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TARP and HAMP failed to halt foreclosures
In his latest quarterly report to Congress, special inspector general Neil Barofsky said that the Troubled Asset Relief Program, or TARP, has failed to boost bank lending as well as halt the spread of foreclosures — two key aims of the sprawling program. ”Whether these goals can effectively be met through existing TARP programs is very much an open question at this time,” Barofsky said in the report. Since Congress enacted TARP, lending to both consumers and businesses has continued to decline. Earlier this month, the Treasury Department reported that the 22 banks that got the most aid from the government’s various bailout programs have actually cut their small business loan balances by $12.5 billion since April.
The Obama administration did propose a joint program between the Treasury Department and the Small Business Administration in October to make capital cheaper for community banks that commit to increasing their small business lending, but three months later the government is still drafting guidelines for that initiative. Barofsky, whose office has been closely tracking the evolution of TARP, also criticized the Obama administration’s Home Affordable Modification Program. Even as Treasury allocated $35.5 billion towards that foreclosure-prevention program as of the end of last year, only 66,500 homeowners have received permanent modifications, with another 787,200 homeowners in trial modifications. There is no sign that the rate of foreclosures is slowing down anytime soon. Earlier this month, RealtyTrac, the online marketer of foreclosed homes, reported that foreclosure filings surged to a record 3 million in 2009, up 21% from 2008. There was at least one bit of good news from Barofsky’s latest report however. He acknowledged that while the ultimate cost will still be “substantial” for American taxpayers, it will be less than originally estimated.
New $3.8 trillion budget
Today President Obama will reveal a $3.8 trillion budget for 2011. The budget proposes new tax breaks and incentives for small businesses that hire new employees or boost wages, which would cost $30 billion. There would also be tax breaks for small businesses that make new investments. The budget includes a one-year extension of Making Work Pay tax breaks, delivered as a part of last year’s stimulus package. This credit resulted in slightly higher paychecks for 110 million families, according to the White House. It would make permanent tax cuts passed during the Bush administration for all except high-income households. Other spending hikes will include: $17 billion more for Pell Grants to help students pay for college and $6 billion for “clean energy technologies.”
The administration would also spend $734 million to install 1,000 new full body scanners at airports. The budget also calls for a relatively small three-year cap on non-defense discretionary spending. Critics, like the budget watchdog group OMB Watch — which called the move “emptying a sea with a teaspoon” — point out that the cap is on a small part of the total budget, leaving room for big increases on war, military and national security spending. In fact, the president’s budget will call for billions more in spending increases for defense, diplomacy and homeland security agencies, even though House Speaker Nancy Pelosi said last week that some defense spending should also be subject to the freeze. White House budget chief Peter Orszag claims that the White House’s guiding philosophy is: “Don’t make the situation any worse.” Shame they didn’t think that one up before…
DSNews.com – Fannie Mae seller assistance program
Fannie Mae has announced a temporary seller-assistance program under which people purchasing a property through HomePath, Fannie Mae’s REO disposition operation, will receive up to 3.5 percent of the final sales price, which can be applied toward closing costs or used to purchase appliances for their new home. The offer is available to any owner-occupant who closes on the purchase of a property listed on HomePath.com before May 1, 2010, the company said. In addition, many Fannie Mae-owned properties are eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing, with as little as 3 percent down. “Attracting qualified buyers to the market and reducing the inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover,” said Terry Edwards, EVP of credit portfolio management for Fannie Mae. “Many families are taking advantage of the federal homebuyer tax credit to buy a new home so this is a great time for Fannie Mae to offer some additional help.”
According to the GSE’s most recent quarterly filing, Fannie Mae acquired 98,428 homes through foreclosure during the first nine months of last year and sold 89,691 REO properties during the same period. But at the end of September, Fannie Mae still had 72,275 REO properties on its books, marking a 7 percent increase year-over-year. Furthermore, Fannie Mae’s monthly summary shows significant growth in seriously delinquent single-family mortgages held or guaranteed by the company. Up from 2.13 percent in November 2008, loans three or more months behind in payments or in the foreclosure process soared to 5.29 percent in November 2009.
Obama and his phantasmagorical job count
In the ongoing circus of the White House’s elusive “jobs saved or created,” administration officials claimed Saturday that its stimulus plan directly funded 599,108 jobs in the fourth quarter. The figure is based on about 160,000 reports from state, local and corporate recipients that have spent stimulus money to keep teachers in schools and cops on the street, as well as to rebuild roads, launch green energy initiatives and fund other projects. That spending represents one-fifth of total stimulus spending to date. In total, the economic stimulus program has boosted employment by 1.5 million to 2 million jobs, the president’s chief economic adviser said in mid-January. But unlike the figure reported Saturday, that number is derived from a mathematical formula based on how much money has flowed out the federal door and includes both the direct and indirect hires. A total of $263.3 billion has been paid to states, contractors and other recipients or distributed in tax breaks. Recipients’ reports cover $57.9 billion of that spending, according to the White House. Since it was enacted last February, Republicans have repeatedly attacked the $862 billion effort as a colossal waste of taxpayer dollars that has not created meaningful, long-term employment. “Americans deserve more than fictitious claims that don’t match the reality of what they are going through,” said Kevin Smith, spokesman for House Minority Leader John Boehner, R-Ohio.
Fannie Mae hits 5.29% delinquency rate
Fannie Mae reported a serious delinquency rate for its mortgage portfolio of 5.29% in November 2009, the latest month of data, the highest in recent memory. That number grew from 4.98% in October and more than doubled the 2.13% in November 2008, according to its monthly summary. For December 2009, the entire Fannie book of business grew at an annualized rate of 9.7% in December to $3.2bn. For all of 2009, the book grew 4.2%. Fannie’s mortgage-backed securities (MBS) and other guarantees totaled $2.82bn in December. It issued $55.3m in MBS – up from $40.3m in November – bringing its total issuance for the year to $807.8m. Fannie’s gross mortgage portfolio grew at an annualized rate of 37.6% in December and stood at $772.5m at the end of the year. Wilshire Credit Corp., the mortgage servicer bought by IBM in October, is set receive a substantial servicing portfolio from Fannie and catch the servicing rights to a portion of these delinquencies. In fact, the mortgage finance industry is abuzz over a rumored change to the way Fannie and its brother GSE Freddie Mac would assign and manage mortgage servicing rights.
Now on to our real estate investing educational section…
Bridging the Gap
It is estimated over 95% of millionaires made their money from real estate. On the other hand, the average Realtor earns less than $40,000 annually. Why the discrepancy? Obviously it’s quite possible to make stellar returns from real estate yet each and every year plenty of people barely make ends meet even while working at it full-time. Yet research shows that success in real estate doesn’t require full-time work, a large private income or many of the other trappings of success typically associated with wealth creation from other venues. In fact, plenty of part-time investors far outperform fulltime real estate associates each and every year. Learn the secret of their success with these quick tips:
1. Accept Success – Seriously! Have you ever stopped to contemplate how easily most people accept failure or fate versus those that take responsibility for their own success? It’s quite remarkable when you stop to think about it. Understand that everyone is capable of making a success from short sale investments – but few people actually do so not because they are helpless but because they wait for help rather than forging their own path. When in doubt about what to do, first find a mentor and then…simple do it. IF it’s wrong you will learn from the experience but if not, you have made progress either way.
2. Work at home when possible. Set a schedule then stick to it. Don’t allow distractions to clutter up your productive short sale investing time. Hire childcare if needed, find a reputable and reliable virtual assistant and then focus time and energy on building the foundation for your short sale empire by automating as much as possible.
3. Dump dumb rules. Simply your life and investing goals as much as possible. Sit down and think about how much time it takes you to argue with your spouse about some minor situation versus finalizing a deal or making offers on upcoming short sales. Re-evaluate what rules and roles dominate your day then eliminate those that don’t enhance your life.
4. Learn to say NO. Stop apologizing and don’t try to do it all yourself. It’s not in your best interest (or that of your family and friends) to tackle more than you are able to deal with on a regular basis. Leave space for down-time as well as impromptu activities. Short sale investments are especially prone to last minute maneuvers where those that win aren’t necessarily the most prepared but simply those in the right place at the right time.
5. List- Buy. The more you list the more they buy and vice versa…the more you buy the more you have to list as a short sale investor. It’s a numbers game so take action and automated it as soon as possible. Increase your target marketing efforts on a regular basis; once you reach the desired number of homes, begin to switch your strategy to include more affluent clients.
See you at the top!
Chris McLaughlin
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Copyright Loss Mitigation Institute LLC 2009.
All Rights Reserved.
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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
* Follow me on Twitter: http://twitter.com/mclaughlinchris
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