Market and Regulation Updates – Investor Newsletter

Hello,

I hope this message finds you well. I wanted to share some valuable insights and key takeaways from our recent CMA (California Mortgage Association) Conference we just returned from.

This event brought together California industry leaders & experts, and I believe the following statistics, market updates and legal news are valuable for enhancing investment strategies.

We work to stay informed about shifting markets & changing lending regulations, and relay what information we obtain to you so that you too can stay informed. I hope you find this newsletter covering the 3 key conference highlights both informative and insightful:

#1 – Regulatory Update:

Understanding the regulatory landscape with private lending is critical for staying compliant and profitable.

The single BEST piece of news was regarding Senate Bill 1146, which was sponsored by our Association (CMA). This bill has passed both parties and now sits with the Governor to sign, expecting to become law on January 1st 2025. This Bill will fix the problem that was created by the Moon case (we have sent a couple of newsletters on this, click here to see the latest one sent in July of this year Legal Update – Latest Newsletter from the Broker, Updated Forbearances).

Once this bill is approved, it will enable us, as your licensed Broker, to negotiate and arrange modifications, extensions, or forbearances on any past private loan with an interest rate exceeding 10%, while maintaining the broker exemption under the usury regulations!

So, if you have a loan coming due or has already matured, and your borrower has requested an extension for more time to pay it off in full while continuing to make timely interest-only payments, we now have an option that should be available starting January to extend the loan without facing potential legal risks, as outlined in this bill based on the Moon case.

#2 – Private Lending Update:

Leaders in the field provided an in-depth look into both State & National trends in private mortgages. I would like to share a few notable statistics:

• Private loan rates vary from 7.125% up to 15.99%, with the average being between 10-12%. (Our average this year is right around 11.25%)
• The average default rate is 6%. (This is the default rate that we have on our offerings as well.)
• 80% of Private loans done are refinances.
• 65% of Private loans done are 1st mortgage loans and 35% are 2nd mortgage loans.
• 80% of Private loans are done on Single Family Residences.
• The number of Bridge Loans (a loan on a current primary residence to buy a new primary to move into) are up 30% over last year with about 1,400 – 1,500 such loans being done each month Nationally.
• Bridge Loan interest rates have been slowly decreasing with 83% of loans done at 10-13% and the average is at 11.2% interest rate. California had the lowest average interest rate for Bridge loans in the past year!

#3 – California Market Update:

In addition to the Private Lending industry, leading experts provided key statistics and insights on the real estate and financial markets. Following are some of the top takeaways I thought beneficial to share:

• The Federal Reserve just reduced interest rates by 0.5%. This is the first rate cut since March 2020! And the Fed Chairman stated that rates will continue to move down, so we will see how that shakes out over the next year.
• Average bank rates have been on a downtrend since November 2023 from a high of 8% to a current average of 6.35%.
• House prices through 2024 and 2025 are predicted to increase from 2-6%, per Fannie Mae, Freddie Mac, Realtor.com and a number of other sources. The limited supply of houses on the market continues to keep house prices trending upwards, maintaining a strength in property values.
• California’s population is also continuing to grow. In April 2024 the population increased by 67,000 to over 39 million! Despite the News and stories that go around that California has “floods leaving the State”, the numbers show otherwise. California remains the highest populated stated in the US, with Texas being the 2nd most populous, at 10 million people less than California!
• There are only 59,000 active property listings in all of California, well below current needs and is major contributing factor to real estate values remaining high.
• The average credit card interest rate is 27.64% with a current balance of credit card debt in the US at 1.1 trillion! With these higher interest rate debts, many homeowners are turning to home financing to consolidate their high interest debt. We are already seeing an increase in loan requests for this exact purpose. Even with the higher Private Money rates, the average borrower can cut their monthly expenses in half when getting a private money loan to consolidate debt!

What This Means For You:

The Trust Deed opportunities we present to you through our email offerings, have gone through our due diligence and are presented to you for your review and potential investing. With the information above, it’s clear that real estate values remain strong, which is a good benefit when investing in real estate!

Thank you for your continued trust and investing through our family company. My team and I look forward to achieving even greater success together in the coming months and years ahead.

Warm regards,
Ken Walker
Broker/Owner
Pacific Direct Mortgage & Real Estate, Inc

DRE #01858042 / NMLS #1221130
Phone: 707-708-0797 
Office:  1400 N Dutton Ave #22 Santa Rosa, CA 95401