Real Estate News & Commentary by Chris McLaughlin, June 23, 2009
http://www.shortsalesriches.com
“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live Tuesday at
8:30 PM ET, 5:30 PM PST:
https://www2.gotomeeting.com/register/443058482
Why would I do that for no charge? Because
I want a chance to tell you about the other
high-income opportunity, too.
And I can’t do it in an email.
But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early. See if there’re any spots left:
https://www2.gotomeeting.com/register/443058482
——–
Existing-home sales rise for the second straight month
According to the National Association of Realtors (NAR), sale of existing-homes rose to a seasonally adjusted annual rate of 4.77 million units in May, denoting a rise of 2.4% over the April figure. This is the second straight month of increase in sale of existing-homes, due to a plentiful supply of homes and availability of attractive mortgage rates. According to NAR, this is the first back-to-back rise since August and September 2005. “While sales may not have yet reached an absolute bottom, clearly a bottoming process is underway,” said Wachovia, a financial services firm. The total number of existing-homes available, at the end of May, stood at 3.80 million units; this represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in April, according to NAR. Lawrence Yun, NAR chief economist, expressed concerns about “faulty valuations that keep buyers from getting a loan.” Yun said: “Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales. In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment.” Yun warned of a “delay in housing market recovery” and a “further rise in foreclosures” if the appraisal problems are not quickly corrected.” Regionally, existing-home sales in May rose 3.9% in the Northeast, 9% in the Midwest, remained unchanged in the South, and dropped 0.95% in the West.
The state of the nation’s housing
Despite the current slump, the long-term prospects for the housing industry are not bleak, according to the “The State of the Nation’s Housing 2009″ report, released by Harvard University’s Joint Center for Housing Studies (JCHS). The report details factors such as unemployment and the credit crisis leading to problems in the sector. Home equity is positively correlated with consumer spending, and plunging home values have pulled down consumer spending and economic growth in the last couple of years. Analysts say that the current recession provides a painful but a much needed correction to the housing market. But is there a silver lining anywhere? The so-called echo boomers, who are the children of baby boomers, will be a big source of housing demand in the next year and beyond, according to the report. “Echo boomers are larger than the baby boomer population. Couple that with immigration and you have the seeds, the possibility of a housing recovery,” said Nicolas Retsinas, director of JCHS. The report states that minorities will drive 73% of household growth in 2010–20, with Hispanics leading the way at 36%. Given the lower average incomes and wealth of minorities, the increase in minority households “could add significantly to the nation’s already widespread housing affordability challenges,” according to the report.
Government ownership of Fannie and Freddie is bad
James Lockhart, Chairman of the Oversight Board of the Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, says that the government should not be running Fannie Mae and Freddie Mac. The two firms have been losing money since the current credit crisis started, and the government has invested $85 billion in equity of the 2 companies. In addition, the Treasury and the Federal Reserve have bought over $700 billion of mortgage securities from both the firms. Despite the government support, the turnaround of the two companies is not yet in sight. According to Lockhart, it will take another year or two before the bottom lines of Fannie and Freddie rebound. Lockhart believes that there is a moral hazard in the government owning the mortgage firms. “What I have seen is that government insurance programs are high-risk,” said Lockhart. “It is often difficult in a political environment to calculate or charge an actuarially fair price.” If the government is offering cheap insurance, banks will have an incentive to make loans they shouldn’t. And that will lead to an increase in losses for the 2 firms down the road. Some lawmakers say that the 2 firms should be broken up into smaller firms. Congressman Paul Kanjorski says, “I think it would be bad for the mortgage market to get rid of them completely. But if they were smaller, perhaps next time we won’t be in the situation where these firms are too big to fail.”
Number of bank failures this year: 40 and counting
Last week, regulators closed three banks, bringing the number of bank failures to 40 so far this year. Cooperative Bank of Wilmington, North Carolina, with $970 million in assets and $774 million in deposits; Southern Community Bank of Fayetteville, Georgia, with $377 million in assets and $307 million in deposits, and First National Bank of Anthony, with $156.9 million in assets and $142.5 million in deposits were closed last week. The Federal Deposit Insurance Corporation (FDIC), which insures up to $250,000 per account at member institutions, will take a hit of over $363 million on account of the 3 failures. Amid the recession and a rise in delinquent loans, the pace of bank failures has been rising, from 3 in 2007 to 25 in 2008, to 40 this year. Last year, Washington Mutual became the largest bank to fail in the U.S. history. FDIC’s list of “problem” banks had 305 firms at the end of the first quarter this year. It looks as though there are more failures to come in 2009.
Laid off from Wall Street? The CIA could be your next employer
The Central Intelligence Agency (CIA) has embarked on a recruitment drive to hire finance and economics professionals, as the number and sophistication of frauds rise. “Economics, finance and business professionals, if the quest for the bottom line is just not enough for you, the Central Intelligence Agency has a mission like no other,” says an advertisement from the agency. The agency will conduct rigorous background and medical checks, and a lie-detector test on the recruits. Salaries range from $60,000 for fresh graduates to $160,000 for experienced professionals, in addition to generous benefits. Ron Patrick, a spokesman for recruitment and retention at the CIA, said: “Our economic analysts are looking at counter terrorism; they’re looking at counter proliferation issues, crime issues, and drug issues.” According to Patrick, the response has been good so far. The agency has received several hundred resumes from a variety of applicants including fresh graduates and laid-off bankers. “Typically the people that come to the CIA want to serve the government, they want to serve their countries. It’s a different mindset perhaps than serving a company or serving profit as a bottom line,” said Patrick.
Now on to our real estate investor education section…
What’s Up with Title Insurance on Short Sale Flips in Florida?
According to recent reports, the Attorney’s Title Fund (a major underwriter in Florida) has recently notified attorneys to exercise caution when underwriting short sale flips created with options or similar contracts… but what are the facts behind the situation? Does this represent an end to short sale profits? Of course not. It may require certain modifications and further disclosures, or perhaps it means you use a different title insurance underwriter. Let’s take a look at the stipulations outlined by The Fund on their website (http://www.thefund.com/portal/news/index.jsp?id=1011632#item).
- No violations of restrictions listed in the payoff letter or closing instructions….so don’t knowingly commit fraud or ignore specified contractual obligations. This is common sense!
- No misrepresentations related to the value or ownership of the property to any party…again, the bank must be told that you are the seller and that you intend to resell the property. Again, nothing new here.
- All disbursements must be made in conformation of HUD-1 settlement statements…again, abide by what is in writing.
- Simultaneous closings are to be treated as individual transaction independent of one another. (That’s what we teach at Short Sales Riches…you NEVER use C’s money to pay off A! Each transaction must be separate and distinct).
- If any of the above situations are not met, prior approval must be provided before insuring the transaction.
In a nutshell, The Fund has taken the position that short sale deals using option contracts should comply with the actual terms and conditions of the contract. Of course, that is hardly earth shattering news and is simple common sense in most cases. It highlights the importance of having a solid paper trail behind your every move…not only does it protect your investment but it’s a solid CYA measure. But, what happens if you find yourself facing a short sale gone bad due to an insurance related issue? Start by taking these steps:
- Provide copies of all paperwork. Make sure your bases are covered by using tried and tested techniques that use proper disclosure.
- Always have a spare. Think of it like that extra key you have floating around just in case you need it. The same applies to every professional relationship; no matter how happy you are with your current broker, banker or insurance underwriter take the time to have a secondary resource lined up “just in case.”
- Comparison shop. The plain fact of the matter is this…short sales make sense. That is why the Federal Government recently updated legislation to make it easier for short sales transactions to take place and provided financial incentives to encourage brokers, bankers and others to participate. Where there is demand someone will step in to fill the gap even if your own insurance agency decides not to participate.
- Follow the program and the advice of your legal counsel. All too often people take short cuts instead of doing what attorneys have advised them to do. In this case, our program clearly indicates that you MUST inform the lender that you intend to resell the property for a profit, and you MUST use cash to fund the A to B transaction and NOT the cash from C’s end lender. The transactions must be separate and distinct. But all too often someone watches a webinar and thinks they don’t need to invest in the system and that they can figure it out on their own. Not a bright idea….and it just leads to negative media attention that’s not focused on the good short sale reselling is doing in getting our market moving again. ‘Nuf said.
———
See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com
PS:
“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live Tuesday at
8:30 PM ET, 5:30 PM PST:
https://www2.gotomeeting.com/register/443058482
Why would I do that for no charge? Because
I want a chance to tell you about the other
high-income opportunity, too.
And I can’t do it in an email.
But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early. See if there’re any spots left:
https://www2.gotomeeting.com/register/443058482
Copyright Loss Mitigation Institute 2009.
All Rights Reserved.
http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.reomillionaireclub.com
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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 nearly
450 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
* Add me on Twitter: http://twitter.com/mclaughlinchris
* Add me on Facebook: http://www.facebook.com/mclaughlinchris
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