Palos Verdes Blog

Palos Verdes blog is about Palos Verdes real estate market trend, valuable news about how to buy, sell, or lease homes, condos, town-homes, apartments, multi-family homes, and land, including short sales, and foreclosure information.

Jan. 21, 2022

US median rent rose 11% in 2021 due to inflation

Rents increased 3 times the rate of a normal year, in which rents might rise 3-4% overall, according to a new report from online rental marketplace Dwellsy

The median asking rent in the U.S. increased 11 percent over the course of 2021 as inflation hit Americans in full force, according to a report from online rental marketplace Dwellsy. That’s three times the rate of a normal year, in which rents might increase 3 to 4 percent overall. Single-family rentals bore the brunt of inflation, with rents increasing 26 percent over the course of the year. By contrast, apartment rent inflation was only up 1 percent. “For many renters, a single-family home was the ideal in 2021, with safe outdoor space and more room to work from home,” the report from Dwellsy states. “At the same time, demand from single family homebuyers escalated, driving prices up and causing more landlords to sell to homeowners, reducing the inventory of rentals.”

Standout metro areas where rents surged over the course of the year include places like Naples, Florida, and Tucson, Arizona, where rents increased 112 percent and 108 percent, respectively, between January 2021 and December 2021. In Naples, that meant that the median listing rent in January 2021 of $1,605 increased to $3,398 by December 2021. In Tucson, the median listing rent rose from $769 to $1,600 during the same period. 

The metro with the highest median asking rent for the entire year across all rental types was Boston, Massachusetts, which saw median asking rent increase 9.6 percent over the course of the year to $2,741. San Francisco and New York City followed close behind in second and third place, with rent increases of 11.5 and 10.6 percent, respectively, over the course of the year to median asking rents of $2,676 and $2,670. Data for this report was drawn from Dwellsy and the U.S. Census Bureau.


Jan. 19, 2022

Is Your Property In A Flood Zone? Find Out In 2 Minutes Or Less!

For most of us, the risk of losing everything in a flood is NOT something we lose sleep worrying about at night.

Flooding disasters tend to be highly infrequent, once-in-a-lifetime events that happen to other people, right?

It’s an understandable bias, because statistically speaking, the average person will never have to deal with it. But what if YOU are part of that dreaded statistic.

Like most natural disasters, a flood can wipe out everything you own in a matter of seconds. So if there is ANY risk that your property is in a flood zone—is it really worth rolling the dice on this?

Why Do Flood Zones Matter?

Flooding may or may not end up hitting you where you live. But regardless of how concerned you are about it, there are at least a few solid reasons to check whether your property is situated in (or anywhere near) a flood zone.

Simply understanding your situation is half the battle won:

Flood Zones = Risk

When a property is located in a confirmed flood plain, it can have a serious effect on the cost of property ownership, even if it doesn’t flood. What’s more, if you’re buying land in a flood zone using some kind of financing (such as from a bank or a credit union), they may require you to pay for flood insurance.

RELATED: How to Identify (and Avoid) Wetlands

Do I Need Flood Insurance?

If your property is in a confirmed flood zone and you are borrowing money to buy the property, the short answer is yes.

Even if the risk is relatively small, a property at risk of flooding puts the lender’s collateral at stake. Most lenders will require their borrowers to pay for flood insurance to mitigate that risk.


Jan. 17, 2022

How a Lien Affects the Real Estate Title

Many people have liens on their real estate. Consider your mortgage—a lien that leverages the home as collateral for your mortgage loan. Other liens, too, can show up in a title search. Homeowners should know what kind of liens might attach to a home they already own, or a home they’d like to buy. Here, we review the basics of home liens: types of liens, how they impact the home’s title, how they can lead to foreclosure, and how to remove them.

Types of Home Liens and Their Impact on a Title

A home lien represents an unpaid debt. Recorded liens, including mortgages, appear in a title search until the debtor completes the final payoff. They must be resolved for a new buyer to receive an unencumbered title.

States regulate voluntary liens (example: your mortgage) and involuntary liens (example: tax liens) in terms of their priority. The order of lien priority determines which creditors can get access to their share of the collateral’s proceeds first. Thus, the higher they rank in priority, the more likely certain lien creditors are to insist that a home is sold to pay debts. 

Mortgage Liens

A mortgage lien or deed of trust is a common lien on the property title. The seller must pay off the mortgage so that clear title may be conveyed to the buyer.

Tax Liens

The Internal Revenue Service may place a tax lien against all of a person’s property—including the home—once it sends the debtor a demand letter for overdue taxes and more than 10 days pass without payment. Look for a document in the county records called the Notice of Federal Tax Lien, and check the date. It has priority over every subsequent lien. 

The IRS has a right to repossess a home, but rarely does. Anything but a high-value home with a sure buyer lined up can leave little satisfaction for the government once the mortgage gets resolved. In the more common scenario, the owner sells, refinances, or faces foreclosure, and the government receives the payment for its tax lien at closing.

Mechanic’s Liens

Other liens to look for are mechanic’s liens, which represent money the owner owes a contractor for carrying out improvements on the home.

Liens for unpaid bills for local services, or state and local taxes, may also cloud the title. Resolution is necessary before the owner transfers title through a home sale. Assuming the owner has sufficient home equity, the parties can draft an agreement that the owner will resolve the lien from the home sale proceeds, completing the debt payoff before a title transfer. 

Judgment Liens

Common examples of judgment liens are court-awarded child support debts or damages owed to plaintiffs in an accident lawsuits. When a court awards a monetary judgment to a plaintiff, the plaintiff becomes a judgment creditor, who records the lien against the title. As with a mechanic’s lien, a judgment lien clouds the title. The owner must resolve the debt to convey the title to a buyer.

Other Mortgages and Debts

Second or third mortgages and home equity debts may attach to the property. Lenders that have extended secured financing, and filed UCC-1 Financing Statements with the secretary of state, can create liens against home equity. Liens can also involve unpaid homeowners’ association dues, which the association may help to resolve in order to bring a new buyer in.  

The order in which multiple liens were recorded generally establishes seniority. Again, check state law’s impact on payment priority.

A Buyers’ Due Diligence

Buying? Consider scouring the title report for unresolved liens. Most buyers don’t go to the county recorder’s office to review the title history, but—especially when buying a home at a foreclosure auction—they should pay for title searches.

If a title report shows a lien, the title or escrow company checks for the recording date, creditor, and debt amount, so the lien creditor can be identified, and the lien resolved, before closing. 

If the sale involves a foreclosure home without a general warranty deed, a buyer might lack notice of yet-unrecorded UCC filings and mechanic’s liens. Title insurance anticipates the possibility of future claims against the title. The title company can explain to the buyer what steps to take to obtain a general warranty deed. 

When a Lien Leads to a Foreclosure, What Happens?

When a mortgage debtor cannot pay enough to avert foreclosure, home is sold at auction. 

The purchase of the home extinguishes the trust deed. Yet some unsatisfied lien holders, or those that received no notice of the sale, may still have rights.

The buyer should have the title history examined for liens senior to the one being foreclosed on, as these survive foreclosure. Tax liens, judgment liens, UCC liens, and even other mortgages might have survived the foreclosure.

The buyer’s eyes must be wide open for any outstanding agreements—either to obtain assurance that they will not become the buyer’s responsibility, or to prepare for resolving the liens (see below). The buyer should also anticipate leases, easements, and other agreements that could survive the foreclosure sale.

How to Remove a Lien

Property title liens can be paid out of the home sale or foreclosure sale proceeds. If there is no such agreement, the buyer has several options:

  • Pay the debt, and ask the creditor to file for removal of the claim against the title.
  • Negotiate with the creditor to settle the debt at a discount if possible.
  • Bring a quiet title action to try to prevail over the creditors’ lingering rights and remove a lien from the title.

To resolve a tax dispute that may impact your home’s title, request an informal Collection Due Process hearing by the deadline in the federal lien notice. This can provide an opportunity to resolve tax debts through installment payment plans, or receive a discount on the debt, called an offer-in-compromise, from the IRS. 


For case-specific advice and assistance, as always, consult with your accountant or a tax attorney.

Jan. 14, 2022

Estate Planning With a Transfer on Death Deed

New Rules for California Homeowners

A parent and child standing outside discussing important things.

Since 2016, California has been offering homeowners a very simple way to transfer their homes to beneficiaries. It’s called the transfer on death deed — also written as TOD deed, TODD, or beneficiary deed. A TOD deed, where a state allows it, enables a named beneficiary to take title without the need for probate or trust administration.

Fast-forward to September 2021. California’s governor has signed Senate Bill 315 into law. This has changed the way a homeowner can create or revoke a transfer on death deed, starting in 2022.

Note: If a California TOD is executed before Jan. 1, 2022, it will be valid.

Now, what’s the difference between the current TOD law and the one that takes effect in 2022? Let’s check it

Nuts and Bolts: Requirements of a TOD Deed in California

First, to use a TOD deed in California, you must be passing along a residence. This is defined to include a single-unit home, a multi-unit residence of up to four housing units, a condo, or a home on agricultural property of up to 40 acres.

The TOD deed will work on its own after you pass on. It won’t need a trust or a probate court to operate. But be sure to check your current deed to see how your title is vested. Of course, a TOD deed will never trump a joint owner’s rights of survivorship.

☛ For more information on vesting your title as sole versus jointly owned, see How’s Your Property Vested? It Matters as Much as Your Will or Trust.

A California TOD deed must be signed before a notary, dated, and recorded in the county within 60 days. It must precisely name the beneficiary or beneficiaries to whom you’d like to pass your ownership. (If it names multiple beneficiaries, they must get the asset in equal shares.) The TOD deed has to recite the legal property description. Be sure the property description and your name on the TOD deed exactly match what’s written on the current deed (the one recorded when you took title to the house).

You can change your mind or fix an error on the TOD deed, by revoking the deed and creating a new one. A TOD deed is revocable because the beneficiary has no rights in the property until the homeowner dies. As the homeowner, you pay the home loan, taxes, and all costs of maintaining the home as long as you’re living. When you pass on, your named beneficiary takes over these responsibilities. Your beneficiary will have to pay off any debts still attached to the home.

What’s New and Why

Owners are drawn to this legal innovation for its simplicity: it conveys a home after death without involving probate or the expense and complexity of a revocable living trust. TOD deeds are easily made: the homeowner just completes a form, signs it with a notary, and records it, as explained above.

Here’s the rub. While offering simplicity, the TOD might make it too easy to pass a house to a manipulative person. Title insurers are leery of TOD deeds for this very reason. The instruments have only been legal in California for a few years, and insurers often expect to see that the new owner has owned the home without any issues for three years after the late homeowner passed. So, your beneficiary could run into hitches selling or taking a loan out. California acted to make the TOD more trustworthy.

Specifically, S.B. 315 has redefined some terminology, and inserted safeguards into the law to support older or vulnerable homeowners, as well as to prevent burdens from being unfairly passed on to beneficiaries. Here are a few of the key provisions to watch for:

  • From 2022 on, notarizing the TOD deed will require two witnesses to be present. They must sign as well. The beneficiary of the TOD deed should not be a witness.
  • Revoking the TOD deed will involve signing a new document with a notary.
  • When the homeowner passes, the beneficiary will need to notify the homeowner’s heirs.
  • The creator of the TOD deed must use the new notice form, from 2022 onward.

As you can see, S.B. 315 tightens the rules of the TOD. Yet it also adds a measure of flexibility for language, so that the property can go where it was meant to go, despite some procedural mistakes that might be made by the homeowner. It will guide courts on correcting certain errors instead of deeming a TOD deed void, if there’s the homeowner’s intent is evident. An imperfect TOD deed intended to donate property can be corrected — though a charity or public entity has to agree to receive the title.

Look also for the new provisions pertaining to liability of a beneficiary, return of property from the beneficiary to the late homeowner’s estate, and procedures for challenging a TOD or its revocation.

Is It Better to Use a TOD Deed Than a Trust?  

It could be. The TOD will still be relatively simple and inexpensive, and it leaves the homeowner in control of the real estate throughout life. But speak with a lawyer in the state, so you understand the property tax reassessment consequences. You might find out that a better plan is to work with an estate planning lawyer to place your home in a trust specific to your needs and circumstances.

Consider what will happen if you become incapacitated. Should that happen, your beneficiary won’t be able to assist in decisions about your property, or help you tap into your equity for medical care — because the beneficiary’s role is nonexistent while you are still alive. In contrast, a revocable living trust could empower a trustee to act for you.

Pro tip: Have you received Medi-Cal benefits? If so, and if your beneficiary dies with you or dies before you, your property will be subject to probate and hence to Medi-Cal recovery.

Are There Special Concerns for Minors as Beneficiaries?

Yes, and it is important to speak with an estate planning attorney to understand the ramifications if you name an underage beneficiary. The attorney can also advise you on the best actions to take to protect your estate or your beneficiaries from debt and liability risks. Here, we’ll go over just two broad-stroke concerns.

First, if your TOD beneficiary is still a minor when you pass away, a court will appoint a representative for your child. Remember, a revocable living trust enables you to decide on who should represent your beneficiary and manage your finances if circumstances require this.

Second, note that a 2020 ballot measure, California’s Proposition 19, interacts with your estate planning. A child who receives your home has to keep it as a primary residence and the property has to be valued under $1 million to be exempt from property tax reassessment.

☛ Proposition 19 became effective in 2021 and will result in tax increases for heirs as they face property tax reassessments. Learn more about California Prop 19 here.

Plan Wisely

If you are a California homeowner who’s considering a transfer on death deed, know that S.B. 315 will change the rules, starting in 2022. It will complicate TOD deeds a little more — the cost of making them less vulnerable to fraud and manipulation.


Of course, no law can make TODs fraud-proof, as forgeries can still occur. Sometimes, extra steps in the law can create more ways of potentially making mistakes, too. It’s important, when creating a deed of any type, to check your work for errors (even typos), and adhere to the format required by law. At, we offer state-specific Transfer on Death Deed Forms for downloading.

☛ Important note: Deeds have legal effects. As always, speak with an estate planning attorney to understand case-specific consequences of legal decisions about passing your assets on after your life — particularly your home.


Jan. 12, 2022

Encroachments: What They Are & What You Can Do About Them

NYC-based boutique law firm Pardalis & Nohavicka brings the latest legal updates from the world of real estate. Pardalis & Nohavicka handles an eclectic array of matters, representing individuals and business owners in civil litigation, criminal cases and business transactions, currently litigating and representing clients throughout the United States and around the world. 

What is an encroachment?

An actionable encroachment is the intrusion of a structure or even temporary object onto a neighboring property in the absence of right — either by agreement or law. This often takes the form of a fence or other border demarcation, but it can also be as innocuous as an oversized vehicle or jutting air conditioning unit.

Often, an encroachment is identified after obtaining a survey, either for tax purposes or perhaps as part of a renovation or other project. It could even be as simple as investigating part of the neighbor’s property you keep tripping on that turns out to be on your property.

What to Do

Neighboring property disputes can sometimes be contentious. Therefore, it’s always a good idea to try to communicate with your neighbor to express your concerns. Then, if your neighbor ignores you or disagrees with you, you can send a more formal notice, sometimes referred to as a notice of claim. When these steps indicate an impasse between the parties, it may be time to file a lawsuit. 

In the meantime, avoid touching, removing or damaging any encroachments, unless they create an imminent danger. Even then, seek consultation before doing anything.  always document the encroachments and their effect on your property with photographs or video.

Adverse Possession

An adverse possession is “the occupation of land to which another person has title with the intention of possessing it as one’s own.” Essentially, that translates to, “That fence has been there for as long as I can remember.” In other words, adverse possession is the adverse taking of someone else’s property through continued use and improvement for a period of 10 or more years (in New York).

A helpful way to remember the elements of adverse possession is with the acronym OCEAN.: Taking of property that is Open, Continuous, Exclusive, Adverse and Notorious for a period of 10 years.

Recent changes to New York law regarding adverse possession have reinvigorated the de minimus rule, which means that certain minimal encroachments — in some cases, even fences — are insufficiently adverse to trigger adverse possession. As such, it’s wise to understand how long an encroachment has been on your property, whether de minimus or otherwise. 

What Happens in an Encroachment Dispute

An encroachment dispute often involves the following steps:

  • Retaining a surveyor to establish and confirm property lines. Or, if you already have a survey, requesting your surveyor to provide his or her interpretation of the findings.
  • Filing an emergency order to show cause seeking injunctive and other forms of relief, such as removing the encroachment or halting construction.
  • Potentially, attending a hearing before a judge. In clear cases of encroachment — especially when your neighbor’s survey shows the same property lines as your own — the judge may be able to issue an order without a hearing, known as an order of submissions.

The Good, the Bad & the Ugly

Let’s use the following as an example: Five years ago, your neighbor Brad’s fence was blown down in a storm. Brad put up a new fence, but not in the same place. The new fence was a little closer to your house. You never said anything because it didn’t really bother you. Now, you want to add an addition to your home, so you have your property surveyed. Based on your survey, the town you live in notifies you that Brad’s fence is, in fact, on your property and that it also affects your acreage, thereby disqualifying the addition. You let your neighbor know what’s going on.

The Good: Brad looks at your survey and realizes his mistake. You both come to an agreement as to the correct property line and perhaps come to a cost-sharing agreement for the placement of the new fence. Your lawyer can help you draft the paperwork, including any potential boundary dispute agreement, allocation of cost or otherwise.

The Bad: Brad sees your survey and tells you that, while it may be correct, he put up the fence a long time ago, so the property is actually his. He’s sorry, but he’s also not moving the fence. You remember having read about a 10-year limit and decide to do something about it. Your lawyer can help you here by filing an order to show cause to remove the encroachment at Brad’s expense and rebut Brad’s argument about adverse possession. A case like this may very well generate an “order of submissions,” as previously referenced.

The Ugly: Brad looks at your survey and decides to get one of his own. Brad tells you that his surveyor also conducted a survey, and not only is the fence on his property, but it should be even further on your property. Brad tells you that it’s a good thing he got his own survey, because the swimming pool he plans to build is going to go beyond the fence and come within a foot of your backdoor. This is when your lawyer should immediately step in.

You’re going to need an emergency order to show cause seeking injunctive relief to stop construction of that pool. You’ll also need declaratory relief to determine the correct property line, monetary relief for any damage caused to your property and so on. In this circumstance, you probably won’t get an order on submissions because, even though Brad’s surveyor is unscrupulous, that is an issue of credibility, which cannot be decided on the papers. Instead, you would need a hearing.

We hope this guide sheds light on the many possible legal outcomes when encroachments occur. And, if there are any Brads living next to you, we hope it’s the Good Brad, but we’re ready for the Ugly one, too.


Jan. 5, 2022

Mortgage Concepts: What triggers repayment of a reverse mortgage?


PVH Blog: Mortgage Concepts: What triggers repayment of a reverse mortgage?

Mortgage Concepts is a recurring video series covering best practices and compliance education for California mortgage loan originators. This video discusses circumstances that trigger repayment of a reverse mortgage. For course credit toward renewing your NMLS license, visit

The Baby Boomer effect

The reverse mortgage is a mortgage product that allows senior citizens (specifically, those 62 years old or older) to use their home equity as a stream of income.

The massive Baby Boomer generation (defined by the U.S. Census Bureau as the generation born between 1946 and 1964) is poising itself for retirement. Many seniors hold the majority of their wealth in the form of paper – stocks. Much of this wealth was erased overnight when the stock market crash turned their 401Ks into 101Ks. However, citizens aged 65-75 are more likely to own property than any other age group. The vast majority of retirees will continue to pursue some form of traditional homeownership.

The decision to retire is often swiftly followed by a series of lifestyle changes. One of the most significant changes is the change to the retiree’s flow of income. According to the Consumer Financial Protection Bureau (CFPB), half of homeowners aged 62 or older had at least 55% of their net worth tied up in their home equity in 2009.

As Baby Boomers begin to retire in earnest, some will sell their homes and relocate to be closer to family and warmer climates. Others will remain in their existing homes and seek to tap the equity which they have built up over years of making mortgage payments.

The reverse mortgage programs currently available in the market can assist in both circumstances. Thus, there is a potential for reverse mortgage demand to grow in the near future, to meet the needs of the retiring Baby Boomers.

But how ready are the reverse mortgage programs we have for the coming wave of seniors? The majority of reverse mortgages originated are insured by the U.S. Department of Housing and Urban Development (HUD)’s Federal Housing Administration (FHA) under their Home Equity Conversion Mortgage (HECM) program. In 2013, the FHA made several important changes to the HECM program to staunch the massive losses resulting from the housing and mortgage crises.

However, these changes were not sufficient to quell the continued financial threat facing the FHA’s mutual mortgage insurance fund (MMIF).

In August of 2013, Congress passed the Reverse Mortgage Stabilization Act of 2013 giving HUD the authority to establish additional qualification requirements for the HECM program. Many of these changes, including the establishment of initial disbursement limits, went into effect on loans with FHA case numbers assigned on or after September 30, 2013. [12 United States Code §1715z-20(h); HUD Mortgagee Letters 2013-27, 2013-28 and 2013-33]

Further changes were made in 2014 to curb risky behavior undertaken by some lenders and borrowers in response to the 2013 changes. Additionally, clarification of a non-borrowing spouse’s responsibility after the death of the reverse mortgage borrower was provided. [HUD Mortgagee Letters 2014-07, 2014-10 and 2014-11]

HUD also proposed new rules for borrower financial assessments and funding requirements for the payment of property charges. Initially, the financial assessments and funding requirements were slated to go into effect on January 13, 2014. However, HUD delayed the implementation, pending review of comments received in connection with the proposal. [HUD Mortgagee Letters 2013-27, 2013-28, 2013-33 and 2013-45]

The final financial assessment requirements were announced in November of 2014. HUD rolled out these changes in late 2014 and early 2015. [HUD Mortgagee Letters 2014-21, 2014-22]

In 2015, HUD defined eligible non-borrowing spouses and amended certification requirements related to non-borrowing spouses and implemented financial assessment requirements. [HUD Mortgagee Letter 2015-02]

In 2016-2017, HUD finalized rules to further control MMIF exposure caused by volatility in the HECM program. According to HUD, the HECM portfolio went from -$1.2 billion in the 2014 fiscal year to $6.8 billion in 2015 to -$7.7 billion in 2016. The changes mainly codified existing policy set forth by HUD Mortgagee Letters, but also included an additional disclosure requirement. [82 Federal Register 7094-7146]

What is a reverse mortgage?

reverse mortgage is a loan product designed for older homeowners. Although some lenders offer proprietary reverse mortgages without government guarantees, the vast majority of reverse mortgage originated are insured under the FHA’s HECM programs. For simplicity, we will use reverse mortgage and HECM loan interchangeably. [12 USC §1715z-20(a)]

The original purpose of the HECM program was two-fold:

  • to meet the special needs of elderly homeowners faced with economic hardship caused by the increasing costs of meeting health, housing and subsistence needs at a time of reduced income; and
  • to encourage and increase the involvement of lenders and mortgage market participants in the making and servicing of HECM reverse mortgages for elderly homeowners. [12 USC §1715z-20(a)(1)]

The reverse mortgage requires no monthly payments. It’s the opposite of a traditional mortgage where the borrower makes payments to the lender each month. Instead, the lender agrees to lend against the borrower’s equity in the home. The lender makes payments to the borrower according to a payment option requested by the borrower.

Borrower payments

The method of calculating the payment to the borrower each month is chosen by the borrower, subject to limits. The limit to total disbursements is determined by considering the value of the borrower’s home (or, more accurately, the maximum claim amount, which is the lesser of the home’s appraised value and the maximum loan amount allowed in the neighborhood as set by the FHA), the current interest rate and the borrower’s, or their eligible non-borrowing spouse’s age. [HUD Handbook 4235.1 Rev-1 Chapter 1-4.A; HUD Mortgagee Letter 2014-07]

This disbursement limit is called the principal limit. The principal limit is the present maximum amount that the borrower may be paid under the HECM loan. Generally, the greater the age of the oldest borrower or eligible non-borrowing spouse, the higher the principal limit.

The principal limit generally increases every month by one-twelfth of the sum of the expected average mortgage interest rate, plus the monthly mortgage insurance premium. When the outstanding mortgage balance (the amount the borrower has been paid, plus any mortgage insurance premium payments, closing costs or other amounts set aside from the principal limit for servicing fees) equals the principal limit, the borrower cannot receive any more payments. However, they may remain in the property as long as they pay their taxes and insurance, and maintain the property. [HUD Handbook 4235.1 Rev-1 Chapter 5-5]

Note that while the principal limit increases each month, the new initial disbursement limits do not allow the borrower to draw on the increased amounts during the first 12-month disbursement period. [HUD Mortgagee Letter 2014-21]

Editor’s note — In a traditional mortgage, the mortgage balance is the amount of loan yet to be repaid by the borrower to the lender (with interest, etc.). In a reverse mortgage, the mortgage balance is the amount of money that has been paid to the borrower, and has yet to be repaid to the lender.

Since the reverse mortgage is pulling equity out of an illiquid asset (the house), reverse mortgages are only available to borrowers who have paid down all, or most, of the principal balance on their existing mortgages. [HUD Handbook 4235.1 Rev-1 Chapter 1-3.G.3]

The borrower’s home is the collateral for the reverse mortgage.

Additionally, the debt is a nonrecourse debt. This means the lender’s only means of collecting on the debt is a foreclosure on the property. Neither the borrower nor their heirs may be personally pursued for the debt on a reverse mortgage.

However, interest and mortgage insurance premiums do accrue with each advancing month. So, while the borrower is able to draw a certain amount of equity out for their own use (limited by the principal limit), the remaining equity (the difference between the maximum claim amount and the principal limit) not accessible by the borrower is slowly reduced by the interest accrued on the loan. In other words, the interest due on the loan adds to the total amount due to the lender. [24 Code of Federal Regulations §206.19(e)]

Any mortgage insurance premium due the FHA is added to the loan balance each month, reducing the principal limit. [24 CFR §206.25(e)]

A reverse mortgage is not required to be repaid unless or until:

  • the borrower dies;
  • the borrower moves permanently from the home;
  • the borrower transfers title to the home; or
  • the borrower fails to meet their obligations under the mortgage, as set in the mortgage terms. [24 CFR §206.27(c); HUD Handbook 4235.1 Rev-1 Chapter 1-3.B]

If there is more than one borrower on the loan and one borrower dies or otherwise moves from the property, repayment is not triggered if the surviving borrower still occupies the property as their principal residence. [24 CFR §206.27(c)]

However, for HECM loans with case numbers assigned on or after August 4, 2014, if the borrower is married at the time of their death, and the borrower’s spouse was not a borrower on the HECM loan, repayment of the HECM loan is deferred. This eligible non-borrowing spouse deferral period is subject to some restrictions. [HUD Mortgagee Letter 2014-07]

HECM loans can be used for three purposes:

  • to pull out equity out of the current property (the traditional HECM reverse mortgage);
  • to purchase principal residences (the HECM purchase loan); and
  • to refinance an existing HECM loan with a new HECM loan.

The most prevalent use is the traditional HECM reverse mortgage. We’ll discuss the qualification for that program first, then move on to discuss how the purchase and refinance transactions work under the HECM program.

Borrower eligibility requirements

HECM loans are only available to borrowers 62 years of age or older. This minimum age rule applies to all borrowers and co-borrowers on the loan. [24 CFR §206.33]

Marital status and eligible non-borrowing spouses

Eligible non-borrowing spouses now have protection against being effectively evicted from their home upon the death of the borrowing spouse. An eligible non-borrowing spouse is the borrower’s spouse at the time of the HECM loan closing, but is not a borrower on the HECM loan. The eligible non-borrowing spouse does not have to meet any age requirements, but their age will be considered in determining the principal limit for the borrower.

For HECM loans with case numbers assigned on or after August 4, 2014, an eligible non-borrowing spouse may defer repayment of a reverse mortgage in the event of the borrower’s death.

To be considered an eligible non-borrowing spouse, the non-borrowing spouse needs to:

  • remain the spouse of the borrower for the borrower’s remaining lifetime after obtaining the HECM loan;
  • be identified and disclosed as the spouse at the time of origination, on the HECM loan documents; and
  • have occupied, and continue to occupy, the property securing the HECM loan as their principal residence.

If any of the above criteria are not met, the non-borrowing spouse is an ineligible non-borrowing spouse.

To determine marital status, an unmarried borrower must provide a certification at loan closing which states they are not married and the HECM loan will not be deferred for any future spouses.

A married borrower with an ineligible non-borrowing spouse must provide a certification at loan closing which states they are married and the HECM loan will not be deferred for their current ineligible spouse.

Further, the ineligible non-borrowing spouse must provide a certificate at loan closing which states they understand they are ineligible to defer HECM repayment upon the death of the HECM borrower.

A married borrower with an eligible non-borrowing spouse must provide a certification at loan closing which states the name of their eligible spouse, and the conditions for HECM deferral after the borrower’s death.

The eligible non-borrowing spouse must provide a certificate at loan closing which states they are also aware of their status as an eligible non-borrowing spouse and the conditions for HECM deferment.

Married borrowers and their non-borrowing spouses must provide the certifications annually.

All rights to an eligible non-borrowing spouse’s right to a deferral cease in the event of a divorce.

Upon the borrower’s death

Within 30 days of receiving notice of the borrower’s death, the lender is to obtain the above certification from the eligible non-borrowing spouse, and annually thereafter. Within 90 days of the death of the borrower, the eligible non-borrowing spouse must establish legal ownership or other legal right to remain on the property securing the HECM loan.

The deferral period lasts for as long as:

  • the surviving eligible non-borrowing spouse lives in the property as their primary residence; and
  • they continue to meet the borrower’s obligations under the HECM loan, including the payment of property taxes and insurance.

Note that while the eligible non-borrowing spouse is able to continue to live in the property and defer repayment of the HECM loan, they do not have access to the HECM loan funds. The HECM loan will continue to accrue interest, and the lender is still required to remit mortgage insurance payments to the FHA, and collect any servicing fees due.

The non-borrowing spouse still retains all rights as a successor to sell the property to satisfy the debt, according to rules set forth by HUD. [HUD Mortgagee Letter 2014-07]

Primary residence certification

The property must also be the primary residence of each borrower applying for the loan. If one or more of the borrowers is in a health care institution at the time of the loan, the property is still eligible if at least one of the other borrowers on the loan lives in the property as their principal residence. [12 USC §1715z-20(d)(3); 24 CFR §206.39]

The borrower is to make an annual certification that at least one borrower is still occupying the property as the primary residence in order to meet this requirement. Additionally, a second certification is required which verifies that the eligible non-borrowing spouse is still married to the borrower and the property is still the eligible non-borrowing spouse’s principal residence. If the borrower has died, the eligible non-borrowing spouse makes the annual principal residence certification. [24 CFR §206.211; HUD Mortgagee Letters 2014-07 and 2015-02]

If the surviving eligible non-borrowing spouse temporarily resides in a health care institution, the property is still considered their primary residence if:

  • they occupied the property immediately prior to entering the health care institution; and
  • their residency in the health care institution isn’t longer than 12 consecutive months. [HUD Mortgagee Letter 2014-07]


Jan. 3, 2022

Fed announces a quicker increase to interest rates


PVH Blog: Fed announces a quicker increase to interest rates

Fed announces a quicker increase to interest rates

Following yet another month of record-setting inflation, the Federal Reserve (the Fed) has announced during their December 2021 meeting a quicker end to their economic support than previously determined.

The Fed’s goals are to maintain:

To achieve these goals, the Fed uses a number of tools, including their benchmark Federal Funds Rate. During times of economic distress, the Fed also makes bond market purchases.

Interest rates on long-term products, such as 30-year fixed rate mortgages (FRMs), reflect bond market investor perceptions about the level of success the Fed will achieve fighting inflation. When the Fed’s inflation fight becomes aggressive, the long-term bond rates decline as investors pile back into bonds. In contrast, when the Fed allows inflation to rise beyond its target rate, investors shy away from bonds, and these bond rates rise.

In other words, when bond prices are rising (as during 2020-2021), interest rates tend to fall. When bond prices fall, interest rates rise; an inverse relationship.

Beginning in March 2020, the Fed began buying $120 billion per month in bond market purchases, including mortgage-backed bonds (MBBs), thereby reducing the supply of MBBs. Axiomatically, a reduced bond supply means higher prices — and lower yields, reflected in lower interest rates. While many of the factors influencing today’s high inflation are transitory — meaning, pandemic-induced and likely to ease off with a return to stable supply-side economics — the Fed’s MBB purchases now seem excessive for prices, and even dangerous.

In November 2021, the Fed announced their plan to begin tapering MBB purchases by $15 billion a month, including a $5 billion-per-month reduction in MBBs.

However, inflation continues to rise rapidly. The latest report shows the year-over-year consumer price index (CPI) up 6.8%, the highest level of U.S. inflation experienced since 1982, according to the Bureau of Labor Statistics (BLS).

Thus, the Fed is being forced to reign in their bond market purchases more quickly, from $15 billion less to $30 billion less per month. At this pace, the Fed’s bond buying program will wind down completely by March 2021.

Bond taper = higher interest rates

As the Fed reduces and eventually ceases its MBB purchases, prices will fall. In turn, interest rates on mortgage products will inevitably rise.

Further, the Fed expects to increase their benchmark rate three times in 2022, from today’s zero to 0.75%-1.0%, according to Fed’s latest economic projections. Previously, they had assured the public they would not increase the Federal Funds Rate until 2023.

The implications for real estate are clear.

Mortgage interest rates have already begun a gradual increase in 2021, with the average 30-year FRM rate increasing from a low of 2.65% in January 2021 to the current average of 3.12%. Today’s higher interest rates mean less principal available to homebuyers with the same mortgage payment.

The average FRM rate increase throughout 2021 alone has seen buyer purchasing power reduced by 5%. In other words, a homebuyer with the same income and savings at the beginning of 2021 now qualifies for 5% less mortgage principal due to interest rate increases alone.

Buyer purchasing power exerts a pull on home prices. In fact, the rapid rise in asset prices, including home prices, is forefront in the Fed’s decision to allow interest rates to rise. Here in California, the average annual home price increase ranges from 19% in the low tier to 22% in the high tier as of September 2021. While significant, this price increase has eased somewhat from mid-year.

Expect home prices to continue to fall back in 2022. On top of the Fed’s easing off the gas pedal by allowing interest rates to rise, home prices are also losing momentum due to a growing inventory of homes for sale, fueled by the end of the foreclosure moratorium and forbearance programs. This will be good news for homebuyers, who have spent the last 18 months struggling to gain a foothold amidst months of high competition for an historically low inventory of homes.


Dec. 31, 2021

What is a Mortgage Pre-Approval?

In a seller’s market, you increase your chances of landing a dream home if you have pre-approved financing in place. This tells sellers that you’re serious about buying. They will also feel more confident about escrow closing on time. But what exactly is mortgage pre-approval? And how long does it take?

Read on to learn more about what mortgage pre-approval can do for you and how a lender will decide whether or not you’re approved.

Pre-approval vs. pre-qualification

It’s easy to get pre-qualification and mortgage pre-approval confused. But it’s important to understand that they’re not the same thing — because if you get pre-qualified, you can still be denied for funding later on.

Pre-qualification comes before pre-approval in the home buying process. During this stage of the borrowing journey, you will self-report information about your finances. Your lender will then give you an estimate of what you’re likely to get approved for. A credit check may also be conducted.

Mortgage pre-approval goes further than a simple pre-qualification. At this point you complete a full application with a potential lender and submit official documents. You will prove your income, credit, and down payment at this stage. Once you’re approved, your lender gives you an official pre-approval letter that you can show to a seller’s agent. This is concrete proof of what your lender has agreed to.

What goes into a pre-approval?

Your bank will consider a variety of factors when you get pre-approved, from details about the property you want to buy to your monthly income. As a part of the pre-approval evaluation, you can expect the lender to ask for information that includes:

  • What type of mortgage you’re asking for. You may get approved for a FHA loan but not a conventional loan, etc. Be clear about what you want to be approved for.
  • Details about your life. Your type of employment, level of education, and number of dependents can all factor into how much you’re approved for.
  • Income. You will probably submit multiple proofs of employment throughout the mortgage process. At the pre-approval stage, the bank wants to know your monthly income. You may also submit rental income, alimony, and other revenue streams as a part of your income.
  • Monthly expenses. Your lender also needs to understand what your bills are. They will determine this through your own documents and a credit check.
  • Debt-to-income ratio. Your income vs. debts help the lender determine what your monthly debt payments are in relation to your overall income. A DTI at 30% or below puts you in the best position for pre-approval.

How long does pre-approval take?

You may get a mortgage pre-approval letter as quickly as 10 days after you submit your application. The letter is only good for 90 days. That means it’s best to have a property in mind when you submit your documents. If you don’t find a place you love within three months, you’ll have to start the mortgage pre-approval process all over again.

What pre-approval means for sellers

For sellers, a pre-approved buyer means a smoother transaction. There is a smaller chance that the deal will fall through in escrow, and they may be more likely to accept your offer if you have a pre-approval letter in hand.

If you’re a seller having a hard time finding the right pre-approved buyer, consider calling California Family Homebuyers. We are able to buy using an all-cash offer. You won’t have to worry about our funding falling through. Plus, we close quickly. You may be able to select a closing date as quickly as seven days.

In Sacramento and can’t find a buyer? Call us today to see if we can help!


Dec. 28, 2021

How to Make an Offer on a House (and Win)

You did it. You found a home you know you could be happy in. But do you know how to make an offer on a house that will stand out from the rest? It’s not as simple as you might think. In a sea of other offers, you want the seller to notice yours — fast.

Read on to learn how to make a great offer that will be accepted the same day. If you make the right bid, you could be under contract before you know it and moving in within the month!

5 tips for making the best offer on a home

  1. Get pre-approved
    Getting pre-approved funding can give sellers confidence in your offer. A pre-approval letter from a lender means you’re guaranteed to get a certain amount of funding. This can reduce the chances that your escrow will fail. If given the choice between a buyer who is hoping to get approved for a mortgage and one who already has funding secured — a seller is likely to choose the pre-approved buyer.
  2. Don’t go too low
    Real estate is full of haggling. The seller asks for a certain price point, and you’re allowed to offer less than list price. That being said, going to low will put you out of contention. If you have a good reason to offer less than list price, such as you notice that the appliances need to be replaced, then go for it. But be mindful of what comparable homes are going for in the neighborhood. You may insult the seller if you low ball them and they know they can do better.
  3. Offer to close fast
    Your offer may also stand out if you offer to close quickly. Many sellers are motivated to sell quickly because they already have their eye on another property, or they need to move out of town. By offering to close in under 30 days, you might appeal to the seller’s urgency. If you’re already pre-approved for funding, your lender can pull together your money within a few weeks in many cases.
  4. Limit your contingencies
    Some real estate sales involve contingencies. This means you’re saying you will only complete the deal if certain things fall into place. One common contingency is the sale of another property. For instance, you may offer to buy a property, but let the seller know that you need to sell your current home first. If you can’t find a buyer for your own house within a set period of time, this contingency allows you to pull out of the deal with not consequences. Contingencies can complicate sales, so try not to have too many if you want your offer to be accepted.
  5. Write a meaningful letter
    Believe it or not, an old fashioned letter appealing to the seller may help you. If you’re so excited to live in your dream home that you just can’t stand to let it go to another buyer, submit a heartfelt letter with your offer. Let the seller know why you’re so set on the property, explaining what it would mean to you to live there. If there is a similar offer on the table, the seller may choose yours to make your dreams come true!

California Family Homebuyers is here to help you figure out how to make an offer on a house — and how to sell yours when you’re in a pickle. If you can’t find a buyer for your home or you need to sell super fast, give us a call to see if we can help. We may be able to ta a problem property off your hands in as fast as 7 days!


Dec. 27, 2021



Existing Home Sales grew 1.9% in November, to a 6.46 million annual rate, landing above 6,2 million for the third month straight. It looks like sales for 2021 are on the way to be the highest for any calendar year since 2006.

New Home Sales increased 12.4% in November, to a 744,000 annual rate. But the gain came after big downward revisions to prior months. However, builders are active, with homes under construction at the highest level since 2007.

Home sales should continue to be driven by millennials who are now the country’s largest living generation and are entering the housing market big time, making up more than 50% of new mortgage issuance since 2019.


SANTA CAME EARLY... The "Santa Claus rally" period is all this week and the first two sessions of the new year. But Santa showed up last week to gift traders with a three-day rally, sending the S&P 500 to a new record high.

This was clearly driven by investors buying the dip, optimistic that the omicron variant won't derail world economies, and ignoring the fact that the Fed's favorite PCE inflation measure rose 5.7%, the highest rate since 1982. 

We also had University of Michigan Consumer Sentiment near historical lows, and Q3 economic growth slowing to 2.3%. But Personal Income and Spending are up, while continuing jobless claims keep receding.

The week ended with the Dow UP 1.7%, to 35,951; the S&P 500 UP 2.3%, to 4,726; and the Nasdaq UP 3.2%, to 15,653.

As money went to stocks, bond prices slipped, the UMBS 3.0% down .18, to $103.48. The national average 30-year fixed mortgage rate dropped a bit in Freddie Mac's Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW… Yardi Matrix reports rent increases for single-family homes continue to sizzle, up 14.3% annually, substantially higher than multifamily rents in November. 


PENDING HOME SALES UP, JOBLESS CLAIMS DOWN... Economic data is light this week, but we'll see two key reports. The Pending Home Sales index of signed contracts on existing homes is expected up a tad for November. Continuing down is the forecast for Initial Unemployment Claims.

Stock markets are open New Year’s Eve, Friday, December 31, but bond markets close early at 2 p.m. All U.S. financial markets are open Monday, January 3, but other global markets are closed.