Michael Roberts' Blog -San Jose Homes, Real Estate and Houses for Sale

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5 New HomeOwners and 5 Successful Sellers makes for great news this past week.

220 BERSANO LN, Los Gatos 95030
$1,729,000 Beds: 4 bed(s) Baths: 3|0 bath(s)

17050 Wild WY, Los Gatos 95030
$1,485,000 Beds: 3 bed(s) Baths: 2|0 bath(s)

16345 LOS GATOS BL #49, Los Gatos 95032 (Los Gatos)
$510,000 Beds: 2 bed(s) Baths: 1|1 bath(s)

30800 LOMA CHIQUITA RD, Los Gatos Mtns 95033 (Los Gatos Mtns)
$159,000   Raw Land

14685 OKA RD #11, Los Gatos 95032 (Los Gatos)
$140,000 Beds: 3 bed(s) Baths: 2|0 bath(s) Mobile Home

There are 12 new Los Gatos listings for the week you can see these new listings using comprehensive search tool on my home page.

Have you noticed?   Most markets are experiencing a price stabilization, however there are price reductions being made even as late as October.    43% of homes listed in 27 major markets saw price reductions of  $24,781 dollars.

From Rismedia:

Other highlights of the brokerage’s monthly survey of price reduction data include:
-Miami-area (Ft. Lauderdale/Palm Beach) homeowners reduced list prices by the largest percentage at 15.7% or $40,000 on average
-Homeowners in Raleigh-Durham reduced prices by the smallest percentage at 4.6% or $11,000 on average
-Of the markets studied, those with the highest percentage of price-reduced homes are Jacksonville (50.9%), Orlando (50.1%) and Chicago (50.1%)
-Markets with the lowest percentage of price-reduced homes are Denver (31.1%), Los Angeles (33.6%), Sacramento (36.4%) and San Diego (35.7%)
-Markets where sellers have cut the most in absolute dollars are: San Diego ($54,000 median price reduction), Orange County, Calif. ($51, 000 median price reduction), San Francisco ($50,500 median price reduction) and Los Angeles ($43,000 median price reduction).
-As in September, Orange County had the highest median list price at $624,900. Jacksonville, Fla. has the lowest median list price at $172,000.

I love this video series…California from 1939

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jump to Part 2 of the series

If you have to ask that question then the answer is ‘yes’ your agent is probably lying to you. Notice I use the active ‘probably’?

In this series of articles you will learn:

• How to identify what is most important when choosing a Realtor.
• Why do I feel like a Deer in headlights?
• Learn if you chose a ‘Realtor’ or a’ Salesperson’
• What does Market price really mean to me?

There is a question every Realtor has been trained to use as an example to sell their service to a potential client. It goes something like this…

Seller/Buyer : “What is your commission on the sale?”

Realtor: “Well, my commission is one half of the whole – 6 or 7%”

Seller/Buyer: “Oh really? We only want to pay 5%”

Realtor: “If I were willing to give up MY money would you trust me with YOURS?  I am not willing to negotiate my commission”

Wow! The Seller/Buyer answer is a given.   “No  I wouldn’t trust you with my money”.  In sales you are supposed to get ‘yes’ answers… the psychological affect of this ‘no’ is actually an affirmation.  Makes sense, but doesn’t it make you want to grab the Pepto?

Let’s analyze the basis for the above exchange. The Seller/Buyer (S/B) is trying to get something from the Realtor and immediately the Realtor is trying to protect himself from them.  Could it be the S/B is trying to protect their self from the Realtor? Both are true and both are a natural human reaction when something is missing from the relationship. Trust.

This is a salesperson tactic using the ‘common sense approach’.  Politicians use it all the time.  When you are asked a question that you naturally say yes to, be cautious, you are working with a salesperson.   This should perk up your ears.  A salesperson wants yes answers for the psychological affect it will have in persuading you to make a decision that benefits them.  A Realtor will ask you questions that require more thoughtful answers.   Your thoughtful answers will create a working strategy the Realtor can use to help you get what you want.

If a Realtor feels it necessary to sell their services using psychological affirmation tactics, beware.   It is highly probable they have no inclination to do what it is you are hiring them to do.  That is…sell your home, strongly negotiating the price and terms that best suit your financial future and professionally manage the process the entire way.  This is not to mention the investment of time and resources the Realtor should be investing in marketing your home…not selling themselves!   Would you want someone that only focuses on themselves or someone who makes you their priority?

In a relationship where the Realtor is representing a Buyer there is no question of commission and the above scenario mentioned in Part 1 is meaningless. The Seller pays commission to both the selling agent and the listing agent 99.9% of the time

There are other Buyer:Realtor scenarios I will share in Parts 2 and 3.  Part 4 of this series is for experienced Sellers.   For now, I want to remind you that trust is the most important factor in the equation.

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Buying a short sale is like being a miner…A miner will dig and dig, for months, until they find gold right?  Buying a short sale can be very much like mining for gold.  You need to have a miner’s mindset and use better tools than the others.

“How many months is this going to take?”   This question is being asked with great regularity… too much really.   The answer…It depends on who has the mine.  Period.  If the Listing agent  (who has the mine or short sale) is not proactive then it doesn’t matter how hard your Realtor works or how high your offer is…you won’t find any gold.

Your Realtor is your mining pick.   They need to know how to qualify the listing agent’s knowledge, experience and ability or, at least, be willing to work to help the listing agent make progress with the bank who is ultimately going to approve the short sale and…shine the light on the gold.

A successful gold miner will have a map of the gold mine and know how to navigate it.   Your Realtor of choice will need to have a good map and understand the best way to navigate their way to the gold and extract it.   This map is developed through representing sellers AND buyers of  short sale properties, understanding all the pitfalls  and the best practices to avoid them.

More and more short sales will be coming to the market and,  the best homes and best buys available, will likely be short sales.   This is the market condition reality for the next year or longer according to Banking industry experts and Real Estate professionals based on market statistics and economic conditions.

The extremely low interest rates are bringing droves of buyers out and multiple offers on the best homes are the norm in San Jose as well as Los Gatos and all around Santa Clara County, for that matter.  Too many miners and not enough mines.  You can avoid having to compete with these buyers if you realize they are overlooking the opportunity in front of them.  The Short Sale properties.    Agents are avoiding them because they think  that most of them will never close.    Ahhaa!    The key!   Find other mines!  Be a good miner and have the sharpest pick!

Ok!  I am suffering from too many numbers, quotes and opinions.  Cap Rates, Cap and Trade, Carpet Tiles, Carbon and Tire Piles.   From Obama’s economic plan and Bush’s mistakes to Barney Franks…too much clutter!  Maybe it’s from the Starbucks at 9pm.

Like Obama said yesterday ” The stars have aligned…”  He was referring to the congress and white house being on the same side, I know.  Who cares!   I only care about the residential housing segment!  In my 28 years of working in the residential housing market has made it clear to me..The Stars Have Aligned..NOW!!!!

The market has bounced around, the housing segment has free fallen, like a trolley car going down Lombard street without a break man.  The job losses are about to level off.  The truth is the housing market is preparing to make a surge big time.  The mortgage finance rates are so low they are nearly free considering the 5-7 year equity upside coming.  Especially the fixed rates.  It is bringing tears to my eyes!..or is it the coffee?

I have been writing offer after offer for buyers, lately(today),  and homes are seeing multiple offers like 2003.  It is amazing how many best buys we are finding for everyone… are you one?   The inventory is down from 16 months worth to 4 months worth.   Some communities are at 3 months worth of inventory.  The big question….Where is the bottom?  Ummm…I think it is about to go on sabbatical.

If anyone is waiting…they are going to be like those in 2005 and “wanting”.    Market conditions have never been better.   Find a savvy Realtor, mortgage professional and your calculator and get moving on the Foreclosures and Short Sales available.    Where?  Wherever YOU want to buy a home in Santa Clara County or an investment out of the area.  Your Realtor is licensed to sell in California!  Everywhere in California!

Don’t believe me!   Call your friends…Call your Uncle, the Realtor…Go to open houses this weekend!  Then come back here and tell me what you learned!

This question is asked of me everyday.   A short description of the differences should be addressed first.

Since Short Sales are more prevelant than REOs I will start there.    A Short Sale is , simply, the process of selling a home for less money than is owed to the mortgage company.   Commonly found in San Jose today,  the pitfalls of buying this type of home are many, it is important to realize it can be done however, the final price is determined by the bank.

Once the seller has accepted an offer, the listing agent, subsequent to submitting the third party authorization to communicate on your behalf, will submit it to the banks representative for approval.   The party to which the agent is communicating may only be representing the bank…a servicer.  This means we have now added a new layer.  How many times have you heard “I want it from the horses mouth”?  Well, it is not likey the horses mouth will be speaking.  It takes several days and sometimes weeks for your offer of Short Sale to be assigned to a negotiator (loss mitigation specialist) who will then begin the process of reconciling the numbers.

A BPO (broker price opinion..basically,  a market analysis) will be ordered to learn the market value of the property and a financial statement will be required from the seller.  Actually, what the seller has to produce is a very long list.   None of this can happen until the seller’s agent has packaged the offer correctly.    Mistakes here will set the procees back even further.  An experienced agent is paramount in these sale situations.  This is no place for a newbie.

If all is done well the  sale can proceed per the purchase contract.   The date that the bank approved the short sale is the ”actual date” the contract timelines begin.   This applies to REO sales too.

An REO, on the other hand, removes the seller’s emotions and other complications from the real estate equation.    Getting it “from the horses mouth” is bit more likely.   Still, there are servicing companies negotiating for the bank in most cases.    

Many buyers want to make offers below the asking price of an REO.   This can be fraught with problems.    The bank already priced the property according to a number of BPOs they have ordered and reviewed.    The highest and best price is the only offer they are interested in.  You want to be that offer.  No?  Yes, you do.  

The terms of the contract is where you are going to make your money.     With the bank focused on the price they leave open the terms of the contract for you to get your advantage.  A short escrow period or longer escrow,  escrow fees paid,  loan finance points paid and city or county transfer taxes are a few of the areas to negotiate your way to a great buy.  The question of repairs is asked often….Yes, banks make repairs on REOs!  I know you have heard different.   Clearly stated and evidenced, necessary, cost of repairs can be negotiated after your offer is accepted.   I have experienced this with buyer clients before.  Investors know this very well!  The bank does not MAKE the repairs…They reduce the price in accordance to the evidence and qualified estimates your agent must provide.   San Jose has many single family homes and condos, for sale, that you and your agent should be considering using these tools. 

What frustrations have you had trying to buy one of these homes?

While searching for a particular single family home for a recent buyer client, looking for REO’s (bank owned properties) (foreclosure to be specific), I kept getting the same results….good relative data that was current and up to date in the right communities.   In the meantime,  my new client forwarded a handful of MLS numbers and excitedly asked  “Can we see these foreclosure homes this afternoon?”   Funny thing was… They were no longer available.  One had a  pending sold status another was no longer on the market and the last one…I could not even find.

Frustrated, I asked my client where did you find these listings?   The answer was disappointing…another website.  I won’t share which one as I have found the data there to be poorly arranged and not current by any standards.   Figures!   I asked “Why would you go to another website to find a home when I have been sending you the most recent daily updates?”   I got another “figures” answer. …”I saw it on the web and they advertised on the TV news”.    Oh Gosh!  Not the web monkeys!

Many new websites and data exchanges have been popping up lately.  The problem with these other sites is that their data is third party.   They are built by web masters to capture leads that are then sold to the uninformed Real Estate agent looking for new business. These sites load from the same place your search is sourced from.  The one you set it up with your Realtor whom you probaly hired to find you the best home at the best price available.

Unfortunately, the web architecture does not have a true update process programmed in.  This allows for information to become old and irrelevant.    Much of the information is derived from Title records too.  If someone refinances their mortgage it will report it as a sale when it is “far from that”.   If you thought a home sold for $250,000 which was actullay in a million dollar neighborhood…good chance it did not REALLY sell.    Then there is the home that is $300,000 under market price….it actually sold 2 years ago!

In short,  all the homes available for sale were right here at their finger tips.   The data derived from this search tool is current, changes are updated by the minute and there is the capability to have any new results, based on the home search criteria, emailed directly to them.

The map search is the Best home search tool for many buyers.  This allows you to draw a line around a neighborhood and see only those results without being overwhelmed with a zip code search that will, invariably, return homes not anywhere near your desired neighborhood.   San Jose is rich in investors and fast, filtered results are paramount in being the first to find the best buys.

I hope I remember, the next time a meet a new client,  to share with them the dynamic web source for home buyers is right here.   Santa Clara County, Los Gatos, Cambrian, Blossom Valley, East Hills, Silver Creek, Milpitas, Fremont and Campbell etc… are included.   Cities in Merced, Stanislaus, Alameda and San Joaquin County are participating in the results found in this too.

Maybe I should post a bulletin on TV!

After years on the decorative outs, wallcoverings are back in style. They’ve shed their dowdy association with teddy bears and tiny country prints and re-emerged in fresh, attention-getting forms.

Wallpaper’s return has followed a decline in the popularity of faux finishes, noted Stacy Senior Allan, marketing director for wallpaper maker Thibaut Inc. Maybe one too many badly sponged walls convinced us to leave the wall decorating to the experts.

But like faux finishes, wallpaper adds a dimension that a plain coat of paint can’t, Allan noted. Especially in rooms without a lot of soft surfaces – dining rooms and bathrooms, for example – wallpaper adds softness and a layering effect, she said.

We talked to some leaders in the industry to find out the latest trends in wallpaper, and here’s what’s hot:

Tradition with a twist
Ages-old motifs are still around, but in oversized forms and surprising colors. ”Everything has gone large-scale,” said Paula Berberian, creative services manager for Brewster Wallcovering Co. Familiar designs such as damask and Jacobean prints are being blown up into bold proportions and rendered in unexpected hues or metallics.

The result is a less stuffy look that can work even in modern settings. It can be busy, though, so Lilly Sosic of the Brunschwig & Fils showroom in Beachwood’s Ohio Design Centre said wallpapers with oversized graphics might be best for areas where people don’t spend a lot of time – a powder room, for instance, or a foyer.

Or cover just one wall, suggested Gina Shaw, vice president of product development for York Wallcoverings. Not only is creating a feature wall a returning trend among designers, but it’s also a less costly way to bring interest to a room, noted her colleague at York, director of marketing LeRue Brown.

Sophisticated finishes
Texture adds a third dimension to many of today’s wallpapers. Thibaut’s Allan said improvements in manufacturing technology allow wallpaper to have raised textures and embellishments that weren’t possible earlier.

As a result, many of the new wallpapers enhance rather than dominate a room. ”Wallpaper used to be really ‘pay attention to me,”’ she said. Now it tends to play a supporting yet glamorous role.

Sand and tiny bead accents are popular, as are bits of bling such as crystals and pearls. Metallics are big, too, but don’t be scared away by bad memories of disco-era Mylar. Metallics now are more subtle, often used just for accents.

Eco chic
The world is wearing its Earth obsession on its walls. That means grass and leaf designs are popular, as is grass cloth, a classic look that’s making a comeback. It’s made of reeds, bamboo and other natural grasses, Berberian said, so it fits right in with people’s desire to decorate with renewable materials.

Spa blues and greens are strong from a color standpoint, as are other Earth-inspired shades. Brown remains popular, often paired with brighter colors.

’60s flashbacks
It’s a mod, mod world, at least for the people who missed the ’60s. The bold geometrics, pop art and bright colors that exemplified that groovy decade are in big demand among younger consumers, and that’s translating to wallpaper design.

Because many of the fans of ’60s design are young enough to be decorating dorm rooms or first apartments – or even their tween or teen bedrooms – the look is strong in lower-priced, repositionable decals. The peel-and-stick decals use an adhesive like the one used in Post-it notes, so they leave no residue when they’re removed.

Handcrafting
The renewed interest for handmade goods is apparent in wallpapers, too. Shaw thinks it’s an effect of the uncertain economy, an appreciation for things that are crafted thoughtfully and made to last.

Handmade wallpaper can be pricey, but more mass-produced wallcoverings have the look and feel of hand crafting. Berberian said many have raised inks, which give the illusion of hand-printing. Asian-inspired designs and line drawings or other simple motifs are common, too.

Such wallcoverings often include layered colors and small mistakes that make them appear handcrafted, Allan said.

Global influences
Our well-traveled society has shrunk the planet and brought the colors and designs of other cultures to Western walls. African countries and India are particularly strong influences in wallcovering design and in home decor in general, Berberian said.

You’ll see that in paisleys and ikat designs, elongated geometric patterns originally used in fabrics that have the appearance of having been stretched. Animal prints are strong, too, and you can even find wallpaper that resembles faux reptile skins so closely they almost look and feel real.

© 2009, Akron Beacon Journal (Akron, Ohio).
Distributed by McClatchy-Tribune Information Services.

Which season is the best time to be a homeowner? Tax season! Along with the freedom to paint and remodel, tax breaks are one of the many perks of homeownership.

The bad news? Unless you choose to take the standard deduction, your days of “EZ” tax returns are over. You’ll need to pick up the 1040 long form and itemize your deductions on Schedule A. Get IRS forms here.

Most state and local governments charge property taxes, which are an annual tax on the value of your property. You can deduct all of the real estate taxes that you pay.

There is some good news about those monthly mortgage bills: A part of the soul-crushing sum can be deducted on your tax return. For most homeowners, the bulk of each payment goes towards interest. That interest is tax deductible, up to a total of $1 million ($500,000 if you are married filing separately) on loans taken out to buy, build or substantially improve a principal residence and a second home. Any type of home is eligible: a mobile home, house, condo or even a houseboat.

In order to deduct mortgage interest on your second home, you must stay there at least 14 days a year or more than 10 percent of the days it is rented during a year. If you don’t meet this requirement, it is considered a rental property rather than a second home.

Also, other rules apply if you rent out space in your primary residence.

“Talk to a tax professional. You have to report the income because that is business use of the home as well as residential,” explains Alison Flores, a research analyst at the H&R Block Tax Institute.

You can also deduct interest on home equity loans of less than $100,000 ($50,000 if single or married filing separately), as long as the first and second mortgages total less than the value of your home.

EXAMPLE: You take out a $40,000 home equity loan to pay for your son’s college tuition. Your home is worth $100,000, and you owe $70,000. You can deduct the interest on $30,000 dollars of the loan, but you’re on your own for the remaining $10,000.

If you deduct enough mortgage interest to get a tax refund, you’ll need to claim that money as income in the year you receive it.

Always consult your tax advisor. For more information, read IRS Publication 936.

Scroll Down for More Tax Tips….

Congratulations — you’re a homeowner! Now that you’ve moved into your new digs, you’ll need to:

• Decide what color to paint the living room
• Sort through those last few boxes (eventually)
• Learn about tax deductions for new homeowners

Even before you sign on the dotted line, you can get a mortgage credit certificate (MCC), which is intended to help lower-income buyers afford homeownership.

If you qualify, you can claim the credit each year to cover part of your home’s interest. The only catch: You must get an MCC before you get a mortgage and buy a home. Contact your state or local housing finance agency for more information.

You’re eligible for a host of tax deductions the minute you get the keys to your front door. Like all homeowners, you can subtract real estate taxes and mortgage interest from your tax tab. Even if you bought a home in December, it’s worth getting a few dollars off your IRS bill.

The year you buy your home, you can also deduct any money paid towards mortgage points. The term “points” refers to charges paid by a borrower to get a mortgage, and can also be called loan discounts, discount points, origination fees or maximum loan charges.

You must meet these criteria to qualify: You are buying (not refinancing) a primary residence. Your loan must be secured by the home you live in most of the time.

·  Your overall cash paid at closing exceeds the points charged. This can include money from you, or points paid by the seller. You can’t deduct points you paid for with borrowed funds from a lender or mortgage broker.

·  You’re not using the points to avoid traditional closing costs. If you paid points in lieu of closing costs, like title insurance and attorney’s fees, you can’t get a tax credit.

If you meet that criteria, the amount on your settlement statement that’s listed as “points charged for the mortgage” can be deducted from your taxes.

If you refinanced your mortgage, the points you paid are not deductible in the year you paid them, unlike the points you paid when you first took out your mortgage. For refinanced mortgages, you have to deduct the points equally over the life of the loan. This also goes for loans you take out to buy a second home or investment property.

HERE’S HOW: Divide the points paid by the number of payments to be made over the life of the loan. EXAMPLE: If you paid $2,000 in points and will make 360 payments on a 30-year mortgage, you can deduct $66.72 [($2,000/360) x 12] each year, assuming you make 12 mortgage payments in a year.

There is an exception: If you use part of the money for home improvements, you can deduct the portion of points related to the improvements in the year you paid them.

EXAMPLE: If you refinanced your $200,000 mortgage with a new 30-year loan of $250,000, paid $2,000 in points and used the extra $50,000 to make home improvements, you can deduct 20 percent or $400 [($50,000/250,000) x 2,000] of points in the year they were paid. The remaining points paid must be deducted equally over 360 monthly payments or $53.28 [($1,600/360) x 12] each year.

NOTE: If your mortgage ends early because you paid it off, refinanced it with another lender or sold the home, you can deduct any remaining points for the mortgage in that year. So, in the above example, if you sold the house the following year, you can deduct $1,546.72 ($1,600-$53.28).

This is right from the Bank of America Press Kit!!!! 

Bank of America’s Nationwide Homeownership

Retention Program for Countrywide Customers

Fact Sheet

§         Countrywide and state Attorneys General has cooperated in the development of a comprehensive home retention program to systematically modify troubled mortgages with aggressive solutions, including interest rate and principal reductions.

§         It is anticipated that the loan modification program in this agreement will result in an estimated $8.4 billion in permanent payment relief to an estimated 400,000 Countrywide borrowers nationwide.

§         In participating states, the agreement provides up to $150 million in payments to borrowers who defaulted early in their loan terms, while committing to a “soft landing” program to help borrowers who are unable to retain their homes with relocation costs.

§         Countrywide will begin its proactive outreach to eligible borrowers on December 1, 2008.

Formalization of Existing Commitments

§         Countrywide no longer offers “subprime,” “high cost” or “negative amortization” mortgages and has significantly curtailed no- and low-documentations loans.

§         Broker compensation will be limited to 4% of the amount borrowed.

§         Countrywide will retain, for at least one year following the acquisition of BAC, a minimum of 3,900 personnel to assist with loan modifications and other foreclosure avoidance measures.

§         We will continue to proactively seek delinquent borrowers and offer streamlined loan modifications and report the progress of this agreement on a regular basis.

Home Retention Programs

§         Beginning December 1, 2008, Countrywide will proactively contact subprime and Pay Option ARM borrowers whose loans are scheduled for an interest rate change. We will invite them to contact us if they believe they will not be able to afford the new payments.

§         Countrywide will not advance foreclosures for eligible borrowers for the time necessary to determine the borrowers’ interest in staying in the home and their ability to afford the new terms as well as the investor’s willingness to accept a loan modification.

§         Countrywide will waive late/delinquency fees for missed payments when modifying loans and will not charge modification fees to borrowers in the participating states.

§         When possible, Countrywide will waive prepayment penalties in connection with any workout or refinance, whether or not the new loan is originated with Countrywide.

Eligibility

Borrowers eligible for loan modifications under this program must have received a qualifying subprime mortgage or a Pay Option adjustable rate mortgage prior to December 31, 2007, and the property must be a 1-4 unit owner-occupied residential property. In addition, certain other requirements are set out in the program:

• The borrower is 60 days or more delinquent and the current loan-to-value ratio is 75% or higher;
• The borrower is current today but becomes 60 days or more delinquent at any time prior to June 30, 2012, and the loan-to-value ratio at the time of the modification is 75% or higher;
• The borrower has a subprime hybrid ARM and the borrower is current but reasonably likely to become 60 days or more delinquent as a consequence of a rate reset, and the loan-to-value ratio at the time of the modification is 75% or higher;
• The borrower has a Pay Option ARM and the borrower is current but reasonably likely to become 60 days or more delinquent as a consequence of a rate reset or payment recast based on negative amortization, and the loan-to-value ratio at the time of the modification is 75% or higher.

In addition, customers may be eligible for the early payment default benefit of this program if: (1) the customer has a Countrywide-originated first lien loan; (2) the loan was on or prior to December 31, 2007; (3) the customer’s primary residence is the property that secures the loan; (4) the customer has made three or fewer payments over the life of the loan (the borrower’s state may expand eligibility); and (5) the customer has either lost his home to foreclosure or is at least 120 days in arrears on mortgage payments.

Loan Modification Program Details

Countrywide will first offer eligible borrowers an FHA refinance under the HOPE for Homeowners Program. If not eligible for that program, Countrywide will offer these specific programs based on product type. 

Subprime 2-, 3- 5-, 7- and 10-Year Hybrid ARM borrowers will receive an unsolicited extension/restoration of the introductory rate for five years and an invitation to contact Countrywide for additional relief if affordability concerns persist. Borrowers who cannot afford the introductory rate will be considered on a streamlined basis for a five-year interest rate reduction to as low as 3.5% (based on the affordability equation) and a conversion to a fixed-rate mortgage at the end of five years.

Pay Option ARM borrowers accepting a streamlined loan modification option will have the negative amortization feature eliminated from their loan. The mortgage interest rate will be reduced to as low as 2.5%, and the loan will be converted into either a fixed-rate mortgage or a ten-year interest-only loan. For single property owners who currently have no equity in their homes, Countrywide will write-down the principal balance to as low as 95% of the current value of the property to restore an equity position.