get you a larger loan than you may have thought possible.

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings or contact Valerie Fitzgerald at 310-285-7515.

“While all real estate in the U.S. is local, the same is not true for property owners,” said NAR President Vicki Cox Golder. “The U.S. continues to be a top destination for international buyers from all over the world. Foreign buyers understand the value of owning a home in this country and can rely on Realtors to help guide them through the complex process of buying property in the U.S. With expertise, knowledge and experience, Realtors have a global perspective.”

The survey covers the period between April 1, 2009 and March 31, 2010. During that time, foreign buyers, including those with residency outside the U.S. as well as recent immigrants and temporary visa holders, are estimated to have purchased $66 billion of U.S. residential property, or 7% of the residential market.

Slightly more than a quarter of Realtors, 28%, reported working with at least one international client in the past year. This is a significant increase from the 2009 report, when 23% of Realtors worked with foreign clients. Eighteen percent of all Realtors were estimated to have completed at least one sale, compared to 12% last year.
“Several factors have contributed to an increase in international buyer interest in the U.S.,” said Golder. “A large majority of Realtors report the changes in value to the U.S. dollar have had a strong impact on the international real estate business. In addition, perceptions abroad about trends in the U.S. real estate market have led many international clients to believe purchasing a home in the U.S. is more affordable than in their country and holds more value.

International buyers came from 53 different countries around the world. The top four countries were Canada, Mexico, the U.K. and China/Hong Kong. With 23% of international buyers coming from Canada, the country has remained the largest buying group in the past three years. Foreign buyers from Mexico have been steadily increasing. In 2010, Mexico replaced the U.K. as the second largest buying group with 10% of buyers. Buyers from the U.K. decreased from 10.5% in 2009 to 9% in 2010. Eight percent of recent buyers came from China/Hong Kong.

Two factors important to international clients when purchasing property in the U.S. are proximity to their home country and the convenience of air transportation. Florida typically attracts European, Canadian and South American buyers while the East Coast draws Europeans. The West Coast brings Asian buyers and the Southwest attracts Mexicans.

International buyers were reported in 39 states in 2010, but a slight majority of the total buyers are concentrated in Florida, California, Arizona and Texas. These four states account for 53% of purchases and have remained the top destinations for the past three years, with Florida and California remaining the top two destinations.
The median price paid by international buyers for a home in the U.S. was $219,400, a decrease from 2009’s median price of $247,100. However, the median price paid by foreign buyers was significantly higher than the overall median market price, which was $172,500 in 2009. On average, foreign buyers tend to purchase closer to the upper end of the market; 16% of the total international purchases were for homes priced at more than $500,000. According to Realtors, this was because international buyers are typically looking for a second home.

A majority of international buyers, 66%, purchased single-family detached homes. However, more international buyers purchased a condo than did their U.S. counterparts, at 23% and 7%, respectively. Only 44% of international buyers used a mortgage to pay for their home, compared to 92% of domestic buyers. Fifty-five percent of foreign buyers paid all cash. Realtors reported that a majority of international buyers use all cash because of the difficulty in establishing international credit in the U.S. Over one-third, 34% of potential foreign buyers were unable to complete transactions because of financing problems in the U.S.

From RIS Media

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings

“We have seen home buyer interest in FHA loans go from practically zero three years ago to upwards of 87% today,” said Christopher Gardner, founder and president of FHA Pros, LLC. “Despite this rapid rise in popularity, many buyers still do not fully understand the benefits of these loans, and we believe it’s time to change that.”

1. FHA loans are not only for lower-income borrowers. FHA loans are available to everyone. There is no maximum income restriction associated with FHA loans, but borrowers do need to substantiate income and assets by submitting proper documentation. This requirement ensures that borrowers are well-vetted and truly able to afford their future homes.

2. FHA loans are not only for first-time buyers. Many people believe FHA loans are available only to first-time home buyers, but this is not the case. Whether borrowers are making their first home purchase or their fifth, they can look to FHA loans as a home financing option.

3. FHA loans are not just small loans; in fact, loan amounts can be as high as almost $800,000. The government recently raised the maximum loan amount from its original cap of $362,790 to $793,750 as a way to help stabilize the housing market. The amount a buyer can borrow varies from county to county though. Later this summer, condo buyers interested in FHA loans can visit www.checkfhaapproval.com to instantly identify FHA-approved condo associations and review maximum loan amounts for a given location.

4. FHA loans are not affiliated with the section 8 housing program. While both programs are administered by the U.S. Department of Housing and Urban Development (HUD), FHA loans have nothing to do with low-income subsidized housing. FHA loans are simply mortgages insured by FHA. This insurance provided by the federal government allows lenders to lend more freely by assuring them that they will be repaid in the event of default. Most traditional lenders, including Wells Fargo & Co., JP Morgan Chase and Citigroup are able to provide FHA loans to their customers.

5. FHA loans are often more affordable than conventional loans. While FHA loans typically offer the same interest rates as other loans, borrowers benefit from a much lower down payment of as low as 3.5%.

6. FHA-approved condo developments are more desirable to buyers. With 87% of home buyers indicating that they plan to use FHA loans, condo associations that are not FHA approved are missing out on a significant pool of prospective buyers. Under rules in place since February 2010, an entire condominium development must now apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.

Due to the general unwillingness of today’s lenders to extend credit with respect to conventional loans, many borrowers find that FHA is their best bet. Lenders don’t mind lending when the federal government (FHA) assures them of repayment.

Homeowners associations (HOAs) should note that although FHA-insured mortgages might be easier to obtain, they are not “risky” loans, due in large part to the strict “full documentation” requirements placed on borrowers. Individual buyers or sellers can initiate the approval process or current owners can encourage their HOA to apply.

7. FHA loans are assumable. In addition to lower down-payment and credit-qualifying requirements as compared to conventional loans, FHA loans are assumable. This means that when a seller with an FHA loan sells his or her property, the loan and its financing terms (interest rate) can be transferred to the new buyer. This unique feature will certainly make a property more valuable in times of rising interest rates.

“Now, more than ever, buyers and sellers need to understand the options available to them when it comes time to buy a home,” continued Gardner. “At FHA Pros we have worked with countless HOAs, attorneys and individuals to easily and efficiently navigate the historically tricky FHA-approval process.”

From RIS Media

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings

The book recounts Fitzgerald’s personal journey from unemployed single parent to entrepreneur, philanthropist and corporate executive in the competitive L.A. real estate metropolis.

From beginners just getting started to seasoned agents — or anyone in business looking to take their game to the next level — this step-by-step guide teaches readers the art of selling.

Order it on Amazon.com.

Heart and Sold shows readers how to:

• Manage clients with style
• Choose the right company and the best mentor
• Establish a stellar reputation in their field
• Develop a daily schedule for running a home office
• Maintain a successful attitude every day

Heart and Sold shares the mind-set of a respected businesswoman who gracefully balances the demands of  real estate with the intimacy of her family.

What They’re Saying…

“Through her absorbing stories and life experience Valerie gives advice to anyone looking for a new beginning in their life or business. A great read.” – Larry King

“After reading this book, you will feel that you too can accomplish anything your heart desires.”  – Vanna White

“Heart and Sold is inspirational for any woman – or anyone – struggling to build a business of their own. Valerie’s personal triumphs will make you feel like you can do anything.” – Leeza Gibbons

Those Who Read The Book…

“I’ve been thinking about getting into real estate for years now and keep letting myself get side-tracked. I have been working on studying for the State Licensing exam, but was having a few doubts about my capability to make the jump and change my career.

After reading this book, I am now very excited. This book is both inspirational and informative. It’s full of helpful advice and references that can be used. Once I started reading the book, I couldn’t put it down and I plan to go through it again and highlight useful information. This will be a great desk reference as I move forward.

Thank you Valerie, for a great book. I highly recommend it to anyone thinking about getting into Real Estate or already working in the field.” – Tania Brown

. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . . . .

“I am a Real Estate Broker and since completing this book, I have asked my Director of Education for my office to read this book as well. I’m thinking of making it required reading for any new agent coming to our Company.

I enjoyed the book for several reasons. The first, it is inspirational, and agents need inspiration more now than ever these days. The transparency of Valerie’s early life is highly admirable and endears a reader to her personally.

Secondly, the book is pragmatic in teaching agents the basics and human side of the real estate business, in addition to pointing out the need for business systems. I often disagree with the “Selling Philosophy” of some real estate trainers, but with this book, Valerie is right on. Valerie’s philosophy and mine are similar in that we both consider real estate sales more about building relationships and helping people achieve their dreams. The agent’s role is very crucial because they act as both the “Coach” and the “Quarterback” of the transaction.

Thirdly, this book is expansive because it is good for new agents entering the business, for agents that want to improve their business, and for seasoned agents that want to build a team. Great Book.”  – A. May

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of Heart and Sold: How to Survive and Build a Recession-Proof Business. Find it at Amazon.com

Located in Marina Del Rey at 330 Washington Blvd, Latitude 33 is a collection of 122 homes two blocks from Venice Pier starting in the low $600s. The community is made up of luxury condominiums, town-homes and high-rise flats. The top two floors of the building are exclusively penthouse units.

“This is a long awaited debut for this amazing and culturally-expanding community,” says Valerie Fitzgerald. “This project offers contemporary beach living with traditional Southern California lifestyle.”

A modern beach-inspired community combining Los Angeles’ high-style attitude with the unique and eclectic flavors of the locale, Latitude 33 offers flats and townhomes in three distinctive yet complementary lifestyle collections: the SKY Collection, BOARDWALK Collection and BEACH Collection. Latitude 33 combines an inviting atmosphere with a unique coastal backdrop, perfect for enjoying the ultimate California lifestyle.

A West Los Angeles veteran representing high-profile new construction projects, Fitzgerald knows what it takes to promote and sell high-end real estate developments from the construction phase to roll out. Fitzgerald most recently oversaw sales at The Carlyle Residences (The Elad Group of New York’s Plaza Hotel), a 24-story, 76-unit tower rising on the Wilshire Corridor. In 2005 she lead sales at The Century, as well as at The Hollywood in 2009.

Latitude 33 offers residences ranging $600,000 to $2,400,000. Residences include designer-selected wood flooring in entry and throughout main living areas dramatic floor-to-ceiling windows and private balconies with glass rails. Kitchens have modern Italian cabinetry featuring clean lines of Bon Tempi or Gato design, elegant granite countertops, professional quality Wolf stainless steel built in appliances, Sub Zero refrigerators and wine coolers, Grohe stainless steel faucets and Kohler stainless steel sinks.

Valerie Fitzgerald has more than 20 years real estate experience and one of Coldwell Banker’s top producers nationwide. She was recently named one of The Wall Street Journal’s top agents and is president of The Valerie Fitzgerald Group in Beverly Hills, CA. Author of Heart and Sold: How to Survive and Build a Recession-Proof Business (Simon and Schuster), and is a regular contributor to real estate trade publications. For more information, visit: http://valeriefitzgerald.com.

To interview Valerie Fitzgerald or request high resolution images, please call Jeanna Zelin at 480.298.0928 or jeanna@lightboxpr.com or Lisa Loeffler at 602.319.5982 or lisa@lightboxpr.com.

Home prices in the 20-city index also rose 0.8% from March to April — the first month-to-month increase in half a year, Case-Shiller said.

Economists surveyed by Bloomberg had expected home prices to rise 3.5% in April on a year-over-year basis.

Meanwhile, the S&P/Case Shiller 10-city index rose 4.6%, on a year-over-year basis, and 0.7% from March to April.

David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said that although the April data indicated improvement in the housing sector, the gains were enhanced by the expiration of the home buyer tax credit in April, and were not as broad-based as one could wish for.

Gains Were Concentrated in California

“Home price levels remain close to the April 2009 lows set by the S&P/Case Shiller 10- and 20-City Composite series. The April 2010 data for all 20 MSAs [metropolitan statistical areas] and the two composites do show some improvement with higher annual increases than in March’s report. However, many of the gains are modest and somewhat concentrated in California,” Blitzer said, in a statement. “Moreover, nine of the 20 cities reached new lows at some time since the beginning of this year. The month-over-month figures were driven by the end of the federal home buyer tax credit program on April 30.”

Year-over-year percentage price changes in some major U.S. cities included: New York, down 1%, Chicago, down 1.6%, Boston, up 4.9%, Washington, D.C., up 7.3%, Atlanta, up 0.2%, Tampa, down 2.4%, Miami, down 0.5%, Dallas, up 3.3%, Denver, up 4.4%, Los Angeles, up 7.8%, San Francisco, up 18%, and Seattle, down 2.8%.

Overall, April’s home price report represents only a small victory for the U.S. housing sector. The 3.8% year-over-year gain and the 0.8% rise in April are positive developments, but economists generally agree that the now-lapsed home buyer tax credit likely boosted sales and prices. If demand is not strong enough to support prices without the support of the tax credit program, home prices could retrench in May or June.

For now, the modestly positive numbers in April report are a signal that the negative wealth effect may be dissipating — but it will take two or three more months of data before economists and real estate agents can predict whether the U.S. housing sector will continue to recover.

Consumer mortgage protections outlined in the bill are Congress’s way of legislating common-sense underwriting and more borrower protection, “to an industry that lost sight of it,” said David Berenbaum, chief program officer for the National Community Reinvestment Coalition.

Below are a few of the mortgage-related highlights of the bill as it stands currently:

Documentation required

It seems like ages ago that consumers could get a no-documentation mortgage, stating their income instead of providing proof of it. In today’s mortgage market, much more documentation usually is required.

But this legislation would work to prevent the no-doc loan from returning if and when lending standards loosen up again.

“Banks have to find out how much money a consumer is making, as opposed to taking someone’s word for it,” said Pedro Morillas, consumer advocate for the California Public Interest Research Group. In the past, some borrowers got loans they probably shouldn’t have by overstating their income and assets.

This measure amounts to creating a safeguard for the future. “It doesn’t represent a change in today’s marketplace,” said Keith Gumbinger, vice president of HSH Associates, a publisher of consumer loan information. “But it addresses what could be a future relaxation of standards.”

The bill doesn’t ban no-doc mortgages outright, but if lenders choose to make one they will be subjected to certain risk-retention regulations, otherwise known as “having skin in the game,” said John Courson, president of the Mortgage Bankers Association. That requirement would also likely increase consumers’ mortgage costs, he said.

“It’s clearly going to have a chilling effect on loans that have the feature,” he said.

Mortgage fees

The legislation also limits mortgage loan prepayment penalties. Under the bill, such penalties could only be incorporated into the most basic, straightforward mortgages, said Kathleen Day, spokeswoman for the Center for Responsible Lending. Even when such a penalty is allowed, there will be limits on how high it can be.

In the past, the penalties created a catch-22 for some borrowers. For example, a homeowner hoping to refinance out of an adjustable-rate mortgage — ahead of the loan’s skyrocketing rate reset — could be hit by a hefty prepayment penalty for paying off the original loan early.

The legislation would also restrict excessive yield-spread premiums, one form of broker compensation, Gumbinger said. The premiums have been blamed for causing mortgage brokers to steer people into more expensive loans than they qualify for, Morillas said.

“We saw some outrageous YSPs in the past,” Berenbaum said, with the premiums basically “gouging the consumer for profit.”

Under the proposed rules, “The loan originators could receive a commission based on the loan amount and bonuses on the [volume of] loans they do, but not based on the rates or the terms of the loan,” Courson said. Many lenders already have made changes with compensation or are in the process of changing it to get into alignment with the best interests of the borrower, he said.

Consumer protection

The new Consumer Financial Protection Bureau is charged with looking out for consumers with regard to loans and other financial products.

“Once this new financial bureau is established, they’re going to have wide-ranging, rule-making power,” Gumbinger said.

One of the bureau’s immediate tasks, under the legislation: The creation of new appraisal standards to ensure there’s no pressure on appraisers to produce banks’ desired property values.

“The suspicion is that banks would tend to hire more often the appraisers who would consistently come back with higher appraisals than others,” Morillas said. “That helped to drive up home prices.”

Currently, a Home Valuation Code of Conduct is aimed at addressing this issue, but it’s due to expire later this year. HVCC was met with criticism, however, that it encouraged the use of appraisal management companies that used inexperienced appraisers and those who weren’t always familiar with the local area in which the home resided.

“The intent of the HVCC was good and needed… but there is a need to update to reflect the current marketplace and insure that [appraisal management companies] aren’t creating more risk in the market,” Berenbaum said.

Another important aspect of the bureau is that it will consolidate reporting and disclosure oversight, with regard to laws including the Real Estate Settlement Procedures Act, Truth in Lending Act and Home Mortgage Disclosure Act, Courson said.

“That had been scattered through the Fed and HUD,” he said, and the change represents an opportunity for a better disclosure package for consumers.

Amy Hoak,  MarketWatch

Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.

Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings