Watch Out for Loan Mod Sharks

We all know there are lots of people struggling to keep their homes today. Unemployment, layoffs, bailouts, foreclosures, and loan modifications are probably some of the most common words in the news, and have been for a while.

Shouldn't You Get Professional Help?

For some people who have certain types of loans a loan modification is a real option, but large numbers of people in distress tends to bring out the scammers. Who can you trust to help in your loan modification negotiation? Normally, the safest answer would be to consult with an attorney.

Pros Gone Bad

That's what makes today's announcement by the State Bar of California so disturbing. They've publicly identified 16 attorneys who are under investigation for misconduct related to loan modifications. The charges against them include taking a fee for services and then failing to perform those services - or even further communicate with the client!

The Office of Chief Trial Counsel experienced a 58% increase in active investigations compared to 2008, and 25% of them involve loan modification.

What to Watch Out For

If you or someone you know is having trouble making mortgage payments loan modificaiton might be a good option - but just be sure you are working with someone you know you can trust. Get references, and check them! In addition, the State Bar has identified a list of "red flag" circumstances that could be a sign something isn't right:

• Advertisements of the office do not expressly identify by name the attorney who is responsible for the business.
• Office staff will not readily identify by name the attorney responsible for oversight of the business.
• The attorney in charge of the office is too busy or not willing to meet personally with prospective clients.
• The firm advises a consumer to stop paying the existing mortgage.
• The business, through its advertisements or claims of its representatives, makes claims that sound too good to be true, such as claims of a 90 or 100 percent rate of success in obtaining loan modifications, or claims that a reduction in the mortgage principal is likely to be achieved.
• The business demands payment of a large fee, even before obtaining a prospective client’s basic income and expense information, and information about the existing mortgage and present home value.
• The attorney responsible for the business is not licensed to practice law in the state where the consumer resides.

Are There Other Options?

One thing to keep in mind is that a loan mod may not even solve the matter for a home owner in distress. Check out this list of all the various options, as well as a FAQ on Short Sales, and remember to work with someone you know has a track record of success!

Proposed Legislation Would Expand Tax Credit

Senator Johnny Isakson has introduced new legislation that would significantly expand the existing first-time home buyer tax credit. Isakson is a Republican from Georgia, but he was joined by a bi-partisan group of co-sponsors, including Senators Chris Dodd, a Democrat, and Joe Lieberman, an Independent.

Here are the key provisions of the bill:

• The maximum amount of the credit would be increased from $8,000 to $15,000
• The credit would be available to all home buyers, not just first timers
• The current $75,000 and $150,000 income limit for individuals and couples would be eliminated
• The credit would be extended one year from the date of passage
• Buyers could claim the credit on 2009 tax return, even if the purchase was in 2010

Another group of senators, including Harry Reid and John Ensign, are pushing for a six month extension of the existing tax credit for first-time buyers.

As for support for extending the credit from the White House, Michael Cohn of WebCPA.com writes that spokesman Robert Gibbs has indicated that the administration is the administration’s economic team was evaluating the impact on new home sales and would make a recommendation to the president.

The likelihood of the bill's passage is unclear, but it's already had an impact on the market. At least one potential buyer has told me that he's "crossing his fingers" that it will pass - which could translate to buyers adopting a "wait and see" attitude in the short term. If the bill does pass in anything like it's current form, it will eventually add incredible motivation to buyers and increase demand for homes.

Bank Owned Home Update

Here's a little status update on our Bank Owned Listings:

New Pre-Listing Flash!

2834 W Bridgeport Ave, Anaheim

215 Knox Street B, Costa Mesa - Open House this Saturday 11-4

11 Villa Valtelena, Lake Elsinore - Multiple offers received, pending investor approval

21331 Bristlecone, Mission Viejo - In Escrow, accepting Backup Offers

If you'd like more info on any of these, or any of our other listings, just contact me or Leslie directly!



Late breaking update: we now have fully ratified contracts on 11 Villa Valtelena and will open escrow tomorrow.

Orange County Homes UNDER Valued by 10%?

Jonathan Lansner at the OC Register reports today that, according to a model developed by IHS Global Insight, Orange County homes are under valued by 10.6%.

Here's the chart showing the historical movement of the formula:


IHS uses a blend of regional economic data to calculate the over/under valuation of homes. By this model, the peak of the "bubble" was in the first quarter of 2006 with overvaluation estimated at 34.6%.

This is clearly a broad-brush picture, and doesn't deal with various market subtleties. For example, no distinction is made between homes priced under $500,000 vs homes priced over $1 million, which are like two different universes right now. Nevertheless, it's one more small indication that the worst has been seen and Orange County Real Estate is showing signs of a comeback.