Market Update

In riding the roll-coaster market of real estate and the tumultuous mortgage industry, one thing is certain, everything changes and unless we change with it we may be left behind. For those that receive my Mortgage Bulletin in the mail inside is a really great comic piece that is right on the money, literally! The comic piece poses a couple and a real estate agent whereby the couple states they will consider buying when the agent's $900,000 property drops to $40,000. The comic piece while funny is not far from the truth with the many foreclosure and short sale properties receiving substantially lower offers and requesting everything under the sun including cars, vacations, plasma T.V.'s and a vast array of items to induce potential buyers. Creative agents list their properties well below market value to ignite a "bidding war" between potential buyers to earn the "highest and best" price. The market has become interesting and not without a dull moment!

While we received the much anticipated new FHA conforming limits in San Diego to $697,500, the concern over property value remains. The new loan limits will allow those with existing mortgage balances exceeding the original conforming limit of $417,000 to refinance with conforming loan programs and interest rates that have been around 1% lower than Jumbo loans or those above the $417,000 limit. This may also stimulate potential buyers to submit offers on higher valued property based upon the increased limits and more favorable pricing. Lenders are currently working to update their programs and procedures to accommodate this new increase and handle the anticipated volume. Declining property value in some areas may hinder borrowers in refinancing if their loan-to-value ratio exceeds lender guidelines. We have returned to a more conservative approach of affordability where cash is king and full income documentation is necessary to make a transaction work. In some cases, lenders continue to allow "low income/stated income" documentation for self-employed borrowers with high FICO credit scores and a substantial amount of liquid assets. In addition to the conforming loan amount increase which is only effective through December 31, 2008, there are some new industry items in 2008. They are as follows:

1) Mortgage Debt Forgiveness:

Congress recently passed legislation effective January 1, 2008 assists distressed homeowners with their primary residence whereby they will not be required to pay taxes on mortgage debt affiliated with a bankruptcy, short sale, foreclosure or other renegotiation. The legislation applies to debt discharged between January 1, 2007 through December 31, 2008 (Real Estate Magazine March 2008-Industry News).

2) FICO 08:

FICO 08 is the brainchild of Fair Isaac Corp. which created a system to more accurately predict those at risk for default. The scoring system 300-850 will remain in place, however more points will be given to consumers who carry a variety of credit and penalize those that max out or utilize most of their credit availability. The new system will be available early Spring 2008 but may take lenders further testing before acquiring the system (Real Estate Magazine March 2008-Industry News).

3) PMI Deduction:

The PMI deduction for homeowners with an adjusted gross income of $100,000 or less and a mortgage originated between 2007-2010 will continue to qualify for the PMI deduction on this mortgage insurance tax. Those with an adjusted gross income up to $109,000 can also take advantage of a partial deduction (Real Estate Magazine-March 2008-Industry News).

The above items should be consulted with your tax advisor.

Thank you for reading the TRU Financial Services blog, please look for our blog and a new video clip addition to the website coming in April 2008 at http://www.trufinancialservices.com/. Your mortgage manager for life! Until next time, "Waste no tears over the griefs of yesterday" Euripides