Love's Real Stories

“Keep Your Home California” is a state-run program paid for by the U.S. Treasury Department’s “Hardest Hit Fund”, a 2 billion dollar program. We’ve received a big response from people with questions about the program, and from people who sent us their success stories from working with the program, we’re running some of the information again:

Keep Your Home California has four parts:

• Mortgage help for the unemployed.
• Mortgage help for people with “documented financial hardship.”
• Relocation help for people in the midst of a short sale.
• Reduction of principal balance on mortgages.

Keep Your Home California has helped close to 8,000 low- and moderate-income households that are behind on loan payments or close to default, according to agency leaders.

The program has recently made changes in eligibility guidelines, opening up help to more people.

“This expanded eligibility will allow more families to qualify and receive greater assistance,” said California Housing Finance Agency Executive Director Claudia Cappio. “We are continually evaluating our experience, and making adjustments like these based on the initial results of the Keep Your Home California program.”

The new changes include:

• Allowing homeowners who completed “cash-out” mortgage refinancing to take part in the four programs.
• Allowing borrowers who own more than one property to apply. Program officials said this will be particularly helpful to those who co-signed on properties for family members.
• Offering mortgage aid to unemployed borrowers for nine months, instead of six. Such homeowners can get up to $3,000 a month. To qualify, you must receive unemployment benefits.
• Reinstating up to $20,000 in past-due mortgage payments instead of the previous $15,000 cap.

Most lenders, but not all, participate in the Keep Your Home California program. For a list, go to www.keepyourhomecalifornia.org/participating, or call 888-954-5337.

Good luck to you who might benefit from this program. I’d love to hear your experiences.

“I admit it. I’m a strategic defaulter,” said James Logan. That is, Mr. Logan lost his home through foreclosure- on purpose. He quit making payments to the bank, and walked away when the bank took the house.

“Yeah, I walked away, but it took a while,” said Logan.

Two years. Logan lived in his house, rent-free, and saved the money, for two years.

“Hey, I tried hard to keep my house. I fought the good fight for years. But my take-home pay kept shrinking and my bills kept growing. I cut expenses down to zilch and worked a second part-time job to stay on my feet. I was like a clown juggling twenty balls in the air, hopping on one foot.”

The last straw for Logan was when his next-door neighbor, Pete, who Logan considers lazy, was approved for a loan modification.

”Lazy? Try irresponsible. The guy used his house like an ATM machine. He put in a pool, added a game room, bought cars, you name it. Then as soon as he loses maybe an hour a week of work he defaults on his home loan. What happens? He gets a loan modification, cuts his payments in half. He’s still there.”

Pete’s largesse hit home for Logan one particular night when Logan stood outside and observed their two houses. Pete’s house “was lit up like a pinball machine. Giant flat screen TVs glowed and flashed in every window upstairs and down. My house looked like the Little House on the Prairie-maybe a wisp of smoke rising from the chimney; maybe a mule in the yard.”

Logan was denied a loan modification. “I was treading water and going down. But as long as I wasn’t completely under, had one nostril above the surface, I didn’t qualify.”

Next, he tried a short sale. “My bank told me as long as I was still making payments, no short sale. So I defaulted and ruined my credit. The bank denied my short sale anyway.”

Logan decided he would never give the bank another dime.

“I don’t know why it took two years for the bank to foreclose,” he said, “but if that makes me a strategic defaulter, I’m proud of it.”

I grabbed the opportunity to hitch a ride with a Realtor and watch her in action. She was on her way to meet a buyer at a house just listed on the market. I climbed in the back. She piled her gear in the front passenger seat: a laptop, cell phone, Ipad, camera, a big purse and a small purse, a tangle of wires, stacks of paper. We sped away from her office.

“Don’t mind me,” I said.

She didn’t. The cell phone was ringing and the Ipad was dinging. The GPS computer-voice person squawked from the dashboard, “Proceed point-three miles and turn right.” The Realtor snapped a wireless earphone gizmo to the side of her head.

“Hi Jim,” she said. “Jim, could you hold on a sec?” She clicked her earphone gizmo. “Hi Linda, can I call you right back?” Click. “Jim? Hi. I’m on my way now.“ Click. “Hi Linda, let’s meet Jim at the property……..” She told Linda the property was $249,000, and, “……square feet? Hmmm. Let me check….” She leaned over and opened her laptop. She was oblivious to the sounds of honking and screeching outside.

I attempted control of the car from the back seat. I shifted my weight back and forth, gripped the head rest in front of me, and made noises like, “Ooh, Unnh, and Yeeow!” My technique proved successful- we made it.

The house looked like a party scene, the street lined with cars. People strolled the yard. They filed in and out the front door. Jim found us. Here came Linda.

“How long has this been on the market?” asked Jim.

“A few hours,” said the Realtor. “I have the offer ready. Quick, let’s go see the house.”

Later, I got the report. Seven offers. The house sold to a cash buyer (not Jim and Linda) – $10,000 over asking price.

“Welcome to the new market,” said the Realtor.

Cash is a real estate game changer, and the real estate game in the North Valley has changed. Cash buyers are rolling into town like sailors on leave, buying up everything in sight. Sellers are opening their front doors, rolling out the red carpet, waving cash buyers in like long lost friends. Buyers with loans stand outside in the cold watching cash buyers get the V.I.P treatment.

Seller: “I had four offers on my house the first weekend on the market. One was full-price involving a loan; one was $5,000 less, all cash. My realtor countered the all cash buyer; they came up $2,500 and we called it good.”

Accepting less money for all cash?

“Yes. We didn’t want to chance the sticky parts of getting loans. We’ve heard about problems with buyers qualifying for loans, and problems with appraisals,” he said. “Also, the cash buyer could close faster than the loan buyer. That worked for us.”

Seller two: “We had two offers on the table, both with loan financing. We were just about to sign one, when we got the word another offer was coming in. It turned out to be all cash and over our asking price. We signed it quick and closed fast.”

Low supply is another game changer in real estate, and the real estate game in the North Valley has changed that way, too. Low supply puts the buyers in a foot-race every time a new listing hits the market. The buyer-with-loan might win the race to the house, but the cash buyer might win the day, if the seller waits for the offer.

Cash Buyer: “The time is now. Real Estate is my group’s favorite investment, but we’ve held off for the last several years, except for a couple of properties we fixed and flipped. Now we’re buying fixers and rentals. Interest rates are staying low, and we think the real estate market has flattened out, so our money will see a better return in real estate than in a money market account. We’ll buy five or six properties this year in and around the North Valley.”

This is all good news for sellers, not so much for the buyer-with-loan.

Buyer-with-loan: “It’s hard right now. My husband and I thought we could get a great deal on a house. We found out the hard way we’re not the only buyers out there. We wasted a lot of time shooting low-ball offers around, and we walked away from deals we wish we had back now. We started four months ago and it’s gotten a lot tighter. The last few houses we offered on had multiple buyers and the cash guys blew us out of the water on a couple. We’re not discouraged, though. We’re qualified and our loan is solid. We know the market, and our realtor is on the ball, so we’ll get our house. We won’t hesitate now when we see a house we like.”

Real estate math looks like this: cash buyers plus low supply plus high demand equals higher prices.

The real estate game in the North Valley has changed.