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Mortgage applications up

The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending September 4, 2009, and the mortgage loan application volume increased 17.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 15.8 percent compared with the previous week and 64.5 percent compared with the same week one year earlier. The Refinance Index increased 22.5 percent from the previous week, the biggest jump since mid-March. The seasonally adjusted Purchase Index increased 9.5 percent from one week earlier. This was the largest gain since early April, putting the index at the highest level since the first week of January. The four week moving average for the seasonally adjusted Market Index is up 7.0 percent. The four week moving average is up 3.3 percent for the seasonally adjusted Purchase Index, while this average is up 9.7 percent for the Refinance Index. Cameron Findlay, chief economist at LendingTree.com in Charlotte, North Carolina, said that while higher demand is a positive for the hard-hit U.S. housing market, the sector still faces plenty of obstacles. “It is hard to make an argument with lower wages, less hours and higher unemployment that people will be upsizing into their dream home.”

Ohio to sue mortgage providers

Ohio Attorney General Richard Cordray says he plans to sue more mortgage companies in an effort to break the foreclosure crisis. Servicing companies have found themselves at the forefront of the battle to curb the home foreclosures that helped push the economy into recession, but they have drawn increased scrutiny in recent months amid signs that foreclosures are rising despite their efforts. Cordray said the discovery process in court would allow his office to more closely examine servicers procedures. Whether it be incompetence or greed — through charging excessive fees for handling loan modification requests — servicers have not yet hired enough people to provide sufficient customer service to stricken homeowners, he added. A slow response by servicers over President Barack Obama’s Home Affordable Modification Program (HAMP) has also led to a rebuke by the U.S. Treasury. “Foreclosures lead to abandoned homes that bring additional costs that have to be paid by our communities, not the mortgage companies and not the servicers. They (mortgage companies) know they won’t have to bear those costs and they don’t give a hoot.”

Obama on track with foreclosure prevention?

Federal Housing Administration Commissioner Dave Stevens thinks so, but then he would, wouldn’t he? In testimony prepared for delivery at a congressional hearing today, Federal Housing Administration Commissioner Dave Stevens claims that about 360,000 borrowers had seen their monthly payments lowered under the plan. A month ago the U.S. Treasury Department had put that figure at about 230,000. In all, mortgage servicers had extended more than 571,000 loan modification offers to date, up from about 400,000 reported through July, Stevens said. The new figures put the program to combat rising U.S. home foreclosures on track to meet the administration’s goal of modifying more than half a million delinquent mortgages by November 1, according to Stevens. Administration officials have been frustrated by how few mortgages have been modified under the plan first announced in February, but Stevens said the administration was conducting a “high level review” of the housing rescue effort and was also exploring “programmatic options” to ensure signs of stabilization in the housing market are maintained. Who knows what that means, but why do I suspect it’ll cost megabucks?

Consumer credit down 10%

Federal Reserve data indicates that total U.S. consumer credit fell by a record $21.6 billion in July, the latest hint that household spending would be too weak to drive the economy’s recovery from recession. July consumer credit outstanding fell at a 10.4% annual rate to $2.47 trillion, steeper than analysts’ expectations for a $4.0 billion drop. Total credit in June was down $15.5 billion instead of the $10.3 billion drop previously estimated by the U.S. central bank. According to Bernard Baumohl, chief global economist at The Economic Outlook Group in Princeton, New Jersey, “it is one more important sign that consumers are not going to be contributing very much to the economy for the balance of this year and probably for a good part of next year. Consumers will be in the background.” With an unemployment rate of 9.7%, the highest in 26 years, and incomes falling, households have drastically cut back on spending. “There is no way that this recovery can be sustained unless we see a pickup in household spending. The big question out there is will we see Americans spend again to keep this recovery alive,” said Baumohl.

Will Fed keep inflation down?

Chicago Fed President Charles Evans says it’s too early to start reversing the United States’ accommodative monetary policy, but that the Federal Reserve will act aggressively if inflation starts to build. Even though the U.S. monetary base has nearly doubled in the past year as the Fed has rapidly expanded its balance sheet, sluggish growth in bank credit has held broader money growth to about 8 percent. Evans, a voting member of the central bank’s Federal Open Market Committee in 2009, focused on the “raging” debate between those who still fear price deflation in the U.S. economy, and others who fear inflation is poised to rise uncontrollably. “Highly regarded analysts talk about the possibility of another debilitating deflation while others — just as highly regarded — suggest that even though we have avoided the Great Depression 2.0, the U.S. economy may be facing the Great Inflation 2.0,” he said. Evans said the answer was none of the above. “I am confident the Federal Reserve will achieve the price stability component of our mandate.” I wish I was as confident of the government’s ability to manage money.

A few more billion down the auto bailout drain

A Congressional Oversight Panel report questioned some of the decisions President Obama’s Auto Task Force made with regard to General Motors and Chrysler on the use of Troubled Asset Relief Program (TARP) funds to restructure the auto industry, and while it didn’t say the Task Force broke any laws, it suggested there were many unresolved issues regarding the handling of GM and Chrysler. Now that the U.S. government owns 10 percent of the new Chrysler and 61 percent of the new GM, the Panel made several recommendations for how the Treasury Department should oversee its investment. Among them, the Panel called for the Treasury Department to provide, “…a full, transparent picture of its actions.” On the issue of potential conflicts of interest, the COP urged the Treasury Department to “…consider placing its Chrysler and GM shares in an independent trust that would be insulated from political pressure and government interference.” Finally, the oversight panel said it believes the Treasury Department should provide the legal justifications for its use of TARP funds to restructure the auto industry. Oh, and in case you had any doubts, the panel concluded about $23 billion of initial loans to the two companies will be subject to “much lower recoveries.” In particular, $5.4 billion of the loans to Chrysler are “highly unlikely to be recovered.”

Surprise!

Now on to our real estate education section…

Short Sales Template

One of the great things about short sales is that half the profit equation is created from day one…buying right sets the stage for exceptional profits leaving investors with only one major concern…selling. Whether you flip the property the same day or rent out while waiting for favorable capital gains taxation rates, there are certain triggers that can heighten the desirability of the property and help fetch better prices and bigger gains. Use the following to create your own template simply or as a starting place for presenting properties for potential clients.

Need. Everyone has a need so what needs does this specific property fill?

Convenient
Safe
Attractive
Amenities
Income/Investment
Other

Cost. The price point or cost of any property – rental or resale – will fall somewhere in a scale that makes it affordable (not necessarily desirable) to a specific percentage of the population. Those that are most affordable typically have the greatest flexibility whereas those with the least affordability often attract the most highly qualified pool of potential clients.

Income equal what percentage of the median for the MSA/area…

Less than 20%
20%-40%
40%-60%
60%-80%
80% or Greater

Access. Whether or not the Cap & Trade replete with carbon credits and new housing codes passes or not, the issue of access is likely to create an instant gold mine for those properties located near highly desirable areas. Remember, access is a lot like beauty and in the eye of the beholder; don’t assume a high traffic property is undesirable due to location. On person’s traffic is another’s quick commute.

What locations does the property provide access to…?

Shopping
Hospital/Medical
Major Employer
School Park/Playground
Water
Forest (Hiking/Hunting/Privacy)
Agriculture
Other

Experience. Today’s generation has grown accustomed to experiencing everything so take the time to paint a complete picture of the property in the minds of potential clients. What is the likely experience this property will provide?

Newlywed Starter Home
Family & Friends
Entertaining
Retirement
Country Living
Artistic Individualism
Investor
Sophisticated
Cosmopolitan

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

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Real Estate News & Commentary by Chris McLaughlin, September 9, 2009