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Freddie Mac Short Sales Up 600% from 2 Years Ago
Freddie Mac CEO Ed Haldeman said the company has seen the number of its short sales increase 600% from 2008 as lenders look to dampen the impact of foreclosures hitting the marketplace. In a statement put out this week, Haldeman said Freddie Mac is doing everything it can to prevent more foreclosures, and that short sales are becoming an ever-popular tool in situations where foreclosure is imminent and modifications have failed. That number could increase as the Home Affordable Foreclosure Alternatives (HAFA) program takes hold. The Treasury Department launched it in April to provide cash incentives to servicers for conducting short sales and deeds-in-lieu of foreclosure.
RealtyTrac, an online foreclosure marketplace, is even preparing a short sale report to go long with its usual foreclosure report every month. It won’t be available until the end of 2010 however. “Foreclosure alternatives like short sales and deeds-in-lieu help borrowers to avoid the stigma of foreclosure, shorten the waiting period before they can buy a new home, and may inflict less damage on their credit reports,” Haldeman said. While short sales still add to the housing supply and can put pressure on local home values, they often avoid the lack of maintenance or damage foreclosed homes often display. Since the middle of 2008, Freddie Mac reported total losses of $84.4bn, according to its quarterly reports. The company’s plight has forced a directive from the Federal Housing Finance Agency (FHFA), its conservator, to de-list its and Fannie Mae’s common stock from the New York Stock Exchange.
Foreclosures sell at 30% discount
Foreclosures accounted for a third of all sales — and sold at a nearly 30% discount — during the first three months of 2010. According to a new report from RealtyTrac, the marketer of foreclosed properties, 31% of all sales were foreclosures. And homebuyers purchasing those properties paid a whopping 27% less, on average, compared to sales of non-distressed homes. These foreclosure sales include properties sold in short sales or after a bank repossession, known as REOs in industry terms. It does not include transfers from borrowers to banks, as in a sheriff’s auction. Foreclosures have become a dominant feature of many real estate markets, finding willing buyers among young bargain hunters and savvy housing market veterans. Foreclosure sales were highest, expectedly in the bubble states of Nevada, Massachusetts, Rhode Island and Florida. Lenders have been trying to manage their inventories of foreclosed homes to prevent them from flooding the market and dragging down prices. The impact of foreclosure sales on the home sales market can have a depreciating effect on the entire inventory out there.
Wall Street reform bill reformed
Lawmakers came up with an alternative plan to save the Wall Street reform bill falling flat in the Senate. After key moderate Republicans who had supported earlier versions of reforms threatened opposition, Democrats leading negotiations in the Senate and House scrapped an effort to pay for reforms by taxing big banks and hedge funds to the tune of $19 billion. Instead, they agreed to pay for Wall Street reform by ending the $700 billion federal bailout program called the Troubled Asset Relief Program (TARP) immediately upon final passage of the bill. Lawmakers would redirect the stream of bailout repayments as well as untapped dollars to offset shortfalls created by the Wall Street reform bill, which spends money by creating new agencies. The move would offset $11 billion in spending. Republicans involved in financial reform talks balked and tried to get Democrats to cut the federal stimulus program to pay for Wall Street reforms. “This ranks right up there at the top of the list for pure deception for treating the American taxpayer in an inappropriate way,” said Sen. Judd Gregg, R-N.H. The full House is expected to take up the bill Wednesday.
Mortgage Refinance Applications Increase as Rates Continue to Drop in Latest MBA Weekly
The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending June 25, 2010. The Market Composite Index, a measure of mortgage loan application volume, increased 8.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 8.3 percent compared with the previous week. The Refinance Index increased 12.6 percent from the previous week and is the highest Refinance Index observed in the survey since the week ending May 22, 2009.
The seasonally adjusted Purchase Index decreased 3.3 percent from one week earlier. The unadjusted Purchase Index decreased 3.8 percent compared with the previous week and was 36.0 percent lower than the same week one year ago. “Amid continuing financial market volatility, mortgage rates dropped again last week, with rates on 15-year loans reaching a record low for the MBA survey. Refinance applications jumped in response, but remain at about half the level seen in the spring of 2009,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Purchase applications declined for the seventh time in the last eight weeks, keeping the purchase index near 13-year lows.”
Diana Olick – Is Home Ownership an American Right?
“Maybe the government doesn’t want to deal with Fannie Mae and Freddie Mac. just yet, but that doesn’t mean we should all just ignore the fact that these two ticking time bombs continue to support more than half of the mortgages in this country and the bulk of new originations. Is home ownership an American right? The government appears to say yes. In my piece on CNBC today, I relate through the history of just how we got to this ownership society…the politics, policies and politicians behind home ownership. But here I’d like to take the conversation forward. We know how we got here, and we know what happened when home ownership went completely haywire. Now the politicians are calling for “responsible” home ownership, and yet government continues to pour billions of dollars into programs and incentives that push more borrowers into homes that may not be the best fit. Today the S&P Case Shiller Home Price Index showed an improvement in home prices over the same period last year. California is leading the way in recovery.
But in an interview with David Blitzer of S&P, you would have thought prices fell through the floor again. Blitzer’s claim is that prices should be recovering far better and faster than they are. He cites the disappointing fact that nine of the top twenty cities hit new price lows at some point since the beginning of this year. And then there’s the concern that the gains are artificially boosted by the home buyer tax credit which expired April 30th.
Which all brings me back to my original thesis: Government gets involved in the housing market, the housing market surges and then that same housing market inevitably pays the price when government pulls out. This is not to say that there aren’t some good, long-term programs out there to spur home ownership for deserving, low-income buyers, but the idea that the government was somehow going to jump start home buying with a tax credit, and then that car would just keep on driving, really couldn’t work in this market. Government, yes, has a responsibility to save the banking system from a total meltdown due to bad mortgage debt, but the future of housing, of home ownership, needs to reinvent itself without artificial stimuli. Americans have to get back to basics, and by basics I mean affordability, responsibility, and plain common sense. Government is not famous for any of those.”
Now for our real estate education section…
Facts, Figures & Other Tidbits That Make a Real Difference
Admit it. Most people don’t have a head for facts, figures and statistics. Except for a few special people that seem to thrive on data and obscure calculations, just the mere mention of facts and figures tends to cause people to start shifting in their seat and looking for the nearest exit. This is NOT one of those situations. Today we are going to cover a few facts and figures that make a very real difference in your real estate and investing career. Things you can put to work and take straight to the bank. Try these out and see for yourself.
1. Establish a ratio. Not just any ratio…a ratio that has been proven effective. Burn this number into your brain and use it as a foundation for growth and maintenance. Research conducted by top agents and businessmen indicated a 34:1 ratio to successfully close one deal. Notice, these are successful agents so novice investors may need to use a higher ratio when first starting however, nothing says that each contact must be time consuming or made in person. Learn how to use social media to dramatically reduce the time, effort and expense to meet this criteria. Bottom line: make contact with an average of 34 buyers/sellers for every deal you close….but worker smarter not harder by using social media.
2. Increase your odds. One of the biggest mistakes most people make when investing in real estate is to think the little things don’t matter. They do. Take the above ratio as an example. It’s tempting to believe that making contact with only 25 people instead of 34 is sufficient. Don’t believe it. Do the math and you will soon realize the impact on your business at the end of the year is likely to be a full 30 percent less than the person who maintained the 34:1 ratio instead! Take away…to grow your business you must not just meet the standard ratio but rather exceed it. Instead of retaining the 34:1 ratio you might need to adopt a 45:1 ratio but remember, by using social media it is possible to work smarter rather than harder while growing your business and profits.
3. Focus on one skill and delegate the rest. Veteran real estate professionals have learned the fine art of delegation but there is one skill that you should NEVER delegate…do you know what it is? Not only is it one of the most crucial skills to business success but it’s where the money is. In fact, it’s probably not an overstatement to say this is the single most important part of your business…yet the majority of real estate professionals are unable to identify this skill when asked. Even worse, many actually delegate this to others…a practice akin to handing over their business.
Have you guess yet? Plan and simple…lead generation. Consider this, real estate entails several core competencies including lead generation, presentations to buyers/sellers, marketing, negotiation, contracts, coordination of closing etc…nearly all of these are technical considerations that can be clearly defined and cost estimated to a narrow margin because they are predictable in terms of time and cost. Lead generation is different. Research has shown that top agents are able to convert nearly 80 percent of leads into successful transactions…novice agents and outside vendors average as little as 10 to 20 percent. Why pay more for less? Remember, the secret to success is to be in front of a qualified prospect when they are ready to buy – not when you are ready to sell. Learn how to use social media marketing to meet your objectives and find ready buyers by joining one of our free webinars.
See you at the top!
Chris McLaughlin
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Copyright Loss Mitigation Institute LLC 2010.
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
* Join my Facebook Fan Page: http://www.mclaughlinchris.com
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