Real Estate News

Friday, October 2, 2020

October 2020 NRWMAC Newsletter

If you are a Lake Nacimiento-area resident or considering property near the lake, I highly recommend joining NRWMAC. Their biannual newsletters are must reads. Please click here to read their just-published October 2020 Newsletter. 

Thursday, August 20, 2020

Sudden Oak Death

Sudden Oak Death is a major concern for property owners across the Central Coast.

Here are two articles I regularly share with clients:

Sudden Oak Death/Homeowners Fear for Their Trees

What You can Do About Sudden Oak Death

Tuesday, June 2, 2020

How Gov't Tax Liens Affect Buyers & Sellers

One of my favorite sources for valuable real estate news and analysis is Dan Dobbs at Mutual Home Mortgage. Dan recently shared the following intel regarding government tax liens, which I feel is important to share.

Assorted government & general tax liens have a way of popping up just before COE; and without proper planning usually derail escrow closings!
And unlike private liens, government and tax liens do not have statute of limitations.
The chaos begins by the buyer simply not disclosing the lien(s) on page 4 of the loan application.
At a later date, the liens shows up on a title report, credit report or during a data base search (the very last step before funding) commonly known as “Cavirs”.

If a government lien does “pop up” there are only 2 solutions:
1) Buyers and the government agency must agree to ‘terms of a repayment plan” (which takes up to 30 days to implement)! Then a buyer must have a 3 month (minimum) payment history, which usually delays or kills COE.
2) If there is not time to begin a repayment plan before contingency deadlines; the lien has to be “paid in full”, further draining a buyer’s liquid cash (i.e.down payment).
Other than simple nonpayment of taxes; other government liens result from specific actions such as:
-Non-payment of child support (county).
-Nonpayment of court fines, restitution and incarceration fees (county/state/federal).
-Nonpayment of medical bills to county facilities
-Employers not paying their business or employee withholding (quarterly) taxes to the EDD

In addition to over due taxes there are tax penalties for:
-Under payment of taxes
-Late filings Not having health insurance
-Filing a frivolous tax return or no tax return at all
-Early liquidation of retirement accounts
-Not paying what is owed.

Non-Filing Penalty
Taxpayers not filing a Form 1040 or an extension (Form 4868) by Apr. 15th ; the penalty for not filing starts accruing the next day.
The assessment: 5%, monthly of the total balance of any tax due.
Taxpayers can file an extension until Oct.15th but have to make that October deadline, or the non-filing penalty will begin.
The IRS considers not filing a tax return (at all) the most serious offense, the non-filing penalty can be as high 25% of the total unpaid tax amount.
The statute of limitations for not filing a Federal tax return is 3 yrs. but can be doubled for fraud, the California statute is 4 yrs.

Nonpayment Penalty
Even if a taxpayer files a return (or an extension) by April 15, but doesn’t pay what is due, they face the nonpayment penalty.
The penalty is 0.5% of the due tax due. The nonpayment penalty can grow until it reaches 25% of the unpaid tax bill.

Under Payment Penalty
U.S. taxes are collected on a pay-as-you-earn system and the IRS wants its portion when the money is received by the taxpayer.
Failure to do so may results in an underpayment penalty.
For example: Independent contractors (1099) are responsible for covering taxes - from earnings with estimated quarterly tax payments.
The same timely taxpaying applies to other income, such as prize winnings, investment earnings & stock options an income source.

Avoiding the Underpayment Penalty
Taxpayers facing a tax penalty for the 1st time can apply for a 1 time abatement request”, by pointing out past taxes have been paid on time and a promise to be compliant in the future.
But even if the IRS grants penalty relief, interest charges on unpaid taxes still apply.
For general nonpayment/non-filing, the current interest rate is 4%.

Thursday, October 3, 2019

A Trailblazing Plan to Fight California Wildfires

Nicola Twilley's piece is a valuable read for any rural lands homeowner and anyone considering purchasing property in our gorgeous California countryside. Please click here to read online or download a PDF version here.

Thursday, August 24, 2017

Energy-Saving Loans Are Turning Bad

Some of us in the real estate industry have been warning about these loans for several years...

"Energy-Saving Loans Are Turning Bad" by Kirsten Grind, published in the Wall Street Journal on August 16, 2017

Loan defaults in a popular program meant to finance energy-saving home upgrades have increased substantially, despite lenders’ claims that few borrowers have missed payments.

The small, high-interest-rate loans were made as part of the Property Assessed Clean Energy program, or PACE, a nationwide initiative designed to help people afford solar panels, energy-efficient air-conditioners and other “green” appliances. PACE loans are among the fastest-growing types of loans in the U.S.

The rise in defaults means some borrowers are at risk of losing their mhomes over relatively small loan amounts and that local governments find themselves in the awkward position of having to collect troubled debt for private companies.

Private lenders in the PACE program have told Wall Street investors, as well as local and federal government officials, that borrower defaults are rare and that no homeowners have gone into foreclosure as a result of the program, according to investors and public officials.

But a Wall Street Journal analysis of tax data in 40 counties in California-by far the biggest market for PACE loans-shows that defaults have jumped over the past year. Roughly 1,100 borrowers missed tw consecutive payments in the tax year that ended June 30, compared with 245 over the previous year. That means they are in default, and could potentially have their homes auctioned off by local governments within five years.

The lenders, including Renovate America Inc., Ygrene Energy Fund and Renew Financial Inc., say the overall default rate of less than 2% provided by the Journal’s analysis is in line with the rate for people who miss property tax payments.

A spokeswoman for Renovate America said the partial data gathered by the Journal is more negative than what the company is seeing. Rocco Fabiano, the chief executive of Ygrene, said in a statement that “Ygrene’s PACE delinquency rate remains far below that of average property tax delinquencies in California.” A spokesman for Renew Financial said property owners in its CaliforniaFIRST PACE program “have similar delinquency and default rates as all other property owners.”

In the PACE program, private companies make the loans and the balances are placed on a homeowner’s property tax bill. Local governments are responsible for collecting the payments and, in the event of a default, potentially seizing the home to recoup the loan amount.

The average PACE loan is about $25,000. But unpaid balances get bigger quickly; they accrue additional interest at the rate of 18% annually. Under California law, homes can be auctioned off in a tax sale within up to five years if the homeowners don’t pay the balance.

“For us to be the heavy hand and make {borrowers} go through the tax sale process is onerous on us,” says Jon Christensen, the tax collector in Riverside County, where 227 PACE borrowers are in default.

Wall Street is hungry for bonds made from PACE loans. In July, asset managers and pension funds piled into $205 million deal from the largest PACE lender, Renovate America. It was the company’s 11th securitization since its 2008 founding.

Investors are attracted to the bonds’ relatively high yield of about 4% and the loans’ priority structure. If a borrower defaults, PACE lenders are paid back before mortgage lenders. The deals have received high marks form credit-rating firms, which have said the program is too new to predict future defaults. 

Still, some investors are getting nervous.

“If we can’t get more data, it’s going to limit our ability to take the risk,” says Dave Goodson, the head of securitized products at Voya Financial Inc., noting that monthly updates on the PACE bond deal he has invested in don’t include default rates. 

Indeed, such performance data are hard to come by. It is up to local tax collectors to rack default rates. “No one is even collecting all the data,” said John Rao, an attorney with the nonprofit National Consumer Law Center.

The Journal analyzed data from the California Association of County Treasurers and Tax Collectors, which collected the information from local tax collectors and from counties. The association is advocating state legislation to increase consumer protections in the PACE program.

The data, which only offer a limited view of overall PACE loan performance, show that the average default rate has climbed to 1.6% from 0.85% in the previous tax year.

But the PACE default rate doesn’t capture borrowers whose missed payments are covered by mortgage escrow accounts, which appears to be a common occurrence, according to borrowers, banks, real estate agents and attorneys.

PACE loans totaling nearly $3.7 million are past due across the state, up from about $520,000 in the 2015-2016 tax year.

PACE lenders have made roughly $3.6 billion in PACE loans nationwide, making the total number of loans roughly 140,000.

Some borrowers say they were pushed into loans by plumbers and repairmen who serve as middlemen in the transactions, and that they were approved for loan amounts they couldn’t afford, the Journal has reported.

A bipartisan group of U.S. senators has introduced legislation to subject the loans to the same level of regulations as faced by mortgages.