Happy Thanksgiving!

Recently I have had a lot of inquiries about Impound Accounts especially from distressed home owners and purchasers of REOs, Short-sales and bank owned properties.

Irregardless of whether you have a 10% of value mortgage, most lenders will require a Impound Account.

An Impound Account, also known as an Escrow Impound Account, is an account set up and managed by mortgage lenders to pay property taxes and insurance on behalf of the home buyer. These accounts are set up with the lender during escrow to ensure that the home buyer’s property taxes and insurance are paid on time and in full. The biggest misconception with the Impound Account is that it is managed by the escrow company. However, after escrow collects the initial deposit for the Impound Account and after the transaction is closed, the escrow company is no longer involved.

How It Works:

Each month, an amount equal to about 1/12 of the total sum of the annual property taxes and insurance due is collected from the buyer, along with their mortgage payment, and placed inside the account. When the time comes to pay the annual property taxes and insurance, the lender makes the payment from the funds accumulated in the account on the behalf of the buyer.

Setting up an Account
The account is set up by the mortgage lender during escrow. Escrow collects an Escrow Impound Deposit, which is typically a deposit of 2-6 months worth of taxes and insurance. Due to the fact that property taxes can be adjusted and insurance rates can change, this deposit ensures there are sufficient funds to make the payments in full when they are due.

Common Questions Regarding an Escrow Impound Account:

Is it mandatory to have an Escrow Impound Account?

No. The buyer may elect to pay property taxes on their own, and there is usually a small fee when waiving the account. However, based on the type of loan, the lender may require the buyer to have one.

Is it a good idea to have an Escrow Impound Account?

Since the property taxes and home insurance bills only come about twice a year, many average Americans have a hard time saving for them, and gladly give their money to the loan company interest free. This is one less thing to worry about, as the lender makes the payments for the buyer.

Do I have to decide now whether or now I wish to set up an account?

If it is not a condition of the loan, the buyer does not have to make an immediate decision. However, depending on the lender, there may be a cost to set it up at a later date.

The purpose of impound accounts is to help home owners pay their annual property taxes and insurance on time. For more information on your account, payments and more information on how they are managed, contact your mortgage lender or seek legal advice.

The growing number of freezes on home foreclosures is likely to shake up the struggling U.S. housing market. Experts say home prices could rise in the short term, but the eventual glut of foreclosure sales could hurt the market in the long run.

The move by some major lenders such as Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Ally Financial to put some of their foreclosures on hold could help temporarily lift prices, by removing the inventory of bargain-basement foreclosed properties from the market.
"Home prices are likely to be firmer than otherwise would be the case in the fourth quarter and into early next year," said Mark Zandi, chief economist at Moody's Analytics.
While that's good news for the economy, the effects might be short lived. That's because the foreclosure freezes are also likely to delay sales of the huge inventory of foreclosed properties, which would hinder a long-term recovery in prices.
"It'll probably push out the distressed sales into 2011 and 2012," said Zandi.

Questions about the validity of some of the lenders' affidavits in foreclosure cases has caused the banks to announce moratoriums over the last two weeks.

Friday, Bank of America expanded its freeze on home foreclosures to all 50 states from the 23 states where foreclosures must be approved by the courts. Some of the states that were added are among those with the highest rates of foreclosure sales, including California, Nevada and Arizona.

If freezes spread to other home lenders, or if other lenders follow Bank of America and expand their moratoriums, it could greatly increase the impact on the market.
Freezing foreclosures? What does that mean?

Distressed sales through foreclosures or short sales http://www.luxurydeserthomes.com/ now make up nearly a third of the residential real estate market, according to an estimate from home sales research firm RealtyTrac, which estimates they are depressing home prices by about 26%.

Any short-term rise in overall home sales is likely to be misleading, said Rick Sharga, RealtyTrac senior vice president, as the numbers might be skewed by the loss of rock-bottom foreclosure sale prices from the market.

"You might get a false positive read on fourth quarter home prices because you'll be eliminating a lot of sales at the bottom of the market," he said. "There are so many factors distorting the market, it's tough to get an accurate read."

He thinks the freezes could cause lenders to move toward more short sales, in which the bank agrees to a sale for less than the balance of the mortgage. That could lead to a more substantial impact on market prices.

"It might stimulate a little more short sale activity, as lenders and servicers look for ways to more efficiently move the property outside the foreclosure," said Sharga. "Typically your discount on short sales is only 15%, compared to 35% for a [foreclosure sale]." http://www.realestateforsaleinpalmsprings.com/

Just the level of uncertainty about the halt in foreclosures has the potential to depress home sales as buyers wait to see what foreclosed homes might be coming on the market in the future.

A prolonged delay in foreclosures could also hurt long-term prices by driving investors who had been returning to the real estate market to invest elsewhere.
"Some of the money that is waiting to go to [into foreclosure sales] might evaporate and those sales could be lost," said Zandi. http://www.financeweb.com/

And the delays could further depress the value of all homes in areas with high numbers of foreclosures by keeping the houses vacant longer and delaying a correction in the market.

"I would think anything that delays the disposition of these properties has the potential to further depreciate surrounding home value," said Sharga


By Chris Isidore

Wednesday, October 7, 2009
By Barry Lotz,J.D.,Ph.D. www.luxurydeserthomes.com
This is the perfect storm for home buyers!
Our summer is officially over and we are getting ready for our 2010 season here in the Palm Desert. The temperatures are in the comfortable high 80’s and the golf courses are being prepped and seeded for our new season and the majority of courses should be open between November 5-10.
A recap of last month sales here in the desert!
The summer of 2009 was one of the best summers I have seen so far in the last 3 years. Of the total sales, 866 were recorded in the Coachella Valley — up 12 percent over September 2008, and slightly up from August of this year.
The median home price paid for a Coachella Valley home or condo was $178,000 in August, slightly down 1.5 percent from July.
Now, in a few local areas like Bermuda Dunes, La Quinta, Palm Desert and one section of Palm Springs — recorded sales that resulted in median home prices in the $200,000 to $275,000 range.
We have seen a small increase of sales in the luxury home market in September versus the same month in 2008. Luxury home sales aren't easy to snare in these times, but they are happening.
Residential inventory in the desert area is down to just over 5,000 units. Take the current housing inventory and divide by the 866 closed sales for August resulting in an inventory of just 6 months…. a number that most would suggest we are reaching a neutral market.
Bank Owned Homes and Short Sales still makes up for the majority of sales here in the desert with the majority of homes being sold for under $500,000.00
It’s the perfect storm for home buyers. Deep discounts on properties, historic low interest rates and great tax incentives are driving home buyers to snap up these great opportunities both for investment and personal use.
To receive a complete list of Bank Owned Homes here in the desert visit: http://www.luxurydeserthomes.com
We are also observing the following:
• An increase of appraisals from banks for distressed homes over 4,000 sq. ft.• Interest rates will stay where they are through next year• Unless extended by Congress, this is the final month to take advantage of the first-time home buyer $8,000 Tax- Credit.• The highest-priced property out of the 866 sales sold $2.2 million. • The Canadian dollar is still very strong. (1 Canadian dollar = 0.93 U.S. dollars)
There are still deals to be made! Don’t miss the opportunity this time!
Please call or e-mail me with any questions .
Barry