The Department of Real Estate reminds us that buyers dreaming of homeownership often shop for loans by looking for the program that has the lowest payments.  In the past several years increasing numbers of these buyers have chosen payment option adjustable rate mortgages (ARMs) to purchase a home thought unaffordable and to limit their monthly payments.

The large numbers of these loans that are now on the books and the gradual but steady increase in interest rates from the lows in 2003 have caught the attention of the national media, Federal Reserve and banking regulators.  The concerns over rising interest rates, the slowing of the housing market and the potential impact of these loans on consumers is real.  The payment option ARM typically allows the borrower to make payments, at their option, based on a 1% interest rate, interest only, with a 15-year or 30-year amortization but there are many variations.  If these loans are marketed to buyers based on claims of low payments or housing affordability, then it can be assumed that many, if not most, buyers, will choose the lowest payment option.

That is why the Department of Real Estate goes on to say that that is why it is incumbent upon licensees who arrange loans as mortgage brokers to completely detail the terms of these loans both in their advertising and when consulting with consumers and discussing different loan options.  That includes an explanation of the rates at which interest can accrue and the effects of deferred interest.  Licensees who sell these loan programs based on their benefits (i.e., low payment options), must also explain the risks involved and help borrowers determine if such a program is right for them or not.  Payment option, interest only and other such ARM loan products may not be right for everyone, especially first-time buyers and those who are trying to afford a home for which they may not otherwise qualify.

The terms of these loans are laid out in the adjustable rate note, addendums and disclosures.  It is incumbent on all buyers/borrowers to read and understand these documents.  There are many variations of these loans on the market today.  It is the fiduciary duty of each licensee who represents a borrower in obtaining a loan to completely explain the terms and discuss the relative merits and risk of these loan products well before the point of signing loan documents.

THE CALIFORNIA ASSOCATION OF REALTORS® has launched a brand new Consumer Advertising Campaign that highlights the value REALTORS® bring to the transaction.  Through a bold, new approach and theme – “California REALTORS® - We get it.” – the campaign also will raise awareness of the REALTOR® brand and reinforce the professionalism of REALTORS® who belong to C.A.R. 

The $2.3 million “California REALTORS® - We get it.” campaign features four new radio spots; interactive Web banners placed on popular Web sites; and search engine marketing on Yahoo and Google directing consumers to a new Web site, www.yourpieceofcalifornia.com, that reinforces key messages of the radio ads while providing valuable information for consumers when buying or selling a home.  The Web site also reminds consumers why they should use a REALTOR® in all of their real estate transactions and links to the “Find a REALTOR®” page on C.A.R. Online (www.car.org).

You can also be involved with the campaign and can customize it for your own use.  Visit C.A.R. Online (www.car.org) and click on the “2007 Consumer Advertising Campaign” button on the home page.  You can listen to the radio spots, view the Web banner ads, and learn more about the campaign and its history.

In addition, the 2007 Consumer Advertising Campaign includes print and HTML components for you to use in your own direct mail and e-marketing efforts.  On C.A.R. Online (www.car.org), you will find downloadable e-mail banners and text that you can insert into e-mails you send to your clients and prospects. Also available are postcards designed with the look and feel of the campaign that you can customize with your photo, contact information, and personalized message. 

The NATIONAL ASSOCIATION OF REALTORS® says that fallout from the subprime loan debacle will lead to tighter lending criteria and a healthier housing market but higher loan standards will slow the housing recovery.

The year 2007, is still forecasted to be the fourth highest year on record for existing-home sales and housing remains a great long-term investment.

NAR projects:

v  Existing-home sales: likely to total 6.34 million in 2007 and 6.52 million next year – in contrast with 6.48 million in 2006.

v  New-home sales:  projected to be at 904,000 this year and 935,000 in 2008, below the 1.05 million last year.

v  Housing starts: estimated at 1.47 million in 2007 and 1.55 million next year, down from 1.80 million units in 2006.