San Jose Real Estate * REALTOR ® * Richard Gonzalez

“Overall, Fitch’s expected losses for recent-vintage Option ARMs range between approximately 35%-45%, depending on the collateral quality of the underlying mortgage loans. In addition to expectations of higher defaults, severities have also contributed to higher expected lifetime losses. Fitch has observed that loss severities on Option ARMs have increased significantly to an average of approximately 60% from 40% a year ago. A key driver in the worsening severities is the fact that 75% percent of Option ARM loans are secured by properties located in California, Florida, Nevada, and Arizona, which have experienced average declines of 48% from second quarter-2006 to date. Even without further declines in home values, defaults on Option ARM loans are expected to soar as loan recasts occur, as these borrowers are unable to effectively refinance into alternative mortgage product.”

Incredible to see the long term aftermath continues with the exotic loan products the the very popular Option Arms in California. I feel for those homeowners who are facing the harsh reality of their decision to leverage it all on an option arm. I do sense that there will be a continued effort to mitigate this impending disaster.

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The question was posed to me by Mark and Susan who I had the pleasure of meeting while previewing a home out in the central valley. An area so hard hit by the housing downturn that in most communities you will find home after home with neglected lawns and notices posted on the doors and windows of a recent foreclosure.

Mark and Susan are among the growing number of homeowners who go to sleep at night knowing that their home is under water. In the case of Mark and Susan they bought their home for $350,000 in 2006 and are now watching homes twice the size of theirs selling in the neighborhood for $150,000.

Frustration and reality for California homeowners

The frustration for Mark is knowing that the government is providing assistance to first time home buyers and people who have decided to stop making payments on their mortgage. “We did everything right and could just let our house go into foreclosure like most homeowners in our position but I can’t see myself doing that”.

Mark is referring to the growing number of homeowners opting to either walk away or in some cases buy another home at a lower price then simply stop making payments on the first home letting it go into foreclosure. Most of Mark and Susan’s neighbors have  done exactly that and yet they continue to fight the temptation of following suit.

Mark also asked me how many homeowners were on the verge of default.

My response to Mark’s question was to share a statistic I recently read from the California Association of REALTORS showing the long run delinquency average of 4 percent increased to just under 9.2 percent. Foreclosure long run average was still relatively low at 5.2 percent.

9o percent of California mortgages were  still being paid on time in the first quarter of 2009.

Mark was surprised when he heard this statistic but it was no real comfort to him knowing that his situation seemed hopeless.

Is there anyone out there who can help?

“Why doesn’t the government help homeowners like us who have done everything right?” asked mark. “Give us a tax credit or provide a little incentive or relief by allowing us to modify our rate, anything to reward us for doing the right thing”.

I shared statistics, talked about legislation regarding tax relief laws for foreclosed homeowners, and just listened.

At the end of our conversation I realized that I didn’t have the answer for  Mark and Susan. All these nice people want is for someone to acknowledge their frustration and to let our legislators know they exist.

Mark and Susan are among the homeowners in this country who want to do the right thing.

A US News article covers the 10 best places to live in San Jose. I remember growing up in South San Jose (Santa Teresa Area) when IBM was the big company in the area and on the weekends it was off to Oakridge Mall to see a movie. Funny thing is that some areas have not changed much.  San Jose is still a great city to raise a family.

“With 9 square miles of green spaces, 300 days of sunshine a year, and four different professional sports franchises to follow, San Jose, Calif., has everything you need for a happy childhood. At just over 1 million residents, San Jose considers itself the capital of Silicon Valley, but it doesn’t take a computer scientist to understand the city’s appeal to kids. San Jose is the country’s safest big city, and although it’s certainly expensive—the median home price is $449,000—the city offers all sorts of great activities for children. Rather than chasing its skateboarders away, San Jose has embraced them by opening six public skateboarding parks, including Lake Cunningham Regional Skate Park, the largest one in the state. And at the Children’s Discovery Museum of San Jose, children can experience everything from theater to gardening.”

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Silicon valley Bidding War is Back

This mercury news article takes a tour of  the Silicon Valley housing market and affirms what all full time real estate brokers have been experiencing over the last 90 days. “The bidding war is back”  states the headline in this article and to say the least is a true  statement that describes the current housing environment.

Buyers beware; low ball offers will only end up in one frustration after another because of cash coming in from overseas investors and low interest rate loans.

Other buyers are doing their best to time the market and have been in the trenches for months on end. My suggestion to those of you caught up in this market is stay positive and be persistent.

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Bank of America Short Sale Approval Process May Improve.

Today I had a conversation with a short sale negotiator from Bank of America and was informed that Bank of America is implementing changes to there approval process for short sales waiting to be approved.

This new fast track process (as I refer to it ) applies to loans that do not have to be approved by an outside investor.  For example if you have a loan that does not require an outside investor approval the negotiator simply runs the numbers in the computer and approves it if the computer shows a favorable calculation.

Hopefully this will shorted the horrid time lines we are experiencing when  working with Bank of America short sales.