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Home prices fall over month, up annually
Standard & Poor’s/Case Shiller home price indexes shows that prices of U.S. single-family homes fell in February on a monthly basis, but posted the first annual increase in more than three years. The report suggests more price erosion is possible before prices start rising on a sustained basis, S&P said. The price improvement can be attributed to momentum from the federal homebuyer tax credits, which expire on April 30, and prices could be pressured further by foreclosure sales. The S&P composite index of 20 metropolitan areas declined 0.1 percent in February on a seasonally adjusted basis, matching the forecast in a Reuters survey, after rising for eight straight months. On an unadjusted basis, prices dropped 0.9 percent in February, worse than the estimated 0.3 percent decline and following a 0.4 percent downturn in January.
The home price indexes, for both 10-cities and 20-cities, showed the first annual upturn since December 2006, rising 1.4 percent and 0.6 percent respectively. The annual rise in the 20-city index, however, was half of the 1.2 percent increase forecast in a Reuters poll. “These data point to a risk that home prices could decline further before experiencing any sustained gains,” David M. Blitzer, Chairman of the Index Committee at S&P, said in a statement. “While the year-over-year data continued to improve for 18 of the 20 Metropolitan Statistical Areas and the two composites, this simply confirms that the pace of decline is less severe than a year ago,” he said. “It is too early to say that the housing market is recovering.”
Wall Street reform stalled
Senate Democrats failed to muster enough votes Monday to take up Wall Street reform, with a key Democrat voting with Republicans against the push to get the debate started, and that made it impossible for Democrats to get 60 votes to push the legislation forward. Democrats want to create a council of regulators who keep an extra eye on firms whose failure would threatens the economy. They also want to empower the Federal Deposit Insurance Corp. to step in and take down big Wall Street banks, tapping a pot of money that banks pay into. But Republicans say that the new unwinding powers and the resolution fund will create a new implicit guarantee of future government intervention. Shelby said on Sunday that the bill leaves too much flexibility for the Federal Reserve and the FDIC. “We need to tighten that up to make sure that it doesn’t happen,” Shelby said on NBC’s “Meet the Press.” “The message should be unambiguously that nothing is too big to fail and if you fail, we’re going to put you to sleep.” Congress wants to make bets on complex financial contracts known as derivatives more transparent, pushing them onto clearinghouses and exchanges.
They also want those making bets to post collateral, backing up the bets. On Monday, key Democrats agreed to new rules to force banks to spin off their swaps desk, or the parts that deal in making such risky bets. However, the financial services sector says too much regulation will hurt U.S. businesses, such as airlines and farmers, who benefit from making such bets to shed the risk of swings in prices and interest rates. And they say it will push the industry to make trades overseas. Democrats also want to create a new independent consumer financial protection regulator. The Senate measure houses the regulator inside the Fed but gives it strong powers to make its own rules, such as capping credit card fees and fees for paying down mortgages early. New rules can get vetoed by a council of regulators. The House bill, which passed last December, goes further with a stand-alone agency. But Republicans think the consumer regulators’ power goes too far, regulates too many financial products and could cut so deeply into banks’ balance sheets, that banks could become unstable and insolvent.
Mortgage fraud on the rise
Incidents of mortgage fraud perpetrated by industry professionals increased 7% in 2009, after jumping 26% the year before, said the Mortgage Asset Research Institute (MARI), a division of LexisNexis. The worst-hit states include Florida, California, Arizona, New York, New Jersey and Maryland. Florida was the worst hit state, according to MARI, with a mortgage fraud index reading of 292. That means the Sunshine State had nearly three times the expected level of fraud given the number of loans issued there. A score of 100 would indicate the state had exactly the amount of fraud expected and a score of 0 would mean no fraud at all.
Although Florida’s reading was the highest in the nation, it was still a huge improvement over 2008, when it was 430. New York was the second worst state for mortgage fraud with a mortgage fraud index reading (MFI) of 217, up 14% from 2008. California was next at 159 and Arizona was fourth with 158. The report described several types of fraud that were detected most often. These include so-called “liar” loans, in which mortgage professionals knowingly listed false income claims for borrowers; inflated appraisals, in which mortgage loan officers or brokers pressure appraisers to overvalue a home so it would qualify for a bigger mortgage; and false occupancy claims, which is when buyers claim they will live in a home but are actually buying it for investment purposes.
Greece just the tip of the sovereign debt crisis?
According to economist Nouriel Roubini, the sovereign debt crisis will get worse and bond vigilantes could move on to even bigger economies like the United States and Japan when they are done sweeping through vulnerable European nations. “The recent problems faced by Greece are only the tip of a sovereign-debt iceberg in many advanced economies,” Roubini told readers of his RGE Monitor Web site. “Bond-market vigilantes already have taken aim at Greece, Spain, Portugal, the United Kingdom, Ireland, and Iceland, pushing government bond yields higher.” “Eventually they may take aim at other countries – even Japan and the United States — where fiscal policy is on an unsustainable path,” he wrote. Roubini said he fears failure to learn the lessons of the credit crisis will simply mean a bigger, more dangerous crisis is just around the corner. “There is a lot of talk about better regulation and supervision of the financial system but the financial industry is back to business as usual — rebuilding leverage, engaging in prop trading and other risky behaviour, compensating bankers and traders with indecent bonuses — and is lobbying against better regulation and supervision,” he said.
Roubini also says he believes that those who claim it is impossible to see an asset bubble coming are misguided. Bubbles are easy to see coming and have had similar characteristics since Tulip mania hit the Netherlands in the 17th century, he said. “An asset bubble — often in real estate or in stock markets or in a new industry — leads to financial euphoria, excessive risk taking, an accumulation of excessive debt and leverage,” Roubini wrote. “So the signposts of this phase — asset boom and bubble, followed by the eventual bust and crash – are highly predictable if one looks at the economic and financial indicators that show the build-up of such excesses.”
DSNews.com – Short sale fraud
With defaults continuing to mount and declining property values still widespread, the industry is seeing an increase in short sales. Such transactions are expected to burgeon even further now that the federal government has implemented its Home Affordable Foreclosure Alternatives (HAFA) program. With the new policies and still-precarious market conditions, short sales are gaining in popularity among lenders and distressed homeowners alike, but as with any modus operandi that rapidly picks up steam, this proliferation can open the gate for fraudulent activity. Experts say one area of the short sale process particularly vulnerable to fraud is property valuation. Bank-owned fraud attributed directly to schemes involving short sales and REO inventories has increased by 40 percent over the past year and has more than doubled from two years ago, according to market data from the California-based risk mitigation firm Interthinx.
The administration’s HAFA program allows broker price opinions (BPOs) to be used to determine the value of properties to establish a minimum offer for a short sale. Some industry groups claim the allowance of BPOs is likely to exacerbate the potential for fraud. They say that the real estate agents and brokers who perform BPOs have an inherent bias toward producing a fee for themselves, irrespective of ensuring a fair return for the lien holder or homeowner. In response to these allegations, the National Association of Realtors (NAR) stressed that BPOs are completed by licensed real estate agents who have a detailed knowledge and understanding of real estate pricing and local market trends. The organization argues that BPOs are widely accepted in the industry because of their established reliability and accuracy, and practitioners providing BPOs must adhere to a rigorous code of ethics and recognize their fiduciary responsibility to their clients. The FBI defines such fraud as: “Any material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan.”
Who will watch the watchers?
The House Committee on Oversight and Government Reform requested a “thorough and independent” investigation into concerns over possible violation or misconduct involved in the US Securities and Exchange Commission’s (SEC) decision to bring action against Goldman Sachs. The charges arrived just days before the US Senate would begin paving the way for sweeping financial regulatory reform through key procedural votes on reform bills. On April 20, eight members of the House Committee wrote to SEC chairman Mary Schapiro, asking whether some form of prearrangement or coordination took place between SEC officials and proponents of the legislation. “The timing of the [SEC's] filing of a civil securities fraud action against Goldman Sachs has created serious questions about the Commission’s independence and partiality,” the letter reads, in part. “The Goldman litigation…has been widely cited by Democrats in support of the financial regulatory legislation currently before the United States Senate.”
Although the SEC publicly responded to the committee members’ initial letter that it does not coordinate its enforcement actions with the Administration, Congress or political committees, ranking Committee member Darrell Issa said the circumstances and events related to the charges “call the timing and release of the [SEC's charges] into question.” In an April 23 follow-up letter to SEC inspector general David Kotz, Issa noted the timing of the Goldman charges coincided with the push for financial regulatory reform. On behalf of the members who penned the previous letter, Issa requested an investigation by the inspector general. “The circumstances of the filing and subsequent events fueled suspicion that the Commission…may have engaged in unauthorized disclosure or discussion of Commission proceedings in order to affect the debate over financial regulatory legislation currently pending before the United States Senate,” Issa wrote. Spokespeople for the SEC and SEC inspector general’s office did not immediately return calls seeking comment.
Now on to our real estate investing education section …
Hubs & Lenses – Online Lesson #2
Chances are you are familiar with hubs and lenses without even realizing it; sites such as squidoo.com or hubpages.com represent niche marketing areas with tremendous potential for local real estate agents and short sale investors alike. Their reach combined with less intensive competition make hubs and lenses a win-win proposition…best of all, getting started is simple and easily outsourced. Today we will take a few minutes to discover what it takes to get started with some of the most popular hubs/lense sites.
Hub & Lenses Defined
Hub and lens sites are a simple webpage created to emphasize a select topic. For example, a local real estate agent or short sale investor may desire to create a web page for their town or even a specific zip code or neighborhood they specialize in. Once the page is created it is then published through a community with your biographical information or that of your business. Because the mini-site or information is promoted via an existing community, it has the opportunity to “go viral” much faster, have access to immediate visitors and grow exponentially due to sharing.
Benefits
More visitors
Increased visibility
Increased link popularity…especially as it pertains to Google
Getting Started
Getting started with Hub and lens sites couldn’t be more simple; decide on a topic or family of relevant topics, hire a writer or do it yourself if you have the time and expertise. Be sure to include a link to your primary website then get your links out there where others can find them!
Hub & Lens Sites
There are many hub and lens sites, each with their own distinctive style and requirements. The following represent some of the most popular:
Digg – This is an article popularity contest where social media meets content. The more readers that “digg” your submission, the higher it rates and the more visitors are likely to view it.
StumpleUpon – A somewhat randomized way to discover websites, blogs and other content.
RedGage – An interesting site with potential for real estate investors due to the heavy use of photographs and backlinks to articles.
YouSayToo – A blogging site where you can promote your existing blog and exchange blog ads with others.
Xomba – A newcomer, Xomba allows users to create articles or blurbs, include backlinks and integrate with Adsense account numbers.
Squidoo – An expert site that allows users to integrate application and nifty widgets for added value. As one of the larger sites, Squidoo and HubPages are considered essential for anyone just getting started with hub and lens pages.
HubPage – One of the most popular hub sites, HubPages is free, boasts one of the largest communities and is an excellent way to reach a new community of readers.
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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