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When everyone chants the “jobs, jobs, jobs” mantra, it is easy to assume that California’s contribution to the national jobs equation would be a significant one. The Real Story talked to John Burns of John Burns Real Estate Consulting last week after hearing him at his annual presentation on the state of the homebuilding market. John reminded us that California adds .7% to its labor force every year, just in high school and college graduates. Our population grows at a rate of 1% per year. So just staying even shows positive movement.

California job growth rate—given our business climate—lags behind the country’s leading employment centers even at the height of good times, so it is easier to assess our progress by comparing California today to the California numbers from last year or the year before.

In that kind of comparison, we are doing better. John states that the Bay Area’s numbers, particularly, are running less negative than they were six months ago. The San Jose market area is actually positive for job growth. These are the kinds of signs of recovery that people are looking for.

The Senate Banking Committee has been meeting this week regarding the general investigation by 50 state attorneys general about “robo-signing” foreclosure practices. If a settlement is reached, several new measures could be introduced, including the elimination of the dual-track system of talking modification while pursuing foreclosure. Being discussed is a plan that would require mortgage banks to go through all of the available modification options BEFORE beginning any foreclosure proceedings. This would halt the occurrences of homeowners receiving foreclosure notices while in the middle of working on a modification.

Other ideas on the table include the creation of a fund to compensate buyers who can prove that they were wronged in the foreclosure process. The fund would be administered by the states’ attorneys general; monies for the fund would come from the mortgage banks/servicers.

Prospective California homebuyers now have a new incentive to buy a resale home: the California Association of Realtors (CAR) has announced a Home Payment Protection Program that will allow home sellers to pay for insurance plans that will pay their buyers up to $1,500 a month toward their mortgages if they’re laid off from their jobs.

The program has been designed to offer homebuyers more confidence about getting back into the market, even if they are worried about potential layoffs in the future. Under the terms of the new program, home sellers can choose one of two programs to invest in: one that pays buyers up to $1,000 in monthly mortgage payments for as long as six months, and another that pays buyers who become unemployed up to $1,500 a month for six months. The cost to the seller? $200 and $275 respectively.

The idea of mortgage payment protection isn’t new, but given the number of people who are on the fence about purchasing a home, CAR is hoping that this plan will provide them with the confidence they need, much as the automotive companies’ buy-back programs have boosted sales during the recession. For more information, go to www.car.org.

Last week, a bipartisan White House commission suggested that the Federal budget deficit could be reduced by excluding mortgage deductions for second homes, home equity loans and mortgages of more than $500,000.

National Association of Home Builders (NAHB) Chair Bob Jones responded to the draft report, saying, “Tampering with the deduction would be a major setback for today’s slowly emerging housing recovery. It would disrupt the plans of young households who are gathering their financial resources to purchase a home. And it would impose a substantial tax burden on existing homebuyers, many of whom continue to stay current with their mortgage payments even as they struggle to make ends meet.”

Jones’s statement continues, “Diminishing or ending the deduction would exert further downward pressure on home prices, leaving more home owners with mortgages larger than the value of their property and fueling even more foreclosures. It is absolutely clear that the mortgage interest deduction should not be on the table.”

The White House commission has until December 1st to reach agreement on a final plan.  Stay tuned for more discussion and updates as they are released.

A widely published story from the Associated Press last week indicates that the foreclosure crisis “intensified across a majority of large U.S. metropolitan areas this summer. . .” — and that California remains one of the nation’s foreclosure hotbeds.

The article cites Modesto, Stockton, Merced and Vallejo-Fairfield as having the highest foreclosure rates in Northern California, Riverside-San Bernardino-Ontario and Bakersfield in the Southland.

Are you at risk? If you’re struggling to make payments and your mortgage payment is more than 1/3 of your monthly income, you might well be in the pipeline. Loss of household income (job loss, divorce, etc) or a big increase in your mortgage payment (ARM) are likely to impact your ability to keep current. Freddie Mac lists these warning signs:

• Maxing out credit cards
• Using credit to pay for groceries, utilities and other necessities
• Unable to keep current on bills
• Paying only the minimum amount on your credit cards
• Having to choose which bills to pay

Foreclosure doesn’t happen overnight, but it is inevitable if you don’t keep up with your payments. The number one piece of advice: DON’T IGNORE THE PROBLEM.

According to the U.S. Department of Housing and Urban Development, there are two phone calls you should make as soon as you even begin to think you won’t be able to make a payment:

1.  Call your lender. Explain your situation. Lenders often have options to help borrowers through tough financial times.

2.  Call a HUD-approved housing counseling agency at (800) 569-4287. Services are free or very low cost to the consumer, and these counselors can help prioritize your bills and understand your rights and your options. There are plenty of scams out there, so be sure to use only a HUD-approved housing counselor.

If you’re facing foreclosure, be sure to keep your eyes on the news. As reported in the Wall Street Journal, attorneys general in all 50 states have joined a joint investigation into shoddy processing and documentation of foreclosures by mega-lenders Bank of America, J.P. Morgan Chase and GMAC, which is owned by Ally Financial.

How did we find ourselves in this fiasco? It seems to be linked to the sheer volume of foreclosures in the pipeline. In the frenzy to process them quickly, many documents have gone unverified and we’re hearing reports of fraudulent affidavits. In 23 states (not California) foreclosures require judicial approval. If there are false documents, the case could be subject to perjury charges. Several large banks—such as Bank of America—have stopped processing foreclosures until they go back and make sure all documentation is in order. This could take a few weeks.

California, one of the states with the largest number of foreclosures, is still processing foreclosures, although at a slower rate. The major impacts are likely be:

• Falling financial stocks, as the markets don’t like uncertainty.
• Investors are reluctant to bid on a home if they’re not sure the sale is legitimate. Slowing the purchase of foreclosed property will force banks to keep debt on their books and allow prices to erode. This could prolong instability in the real estate market, which will hamper economic recovery.
• Most people in foreclosure are so upside down on their mortgage, they simply can’t afford to keep their home. Once documents are all verified, the foreclosures will continue.
• Some analysts predict higher costs, as bank foreclosure departments need to slow down and add more staff.

It’s a fiasco that will no doubt continue to unfold over the next several weeks. WSJ.com, NYTimes.com, HuffingtonPost.com and CBS Moneywatch.com are reporting on the crisis.

P.S.  Speaking of continuing coverage, AP just reported that foreclosures will resume in the 23 states next week.

Resources:
online.wsj.com/article/SB10001424052748704361504575552380138195848.html

www.telegram.com/article/20101016/NEWS/10160348/1052

www.usmoneytalk.com/finance/home-foreclosure-fiasco-boa-now-halts-foreclosure-sales-nationwide-910/