Investment Programs: Mortgage Opportunities for Investors

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What are “Hard Money” loans? In a mortgage environment that has seen banks drastically cut back on their lending programs and flexibility, hard money loans may prove to be productive alternatives for real estate investors. Hard money lenders are basically companies that pool cash from various private investors and private individuals. They look at transactions on a case-by-case basis. The loans usually involve higher rates and short loan terms, but they also allow incredibly fast turn-times and very flexible guidelines. I work with numerous hard money lenders, and I’m happy to consult with my clients to see if these programs may work for them.
Contact Christopher Patrick King of CPK Mortgage for more information: 310-215-1830.

Specialty Loan Programs

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Fannie Mae, one of the secondary market agencies that supplies banks money to lend on Conforming Loans, announced that they are expanding their allowable Loan to Value ratio to 125% for their DU Refi Plus program. This means that if a loan is currently serviced by Fannie Mae, but if the client has a situation where he/she owes more than the value of the home, Fannie Mae will allow the loan to be refinanced so long as the refinance either reduces the client’s monthly payment or moves her/him into a “more stable product” such as a 30 year fixed. If you are concerned about your home’s value loss, talk to me about this great program.
Contact Christopher Patrick King of CPK Mortgage for more information: 310-215-1830.

Avoid the Six Common Mistakes in Estate Planning

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If you are reading this blog post, most likely you have created an estate plan, are considering creating an estate plan, or you are struggling with the consequences of inadequate or absent planning. If you are contemplating creating or updating your plan, consider six common mistakes that can destroy or undermine the effectiveness of your plan.

Not creating any estate plan. Not having an estate plan is, of course, is the most basic of all mistakes. Despite the importance of good planning, a recent FindLaw survey found that nearly sixty percent of Americans do not have any estate plan. Without a plan, you are exposing yourself to the default plan created by the California Legislature for the disposition of your assets. Most likely, your heirs will also find themselves in probate court where administration can take a year or more and cost between four and eight percent of the gross value of the estate.

Not creating a legitimate plan. Did you create the estate plan yourself, or did you hire a professional? Are you familiar with the legal requirements to create an estate plan? Do you know the requirements for a holographic will to be valid in California? Are you aware of the importance of maintaining the original Will? I have seen Wills fail because they were notarized rather than being properly witnessed. I have seen Wills fail because the creator failed to explain his desires in a way that could be implemented by the probate court. I have seen living trusts fail because they were not funded. What is most surprising is that improperly created plans often worse than no planning, because the survivors frequently incur significant legal fees attempting to convince the probate court that the plan is proper and when that fails, the survivors are then required to proceed through probate. The result is frequently a probate longer in duration and more expensive because the creator thought his or her Will would function properly.

Naming the wrong fiduciaries. Estate plans need fiduciaries: executors for Wills; trustees for trusts; agents for durable powers of attorney. Perhaps you named your Uncle Walt because he is kind an empathetic and would do an excellent job raising your minor children. But can Uncle Walt manage your estate or your finances? Perhaps you like your cousin Jennie because she is a fiscally responsible and knows how to squeeze the most out of a dollar. But is Jennie going to spend your money on your care in your time of need? Is she going to give your children the resources they might need to be successful? Or does your cousin Jennie believe that struggling builds a young person’s character? Whatever the choices, give some thought as to whether you have designed the right person for the right position. Do you have adequate checks and balances in your plan? The wrong fiduciary can create problems that most people simple never anticipate.

Not funding your estate plan. A plan that is not properly funded or structured is virtually worthless. For instance, a Will that leaves your estate to a son probably will not stop your ex-girlfriend from collecting your 401k account if she is the designated beneficiary. A trust that does not describe your residence will not allow it to avoid probate if it is in your individual name. It is not enough to simply create an estate plan; the plan must be properly structured so that all of your assets arrive at the designations you desire. A living trust must be funded with assets; otherwise there is nothing for the trustee to control. Properly funding your estate plan is as important as creating it.

Being too secretive. For many, planning is a deeply personal decision and many desire that their wishes remain secret while they are alive. But being too secretive can result in your estate plan becoming a permanent secret. Do your fiduciaries have a copy of your plan? Do they know how to find it if you are gone? In my practice, I have encountered a number of clients who thought their loved ones created a plan, but could not find it. I have encountered numerous situations where parties are accused destroying the estate plan because it doesn’t leave one party a sufficient share of the estate. I have even encountered situations where there are tell-tale signs an estate plan has been created (such as assets title in the name of the trust) but the document cannot be located. More often than not, the problems result in a trip to the probate court to correct and frequently defeat the whole intent of the estate plan. A good estate plan notifies the important parties of their conditional appointments and sets up multiple redundancies in the event the estate plan is accidentally lost or destroyed for reasons beyond your control.

At the Schomer Law Group, we not only create plans, but consider regular reviews of your plan to be a cornerstone of our commitment to our clients. Make sure your estate plan avoids these six common mistakes.

Residential and Commercial Mortgage Market Update

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As we enter summer, I’m excited to see an increase in CPK Mortgage’s purchase business. Many of my clients and real estate agents are entering escrow on some fantastic properties that are now finally affordable. This anecdotal trend seems consistent with the general increase in property sales in California recently.

But I think it may be too soon to assume that the “worst is behind us.” Wall Street Journal reporter, Nick Timiraos, reported on what he calls “shadow inventory” in his July 21st blog (http://blogs.wsj.com/developments/2009/07/21/are-banks-holding-a-shadow-inventory-of-homes/). The theory holds that banks, due to an overwhelming number of foreclosures, have not listed all of the properties that they now possess. Additionally (and, perhaps, involving some behind-the-scenes maneuvering by the corporate elites—I’m still a UCLA Sociology dork, I admit), banks may be “strategically holding off on over-saturating the market.”

In other words, there may still be more homes available to buyers that have just not hit the market yet. In general, I think it is safe to say that there are tremendous opportunities for buyers. Please get pre-approved, so you are ready to move quickly on a purchase!

Contact Christopher Patrick King of CPK Mortgage for more information: 310-215-1830.

Does Your Estate Plan Anticipate the Bereavement Effect?

Families are a complex system of support. No matter the generation, there is usually a division of labor between the principals. In the United States, the stereotypical model envisions a husband employed outside of the home while the wife manages the child care and/or household. Increasingly we are seeing a multitude of models, including the wife functioning as the primary earner or the spouses sharing the roles equally.

Whatever the division of labor, it is not unusual for these roles to change within a family overtime. Perhaps one spouse assumes more responsibility for child care when the other spouse returns to school. Or when one spouse loses his or her job, it is not unusual for the other spouse to become the primary earner. It is this flexibility present in most families that serves as a foundation of strength.

Unfortunately, this foundation of flexibility and support can be severely challenged when one spouse dies. Medical research tells us that when illness or death strikes one spouse, there is an increased likelihood that the other is going to face serious medical problems. Referred to as the “bereavement effect”, researchers have found that your health frequently becomes interdependent on the health of your spouse. In a 2006 study published in the New England Journal of Medicine, the authors concluded that an elderly surviving spouse had between a 17% and 21% of dying within the first year following the death of the first spouse.

Many individuals delay or ignore estate planning assuming it is unnecessary because all of their assets will be inherited by the surviving spouse. A number of planning tools—especially the use of joint tenancy—makes the assumption ostensibly reasonable. But what happens in the event when there is a systematic failure in the family? I have counseled numerous families where the spouse that handled the business affairs passes suddenly, and the surviving spouse is unable to assume all of the management. I have also assisted families where the surviving spouse doesn’t know all of the couple’s assets or how they are managed.

Good estate planning anticipates the bereavement effect by attempting to plan not just for death also but multiple contingencies. Good estate planning allows the surviving spouse to find the assets and assume responsibility for the management of them immediately. If the surviving spouse is not capable of the management role, good estate planning includes contingency plans that allow others to assume the management responsibilities. Good estate planning uses tools—living trusts and durable powers of attorney—to avoid the cost and delay associated with probate court. Does your estate plan anticipate the bereavement effect? Contact Schomer Law Group today to insure your loved ones are protected.