Tuesday, April 30, 2013

Ch.11 Questions By Jazmin Padilla

Ch.11 Review Questions by Jazmin Padilla

1. The government is considered a "partner" in all real property ownership.

2. The tax assessment office is responsible for an inventory of all parcels within the county. 

3.  Property Tax Savings Exemption= Exemption Amount x Millage Rate

4. The homestead exemption is used to encourage renting rather than homeownership. 

5. The following are considered tax-exempt property except:
     a. Churches
     b. Restaurants
     c. Non-Profit Organizations
     d. All of the above

6. A city's comprehensive plan to improve its development and growth is usually a scope of 3 to 5 years. 

7. Zoning may be used for all of the following purposes except:
    a. Promoting a government run property
    b. Increase neighborhood conformity
    c. Regulate land use intensity
    d. Reduce negative externalities 

8. An exception to current land use regulations is known as 
    a. Administrative change
    b. Special use permit
    c. legislative change
    d. grandfathered use

Answers: 1.T  2.T  3.F  4.F  5.B  6.F  7.A  8.B

Chapter 10 by Albert Chang

Chapter 10 Lending Activity

1.) Unsecured debt is the promise to bay backed by collateral? (T/F)

2.) Acceleration clause is a speedy prepayment plan? (T/F)

3.) A mortgage documentation is the collateral that secure the promissory note? (T/F)

4.) When you take a loan from the bank to purchase a car in California, do it fall under title theory? (T/F)

5.) A fee that the mortgagor agrees to pay plus the outstanding mortgage is prepayment penalty? (T/F)

6.) What is origination point?
a) Start from the beginning
b) A fee paid by the mortgagor at origination that was loan -
c) A fee paid by the mortgagee at origination that was loan
d) None of the Above

7.) What is the term or meaning for ARM?
a) A body part
b) Adjustable rate mortgage
c) Added rate mortgage
d) All the above

8.) A process of evaluating the risk associated with taking a mortgage loan?
a) Mortgage underwriting
b) Overall Cap
c) Mortgage Cap
d) None of the above

Answers: 1.) F 2.)F 3.)T 4.)T 5.)T 6.)B 7.)B 8.)A

Tuesday, April 23, 2013

Ch.10 Lending Activity Questions By Jazmin Padilla

Ch.10 Lending Activity Questions By Jazmin Padilla

1. What is the difference between a secured debt and an unsecured debt?
     a. Secured debt is written promise, while unsecured is oral promise.
     b. Secured debt is backed by collateral, while unsecured is a personal promise.
     c. Secured debt has fees, while unsecured debt does not.
     d. Secured debt is interest free, while unsecured debt is not.

2. A promissory note for a real estate transaction must be written.

3. The buyer is the _____and the seller is the _____.
    a. grantee, grantor
    b. grantor, grantee
    c. mortgagor, mortgagee
    d. mortgagee, grantor

4.  Title theory views the lender as the legal owner of the property.

5. The document that transfers the legal title to the trustee is known as the deed of reconveyance.

6. The debt service consists of:
     a. monthly interest + monthly principal
     b. monthly expenses + monthly interest
     c. annual interest + monthly expenses
     d. annual expenses + monthly principal

7. The lender's effective yield is the market interest rate.

8. It is best to pay points if you are planning on moving from the property within five years of the purchase.

Answers: 1. B, 2. T, 3. A, 4.T, 5.F, 6.A, 7.F, 8. F

Wednesday, April 17, 2013

Risky Business

By Luis Villanueva

     Sub-prime lending contributed to the housing bubble and today President Obama and the CFPB (Consumer Financial Protection Bureau) are pushing banks to begin lending under lenient regulations; this seems to be a potential repeat mistake.   Prior to the housing bubble, one of the reasons for sub-prime lending was used to decrease discrimination and now today that theme has come back. The President and the CFPB’s goal are to prevent lending discrimination, but in doing so they are increasing the risk of loan defaults. With a push in sub-prime lending in the Fresno market, it means more potential buyers would be approved in a market that is in short supply of product.

     In a recent article by Investor’s Daily they state “CFPB recently released new mortgage rules that, despite claims of tightening standards, require no minimum credit scores or down payments, and even allow checks from "government assistance programs" as qualifying income.” Among the change in rules the CFPB are also increasing their monitoring of possible discrimination by lenders on denying borrowers under “qualified mortgages”. By doing this it seems that the CFPB and President Obama are putting pressure on lenders to qualify borrowers for mortgage loans when they really should not be qualified. This seems similar to before the housing fall when there was a push to increase home ownership.

     One of the subjects that attributed to the economic crisis of 2008 was the sub-prime market, which was originally implemented to increase home ownership. Sub-prime lending helped low-income families get approved for mortgage loans by lowering requirements. As discussed in Real Estate Analysis Environments and Activities, the problem with sub-prime lending was that when the economy began to fall sub-prime borrowers were unable to pay their mortgage. By pushing for sub-prime lending the President is increasing the risk factor associated with qualifying borrowers. With an increase of barely qualified borrowers it is sure to affect the markets on a local level.

     According to the supply and demand cycle of real estate increased demand can lead to a temporary increase in prices until supply is added to the market. This seems to have a positive effect on the housing market since it would increase the flow of the local market. However if the economy was to decline in the future it can be detrimental to sub-prime borrowers, as seen in the past. The fact is that sub-prime lenders barely qualify, and if the economy were to go bad then sub-prime lenders would be among the first borrowers to default on their homes because they have no financial cushion.

     To conclude sub-prime lending was not the only reason why the economy greatly declined a few years ago, but it was one of the contributing factors. The United States is still recovering from the Great Recession and the encouragement of sub-prime lending may not be the best idea right now.

"Acorn Clones Advising President's Credit Police." Investor's Business Daily. (April 12, 2013 Friday ): 1544 words. LexisNexis Academic. Web. Date Accessed: 2013/04/14.

Diaz, J., & Hansz, J. A. (2010). Real estate analysis, environments and activities. Dubuque: Kendall Hunt.

"Washington: Another Subprime Idea from Obama." US Official News. (April 5, 2013 Friday ): 552 words. LexisNexis Academic. Web. Date Accessed: 2013/04/18.

Blog Assignment #2

Government’s Power of Eminent Domain
Blog Assignment #2

By: Lulu Carrizales

            The American Dream.  A house with a white picket fence and 2.5 kids.  Immigrants from all over the world came to America in search of this dream.  To own a home for their families and themselves, but what happens when your dream is taken from you?  And how can it be legal for someone- let alone the government to do so?  The reality is that the government does have the right to take your private property.
            The government’s right to take private property for the benefit of the public is called eminent domain.  Eminent domain is not the government being out to get private citizens’ property for no reason.  The reason behind eminent domain is to create something that is necessary for people such as but not limited to freeways, highways, or even street lamps.  We can all agree that without those things, our lives would not be as simple.  Imagine trying to get to work or school everyday without freeways or walking home at night without street lamps not to mention stoplights.  This is because of “public use.”
            Public use requires that if the government does want to take your private property it must be for the “good of the public”.  It is defined to include roads, parks, schools, and government buildings, which clearly are for the good of everyone.  If the government did not have the right of eminent domain, individual property owners would have a spatial monopoly.  They would be incentivized to hold onto their land.  A spatial monopoly is when a single landowner controls the supply of the land or property type in a specific geography in the local real estate market.  Roads would have to circle around homes or houses would be in the middle of parks.
            Although, it may seem ‘unfair,’ eminent domain cannot simply happen with a snap of your fingers.  The government must meet two specific requirements when exercising eminent domain.  We have already discussed one of them: public use.  The other requirement is just compensation.  If the government proves that they are taking your land for public use it does not mean that you will be homeless.  The government must provide the property’s present market value to the landowner.  To help the landowner, the market value must be based at its highest and best use.  The landowner is also protected by due process.  Due process is the landowner’s right to sue the government and have a court trial over their land being seized by the government.
            In conclusion there are four terms that we should know: eminent domain, just compensation, public use, and due process.   Eminent domain is an encroachment upon private property rights.  It is a gray area because sometimes defining “public use” is not agreed upon by everyone.  Not surprisingly, more than 40 states have passed some type of law or amendment that restrict the use of eminent domain.   

Real Estate Analysis Environments and Activities, pg 165-166 Julian Diaz III, J. Andrew Hansz.

Tuesday, April 16, 2013

Who Owns Your Debt

Who Owns Your Debt
Blog Post 2
By: Alvaro Villegas

When people hear mortgage, they quickly link the term to banks.  Among those who are paying a mortgage or have done so in the past, there are a great deal of individuals who aren’t aware past the bill they send.  After acquiring a debt for 30 years, one should have an understanding of who made their home purchase possible.
Traditionally Lenders obtain funds lendable for mortgages through deposits.  This method however restricts banks with lendable assets, and therefore become unable to lend money beyond their funds.  For this reason, the U.S. government with intentions of bringing investor and homebuyers together created the secondary mortgage market.  This market includes institutions such as Fannie Mae, Freddie Mac, and other insurance companies.  These main players are responsible for insuring debt that gives investors the security to invest in traded mortgages.
According to Whitney Hunter in “Contemporary Topics in Finance”, the housing market is currently valued at an estimated $4.5 trillion dollars.  In the housing market, lenders provided homebuyers with mortgage loans, which in turn receive mortgage funds.  Lenders such as credit union, banks, thrifts or mortgage companies receive funds through deposits or by selling mortgages to investors.  Selling mortgages to investors is crucial for both lenders and borrowers with the simple fact that gives banks additional money to lend. 
In a secondary mortgage market, the original lender has the option to either keep a mortgage in its portfolio, or to sell the mortgage to investors.  The option of selling mortgage to replenish funds helps keep the necessary cash flow in the housing market.  Without the relationship of mortgage lenders and investors, the banking system alone would not be capable of funding the entire housing market.  The liquidity that a secondary market provides investors correlates to lower interest rates.
It becomes clear that the secondary mortgage market is responsible for housing a great deal of homeowners.  Without the trade of securities backed up by the government, the banking system would not provide the necessary loans.  People alone could not flourish banks with enough money through deposits.  Also, without the insured institutions created by the U.S. government, investors would not be investing in our debt. 

Work Cited
Diaz, Julian, and J. Andrew. Hansz. "Political and Legal Environments." Real Estate Analysis: Environments and Activities. Dubuque, IA: Kendall Hunt Pub., 2010. 182-183. Print.
Padhi, Michael. "Fannie Mae and Freddie Mac at Work in the Secondary Mortgage Market." Federal Reserve Bank of Atlanta. N.p., n.d. Web. 17 Apr. 2013.


Real Estate Ownership Structures
Currently the ownership of real property can be broken down into two different categories. These categories are ownership in severalty and co-ownership or also known as concurrent estate. Furthermore under concurrent estates it can be further broken down to tenancy in common, joint tenancy, tenancy by the entirety and community property. Altogether these forms of ownership are applied in today’s real estate market and will be explained in further detail below.
Ownership in severalty can be described as a single individual owning real property. This type of ownership does not include any other individual just the sole owner of the property. This type of ownership also extends to companies because they are considered as a single entity. An example of this type of ownership is John Doe purchasing a home by himself. John Doe holds ownership of his brand new modern $200,000 home and as an individual owner he can be considered as an owner in severalty. Another example could be MaxDerP Micro Systems Inc. purchase of real property for an expansion. The purchase of a new property to expand their manufacturing facility and increase production is an example of an entity purchasing real property and can be considered as ownership in severalty.
Co-ownership is ownership of more than one individual or entity it is also known as concurrent estates. This type of ownership can be broken down into four categories beginning with tenancy in common. This form of ownership is understood as a joint ownership where each party has an interest in real property. The amount of ownership varies and this ownership allows each party to sell, mortgage or will their own shares of the real property. 
Joint tenancy is a form of ownership where there are more than one owner and hold the same amount of ownership such as ½ and ½ and 1/3, 1/3, 1/3. Under this form of ownership the owners do not have the power to sell, mortgage or will it individually. Ownership of the property turns into ownership in severalty after the last individual attains the right of survivorship which is pretty much outliving the other owners. An example can be owning a home with joint tenancy with MaMa and Papap and being the grandson that is listed as a joint owner. Once Mama and Papap pass away all rights are passed over as they pass away one by one. Sad example but you get the idea!
Tenancy by the entirety is the ownership of a real property between a husband and a wife. Similar to joint tenancy ownership can become ownership in severalty meaning one individual owner after survivorship. Once the husband or the wife passes away the husband or wife gains the rights to the property. They may at any time jointly agree to sell the property as well. 
The last form of ownership under co-ownership is community property this form of ownership is property purchased jointly after marriage. The real property is owned jointly between both parties and can only be sold with the other parties consent.
Now that you have a better understanding of the forms of ownership of real property try to figure out which form of ownership this example can be considered as. MaxDerp Micro Systems Inc. and its parent company ItWorks Computer Systems Inc. are considering purchasing an expansion for ItWorks Computer Systems Inc. Both parties will have a share of the property MaxDerp Micro Systems will own 60% of the property and ItWorks Computer Systems will own 40% interest in the real property. At any time both parties may choose to sell their share conveniently to each other or whomever they choose to sell to at any time. What form of ownership would you consider this to be? Think about it for a second review the forms of ownership if you want and come back to it once you believe you found the answer. Okay, now that you have done that this form of ownership can be considered as….. Drum roll please. tenancy in common.
Now you have a better idea of the types of ownership in owning real property. Ownership in severalty meaning a single owner and co-ownership meaning more than one person or entity both of these forms allows buyers to purchase a home in a way that best works for the buyer or buyers. You have also learned that companies can also purchase real property because they are also considered as an entity. Co-ownership is also known as concurrent estates and is broken down into tenancy in common, joint tenancy, tenancy by the entirety and finally community property.

Source: Textbook Real Estate Analysis Environments and Activities, Ch.7 political and legal environments, Julian Diaz III, J. Andrew Hansz.

Real Estate & Government Powers by Elviz De Alba

Real Estate & Government Powers

The government plays an important role in the regulation of real property.  According to “Real Estate Analysis”, the government should control the money supply; enforce law, order, and property rights’ take action on certain technical monopolies and externalities. The four rights that the government possesses on real property are Police Powers, Eminent Domain, Taxation, and Escheat.  

Police Powers are a government’s right to regulate private property for the health, safety and welfare of the public.  The police powers are patrolled by private citizens and government, and enforced by government officials, judges, and sometime by the actual police officers.  Zoning, subdivision codes, building and fire codes and general health and safety codes are all examples of police powers in real estate.     

Eminent Domain is a government’s right to take private property for the benefit of the public.  Through the process of condemnation, the government eminent domain rights must meet two specific requirements: just compensation and a public use. 

Escheat is a state government’s right to take unclaimed property from a deceased person dying intestate and without any heirs or anyone to take over the property.  State governments are the ultimate property owners.  Property needs to be maintained physically and financially. 

Taxation is the government’s right to make a financial claim on real property to fund governmental needs and services.  There are many different taxes and they all fall under income, sales and property.  Income tax is collected by the IRS and is used for funding programs like social security, medicare, highways and other federal programs.  The sales tax is used to fund most state expenses such as departments, state roads and state-run programs.  The property tax is the main source of funding for needs of the local government.  These are used to fund public schools, libraries, and hospitals.  

 There are three main reasons that the government infringes on private property.  First, for the creation of regulations to manage the impact of externalities and anything that influences the use and value of a property. Secondly, the government enforcement of regulations.  And third, for the creation and maintenance of public infrastructure.  It is important for the government to maintain a healthy and safe environment for the public. 

Source: Real Estate Analysis Textbook,  http://realestatestudyguides.com/RealEstateStudyGuide/Government_rights_and_powers_-_Real_Estate_Exam_Content.html

Loan Officer

Loan Officer
By Michael McMinassian
            A loan officer is someone who works with individual and businesses to help facilitate the lending process.  Who will be acting as a liaison between the client and the bank.  The loan officer assist client in all the details necessary to complete the loan application process. The duty of a loan officer is to evaluate, authorize or recommend approval of loan applications for people and businesses (bls.gov). 
            A loan officer specializes in commercial, consumer or mortgage loans.  A commercial loan help companies buy new equipment and or expand operation.  A consumer loan includes home- equality, automobile and personal loans.  A mortgage loan is the purchase or refinance of real estates.  Loan officer normally works in commercial banks, credit union, mortgage companies or related financial institutions.  Most loan officers works full time hours.  Mortgage loan officer works long hours (bls.gov).  Consumer loan officer travels and visit clients.  There are local companies who have a loan officer and in the bigger companies there would be more than one loan officer. It mostly depends on how busy the office is and how many loans are written.
            Pay rates for a loan officer depends on the place of employment.  Some employers will pay by hourly rates, a flat salary and or commission. Commission rates are half a percent (.05%) to one percent (1%) of the loan amount (bls.gov). Loan officer can be a great part time job for people who want to have some side income or income that is extra. This position is a job that gives compensation on your productivity or by commission.
            To become a loan officer you must meet some requirements.  You must have a high school diploma and on the job training (bls.gov). By federal laws you must be license. The requirements   to obtain a state license include 20 hour courses, passing an exam, passing a background check, and must have no felony conviction.  You must fulfill a continued education requirement in order to maintain your licenses. However a commercial loan officer needs a bachelor degree in finances, business, economics and related fields (howstuffworks.com). 
            In conclusion the loan officer is an important part of the lending sector of the real estate market. This is not a glamorous position but is vital for the applicant who wants to purchase a home and the real-estate agent to be able to take that applicant to the home or the homes they qualify for. This way the applicant will have the opportunity of the American dream and be able to actually retain it. Once the applicant has chosen his or her house the rest of the process can go into effect such as placing the bid, appraising the home, inspecting the home, making the offer, and then finalizing the loan. After that there is the escrow process and then that would lead to the title office to finalize everything and hand the keys to the house to the applicant. It all was not possible without the loan officer.  
Reference page

Eminent Domain and Underwater Mortgages By: Javier Guzman

          As homeowners, we are entitled to many rights that were established to protect our property and us. We tend to feel like no one can tell us what we can and cant do in the privacy of our home. However, there is a law that gives government the power to take away your property weather you like it or not, and that is called eminent domain. There are some regulations to eminent domain, the government cannot just take any property it pleases. First, the property being seized needs to be used for the benefit of the public and second, the owner needs to receive just compensation which is the value of the property at current market prices. With this in mind, the County of San Bernardino is considering using the power of eminent domain to fix their foreclosure problem, which is being seen as a controversial plan.
            According to county officials, half of all 300,000 mortgages in the San Bernardino County are underwater (npr.org). This means that value of the property is below than that of the original loan. For example, a homeowner may be making payments of on a $300,000 loan, but the property may only be worth $150,000 in today’s market. The firm Mortgage Resolution Partners wants to fix this problem with the enforcement of eminent domain. They want the government to seize the property of a homeowner who is underwater and pay them just compensation, in other words, what the property is worth in today’s market, the government would be acquiring the loans at a discounted rate. This will get the homeowner out of their previous loan that had them underwater. Then Mortgage Resolution Partners will refinance that same property back to the same homeowner but at current market prices, therefore they will not be underwater, and the firm would receive a small fee. No one would be forced into this program, homeowners would have to volunteer, and this service would only be provided to those homeowners that are underwater and still up to date with their payments.
            The positive things about this creative idea is that it would get many homeowners out of their underwater mortgage, and they wouldn’t have to risk losing their home, ruining their credit and potential to buy another property.  The other positive outcome of this proposal is that homeowners who are underwater, making larger payments then someone who just recently purchased a similar house in the current market, tend to not spend as much money in things like, going out, shopping or hiring a local handyman. If homeowners were not underwater, their payments would be smaller and in turn have more disposable income, which in turn will help out the County’s economy.
            On the downside, many are arguing that this idea is simply bad. First, protestors say that it will lead to government exploiting the eminent domain law, as this law can only be enacted when property is seized for the benefit of the public and that in this case, the beneficiary would be a single individual at a time. Second, that this would be cheating the banks of their money, it will rip off mortgage investors. This will create confusion as the message sent out would be, “if you play by the rules, you could get harm” (npr.org). In turn, banks will not want to lend money in this region or will charge a higher percentage to do so. Finally, some argue that this plan will only enrich the Mortgage Resolution Partners firm, as they will be in charge of refinancing the properties and collecting a fee.
            In conclusion, this is a very controversial proposal, and if the County decides to go through with it, it will most likely end up in court.  In one hand, you have a large number of homeowners that like the proposal, and on the other you have bankers and investors that believe that this is simply wrong. The main issue with this proposal would be proving that the seizure of these properties would serve and benefit the public, as that is the only way eminent domain can be enacted. “If San Bernardino County implements the plan, it would become the first local government to use its powers for this purpose, and would quickly become a test case for a novel approach to the mortgage crisis” (npr.org).

Work Cited
Noguchi, Yuki. “County Considers Eminent Domain As Foreclosure Fix” http://www.npr.org/2012/07/13/156683302/county-considers-eminent-domain-as-foreclosure-fix Visited April 15, 2013