Beware of Homestead Declaration Scam

If you have ever purchased or refinanced a house in California, you have most likely received a letter offering to prepare a Declaration of Homestead. This company typically offers to prepare the document for a fee ranging from $25 to $75. If you send the company the amount they request, they will prepare the Homestead Declaration for you and send it back so you can take it to the County Recorder for recording.

This is a "sales letter" and it is designed to scare you into action. The company uses public records (i.e., Grant Deeds, Deeds of Trust, etc...) to obtain your personal information and targets First-Time Homebuyers, due to their inexperience, and presents the offer in a way that the target (the reader) assumes it is legitimate and is something that needs to be completed and paid.

So what is a Homestead Declaration?

A Homestead Declaration is a legal document and process whereby a homeowner can protect the equity in his/her/their property, not the asset value, but the equity, from creditors. Homestead protection is limited to a homeowner's primary residence. The protection can be lost if the homeowner no longer occupies said residence, but is portable and can be relocated to the new primary residence.

Homestead exemption laws prevent the forced sale of a house to meet the demands of creditors. The laws protect the following:

• the first $75,000 of house equity for single persons
• the first $100,000 of house equity for married couples, or single persons with at least one child
• the first $175,000 of house equity for persons over 65 or legally mentally or physically disabled
• the first $75,000 of house equity for single persons 55 years of age or older with a gross annual income of not more than $15,000, and
• the first $75,000 of house equity for married couples 55 years of age or older with a gross annual income of not more than $20,000

However, there are exceptions, such as mortgages, mechanics liens, and property taxes.

The laws also provide an exemption from property taxes. In California, the first $7,000 of the value of your primary residence is exempt from property taxes. If you need proof, look at your own property tax bill and see for yourself.

You can declare a homestead on your own by filing a one-page document (Homestead Declaration) in the County Recorder's office where your property is located, but it may be redundant since homestead protection is automatic in California.

Consider this article a "heads up" since I am not a lawyer and would not presume to give you legal advice. You may wish to consult with a legal professional for all the details on how this may apply to you. However, perusal of your personal property tax bill may satisfy your curiosity as to whether you are protected or not. My desire is simply to protect you from wasting money on a service that is not only unnecessary, but that you can do for yourself, should you so desire.

What Is Your Ideal Lifestyle?

As the new year is officially under way I am reminded of a something a close friend of mine said to me, "Most people make a living instead of designing their lives?" While I am not a big fan or advocate of New Year's Resolutions, I do like to contemplate the year that just passed and consider what, if anything, I want to do differently in the year ahead. With that in mind, Who is it important for you to design your ideal life for?

The key is not to prioritize your schedule, but to schedule your priorities. A book that I read some time ago shared this story to make the point.

I attended a seminar once where the instructor was lecturing on time. At one point, he said, "Okay, it's time for a quiz." He reached under the table and pulled out a wide-mouth gallon jar. He set it on the table next to a platter with some fist-sized rocks on it. "How many of these rocks do you think we can get in the jar?" he asked.

After we made our guess, he said, "Okay, let's find out." He set one rock in the jar, then another, and another. I don't remember how many rocks he got in, but he got the jar full. Then he asked, "Is that jar full?" Everybody looked at the rocks and said, "Yes."

Then he said, "Ahhh." He reached under the table and pulled out a bucket of gravel. Then he dumped some gravel in and shook the jar and the gravel went in all the little spaces left by the big rocks. Then he grinned and said once more, "Is the jar full?" By this time we were on to him. "Probably not," we said.

"Good," he replied. And he reached under the table and brought out a bucket of sand. He started dumping the sand in and it went in all the little spaces left by the rocks and the gravel. Once more he looked at us and said, "Is the jar full?" "No!" we all roared.

He said, "Good!" and he grabbed a pitcher of water and began to pour it in. He got something like a quart of water in that jar. Then he said, "Well, what's the point?" Somebody said, "Well, there are gaps, and if you really work at it, you can always fit for more into your life.

"No" he said, "that's not the point. The point is this: If you hadn't put these big rocks in first, would you ever have gotten any of them in?"

That story impacts me each and every time I hear it because it is so applicable to what each of us is doing with our time everyday. We're always trying to fit more activities into the time we have. But what does it matter how much we do if what we're doing isn't what matters most? The big rocks represent what matters most to each of us. Are you scheduling time into your day, week, month, quarter, and year, for the things that matter most to you?

The most powerful influence in your life is what you say to yourself, THAT YOU BELIEVE! Goals are neither right or wrong. They simply get us to take action (or not). So whether you believe in making New Year's Resolutions or not, I challenge you to answer these two questions for yourself;

1) Who is it important for you to design your ideal life for? and

2) What is YOUR Ideal Lifestyle?

If you take just a few minutes and answer these two questions you may very well set yourself on a path and progress toward what you defined as important to you and those you care about. For far too many people, life is "Groundhog Day" and it's high time we snap out of it. As Albert Einstein is credited with saying, "If you do what you've always done, you'll get what you've always got!"

Yet Another Hike In Mortgage Fees For Those Who Wait

You've Gotta Love The Gov. In December 2011, Congress voted to extend the Payroll Tax Cut. To pay for this tax cut extension, an estimated cost of $33 billion, Congress decided to increase fees on all mortgages starting in early 2012. Fannie Mae and Freddie Mac will increase their loan fees by 0.10% on each loan they insure. That will result in an 0.125% increase in interest rates, which correlates to about $25 to $30 per month on a $250,000 mortgage.

Congress also instructed FHA to increase its monthly mortgage insurance premium by 0.10%. That will result in a $20 per month on a $250,000 mortgage. While the increase won't cause the world to end, it is another installment in the long list of hits the mortgage market, and ultimately YOU, the homeowner and homebuyer, have taken since the housing and mortgage crisis began.

As interest rates have dropped, loan costs have increased, significantly.

• In 2008, the government introduced loan-level price adjustments (LLPAs) on all loans
• In 2009, the government increased those LLPAs 7 times throughout the end of the year
• In 2010, closing costs jumped 37% as banks met government compliance standards
• In 2011, the FHA more than doubled monthly mortgage insurance premiums

In fact, the FHA has increased its monthly mortgage insurance premiums 5 times in as many years.

Let's look closely at that $250,000 FHA mortgage to see the cumulative impact of these monthly mortgage insurance premium increases.

• In 2008, the monthly mortgage insurance was $100.52
• In 2009, the monthly mortgage insurance was $110.57
• In 2010, the monthly mortgage insurance was $180.94
• In 2011, the monthly mortgage insurance was $231.20
• In 2012, the monthly mortgage insurance will be $251.30

That's an increase of $150 per month on the same $250,000 mortgage from 2008 to 2012. This is yet another example that shows how waiting to buy a house or waiting to refinance your mortgage can cost you in ways you may not even realize. I wrote about this in January 2011 in a commentary entitled "Waiting To Purchase a Home Can Cost You." Congress continues to penalize current and new homeowners that are fully qualifying for their respective mortgages to pay for the recklessness of past homeowners and homebuyers.

Each time loan costs rise, it diffuses the effects of falling mortgage rates. Low rates don't matter if high costs wipe them out. Please feel free to contact me at Support@YourFavoriteLender.com if you would like to go over your specific situation.