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Did you know that foreclosures are at a 52 year high!  A total of 72,571 Notices of Default (NoDs) were filed during the July-to-September period, up 34.5 percent from 53,943 during the previous quarter, and up 166.6% from 27,218 in third-quarter 2006, according to DataQuick Information Systems of La Jolla.

So what is behind this high foreclosure rate? During the housing boom, a combination of optimism and desperation caused many people to purchase their homes with Adjustable Rate Mortgages (ARMs). When you are seeing double digit growth rates in property values and can get in at 3 percent for 3 years it was too tempting for many people to pass up.

Now these people will have to pay the piper as those with ARMs are looking at the first of many resets of their mortgages. A reset is when the fixed length of the ARM is over and the bank adjusts the mortgage to a new interest rate.

2 Trillion in Mortgage Debt to Be Reset in 2006 and 2007 and 2008 has already been called the Year of the ARM.

I have worked with many San Ramon (Windemere), Dublin, Danville, Walnut Creek clients to help them get out of the ARM.  If your ARM is going to be resetting soon, now is the time to refinance! The Fed's have for the 2'nd time in a row lowered the discount rate, which means that I can help you get a great deal on your new loan.

I work with hundreds of lending institutions around the country. Call me for a free consultation and take advantage of my great rates.

Warm Regards and Happy Holidays,

Oleg Chernyak - (925) 984-7734 or oleg@platinumclubrealty.com

This week will be very important for mortgage rates despite the fact that it is a holiday shortened week. There are four relevant factual economic reports scheduled for release along with the minutes from the last FOMC meeting. This means that we may see fairly significant changes to rates more than one day this week.

Tomorrow morning brings us the release of November's Existing Home Sales report, which comes from the National Association of Realtors. It gives us a measurement of housing sector strength and mortgage credit demand, but is not considered to be of high importance to bonds or mortgage rates. However, after the surprisingly large drop in November's New Home Sales report, we could see this data also influence mortgage rates if it shows similar results.

The financial markets will close early tomorrow and remain closed Tuesday in observance of the New Year's Day holiday. They will reopen Wednesday morning with the release of the Institute for Supply Management (ISM) manufacturing index. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are currently expecting to see a 50.5 reading in this month's release, meaning that sentiment fell slightly from November's 50.8. A smaller reading will be good news for the bond market and mortgage shoppers while a higher than expected reading could lead to higher mortgage rates Wednesday morning.

Also Wednesday will be the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed's thinking and concerns regarding inflation and monetary policy. It may also help form opinions of the Fed's future moves toward interest rates. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they shouldn't affect the markets or mortgage rates until afternoon hours.

The Commerce Department will post November's Factory Orders data late Thursday morning, giving us an important measurement of manufacturing sector strength. This report is similar to the Durable Goods Orders release that was posted late last month, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 1.0% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a small change in rates.

The final report of the week comes Friday morning when the Labor Department will post December's employment figures. The Employment report is considered to be one of the most important monthly releases we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a smaller than expected increase in new payrolls and a small increase or even a decrease in earnings would be good news for the bond market.

Current forecasts call for a 0.1% increase in the unemployment rate, pushing it to 4.8%. Analysts are expecting to see an increase in new payrolls in the neighborhood of 70,000 with earnings rising 0.3%. If we see much fewer than 70,000 new jobs, we should see mortgage rates drop considerably Friday. However, stronger than expected readings will likely push mortgage rates higher.

Overall, the key data of the week will be Wednesday's ISM index and Friday's Employment report, which could set the tone for the bond market and mortgage pricing for the next few weeks. If they show weaker than expected results, mortgage rates should move lower for the week.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Hope you all have a very Happy New Year!

I have decided that I am going to post a more personal (non real estate or mortgage specific) blog on monthly bases. We can all take a break once in a while and reflect back on our lives to keep things in perspective. With that, I would like to share with you all a little story that I found to be so well written. May you and your families have a Merry Christmas and a very Happy New Year!

The Mayonnaise Jar

When things in your life seem
Almost too much to handle,
When 24 Hours in a day is not enough,
Remember the mayonnaise jar
And 2 cups of coffee.

A professor stood before his philosophy class
And had some items in front of him.
When the class began, wordlessly,
He picked up a very large
And empty mayonnaise jar
And proceeded to fill it with golf balls.

He then asked the students
If the jar was full.
They agreed that it was.

The professor then picked up a box of pebbles and poured them into the jar.
He shook the jar lightly.
The pebbles rolled into the open
Areas between the golf balls.

He then asked
The students again
If the jar was full..
They agreed it was.

The professor next picked up a box of sand
And poured it into the jar.
Of course, the sand filled up everything else.
He asked once more if the jar was full.
The students responded
With an unanimous
"yes."

The professor then produced
Two cups of coffee from under the table
And poured the entire contents
Into the jar, effectively
Filling the Empty space between the sand.
The students laughed.

"Now," said the professor,
As the laughter subsided,
"I want you to recognize that
This jar represents your life.
The golf balls are the important things -
Family, children, health,
Friends, and Favorite passions --
Things that if everything else was lost
And only they remained,
Your life would still be full.

The pebbles are the other things that matter
Like your job, house, and car.

The sand is everything else --
The small stuff.

"If you put the sand into the jar first,"
He c ontinued,
"there is no room for
The pebbles or the golf balls.
The same goes for life.

If you spend all your time
And energy on the small stuff,
You will never have room for
The things that are
Important to you.

So...

Pay attention to the things
That are critical to your happiness.
Play With your children.
Take time to get medical checkups.
Take your partner out to dinner.
Play another 18.

There will always be time
To clean the house
And fix the disposal.

"Take care of the golf balls first --
The things that really matter.
Set your priorities.
The rest is just sand."

One of the students raised her hand
And inquired what the coffee represented.

The professor smiled.
"I'm glad you asked".

It just goes to show you that no matter how full your life may seem, there's always room for
A couple of cups of coffee with a friend."

On Friday, December 14, 2007, the U.S. Senate voted 93-1 to pass S. 2338, the FHA Modernization Act, which will reform the Federal Housing Administration (FHA). A conference committee will now meet to resolve differences between this bill and the one passed by the House of Representatives earlier this year.

The bill, seeks to make the Federal Housing Administration more relevant in the current housing and mortgage lending environment by expanding the agency, loosening some underwriting standards, and raising its current restrictive loan limit.

The FHA was established in 1934 to help borrowers, particularly those with low incomes, purchase homes by guaranteeing banks that those loans would be repaid should the borrower default. But the agency's loan limits have generally lagged behind those of Freddie Mac and Fannie Mae and as home prices climbed dramatically and lenders with looser underwriting standards proliferated the agency became less and less of a player in the mortgage market.

Over a ten year period ending last December the FHA's share of new mortgages fell from 9.1 percent to 1.8 percent according to Inside Mortgage Finance. A major reason for the slide is the FHA loan cap which, in many parts of the country such as both coasts, falls short of covering the purchase price of even a low end house.

FHA insured loans have been mentioned as a possible escape hatch for borrowers who may be unable to make payments on their current adjustable rate mortgages (ARM's) when their interest rates reset over the next year. The restrictive loan limits, however, make that impossible for many of those borrowers. There is also a theory that a more widely available federal guarantee would encourage lenders to make more loans in the current tight credit environment.

Currently, FHA loans are limited upto $417,000 for mortgages on one-family properties (up from $359,650). These would include Freddie Mac, Fannie Mae, and Veterans Administration loans.

The House bill would raise the loan limit as high as $829,750 in certain areas of the country but the biggest stumbling block to a compromise is a feature of the House bill which establishes a new housing trust fund for troubled borrowers and would require FHA to contribute to it.

Also on Friday the Senate passed a separate borrower relief bill which would end, for three years, a provision in the tax code which has bitten many a homeowner after foreclosure or a loan workout. Under current rules the Internal Revenue Service requires lenders to send borrowers and the IRS a form detailing any loan amounts written off by the lender after a foreclosure, short sale, or loan restructure. The IRS treats that forgiven debt as ordinary income and taxes the borrower accordingly.

The House had earlier passed similar legislation but without the three year sunset provision.

In other mortgage news, Reuters reported on Friday that the hotline established by the HOPE NOW alliance had received 45,000 calls in the three days after its establishment was announced by President Bush. The hot-line provides foreclosure prevention counseling to borrowers who qualify for an interest rate freeze worked out between the Treasury Department and major lenders. The telephone number for the program is 1-888-995-HOPE.

I am sure that many of you have heard of both Short Sale as well as Foreclosure thrown around just about everywhere. What exactly is a Short Sale? How does it differ from a Foreclosure? Do both impact my credit score?  GREAT QUESTIONS!

Basics of a Short Sale

Short sales happen when a lender agrees to accept less than the amount owed against the home because there is not enough equity to sell and pay all costs of sale. Not all lenders will negotiate a short sale, and that is why a real estate agent can be a tremendous help by contacting the lender's loss mitigation department to find out.

You can't just wake up one morning and decide you're going to sell your home at a loss by asking for a short sale. Typically, lenders won't even consider a short sale if your payments are current. Lenders will be more agreeable to negotiation if your payments are in arrears. Plus, if you have cash assets, the lender might try to tap those accounts. Doing a short sale is not for the faint of heart.

Basics of a Foreclosure

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:

1. The borrower/owner reinstates the loan by paying off the default amount to during a grace period determined by state law. This grace period is also known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These are also known as bank-owned or REO properties (Real Estate Owned by the lender).

Short Sale / Foreclosure Deficiency Judgments

The bad news is a seller could be subject to a deficiency judgment for the difference between the loan amount and the amount paid. In California, purchase money loans are not subject to deficiency judgments; however, hard money loans, equity loans and refinances are. Other states have laws regarding personal guarantees, which could also result in a deficiency judgment if the home owner is personally liable for loan repayment.

The lender has sole discretion whether to pursue a deficiency judgment in those instances when the judgment is permitted. To determine whether a pending foreclosure or short sale is subject to a deficiency judgment, talk to a real estate lawyer.

How is the Seller's Credit Affected?

According to David Steep, division manager at Vitek Mortgage, sellers will take a bigger hit on their credit report by going through foreclosure or giving the lender a deed-in-lieu of foreclosure. Steep says the points lost on a FICO score are as follows:

• Foreclosure or Deed-in-Lieu of Foreclosure
  Both of these solutions affect credit the same. Sellers will take a hit of 250 to 280 points. This means if a seller's FICO score before foreclosure was 680, it could dip as low as 400.

• Short Sale
  The affect of a short sale on a seller's credit report is much less damaging. The ding on credit will show up as a pre-foreclosure in redemption status, Steep says, which will result in a loss of 80 to 100 points. This means a short sale with a previous FICO of 680 will see it fall to 580 to 600.

Bottom line

If you're a seller trying to decide whether to let a home go through foreclosure versus attempting a short sale, salvaging your credit is the main advantage to doing a short sale. But seek legal and tax advice before making that decision.

If you have further questions about these topics, please call me at (925) 984-7734 and I'll be happy to answer your questions.

- Oleg

Today's Federal Open Market Committee (FOMC) meeting has adjourned with an announcement of another quarter point rate cut by Mr. Bernanke and friends. This was the most popular move with analysts and market participants, but as expected, the markets have reacted strongly. Stocks have dropped considerably while bonds have rallied since the announcement. The Dow currently stands down 177 points from yesterday's closing level while the Nasdaq has fallen 35 points. The bond market is now up 42/32, which will likely improve this afternoon's mortgage rates by approximately .25 of a discount point over this morning's rates.

The FOMC decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent. This was the third consecutive meeting with a rate cut, which will mean immediately lowered credit card and home equity loan rates for consumers and cheaper borrowing costs for corporate borrowers. In the post-meeting statement, the Fed indicated that more rates cuts may be needed to prevent the economy from slipping into a recession, but also hinted that inflation still a concern. Still, bonds are rallying hard while stocks are falling. I think this afternoon's bond strength is partly being fueled by the stock weakness than directly by the Fed's rate cut or statement.

I am shifting to a float recommendation across the board simply to capture this afternoon's and possibly tomorrow morning's improvements. I will likely be moving back towards locking before we get to this week's key data, especially since two of them address inflationary pressures.

There was no relevant economic news released today. We will see October's Goods and Services Trade Balance report posted early tomorrow morning. This report gives the size of the U.S. trade deficit, but it is the week's least important release. It is expected to show a $57.0 billion trade deficit. Unless it varies greatly from forecasts, I don't expect it to affect mortgage pricing.

The first important data of the week comes early Thursday morning with the release of November's Retail Sales report. This data is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts call for it to show a 0.6% increase in sales from October's levels. If it reveals weaker than expected sales, the bond market should thrive and mortgage rates should fall as a result. A stronger than expected reading could fuel stock market gains and push mortgage rates higher Thursday morning.

Also Thursday and just as important as the sales data, the Labor Department will release November's Producer Price Index (PPI). This index measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If Thursday's release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and should drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should fair well and mortgage rates should fall. Current forecasts are showing a 1.5% rise in the overall index and a 0.2% rise in the core data.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Please visit my daily Rate Lock Advisory, which can be found here.

I had a wonderful opportunity to participate in today's Dougherty Valley Oversight Committee meeting.  These meetings are held throughout the year and allows builders, school districts, counsel members, as well as residents to communicate progress, voice concerns, and work to resolve outstanding issues.  The December 10th meeting was held at the Dougherty Station Community Center Front Row Theater at 9:30am.

Today's meeting agenda can be found here.

Minutes of today's DVOC meeting will be available sometime in March of 2008 and I will post another blog as soon as I get them.  Today's report (over 100 pages) is available to anyone who would like one.  Please let me know and I would be happy to get you a copy.

To summarize it for you, here are some of the highlights that were captured by myself as well as Pam Wong (thank you Pam!!!):

• A Shapell representative reported 2,834 units out of their total 5,830 units have been completed (49% completion)
• A Windemere rep reported 4,285 units out of their total 5,170 units have been completed (83% completion)
• The Camino Tassajara connection to Windemere Parkway is scheduled to open March 2008 Gale Ranch Middle School opens August 2008
• Coyote Creek and Hidden Hills will be expanded to 900 student capacity for the 2008/09 year.  Developers are paying for both schools expansion.  All other Windemere schools have been completed 
• In addition to the childcare facilities on school campuses, 3 child care facilities (Acorn Learning Center, DS Community Center pre-school program & Canyon Creek Church childcare) have been built and a
  4th one (YMCA) is scheduled to start construction in 2010.  There are 18 licensed in-home child care providers in the Dougherty Valley to care for infant and pre-school children
• Bus service to Monte Vista High is no longer offered to 11th & 12th grade students since DVHS has opened and the developers are no longer paying for the bus service.  Instead, the SRVUSD setup a carpool service online (www.pooltoschool.org)
• A Windemere resident raised the possibility of busing diverted elementary school students, but the DVOC said the state law does not require busing.  Therefore, it's a SRVUSD issue, to which Tina Perault
  and Margie Brown responded that busing is not economically feasible for the district, but if parents were willing to pay for the service, they can take it up with the SRVUSD
• The County Connection bus service route 135 is currently being subsidized by developers for the first 5 years.  Within 5 years, the service must reach 70% ridership, otherwise the bus service might be removed. Bishop Ranch has partnered with the bus service to subsidize employees' fares - employees just need to show their badges (proof that they work at Bishop Ranch).  To celebrate its one-year anniversary, gifts will be randomly distributed to bus riders during the period of January 14-February 14

The original reports are more than 100 pages, but here are additional excerpts from 2 reports of interest to us:

Windemere Annual Compliance Report:
Table 2 - Windemere Homebuilding Status Table

• 4,208 building permits have been issued which is 81% of the total 5,170 to eventually be built. 962 permits are remaining which is 19% of the total. (NOTE: this report is dated October 15, 2007, so the Windemere representative gave the latest figures during the DVOC meeting which differ from this one.)

Table 3 - Parkland Table

• The following 5 parks/trails are estimated to open Spring 2008:
• Phase 3: Piccadilly Sq. Park
• Phase 5: Six Pillars Park
• Phase 5: Ramona Park
• Phase 5: Pocket Park
• Phase 5: Tassajara Ridge Trail Staging Area

Table 4 - Affordable Housing Program

• Phase 1 - Moderate Income: 650 completed
• Low income: 250 completed
• Very Low Income: 100 completed
• All Phase 1 Apartments were completed in 2006
• Phase 3 - Submittals Anticipated in Early 2008 - 293 (191 Moderate/73 Low/29 Very Low)
• Total Number of Affordable homes to be provided: 1,293

San Ramon Valley Unified School District Report

• Coyote Creek - 921 students currently living in attendance boundary
• Hidden Hills - approx. 789 students living in attendance boundary
• Quail Run - 261 students currently living in attendance boundary
• Live Oak - 798 students currently living in attendance boundary
• Windemere Ranch Middle School - 547 students currently living in attendance boundary; current enrollment 954 students since it's housing all middle school students from the DV until Gale Ranch Middle School opens in August 2008. The
  district added 2 interim portable classrooms on-site to house the additional students
• Gale Ranch Middle School - 435 students living in attendance boundary. Master planned for 940 student capacity
• DVHS - The high school is master planned for 2,400 but opened for 9th and 10th grade in August of 2007 with capacity for 2,200 students. The high school opened with an estimated 600 9th & 10th grade students at the August 2007 opening.  In Fall of 2007, the current 11th and 12th grade students residing in the DV will continue to attend their diversion schools.  In the following years the DVHS will add an additional
  grade level until Fall of 2009 when anticipated enrollment is approximately 1,200 9-12th grade students. The current high school population is approximately 820 9th-12th grade students

If you would like to participate in these meetings, please let me know and I will be happy to notify you of the next scheduled meetings.

In the wake of the credit crisis, lenders have become much pickier about whom they lend to. Here are some basic facts that will help potential borrowers understand what they face.

The measurement that most lenders use to assess applicants' credit risk is the FICO score developed by Fair Isaac Corp. The score ranges from 300 to 850.

There's not one FICO score. Buyers have three: one for each of the three credit bureaus, Experian, TransUnion, and Equifax.

Each credit score is based on information the credit bureau keeps on file. Since credit bureaus don't share their data with one another, the three FICO scores may differ, sometimes by as much as 100 points.

The components of a FICO score are:

• Payment history: 35 percent
• Amounts owed: 30 percent
• Length of credit history: 15 percent
• New credit: 10 percent
• Types of credit used: 10 percent

WASHINGTON —  The Bush administration has hammered out an agreement with industry to freeze interest rates for certain subprime mortgages for five years in an effort to combat a soaring tide of foreclosures, congressional aides said Wednesday.

I am sure that most of the people are wondering what are the rules.  Based on the information that I've seen thus far, here are the rules:

1. Only certain subprime mortgages are candidates for this program.  (Under the typical subprime loan, those offered to borrowers with spotty credit histories, the rates for the first two years were at levels around 7 percent to 9 percent. But after two years, those rates were scheduled to reset to levels around 9 percent to 11 percent)
2. Rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010
3. The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate

More information will follow soon as President Bush is planning to speak on this agreement at the White House this Thursday, 12/6 and the Treasury Department announced that Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with officials of the mortgage industry.

I will provide additional information as soon as more details are available.  The good news is that the Federal government is finally taking notice of the mortgage crises and the ever growing foreclosure rates.

- Oleg Chernyak

• Salt Lake City — median home sales price: $246,700; Percent change: 14.1 percent
• Charlotte, N.C. — $220,000, 11 percent
• San Jose, Calif. — $852,500, 9.4 percent
• San Francisco — $825,400, 8.6 percent
• Raleigh, N.C. — $229,500, 7.5 percent
• Austin — $188,200, 7.2 percent
• Pittsburgh — $127,700, 6.1 percent
• Seattle — $394,700, 6 percent
• San Antonio — $154,700, 5.7 percent
• Portland, Ore. — $299,700, 5.2 percent