* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

************
HOW DO YOU HANDLE IT ALL?

Short Sales Riches Platinum Coach Frank Hernandez wants

to show you how he manages all his files with a new incredible

technology!  The presentation begins promptly at 8:30 PM ET,

5:30 PM PST tonight.  This is sure to fill up, so take action now

to reserve your spot:

https://www2.gotomeeting.com/register/323860683

************

MBA – Mortgage applications up

The Weekly Mortgage Applications Survey, released by the Mortgage Bankers Association (MBA) for the week ending September 18, 2009, increased 12.8% on a seasonally adjusted basis from one week earlier, (a holiday shortened week), and on an unadjusted basis increased 24.6% compared with the previous week and 14.0% compared with the same week one year earlier.  The Refinance Index increased 17.4% from the previous week asthe 30-year fixed rate dipped below 5%.  The Government Purchase Index is at the highest level ever recorded in the survey and the share of purchase applications that were government-insured was 45.7 percent, the highest share since November 1990.  The four week moving average for the seasonally adjusted Market Index is up 4.3%, and the four week moving average is up 0.7 percent for the seasonally adjusted Purchase Index, and the Refinance Index is up 6.8 percent.  Refinances share of mortgage activity increased from 61.0 percent the previous week to 63.8 percent of total applications.  The adjustable-rate mortgage (ARM) share of activity increased to 6.7 percent from 6.0 percent of total applications from the previous week.

Equifax — Mortgage Delinquencies Still Climbing

According to the Equifax consumer credit trends report for August 2009, delinquency rates for prime and sub-prime mortgages increased nearly every month since March of 2009, for sub-prime borrowers.  30-day plus unit delinquencies for prime mortgages jumped to 6.51% in August compared to 5.89% in March, and the 30-day plus unit delinquencies of sub-prime mortgages increased to 36.35% in August from 33.61% in March.  Dollar rates for prime 30-plus day delinquencies bumped to 7.58%, up from 6.98% in March, and the dollar rates for sub-prime 30-plus day delinquencies rose to 36.35% in August from 33.61% in March.  Definitions of “sub-prime” vary from one source to the next and from one state to the next.  However, The definition of prime and sub-prime mortgages used for the above data refers to the credit score of the borrower, not the type of loan originated, a spokesperson for Equifax said.  Borrowers with an Equifax credit score below 620 are considered sub-prime.  Those above 620 are considered prime.

JPMorgan bullish on housing

JPMorgan has taken a negative stance on the future of housing for three and a half years, but according to a report by JPMorgan analyst Michael Rehaut, it now sees the housing market past its trough and driving toward recovery over the next 24 months.  Rehaut said he is impressed by the current rally in homebuilder stocks, but pointed out that the surge is well below recoveries that followed prior recessions.  The top six builders’ stocks fell 86% from an ‘05 peak and gained 105% from the low in March, compared to the 55% and 66% losses during recessions in 1982 and 1990 and the respective rallies of 171% and 486%, according to the report.  Housing starts remain down 29.6% from August 2008, according to a study by the US Department of Housing and Urban Development (HUD), but according to Brad Hunter, the chief economist at Metrostudy, despite the slowdown in completions, housing starts are approaching a bottom if they have not already reached one.

Geithner – “Consumer Financial Protection Agency”

Treasury Secretary Timothy Geithner will tell a key Congressional committee today that financial reform legislation needs to include a consumer protection agency and enhanced regulatory authority over too-big-to-fail firms.  He calls this the “Consumer Financial Protection Agency,” and suggests that it should have broad rule making and supervisory power of firms offering services and products to the public.  According to CNBC, the testimony reads, “Consumer protection cannot be reformed without addressing these structural problems…Our proposal will address them directly.  It will consolidate fragmented consumer authorities into one agency.”  Committee chairman Barney Frank, for his part, (D-Mass.) is working on an alternative version of the consumer agency bill outlined by the White House in June.  Frank sent a memo to Democratic panel members Tuesday highlighting the key differences in the so-called discussion draft.  With all due respect, can’t anyone find something else for Mr. Frank to do…something that doesn’t involve burning money and wrecking national finances and that kind of thing?

Rates will likely stay low

Federal Reserve Chairman Ben Bernanke and Fed policymakers will almost certainly leave interest rates at a record low and probably will keep other economic supports in place when they announce in the afternoon that the recession is over and that America’s economic and financial climate is improving.  They’ll probably also slip in the usual caveat:  rising unemployment and hard-to-get-credit will make for a plodding rebound.  “We’re kind of in an economic purgatory right now. We’re in a recovery but it won’t feel like one to Main Street,” said Stuart Hoffman, chief economist at PNC Financial Services Group.  “There’s still a lot for the Fed to do to foster a lasting economic recovery.”  The housing market has been propped up by the Fed’s mortgage-buying program, but Fed policymakers have to walk a fine line between leaving programs intact long enough to support the recovery, but not too long as to unleash inflation later on.  For now inflation isn’t a problem with factories still operating well below capacity, a weak job market allowing employers to avoid wage increases, and cautious shoppers making companies wary of raising costs.  Rates on 30-year home loans dropped to 5.04 percent last week, compared with 5.78 percent a year earlier, but the housing sector’s health remains precarious as foreclosures continue to mount.

Now on to our real estate educational section…

What’s Safer – Short Sales or Your Pension Plan?

They told you it would be safely set aside for when you needed it most; Guaranteed by the backing of Good Old Uncle Sam via the Pension Benefit Guaranty Corporation…another quasi-government entity that is ready to petition for their very own version of a big bail-out. You spent the best years of your life waiting for that money to mature only to learn it may not be there after all…or even if it is, you may be required to pay more in taxes, have access to fewer benefits or fight against the ravages of inflation. So, what is really safer…short sales or your pension plan? Let’s examine the facts to find out why relying upon a pension may not pay off in the long run.

1. The  PBGC – Pension Benefit Guaranty Corporation – has been underfunded each and every year since 2002. Remember, this is the main entity responsible for “making good” on pension plans when a corporation goes bankrupt.  Unfortunately, the downturn in the economy has resulted in the largest single short-fall in the history of the PBGC…in addition to the multi-year deficiency. In fact, experts predict it is a matter of months before the PBGC will be forced to petition congress for financial support. Can you count on them to be there when you need it?

High income earners are at even greater risk…if the PBGC is forced to take over your pension plan it already has a cap in place limiting payments to only $54,000 per year to anyone 65 or older – no matter what your original pension might have been!

1. Companies are cutting back, filing bankruptcy and attempting to reduce long-term obligations in any way possible just to remain afloat. Take a look at General Motors. How long can you count on your company to remain viable in a rapidly changing global economy in the midst of a total melt-down? Are you willing to bet your golden years on their ability to remain profitable for ten years? Twenty years? Longer?
2. Too many eggs in one basket. Earning a living is getting harder every day so why place all your eggs in one basket? It’s bad enough to lose an income but even worse to face unemployment lines and a loss of a pension plan should your company meet with an early demise. Remember, even if they stay in business but simply restructure debt, it could potentially impact your financial future.

On the other hand, short sales are directly under your control. They do not rely upon big bail-outs, government intervention or even the whims of investors other than those you deal with directly. Short sale real estate allows you the opportunity to diversify outside of your company by retaining access to an income stream outside of that associated with your place of employment…but without taking on more time away from home. Finally, short sales are able to fit your needs now…not ten, twenty or even thirty years or more into the future. If your situation changes – sell. Need additional write-off’s…hold for awhile. The choices and versatility afforded by short sales are nearly endless compared to dealing with a pension plan where the rules of the game can change before you are able to act on new information.

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches

* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

************
“Lazy Person’s Way to Pre-Foreclosure Riches”

Since putting this system to work instead of me, I’m

slaving away at the beach with sun screen on my arms,

and my cell phone at my ear for a full, uh, 20 hours

a week.

Life’s not so tough when others willingly do your work.

And the earnings?  Out of this world!  See how I do it

anywhere I want from my iPhone… and it won’t cost you

a cent Thursday at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/553411947

************

FDIC combats foreclosure scams

The Federal Deposit Insurance Corp. (FDIC) just released a tool kit to stop “rescue” scams that promise — but do not deliver — aid to borrowers on the verge of losing their home.  The tool kit includes information to point borrowers to the right contacts and clarifies what documents they need to apply for loan modifications.  The “Beware of Foreclosure Rescue and Loan Modification Scams” brochure provides information on common schemes, like partial interest bankruptcy scams.  A partial interest bankruptcy scam asks a borrower to give one or more third parties a partial interest in the home, as the borrower makes payments on the delinquent mortgage.  One by one, the holders of the interest file for bankruptcy to delay foreclosure while the scam operator collects payments.  “Everyone with a stake in this issue – from community leaders to those with a neighbor, friend or family member facing hardship – must take responsibility for reporting questionable activity and directing consumers to legitimate sources for assistance,” says FDIC chairman Sheila Bair.

Economy improving…or not

The Commerce Department said Thursday housing starts rose 1.5 percent from July to a seasonally adjusted annual rate of 598,000 units.  In another report, the Labor Department said the number of workers filing new claims for jobless benefits fell by 12,000 last week to 545,000, the lowest level since early July.  A survey yesterday showed that confidence among U.S. home builders reached its highest level in 16 months in September, which bodes well for future home construction.  All this sounds just peachy, and fuels speculation that the economy is improving, but we’ve heard that before…a lot.  The flip side is that The Labor Department report showed the number of people still on jobless aid after an initial week of benefits increased by 129,000 to 6.230 million in the week ending Sept 5, the latest for which data is available.  It was the largest one week gain since late June.  Meanwhile, the inventory of total houses under construction fell to a record low 595,000 units in August, the Commerce Department said, while the total number of permits authorized but not yet started also hit an all-time low of 99,000 units.

MBA Study Shows Increased Production Profits

According to the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report, mortgage bankers made an average profit of over $1,088 on each loan they originated in the first quarter of 2009 – a marked improvement over the 4th quarter 2008 results in which average profits were $148 per loan.  85 percent of the firms in the study posted pre-tax net financial profits in the first quarter 2009.  In the fourth quarter 2008, only 53 percent of the companies posted profits.  The average number of retail loans originated per retail sales employee rose to 10.4 loans per month in the first quarter 2009, from 5.3 loans per month in the fourth quarter 2008.  The “net cost to originate” fell to $1,725 per loan in the first quarter 2009, compared to $2,324 per loan in the fourth quarter 2008.  The “net cost to originate” includes all production operating expenses and commissions minus all fee income, but excludes secondary marketing gains, capitalized servicing, servicing released premiums and warehouse interest spread.  Net warehousing income, which represents the net interest spread between the mortgage rate on a loan and the interest paid on a warehouse line of credit, continued to pose a challenge for the mortgage bankers in this study.  Interest spread dropped to 6.60 basis points in the first quarter 2009, compared to 9.28 basis points in the fourth quarter 2008.

Bill Promoting Warehouse Lending Passes House

A resolution directing Administration officials to provide support and facilitate increased warehouse credit capacity for qualified warehouse lenders passed in the House.  The bill notes that while warehouse lenders account for as much as 40% of all residential mortgage loans in the US and nearly 55% of FHA loans, warehouse lending capacity has declined by nearly 90% to the current level of approximately $20bn to $25bn.  The resolution, H.R. 3146, would expand Federal Housing Administration (FHA) personnel and training and requires the Department of Housing and Urban Development (HUD) continue to review FHA-insured loans that become 60 days delinquent in the first 90 days of origination to allow earlier intervention and sanctions against potentially underperforming lenders.  It also directs HUD to carry out “demonstration programs” to analyze loss mitigation strategies for FHA-insured loans.  The House resolution will now go to the Senate for consideration.

The blame game begins

A 10-member bipartisan Financial Crisis Inquiry Commission, charged with getting at the roots of the debacle that late last year brought world banks and capital markets to the brink of collapse, will hold its first meeting today.  Critics say the causes of the crisis are already understood, ranging from deceptive mortgage lending and reckless debt securitization, to irresponsible banker bonuses and unregulated over-the-counter derivatives markets, and that dredging through all that again will only be a waste of time and a distraction from more urgent tasks.  Its proponents say that it has the potential to profoundly influence policy, and point at the impact of the so-called Pecora Commission in the 1930s, on which today’s panel was loosely modeled.  The Pecora Commission, initiated by the Senate Banking Committee, exposed rampant misconduct among some of the richest and most powerful men in America and led to reform…which brings us to the real reason for the commission:  it may be the Obama administration’s best hope of reinvigorating a push for tougher financial regulation…and to take a whack at capitalism in the process?

Now on to our real estate education section…

Capital Gains or Cash Flow?

Not so very long ago the rage of the day was investing for capital gains and future appreciation with very little consideration given to cash flow. In fact, many so-called real estate “investors” were more than willing to buy high with the hope of selling even higher while carrying a negative cash flow all the way. Debt was viewed as only a temporary situation likely to be rapidly resolved as soon as the property sold…and properties were selling in record numbers at record prices.

Unfortunately, the tide changed (as it is prone to do) and by 2009, the vast majority of “investors” that purchased exclusively with capital gains in mind are now crying the blues. It’s not limited to real estate investors; the stock market dropped by over 50 percent at the low while home prices plummeted by a third.

On the other hand, those investors that invested for cash flow are in a much better position since rents have not experienced such a dramatic decline. They are able to sit out the financial storm while collecting a steady stream of earnings each and every month or even purchasing additional properties via short sales at bargain basement prices. Remember, rentals are not the only way to invest for cash flow; flips, lease and even owner finance all present the potential for cash flow but the basic idea is always the same….make sure you buy low enough to generate cash flow and keep a little “buffer” just for emergencies.

So, is there a time to invest exclusively for capital gains without regard to cash? Perhaps. Like any investment, if you have additional money to burn and can afford to support the property during any downturns it is possible to generate major returns. However, always be aware of the inherent risk of a property unable to “pay for itself” while still generating a profit.

The bigger question is why settle for a high risk endeavor when there are so many short sale properties that are able to generate substantial cash flow for the taking? If you are still stuck in the capital gains only mindset try out these quick tips:

1. Crunch the numbers. We have said it time and time again – know the numbers for each and every property. Buy right and selling is simple but even if faced with a delay, the property is able to generate enough cash flow to pay for itself and put a little extra in your pocket for the trouble. Learn to do the math…it’s not hard especially if you are a regular reader of the www.shortsalesriches.com/blog.
2. Use a “worst case” cash flow example and a “best case” cash flow combined with capital gains scenario.
3. Improve or purchase currently owned properties. Not only are there plenty of properties to chose from but labor is less expensive thanks in part to extremely competitive bids among contractors. Increase the earning potential of properties to enhance long term capital gains while continuing to college cash flow.
4. Don’t be afraid to sell. Cash is still king and another important source of cash flow that can be used to finance or expand your present forms of property.
5. Calculate your cash flow from assets independent from “earned income” or work. It is more important than ever not to risk your entire financial future solely upon your job.

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches

* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

************
“Lazy Person’s Way to Pre-Foreclousre Riches”

Since putting this system to work instead of me, I’m

slaving away at the beach with sun screen on my arms,

and my cell phone at my ear for a full, uh, 20 hours

a week.

Life’s not so tough when others willingly do your work.

And the earnings?  Out of this world!  See how I do it

anywhere I want from my iPhone… and it won’t cost you

a cent tonight at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/704239738

************

Modified mortgages still defaulting

Tens of thousands of homeowners who were hoping for lower payments are discovering that lenders roll late fees, back taxes or other costs into the principal, sometimes turning a difficult payment into an impossible one.  That’s one reason many reworked mortgages are sliding back into default.  Monthly payments, on loans modified from Jan. 1, 2008, through March 31, 2009, increased on 27% and were left unchanged on an additional 27.5% according to a recent report by banking regulators.  Many modified mortgages fall delinquent — 25% to 40%, depending on the type of mortgage.  It’s too early to know if this pattern will continue under the Obama administration’s $75 billion initiative to get lenders to reduce monthly payments for homeowners struggling to make their mortgages.  A total of 360,165 mortgage modifications are now in a three-month trial period under the government’s plan announced in March.  But the initiative focuses on reducing interest rates rather than cutting principal.  “Payments have [either] gone up [or] the payment relief can last for the first few years and then go up (again),” says Alan White, assistant professor of law at the Valparaiso University School of Law in Valparaiso, Ind.

FDIC details mortgage payment reductions

Yesterday I mentioned an “urging” by the Federal Deposit Insurance Corporation (FDIC) directed at its loss-share partner institutions to consider temporary mortgage payment reductions for unemployed borrowers.  A spokesman for the FDIC offered further clarification: “Servicers may provide the borrower with at least six months of payment relief…The term [of] forbearance may vary based on the borrower’s circumstance.”  The program reaches out to both the unemployed and the underemployed, and applies to borrowers who suffer a reduction in household income due to decreased hours, loss of job, or a qualifying pay cut.  Acquirers of failed insured institutions who agree to a loss-share arrangement must abide by the FDIC Mortgage Loan Modification program for any assets purchased from the failed bank. The program provides loan modifications by reducing the borrower’s monthly housing debt to income ration (DTI ratio) to no more than 31%.  “The FDIC has a loss share monitoring program responsible for surveillance and compliance monitoring of the assets covered in the shared-loss agreement,” the spokesperson said. “In this oversight capacity the FDIC will review loss share servicers forbearance policies and ensure compliance with the shared-loss agreement.”

GAO looks at alternatives to Fannie Mae and Freddie Mac

The Government Accountability Office (GAO) is scrutinizing some of the proposed alternatives to Fannie Mae and Freddie Mac, now both in conservatorship.  The alternatives include reconstituting the GSEs as for-profit corporations with government sponsorship and additional restrictions.  According to the GAO, this option would effectively add controls to minimize risk in the system; eliminate or reduce the GSEs’ mortgage portfolios; establish executive compensation limits; and completely convert the GSEs from shareholder-owned corporations to lender-owned firms.  This model is not entirely without risk, however, as investors might be unwilling to invest capital in reconstituted enterprises unless the Treasury Department assumed responsibility for losses incurred during their conservatorship, GAO said.  “Continuing the enterprises as GSEs could present significant safety and soundness concerns as well as systemic risks to the financial system,” GAO said in the report. “In particular, the potential that the enterprises would enjoy explicit federal guarantees of their financial obligations, rather than the implied guarantees of the past, might serve as incentives for them to engage in risky business practices to meet profitability objectives.”

Sales up in August

The Commerce Department said total retail sales rose 2.7% last month, compared with July’s revised decline of 0.2%.  Sales excluding autos and auto parts rose 1.1%, compared to a 0.6% decrease in July, suggesting that the Cash for Clunkers Program is largely responsible for the bounce.  Economists surveyed by Briefing.com had predicted August sales would increase by 2%, and had expected a gain of 0.4% in August sales, excluding auto purchases.  Some of the other biggest sales winners were gasoline stations, whose sales rose 5.1%, as well as clothing and department stores, which each rose 2.4%.  “We expected a big jump in autos, obviously, but we got decent increases elsewhere when we expected only modest gains,” said Adam York, analyst at Wells Fargo Securities.  But furniture store sales slipped by 1.6%, and building/garden equipment fell by 1.2%.  York said it was “tough to say” whether the broad gains will hold in future months, though September auto sales will certainly reverse without the Clunkers benefit.

Oh, really, Mr. Geithner?

U.S. Treasury Secretary Timothy Geithner says President Barack Obama can return the U.S. budget situation to a sustainable one without breaking his pledge to not raise taxes on Americans making less than $250,000.  “It’s his (Obama’s) commitment and he’s very committed to that.”  Geithner also said the government would work to unwind its investments in financial institutions and other companies as quickly as possible, but it would likely take longer to sell off its major stakes in General Motors and Chrysler.  “We’re not going to keep a penny in the financial system or in the U.S. economy longer than we think is absolutely necessary,” Geithner said.  Asked if the government would be out of the auto business by next year, Geithner said, “I think it’s going to take longer than that just to be honest and realistic.”  Errr…speaking of “honest and realistic”…no new taxes?  Really, Mr. Geithner?

Now on to our real estate education section…

Short Sales & State Taxes

By now most people realize short sales, deed-in-lieu of foreclosures and other “debt forgiveness” programs may generate federal tax if not properly structured; however, far fewer people consider the potential consequences related to state taxes.

While federal guidelines exempt homeowners from federal taxes through 2012, most states waived taxes for 2008 but are increasingly reluctant to implement the policy for 2009 and beyond. For example, California, one of the hardest hit areas of the nation in terms of real estate declines and foreclosures, has not yet signed a bill into effect for 2009 leaving homeowners uncertain of their financial future.

Because the state tax hit for debt forgiveness is potentially large, the question is more than merely academic despite the fact that most mortgage loans are non-recourse (ie, the lender cannot go after other assets) and therefore less likely to result in taxable income. However, even if the primary mortgage is a non-recourse loan, home equity lines of credit, refinancing and other debt is typically recourse debt subject to income taxation at both the state and (usually) federal level. Furthermore, the temporary waiver does only applies to primary residential properties – not investment or vacation homes creating greater confusion for homeowners and short sale investors alike.  Note: many investors may avoid federal income taxes by declaring insolvency – see our prior blog posts about this topic.

Savvy short sale investors are probably wondering if all states are equally regressive in their reluctance to assist troubled homeowners; fortunately the response is a resounding “no”.  In fact, seven states (or nine depending on how you view it…more on that in a minute) have zero state income taxes which makes it quite simple to avoid potential tax ramification since the federal waiver remains in effect for several more years.

Wondering which states manage to escape personal income taxes? Here’s the list…

• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming
• New Hampshire and Tennessee only tax dividend and interest income which is unlikely to impact short sale investments owned by individuals.

On the flip side, for those short sale investors curious about which states have the highest state income tax rates you might be surprised to learn California has been removed from the top spot; Hawaii displaced California with a new maximum rate of 11 percent. California comes in at a close second at nearly 10 percent while New York makes a strong showing at nearly 9 percent (excluding local taxes which push New York residents into the top spot with a combined 12.62%).

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches

* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

************
Let Us Never Forget Those Who Lost Their Lives on September 11^th.

May God Continue to Bless America…

************

MBA against court ordered mortgage modification

At a House Financial Services subcommittee hearing Wednesday, Barney Frank, D-Mass., supported cramdown legislation, which would allow bankruptcy judges to alter mortgages on primary residences, potentially lowering — or “cramming down” — a portion of the balance.  According to words flowing from the mysterious brain of Mr. Frank, judges rather than jobs are the key to reducing the flow of foreclosures.  David Kittle, Chairman of the Mortgage Bankers Association (MBA), issued a statement in strong opposition to the possibility.  “Allowing judges to retroactively modify borrowers’ mortgage balances will destabilize a mortgage market that desperately needs stability right now…We ought to let [the Obama administration's Home Affordable Modification Program (HAMP)], still in its early stages, continue to take hold, rather than rushing to try to pass a measure that will do more harm than good.  We hope that proponents of cram down will recognize the successes that the industry is making through HAMP and other means to help keep borrowers in their homes.  Loan modifications cannot happen overnight.  But as today’s report from Treasury shows, servicers are making significant progress.”

Mortgage rates down

Both Freddie Mac’s weekly survey and a separate survey of major US banks and thrifts, conducted by Bankrate.com found that mortgage rates dipped slightly this week.  Freddie Mac reported that the average rate for a 30-year fixed-rate mortgage (FRM) was 5.07% with an average 0.7 points for the week ending Sept. 10, down one basis point (bp) from the previous week’s average of 5.08%.  Last year, Freddie Mac reported the average rate was 5.93%.  Freddie Mac also found that the average rate for a 15-year FRM was 4.50% with an average 0.7 point, down four bp from a week ago when it was 4.54%.Bankrate.com reported the average interest rate for a 30-year FRM also dropped 1bp, to 5.4% with an average 0.34 point.  One year ago, Bankrate.com reported the average rate was 6.15%.  Bankrate.com said the average interest rate for a 15-year FRM was 4.75%, an increase of 1bp from last week.  Interest rates on adjustable-rate mortgages (ARMs) also decreased this week.  Freddie Mac said the average rate for a five-year Treasury-indexed hybrid ARM was 4.51% with an average 0.5 point, down from 4.59% last week.  The one-year ARM rate was 4.64% with an average 0.6 point, down from 4.62% last week.  Bankrate.com said the rate for a five-year ARM was 4.89%, down 5bps from last week.

Home prices cut

Trulia.com said in its monthly price report that more than one in four U.S. homes for sale on Sept. 1 had their prices cut at least once since landing on the market, up slightly from a month earlier:  26 percent of homes had their prices reduced, up from 25 percent on Aug.1.  Two factors driving the decrease were the pending expiration of the government’s $8,000 tax credit for first-time home buyers — part of the stimulus bill — and the closing of the summer months peak sales period.  The average discount was 10 percent from the original price, unchanged from August.  On average, sellers dropped their price by $39,378.  Nationwide, $28.5 billion has been dropped from the price of homes for sale on September 1, up by more than $1.1 billion from June to September.

Gap between asking and selling closes

According to a Zillow real estate market report, the gap between asking price and selling price is closing.  Buyers paid 3.3% or nearly $7,039, less than the last listing price on homes for sale in July; down from 3.5%, or $7,630, in June; and 4.6%, or $10,260, in January.  Zillow reported 22.8% of all homes listed for sale on its Web listing service had at least one price reduction as of September 1 and the median reduction was 6.5% off the original listing price.  Negotiating power varied from region to region: Florida homebuyers had the most negotiating power in July, and California buyers, where some actually paid above asking price, the least.

Insider selling up…way up

The stock market has mounted an historic rally since it hit a low in March.  The S&P 500 is up 55% as U.S. job losses have slowed and credit markets have stabilized.  But against that improving backdrop, in August corporate officers and directors were selling $31 worth of stock sales for every $1 of buys.  While a wave of insider selling doesn’t necessarily foretell a stock market downturn, it suggests that those with the first read on business trends don’t believe current stock prices are justified by economic fundamentals.  “It’s not a very complicated story,” said Charles Biderman, who runs market research firm Trim Tabs.  “Insiders know better than you and me.  If prices are too high, they sell.”  Ben Silverman, director of research at the InsiderScore.com web site that tracks trading action, said insiders are selling at their most aggressive clip since just before the onset of the subprime malaise two years ago.  Silverman said the “orgy of selling” is noteworthy because corporate insiders were aggressive buyers of the market’s spring dip.  The S&P 500 dropped as low as 666 in early March before the recent rally took it back above 1,000.

Now on to our real estate education section…

The Most Important Financial Survival Strategies You Need to Implement Today

Need an easy to understand, affordable and hassle free way to keep your books in the black? Keep reading to discover the most important financial survival strategies you need to begin putting into practice today.

1. Step back and plan for the short term and the long term. Like the  old adage – failure to plan is akin to planning to fail. During tough economic times it isn’t merely enough to have a ten year goal in place, you must have objectionable and actionable short and long term goals. Failure to see the big picture leaves you wandering aimlessly while failure to account for short term details increases the risk of ruin due to insufficient cash-flow, liquidity or other problems.
2. Don’t ignore bad news. Yes, there are more than enough nay-sayers that will tell you the sky is falling rather than teaching you how to profit from one of the greatest transfers of wealth to take place in a generation. On the other hand, don’t automatically write-off all bad news…it often contains the information you need to know in order to make informed decisions about your future…or to take advantage of the financial wreckage coming down the pipelines.
3. Control your cash flow. One reason the current financial crisis has hit so hard is an over-reliance upon credit to meet short term obligations. Both consumers and small business owners are at the “mercy” of banks, credit cards and other lenders who can (and will) change credit terms and adjust lines of credit on a moment’s notice.
4. Minimize liability. Aside from cash flow issues, one of the other major risk factors impacting most investors is liability risk. One slip and fall accident by an uninsured worker on a short sale property could negate a lot of earnings. Likewise, while cash is king it also requires a much greater personal level of responsibility for the average investor. Stay smart and learn how to minimize liability both in terms of financial risk and more routine forms of liability by properly insuring and structuring holdings.
5. Focus on profits. Novice short sale investors with more time than money may need to begin small but should move up to more profitable investment as soon as feasible. Always focus on profits and eliminate the bottom 10 percent of all performers in your portfolio. Follow this one simple strategy to increase profits each and every year.
6. Identify your customers. Short sales are a strange business..do you really know who your clients or customers are? Is it the seller? Lender? New buyer? Know your customers and don’t waste money on ineffective marketing. Make everything count.
7. Don’t work too much. We’ve said it before and will say it again; earned income is expensive. Many people work themselves into an early grave only to watch more and more of their earnings go to paying ever rising taxes, health insurance premiums and medical bills. Outsource what you are able and switch the source of income to take advantage of favorable taxes.
8. Work with – not against – your competitors. In reality, there isn’t any such thing as a real competitor, only someone more suitable versus someone less suitable. When you find a deal that doesn’t really work for you…pass it along to someone better able to make it work and ask for them to do the same for you. Create a win-win for all involved in order to secure better profits with less work.

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches