Smart Real Estate News & Commentary by Chris McLaughlin October 20, 2010
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FBI looking at foreclosure mess
As much as the big banks want to end the mess and move on; as much as the country NEEDS this mess to be over, it looks like it’s around for a while. Attorneys general in all 50 states are jointly investigating whether lenders violated state laws, lawyers for evicted homeowners are preparing lawsuits against major lenders, state judges have signaled they will review the banks’ foreclosure documents with skepticism, and lawmakers on Capitol Hill plan to hold hearings. On top of all that, now and unnamed official has told CNBC that the FBI is in the initial stages of trying to determine whether the financial industry may have broken criminal laws in the mortgage foreclosure crisis. The law enforcement official says the question is whether some in the industry were acting with criminal intent or were simply overwhelmed by events in the wake of the housing market’s collapse.
The official spoke on condition of anonymity because the investigation is just getting under way. Hundreds of judges around the country have the authority to penalize bank officials who violate their procedural rules. They could also force thousands of foreclosure cases to go to full trials rather than issue a quick ruling. Judges won’t take well to banks that filed erroneous documents with their courts, said Indiana Attorney General Greg Zoeller. “There could be some serious consequences,” including criminal charges, Zoeller said. Even if there aren’t, lawsuits are likely to continue for years, said Guy Cecala, publisher of trade publication Inside Mortgage Finance. “Some of these plaintiffs’ attorneys clearly smell blood in the water,” Cecala said.
Mortgage apps down
Data from the Mortgage Banker’s Association shows mortgage applications slumped last week as interest rates on 15- and 30-year fixed-rate mortgages rose for the first time in six weeks. seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Oct. 15 decreased 10.5 percent. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 0.4 percent. Demand for home refinancing loans fell for the sixth time in seven weeks. The MBA’s seasonally adjusted index of refinancing applications decreased 11.2 percent. The MBA’s seasonally adjusted purchase index, a tentative early indicator of home sales, decreased 6.7 percent. Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina, said the drop in demand is a reflection of the inability of many homeowners to take advantage of record low interest rates.
“Tight lending standards are preventing many homeowners from home loan refinancing,” he said. “Low credit scores and high unemployment are also playing a big role.” Vitner said “underwater” mortgages — where the amount owed on the mortgage exceeds the value of the home — are one of the biggest banes of the homeowners. This negative equity makes many of them unqualified for home loan refinancing and prevents some from selling.
Colvin – uncertainty is killing the recovery
And yes, it is the fault of Obama and the Democratic establishment. Geoff Colvin is a senior editor at large for CNN: “Life is inherently uncertain, of course, but this is different. As I travel around the country, businesspeople tell me they’ve rarely felt so unsure of what the laws and rules governing their business will be. Like Kelly, they sense major changes ahead — but what? So instead of investing and hiring as usual in a recovery, U.S. companies are sitting on more cash than ever. We shouldn’t be surprised. It has always been true that the more activist the administration in Washington, the more uncertainty it spawns. The reasons are several. Sweeping new laws — like the 2,400-page health care law and the 2,300-page Dodd-Frank financial services law — create winners and losers, but the horsetrading continues almost until the President’s pen signs the bill. Did you know that Dodd-Frank exempts car dealers from the oversight of the new Consumer Financial Protection Bureau? Such oddities are legion, but in major legislation still to come, such as an energy bill, no one knows what they’ll be.
Once these mammoth laws are enacted, government agencies must write new rules to implement them. For example, the Dodd-Frank law requires 243 new rules, by the count of the Davis Polk & Wardwell law firm, and no one yet knows what they’ll require. It takes a long time to figure out what the new rules really mean, especially at 2,000 pages. When I asked AT&T chief Randall Stephenson whether the new health care law might cause him to drop medical coverage for his employees, he did not say anything to reassure workers. “We don’t know exactly what we’ve got here yet,” he said. “But something will change.” McDonald’s recently said it might drop medical coverage for 30,000 employees because of a rule buried in the new law. Such surprises are only beginning. These historic new laws bestow significant new powers on administrators, who are not elected and are highly unpredictable. For example, the new Consumer Financial Protection Bureau has been granted extremely broad powers; its director (not yet nominated) is apparently “beyond the control of the President, the Fed, and the Congress,” says Investment News magazine, citing the new law. What new rules will it promulgate in its first five years? Uncertainty is a Republican talking point in the midterm elections, so Democrats disparage it, maybe leaving ordinary citizens to dismiss the debate as partisan sniping. That would be a shame. The businesspeople I talk to aren’t libertarians who want a minimalist government. They’re pragmatic managers who want to make an honest buck. As Dick Kelly says, “If they explain the rules, we’ll figure it out. We’ve always figured it out, and we’ll figure it out again.” More than at any time in many years, businesspeople just don’t know what the rules are. They’re frozen. Writ small, that’s a frustration. Writ large, it’s an economy that can’t get going.
Construction activity up
The September Architecture Billings Index was up 2.2 points to 50.4, marking the fourth consecutive month of increases, the American Institute of Architects (AIA) said. The score reflects a rise in demand for design services, as any score above 50 indicates an increase in billings, the AIA said. “The strong upturn in design activity in the commercial and industrial sector certainly suggests that this upturn can possibly be sustained,” said Kermit Baker, AIA’s chief economist. “But we will need to see consistent improvement over the next few months in order to feel comfortable about the state of the design and construction industry.” The AIA’S separate, less predictive, project inquiries index rose to 62.3, from 54.6 in August, reaching its best level since July 2007. Project inquiries typically produce a higher reading than actual billings because multiple architecture firms bid on the same work. The billings index is an indicator of construction spending nine to 12 months in the future. It is regularly cited by companies that sell into the sector as a reliable gauge of demand. Most diversified industrial companies get at least some revenue from nonresidential construction, selling either machinery used in construction or the components of a building: elevators, electrical and lighting systems, heating and cooling and security networks, for example.
Olick – is the mess over?
“As I was driving in to work today, the lead story at the top of the hour on the radio was Bank of America’s announcement that it would start submitting foreclosure sale paperwork again on Monday. The anchors made it out like, okay, we’re all done. Little two-week snafu, but that’s that. Then the president of the New York Fed, William Dudley, during a briefing at his bank on the regional economic outlook, said ‘The Federal Reserve actively encourages efforts to find viable alternatives to foreclosure, like loan modifications, or deeds in lieu,’ but he also added that, ‘It’s important foreclosures that comply with state and federal laws can take place as this is a necessary part of adjustment that will lead to more normal conditions in the housing market.’ Shortly after that, White House Press Secretary Robert Gibbs put out the following statement: ‘As institutions are determining their next steps in addressing these issues, we remain committed to holding accountable any bank that has violated the law. In addition to strongly supporting the investigation by the state attorneys general, the administration’s Federal Housing Administration and Financial Fraud Enforcement Task Force have undertaken their own regulatory and enforcement investigation into the foreclosure process.’
Then the Texas state attorney general, Greg Abbott, one of the 50 state attorneys general who announced a major joint investigation last week, went on CNBC charging that paperwork needs to be cleaned up and, ‘we have to deal with appropriate title to these homes.’ But he also added that with regards to dealing with robo-signing, ‘there’s no reason why all these financiers can’t get that accomplished by the end of October.’ The big banks seem to be taking a legal stand, and trust me, they have plenty of high-priced lawyers telling them what they can and can’t stand on. This is not to say that law suits won’t abound, and we will hear ever more stories in the local news about ‘wrongful’ foreclosures. But this creates something of a conundrum: It feels like there’s a little bit of backpedaling and a lot of continuing to tow the popular political line. Yes, apparently the banks are clearing some things up, but let’s not lose that great momentum of keeping folks in their homes…at least until election day.”
Now for our real estate education section…
Prospecting 101
Prospecting. Love it or hate it, everyone must master it in order to reap rewards in the real estate business. Whether you are a part-time investor, full-time flip guru or veteran agent chances are you could still benefit from refining your prospecting efforts.
Prospecting Logic
There is a natural progression or logic model to the art of prospecting; once mastered it can be used in nearly any industry with fantastic impact. The steps are deceptively simple:
1. To increase profits you must first close/sell more properties.
2. To close/sell more properties, you need to sign more contracts.
3. To sign more contracts, you must have more leads.
4. To obtain more leads, you need more referrals and first contact(s).
5. To obtain more leads and referrals, you need to prospect.
It’s All in the Numbers
We’ve said it before and we will say it again; prospecting is a numbers game. The more you manage the numbers the better the results. We have previously covered the number of contacts, ratio’s and other pertinent data here on the short sales newsletter so we won’t bore you with the data again. Suffice to say, there is one important mistake that even veteran investors and agents tend to make when calculating the target number of contacts each month; don’t forget to replace the units under contract! For example, if your personal ratio is 10:1 and you forget to replace the one unit under contact, by the end of the year your total performance will be “off” by 10 percent!
Ready-Aim-Fire!
Do you know who your target is? Hopefully you do but a surprising number of agents and investors really don’t. For example, what gives the biggest bang for the buck…pitching to other agents/investors or regular buyers? Novice investors often spend an inordinate amount of time working with individual buyers…lots of them…who will only purchase one home. On the other hand, by targeting other agents, larger investors, etc, it is often possible to cultivate a long term relationship that takes less time while yielding better results.
See you at the top!
Chris McLaughlin
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About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
400 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
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