Insurance – Fires – Loans

As I walked into the gym this morning, I couldn’t help but notice that about half the usual crowd was missing. Was it because of the National Day of Mourning for Jimmy Carter? Were the fires consuming people’s lives? Or was it the cold morning combined with schools being out? Who knows! But one thing I do know is that Southern California is currently reeling from devastating wildfires, and the past couple of days have been nothing short of gut-wrenching.

The fires lead me to a topic at the top of many people’s minds: insurance. We’ve all grumbled about rising insurance costs; unfortunately, this week’s devastation is bound to exacerbate the situation. Most of the people reading this don’t work in the ultra-high-end price points. Still, even so, many likely know that those impacted by these fires were probably insured through the California FAIR Plan, supplemented with a wrap policy. If you’re not familiar with the FAIR Plan, here are some critical points to understand:

1. Coverage Limits: The California FAIR Plan’s maximum coverage is $3,000,000. While that might seem significant, it often falls short for those in high-value properties.
2. Financial Instability: The California FAIR Plan had over $300 billion in exposure but only $200 million in cash reserves as of March 2024. To put that in perspective, $200 million is enough to cover approximately 66 homes at the maximum coverage of $3 million each.
3. Impact on Insurers and Consumers: By law, every insurer operating in California must participate in the FAIR Plan. If losses exceed the plan’s funding, the shortfall is passed on to insurers, who then pass those costs on to consumers as a surcharge. This creates a vicious cycle of rising premiums for everyone, not just those in high-risk areas. I guess this means we all get Supplemental Insurance bills?

As catastrophic wildfires grow more frequent, the strain on the FAIR Plan and California’s insurance market continues to increase. In response, the state is working on a “Sustainable Insurance Strategy,” which aims to allow insurers to charge rates that more accurately reflect a property’s fire risk. The hope is that this will bring more private insurers back into the market, increasing competition and ultimately stabilizing rates. However, this is far from a quick fix.

The immediate concern for those of us in the real estate and mortgage industries is how these fires will affect our current transactions. Here are some key considerations:

• Appraisal Updates: Any transactions near fire-affected areas will require a Fannie Mae 1004D (Appraisal Update and/or Completion Report) or the equivalent Freddie Mac Form 442. These reports ensure the property’s condition hasn’t changed due to the fires.
• Insurance Moratoriums: Insurance companies often impose temporary moratoriums on writing new policies in or near disaster zones. This can delay escrows and complicate closings.
• Future Preparedness: The optimism for declining insurance rates is likely gone for now. Escrows and transactions in high-risk areas will face additional hurdles as insurers continue to adjust to the growing risks.

The challenges we face in navigating this insurance landscape underscore the importance of staying informed and proactive. If you’re working with clients in fire-prone areas, it’s critical to communicate these potential delays and changes upfront.

As we move forward, let’s also take a moment to reflect on the broader implications of these wildfires. The cost of recovery is shared by everyone, whether directly impacted or not, and it’s a sobering reminder of how interconnected we all are in facing these challenges. For now, let’s prepare for what’s ahead and support those affected as best we can.

I know many of you have loved ones fighting these fires, and we have to thank them for all they have done this week and so many other times.

I do loans and don’t save lives, but I am good at what I do and hope to work with you and your clients soon! Let me know if I can help you in any way! I’m just a call, text, or email away.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

Let’s start cranking up the 2025 machine to sell real estate and get the distractions behind us!

But wait, there’s more…

Rates are slightly better today, but nothing to write home about! The market closes early today for Jimmy Carter Day of Mourning!

• We offer 12-day escrows for pre-approved buyers - Conventional/FHA/Jumbo/Bridge loans.
• We provide loans in all states, so call me with anything you need.
• Government Loans (FHA/VA/USDA) are in the 6s.
• Conventional loans up to $806,500 are in the 6s and 7s.
• High Balance Loans from $806,501 to $1,209,750 are also in the 7’s.
• Jumbo loans above $1,209,750 are in the 7’s.
• Bank statement loans are available with 10% down again, with larger down payments in the 7’s.
• Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement!
• 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000.
• Private Money lenders offer Hard Money Loans with 35% down.
• No Ratio Loans require 30% down.
• DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down.
• Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go!
• 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates!

Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits.

**Good News for Condos:** Nothing new to report.

**Bad News for Condos:** Nothing new today.

For all other issues involving condos, please check MikeMeena.com. I will post updates here, but all the information on the naughty list is available on my website. Just go there and click about to find our most updated list.

Let me know if you hear anything new about condos or townhouses.

I am available every day if you need anything.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

Have a great day, and an even better tomorrow! Please call me when you have a client who needs to borrow!