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I get asked all the time.
“Chris, how do you guys do it? How the heck do you have
so many Facebook Fans and Twitter followers?”
By the time you read this, I’ll probably have over 12,000
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And guess what?
You could, too. And make lots of money doing it.
Because this coming Wednesday afternoon I’m pulling back the
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Obama’s mortgage plan in troubled waters
A new government report released Monday shows that more troubled homeowners have fallen out of trial mortgage modifications than have received long-term help The administration’s signature housing-rescue plan, Home Affordable Modification Program, known as HAMP saw a surge of people leave the initiative in May. More than 152,000 have had their trial adjustments cancelled since the program started, mainly because they could not document their income or because they earned too much to qualify for assistance, officials said. Nearly 430,000 borrowers have had their trials cancelled — more than one-third of the total started. Servicers place troubled borrowers in trial modifications for several months to verify their income and see whether they can make the lowered payments. More than 70% of those cancelled this month had been in trial for at least six months.
“The administration’s housing policies, combined with actions of the Fed, have lowered mortgage interest rates, helped stabilize home prices and reduced the rate of foreclosures, repairing some of the damage caused by the financial crisis to the financial security of millions and millions of American families,” said Treasury Secretary Tim Geithner. But a deeper look at the scorecard shows that dark clouds remain over the housing market. Completed foreclosures soared to 93,800 in May, up from 65,000 a year earlier, while delinquency rates for borrowers with the best credit history jumped a full point to 5.9% in the first quarter. Borrowers who owe more than their house is worth rose to 11.3 million in the first quarter, up from 10.2 million a year earlier. The number of vacant homes held off the market rose to 3.6 million in the first quarter, up from 3.5 million a year earlier. The number of mortgages refinanced in the first quarter fell to 1.17 million, from 1.31 million during the same period in 2009.
Congress Sprints for Wall Street Reform Finish
Dashing to overhaul the financial rulebook, the U.S. Congress was going through the final touches before submission to the President and the banks are expected to take some knocks off a Tuesday noon meeting. The reforms on consumer protection, debit card fees and mortgage lending, are meant to prevent a repeat of the credit crisis that tipped the economy into a deep recession. A new financial consumer watchdog is expected to take shape as an independent unit within the Federal Reserve. It would consolidate consumer protection duties now dispersed across several agencies, and oversee mortgages, credit cards and other consumer financial products that critics say were poorly supervised in recent years.
Banks were pushing hard for limited, or ‘de minimis,’ exemptions to a part of reforms that would prohibit them from sponsoring or investing in private equity and hedge funds. Some lawmakers were inclined to support the banks on this front, while others were not. The conference committee of congressional negotiators seeking to resolve differences between the House and Senate versions of the bill plans to work through the consumer-protection issues on Tuesday, the Volcker Rule on Wednesday, and derivatives regulation on Thursday. The timing could slip if lawmakers need more time to resolve disputes. Democrats and administration officials still expect almost all Republicans to vote against the final bill. Tightening global oversight of banks and capital markets in a coordinated way will be a key topic at a meeting of the Group of 20 economic powers in Canada next weekend. A senior Obama administration official said Monday the panel would finish a bill within days that would be the strongest reform plan to emerge from a G20-member government.
Obama Administration Scorecard Tracks Housing Data, Foreclosure Mediation
The Obama Administration released the first edition of its monthly housing scorecard that tracks housing market indicators as well as efforts by the Federal Housing Administration (FHA) and the Making Home Affordable programs to prevent foreclosures. The monthly report is an aggregate of housing initiative reports, including the most recent Home Affordable Modification Program (HAMP) numbers, which showed that servicers completed 47,700 permanent modifications in May, down approximately 30% from the 68,100 completed in April. Since the program launched in March 2009, a total of 340,459 modifications have gone permanent and are active through the program, or approximately 11.3% to 8.5% of the projected 3m to 4m modifications the program is expected to generate by its expiration in December 2012.
“For the first time we have comprehensive data that shows how all of the administration’s unprecedented housing recovery efforts are working and the results they’re producing in our neighborhoods and communities,” Department of Housing and Urban Development (HUD) secretary Shaun Donovan said in a conference call with reporters. A section of the scorecard covers housing indicators, including the HUD and Census Bureau home sales data, the Standard & Poor’s (S&P)/Case-Shiller home price index, mortgage origination data, mortgage delinquency rates, as well as CoreLogic projections on the number of underwater homeowners.
Another ‘Flash Crash’ Coming?
The May 6 “flash crash” may be history, but its after-effects continue to loom large after two recent mini-crashes in individual stocks. Regulators have characterized the initial flash crash, which saw the Dow lose nearly 1,000 points in a matter of minutes, as a one-off occurrence possibly attributable to a “fat finger” trade or some other market anomaly. But a growing chorus of traders and legislators believe the flash crash is symptomatic of a larger problem with high-frequency trading and a market that lacks visibility and is susceptible to similar events in the future. Thus far, the main reaction has been the implementation of circuit breakers that stop trading on individual stocks should they rise or fall more than 10 percent in a five-minute span.
The rule, implemented for a six-month test period, got its first workout last week when Washington Post shares doubled inside of a second Wednesday, from nearly $460 to $929.18. The circuit breakers essentially did their job, halting trading in the company after the surge. But the mystery remains over why such events happen in the first place. The non-transparency that stems from high-frequency trades, which can happen in milliseconds, makes tracking the trades virtually impossible. Some estimates have high-frequency trading accounting for about 70 percent of all market activity. A congressional panel looking into the issue has made little headway. From a legislative standpoint, Sen. Ted Kaufman (D-Del.), who has been pressing the Securities and Exchange Commission and Congress to address the underlying causes that led to the flash crash is a trader himself, remains frustrated that Congress is moving so slowly to address the issue.
Diana Olick – Obama Administration’s Housing Scorecard
The U.S. Department of Housing and Urban Development’s new “Monthly Housing Scorecard,” is full of numbers. It came in a package of data, emailed to reporters, that included the already widely cited Home Affordable Modification Program monthly status report. This is the one that calls out all the banks on how many borrowers they’re getting into trial and permanent modifications, and how many are failing the program. It also adds the number of borrowers counseled, which, don’t get me wrong, is a big number at 839,000 in May (although down from 1.075 million in April). Then there’s my favorite part, where they calculate the “change in aggregate home equity.”
The number is about 1 trillion dollars since Q1 2009. The report also shows the ugly side, like FHA delinquencies and prime loan delinquencies both on the rise. Foreclosure completions are also way up from a year ago, and the number of borrowers failing the HAMP program is growing faster than the number of borrowers getting permanent mods. In May, 47,724 borrowers got so-called permanent status, while 152,056 trial mods were “canceled.” But representatives of the government should know, if anyone should, that all those stats about mortgage modifications and home price stabilization are backward looking…looking straight into the mouth of a government subsidized housing market.
After the expiration of the home buyer tax credit, home buyer traffic fell off a cliff. Realtors, mortgage bankers, home builders…ask any of them. The drop off is even worse than expected. Initial data points to a double dip in home sales and prices before a recovery, perhaps, some time next year. We are also seeing a recent surge in bank repossessions and short sales, which will only put more pressure on home prices. “Obviously we are not out of the woods,” Donovan admitted. “Our housing recovery remains fragile.” I’m always wary of report cards, especially those with strong political agendas behind them. The numbers are clear and irrefutable, but I’m not sure they included all the subject matter that needs to be covered.”
Real Estate Owned Inventory to Peak in Summer 2011: BarCap
The amount of REO inventory held by lenders is expected to peak in August 2011 at 545,000 properties, according to analysts at Barclays Capital. In April, REO remained relatively flat, increasing 0.8% from March to 526,000. The influx was primarily due to an increase in REO from the government-sponsored enterprises (GSEs), according to BarCap. Analysts also reported that properties are taking roughly 23 months to move from foreclosure to REO. Servicers are showing signs of caution, not wanting to shock the fragile housing recovery with too much inventory, according to analysts.
And foreclosure moratoriums are the first line of defense. Moratoriums announced by the major banks and GSEs are the latest example. Servicers are also easing on the rate of foreclosure. The inventory of foreclosed homes, not yet in REO, fell to 1.95m in April, a 2.6% decline from 2m. It’s the first drop since 2005. Analysts said the tide in default servicing has shifted. For the past year, fewer loans moved from current status into delinquency as programs like the Home Affordable Modification Program (HAMP) kept foreclosure numbers from climbing. Now, however, homes are moving from foreclosure into REO at a faster rate as delinquencies have peaked. Because of this, analysts said the foreclosure stock is likely to decline in the months ahead.
Now on to our real estate education section…
What’s Old is New Again
Dead subdivisions line the highway, their pompous names half- obliterated on crumbling stucco gates. Lonely white-way lights stand guard over miles of cement side-walks, where grass and palmetto take the place of homes that were to be… Whole sections of outlying subdivisions are composed of unoccupied houses, past which one speeds on broad thoroughfares as if traversing a city in the grip of death.
Henry S. Villard, 1926
If the above quote, written in 1926, seems to resonate with the modern situation of real estate, it should come as no surprise that may other facets of the economy also seem to have been taken from the pages of history. The “roaring 20′s” were a time of prosperity, booming real estate, easy credit and extravagant gains in the stock market. Excess was everywhere, times were good and then it ended….not with a boom as many believe, but rather a series of growing warning signals indicating ominous tones on the horizon. Few people are aware of the false crash that took place before the major market crash and subsequent bank holiday that eventually plunged the nation into the Great Depression.
Likewise, modern history seems to be repeating itself. A series of ever worsening events have taken place each creating shockwaves throughout the financial world. Each time Americans believe the worst is over and attempt to pick-up where they left off with stocks, bonds and “cash” for safety. Unfortunately, many experts predict the nation is still in the midst of what may eventually play out as the second Great Depression where millions of retirees lose their life savings, retirement accounts file for bankruptcy, states are unable to pay their debt and even nations default on their loans.
By now, savvy investors should be asking what worked in the past? Is there a lesson to be learned from the 20′s and the subsequent pain of the 30′s? Of course, those that don’t learn from history are doomed to repeat it and while the nation may not have learned their lesson, that doesn’t preclude individual investors from doing so. Yes, there are lessons to be learned and fine ones at that. While the nation experienced one of the most difficult economic periods in our history, there were still those that were able to profit even during the very worst of times and still others that were situated to make a full and expedient recovery after riding out the worst of the financial storm. Students of history will recognize that tangible assets were the key to profit and recovery for both individuals and the nation.
Real estate experienced a major correction after the excess of the 20′s…as evidenced from the above quote it was severe. Bubble prone areas took years to fully recoup their former value while the excess of the market was absorbed by existing inventory. High unemployment rates and strict lending standards exacerbated the problem but despite everything…real estate did recover and actually flourish even in the midst of severe financial chaos. For those would be investors that shy away from real estate due to the current market conditions, take a big picture approach and learn a lesson from history. Like Proverbs said….”there is nothing new under the sun.” History has a way of re-playing itself with each generation. Watch, listen, learn….and profit.
See you at the top!
Chris McLaughlin
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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
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