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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
**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
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http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

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Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

*************************************************

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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New Home Sales Drop

On the heels of the S&P/Case-Shiller report yesterday, the Commerce Department said sales fell 7.6 percent to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined.  Analysts polled by Reuters had expected new home sales to increase to a 370,000 unit annual pace from November’s previously reported 355,000 units.  New home sales for the whole of 2009 fell 22.9 percent to a record low 374,000 units, but despite the slump in sales there were a few bright spots in today’s report. The median sale price for a new home rose 5.2 percent last month from November to $221,300, the highest in seven months and the biggest rise since April 2009. Compared to December 2008, the median sale price fell 3.6 percent.  The number of new homes on the market last month dropped 1.7 percent to 231,000 units, the lowest level since April 1971. However, December’s weak sales pace left the supply of homes available for sale at 8.1 months’ worth, the highest since June 2009, from 7.6 months in November.

BOA signs up on “piggyback mortgage” plan

As part of its $75 billion foreclosure-prevention program the Obama administration has been offering lenders who made so-called “piggyback” mortgages incentives to lower payments or eliminate the loans entirely.  Second loans allowed consumers to make a little or no down payment and they were all the rage while property values were on the rise.  Now, however, they are an obstacle to alleviating the housing crisis. That’s because piggyback lenders — fearing they won’t be repaid — can veto a borrower’s efforts to modify their primary mortgage.  The trouble with Obama’s offer is that no one was interested until Tuesday, when Bank of America (BOA) signed up.   If more lenders follow Bank of America it could clear the way for more mortgage companies to cut borrowers’ principal balances on their primary loans, but administration officials appear wary of subsidizing such reductions with taxpayer money, because it could spark yet another backlash from critics who claim it’s unfair to people who are still paying their mortgages on time and a bailout for banks that made reckless loans.   But many experts say dramatic changes are needed.  “Unless you modify principal, there is absolutely no hope of restructuring mortgages on a mass scale to keep people in their homes,” Daniel Alpert, managing director of the New York investment bank Westwood Capital LLC said earlier this month. “Eventually their hand will be forced.”

Stimulus $75 billion more expensive than first believed

The American Recovery and Reinvestment Act, passed in February 2009, was initially believed to have a price tag of $787 billion. The Congressional Budget Office (CBO) said the Recovery Act’s effects on government spending and revenues have closely followed its initial estimate for 2009 and 2010, but the addition of skyrocketing unemployment compensation costs has hiked its forecast Tuesday for how much the stimulus bill will add to the nation’s deficit, raising its estimate by $75 billion to $862 billion.  In the CBO’s initial estimate for the Recovery Act, the unemployment rate was expected to cap at 9%, but the rate rose above 9% in May and soared above 10% in October.  The vast majority of the increased deficit impact is linked to anticipated spending in 2011 to 2019. Nearly half of the additional $75 billion comes from more spending on food stamp benefits than originally anticipated. CBO said in its February 2009 estimate that the government would spend $20 billion on increased food stamp benefits through 2019, but it now believes that amount will be closer to $54 billion. It now appears to the Budget Office that stimulus will have a larger impact on the deficit in the years to come based on changing economic factors since the bill was signed into law 11 months ago.  What a surprise.

Mortgage Applications Decrease

U.S. mortgage applications fell for the first time in four weeks, reflecting a dramatic drop in demand for home refinancing loans, data from an industry group showed today. The Mortgage Bankers Association’s (MBA) Market Composite Index for the week ending January 22, 2010 decreased 10.9 percent on a seasonally adjusted basis from one week earlier and, on an unadjusted basis, decreased 10.1 percent compared with the previous week and decreased 19.8 percent compared with the same week one year earlier.  The Refinance Index decreased 15.1 percent from the previous week and the seasonally adjusted Purchase Index decreased 3.3 percent from one week earlier.  The unadjusted Purchase Index increased 2.8 percent compared with the previous week and was 4.5 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 2.6 percent.  The four week moving average is up 1.3 percent for the seasonally adjusted Purchase Index, while this average is up 2.8 percent for the Refinance Index.  The refinance share of mortgage activity decreased to 67.6 percent of total applications from 71.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.7 percent from 4.1 percent of total applications from the previous week.  “Refinance activity fell substantially last week,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today’s rates.”

SOTU tonight

Administration officials say President Obama intends to use today’s State of the Union address to put a new focus on his jobs agenda as he tries to regain the confidence of a disheartened electorate. He will make small-business hiring the centerpiece of that message, pressing Congress to act on a slate of tax cuts that have languished for months.  Mr. Obama will call for eliminating capital-gains taxes on investments in small businesses. He will redouble efforts to give small employers a tax credit for new hires. And he will call for extending bigger tax breaks to those that purchase new facilities and equipment.  Many of the proposals date back to his campaign but have drawn little notice in a Congress preoccupied with other matters, such as overhauling health care. 

According to a new Wall Street Journal/NBC poll, Americans think the president has paid too much attention to health care and not enough to the economy.  Ya think?  The speech will also promise a list of other initiatives for 2010. Mr. Obama will announce a salary freeze for senior White House officials and eliminate bonuses for all political appointees.  According to the poll, business leaders want to see more measures to spur trade, infrastructure development and lending to small and midsize businesses. In addition, the tax credits to be promoted by the president Wednesday have been too long in the pipeline, they say.  Many of the small-business proposals have been rejected by Congress already. The House passed a job-creation package that didn’t mention Mr. Obama’s proposed hiring tax credit.  The number of Americans who feel that the country is headed in the wrong direction has risen to 58%, the highest number since before Mr. Obama’s inauguration.  Moreover, Mr. Obama’s new overall approval rating of 50% might look better than recent polls, but given the survey’s margin of error, the new rating is statistically similar to his 47% approval in December. Forty-four percent say they disapprove of the job he is doing.

How on to our real estate investing educational section…

Why People Fail as Short Sale or REO Investors

It’s not that difficult to succeed at short sales but despite a proven process and track record of success, there are always a few  people that will fail. Fortunately, it’s simple enough to identify these common traits and learn to replace negative thinking with optimistic outcomes.

Whiners – Chances are if you have been in any type of small business endeavor or investment fund, you have met the perpetual whiner. You know the type; they complain that life is unfair, the other guy got the breaks, someone was born with a silver spoon so has all the advantage…the list is endless. Behind the whining is the belief that fate is more important than preparation but fortunately, the facts don’t support this premise. Planning, preparation and a proven process have repeatedly demonstrated the ability to generate above average returns for short sale investors from every walk of life. Sit in on a short sale seminar to find out how others have stopped whining and started winning at short sales.

Dreamers – Are you a day-dream believer? If so, it’s time to stop dreaming and start doing. The majority of dreamers never actual get around to investing in anything…they are too busy thinking up good ideas and grand plans. Dreamers are great at planning but fall short when it comes to actually putting anything into action unless it involves the blood, sweat and tears of others. Rather than investing in short sales with a dreamer, fund your own short sale empire where you can reap the reward that come from executing a solid short sales strategy.

Worriers – Worriers are a bit different; they tend to become very good short sale investors with rock solid returns. So, what is the problem? They stress and fret about every detail of the short sale transaction from start to finish. The constant levels of high anxiety take the satisfaction out of even the most profitable short sale deal leaving them unlikely to repeat the process at a later date. Worriers simply need to relax by understanding how to reduce the risk and put redundant protections in place that provide the additional layer of reassurance they need to sleep well at night.

Braggards – Every family has that one person who always attempts to one-up everyone else. It’s the same with short sale investments. Their house is always bigger, brighter, more profitable or simply better than yours. The funny thing about braggards is how difficult it can be to separate fact from fiction; if the housing crisis has taught us anything, it is simply that appearances are not always what they seem. Unfortunately, bragging has its own risk versus reward…in their quest to “best” everyone else, braggards are prone to overpay for a property or make otherwise unprofitable purchases. Don’t get caught up in an ego-trip at the expense of your short sale investment portfolio – simply stick to what works rather than wasting time trying to impress.

See you at the top!

Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.realestaterichesnews.com/news (subscribe to this newsletter)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

*************************************************

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
–

Forward this e-mail to your friends!  Then they can subscribe directly at the following link:  http://www.realestaterichesnews.com/news

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com 

***********

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More foreclosures coming 

The number of long-term adjustments completed under the president’s foreclosure prevention plan rose to 66,465 at the end of December, or 7.4% of all trial modifications started, up from 31,382 a month earlier.  Another 46,056 modifications are pending borrowers’ final signatures, according to Treasury statistics released Friday. Another 48,924 were denied permanent modifications, mainly because they did not make their trial payments on time, did not hand in the needed paperwork or did not meet the program’s criteria.  Meanwhile, the number of delinquent homeowners in trial modifications rose to 787,231, up from 697,026 a month earlier. 

Housing experts remain concerned that the rate of foreclosures still outpaces the help homeowners are receiving under the program. A record three million homeowners received at least one foreclosure filing in 2009, according to a RealtyTrac report released last Thursday.  A lot of borrowers are too far underwater or don’t have enough income to qualify for a permanent modification, said Celia Chen, senior director at Economy.com. Others will not be able to provide all the documentation needed.  Administration officials said they continue to review the program to make sure it is helping those in need, Chen said she doesn’t think there’s anything the government can do to keep these borrowers in their homes. “As more of these loans fail to make it to permanent modifications, a lot will go back on the market as foreclosures and that will depress home prices,” said Chen, who expects home prices to fall another 10% by the third quarter of this year.

President and Democrats trying to whip up populism in Massachusetts

The Democrats and the White House are scrambling to salvage the special U.S. Senate election in Massachusetts by trying to whip up a populist furor over banks.  Amid reports that financial institutions bailed out by the government are enjoying healthy profits and paying generous bonuses, and as a bipartisan commission began hearing testimony on banks’ role in the economic crisis, Senate candidate Martha Coakley (D), Vice President Joe Biden and others used the issue to portray Ms. Coakley, who is vying to succeed the late Edward Kennedy, as tough on bank executives and Republican Scott Brown (R) as coddling them.  This sort of anti-bank populism was popular in the 1930s by demagogues like Father Coughlin, but rarely has a president engaged in this sort of bareknuckle politics to save his agenda.  Polls show declining voter enthusiasm for Mr. Obama’s health-care plan, and Brown has campaigned on a promise to provide the 41st GOP vote to secure a Senate filibuster to scuttle a health-care bill. 

Democratic strategists concede Mr. Obama’s support in the past for a Wall Street bailout has fueled voter anger, particularly among conservatives and supporters of the antiestablishment Tea Party movement who are pouring money and volunteer hours into Mr. Brown’s race.  With the bank tax, “we can take populism back to our side,” a Democratic Party strategist said.  Mr. Brown he opposed the tax because it would most likely be passed on to consumers through ATM fees, among other things. He said banks would have to pay a hefty tax rather than use the money to extend much-needed loans to small businesses.  “If you’re having an uphill battle selling health care in a blue state like Massachusetts, that should send shivers down the spine of Democrats looking at races across the country,” said Brian Walsh, a spokesman for the National Republican Senatorial Committee.  A new Suffolk University poll finds Republican Scott Brown leading Democrat Martha Coakley, 50% to 46%. If Brown wins, ObamaCare dies. He would be the 41st vote to prevent any compromise legislation from coming to the floor of the Senate.

Questionable practices by banks on second liens?

Diana Olick of CNBC has exposed an alleged practice by banks to recoup second mortgages by demanding cash, off the HUD settlement statements, from either real estate agents or the buyers in short sales.  Olick says she has personally heard a recording of a phone conversation between a short sale real estate agent and a second lien lender, during which the second lien lender clearly asked for cash outside of the settlement and threatened to kill the deal without it. “AGENT: Well yes, I don’t want to lose my license, go to jail, I mean, I have to sign…  LENDER: You’re not going to lose your license – we have plenty of realtors who do this, who actually understand how this whole process goes – and they realize that OK, if I want to get this done, this will take place.” 

When asked about the practice, these are the replies from three of the biggest banks:  JP Morgan Chase simply answered, “No Comment,” Bank of America denied the practice, and Citi ’s reply was interesting: “We work very hard to help distressed homeowners find solutions for their financial challenges. In our attempt to amicably resolve the debt, we will generally negotiate a reduced settlement with the homeowner in order to release a second lien. Unlike some lenders who refuse to reduce the payoffs on second liens, we choose to reduce the payoff amounts in some situations to assist the borrower. We do not provide instructions to settlement agents on how to fill out the settlement statement or any other closing documents, and we certainly do not require settlement agents or any other parties to violate applicable laws.”

House List Prices Down 1% in December

Altos Research’s listing price index declined 1% in December and 1.4% during Q409, but the 10-city composite price index was up 5.2% for the year, the company said, adding it projects asking prices to continue to decline during the winter 2010 months.  The average listing price decreased to $494,426 from $499,267 from November to December. The index took a bigger monthly drop in December than it did in November, a result of the season decline in sales activity, Altos Research said.  Miami was the only market of the 26 that Altos Research measures that experienced a gain in listing prices. San Diego and Salt Lake City experienced the greatest listing price declines, down 4.3% and 3.5% respectively. 

Inventories also declined in 24 of 26 markets, the largest drops in Boston and the California markets of Los Angeles, San Francisco and San Jose. New York (2.1%), and Phoenix (0.7%) experienced the only increases for the markets covered. The 10-city composite experienced a 5.1% decrease in listing inventory.  All markets except San Francisco (99 days) had a median days on market of 100 or more days in December. Miami had the slowest turnover with a median of 247 days, more than eight months. The days on market for the 10-city composite was up 8% to 166 days.  The Altos Research study includes existing single-family homes and does not measure condos, town homes or new construction. Each market measured uses results from Census Bureau Metropolitan Statistical Areas (MSA).

Now on to our real estate investing educational section…

In the Know…Startling Starts & Other Frightening Facts

Information is power so it should come as no surprise that savvy short sale investors make a point of staying in the know. Today the ShortSale blog is reporting on startling starts and other frightening facts that should motivate even the strongest procrastinator to begin shopping for short sale deals in earnest.

Housing Starts

Housing starts have traditionally been a lagging indicator for the real estate market but it is a delicate balance at best. On one hand the population continues to grow even as older homes become obsolete. Data recently released by HUD indicates the number of housing starts at the end of 2008 were a mere 905,000…the lowest in recorded history. In fact, the last time housing starts approached this level was in 1975…since then we’ve added several hundred millions to the population. It should also be noted, the late 70’s and early 80’s were marked by rapidly rising interest rates and tremendous price jumps in the rental market. Short sale investors should take note and position themselves for potential gains. Remember, history may not always repeat itself but it often rhymes.

Not Privately Built

For those that point to private builders as possible rationale for the low number of housing starts, it should be noted the number of new privately owned housing units completed has also fallen to one of the lowest rates in recorded history – barely topping 1,119,700 by the close of 2008. In contrast, 1982 recorded the absolute lowest number of private completions with only 1,005,000 yet again reflecting a higher percentage of the total population.

Not Manufactured

Forget manufactured homes – sales are so dismal the entire industry is facing possible ruin. In fact, sales and shipments are so lackluster they are but a fraction of former years with a mere 82,000 units shipped in 2008. Compare to 378,000 ten years ago, it’s easy to see manufactured homes are not picking up the slack when it comes to affordable housing alternatives.

Bottom Line: Although the number of delinquent properties and shadow inventory continue to rise, early indications seem to point toward a day of reckoning in the future. Once existing inventory is purchased, expect a significant lag time to meet growing demand. Currently distressed homeowners have reduced expenses, moved in with family members and made other temporary arrangements in the hope of “riding out the storm” but short term solutions will eventually give rise to the need for permanent housing. The statistics speak for themselves, inventory is no longer growing sufficiently enough to meet long term need. Position yourself for profitable opportunities both today and tomorrow by using short sales to build a long term portfolio from the proceeds of short term profits.

See you at the top!

Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

http://www.realestaterichesnews.com/news (subscribe to this newsletter)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

*************************************************

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
–

* Follow me on Twitter: http://www.twitter.com/mclaughlinchris

* Join my Fan Page: http://www.mclaughlinchris.com

****************

Foreclosure filings fall as loan modifications slow judicial process

According to RealtyTrac, an online marketer of foreclosed properties, there were 306,627 foreclosure filings last month, making November the fourth straight month of decline (3% drop in October, 4% in September and 1% in August).  Nearly 307,000 households received a foreclosure-related notice in November, and banks repossessed about 77,000 homes last month.  Foreclosure filings were still up 18 percent from a year ago, and a new wave is expected next year as unemployment stays high and borrowers default out of loan modification programs.  “This is providing a welcome respite for the real estate industry, but a full recovery will only come when unemployment recedes to normal, healthy levels and when availability of credit reaches a more rational balance between the extremes of the past few years,” RealtyTrac CEO James Saccacio said.  RealtyTrac spokesman Rick Sharga isn’t convinced the decline is a natural outgrowth of improved market conditions.  “I really don’t believe we’re looking at a trend that suggests the problem is going away,” he said. “Much of the drop was artificially induced.”  He attributes the stabilization to mandatory mediation programs that some states have introduced. For example, in Nevada, where filings have declined for three months in a row, lenders are required to go through mediation with borrowers before moving forward with foreclosure documents. In many cases, Sharga said, these programs just delay the inevitable.  The “sand states” — Nevada, Florida, California and Arizona — continued to amass the largest numbers of foreclosure filings with Nevada the hardest hit state of all. One of every 119 households had a filing in November, nearly four times the national average of one for every 417. 

Unemployment up

A consensus estimate of economists surveyed by Briefing.com expected 455,000 new claims, but the Labor Department said in its weekly report that there were 474,000 initial job claims filed in the week ended Dec. 5, up 17,000 from the previous week’s unrevised 457,000.  The 4-week moving average of initial claims was 473,750, down 7,750 from the previous week’s revised average of 481,500.  The government said 5,157,000 people filed continuing claims in the week ended Nov. 28, the most recent data available. That’s 303,000 down from the preceding week’s revised 5,460,000 claims.  The 4-week moving average for ongoing claims fell by 123,500 to 5,416,500 from the previous week’s revised 5,540,000.  Unfortunately the slide probably just signals that more filers are dropping off those rolls into extended benefits.  Jobless claims in 21 states declined by more than 1,000 for the week ended Nov. 28, the most recent data available. Claims in California dropped the most, by 28,672, which the state attributed to a shorter work week due to the Thanksgiving holiday and fewer layoffs in the service industry.  Seven states said the claims increased by more than 1,000. Claims in Wisconsin jumped by 8,067, which a state-supplied comment said was due to layoffs in the construction, service and manufacturing industries.

HAMP a failure

An editorial in the Providence Journal succinctly outlines the reasons President Obama’s program to curb foreclosures appears to be failing.  The Home Affordable Modification Program (HAMP) offered incentives to mortgage companies to reduce payments for struggling homeowners, but as of September only about 1,700 homeowners had passed through all the necessary hoops to win a new permanent loan modification. In the meantime, foreclosures are on the upswing and well over a million mortgages were 60 days past due in October.

 HAMP was not designed to deal with one of the biggest aspects of the foreclosure problem: falling home values that leave borrowers “under water,” owing more than their houses are worth. Primarily, HAMP is aimed at reducing interest payments but not principal. Not surprisingly, underwater borrowers are not rushing to sign up, and they’re not finding much help when they do.  Participants in the program have to show their worthiness by completing a series of trial payments, and around 650,000 borrowers have done that. But many say they are subjected to disorganized claims for additional paperwork, and others fail to provide the necessary documents in the first place.  Last year, foreclosure sales topped 1 million. This year there were fewer, thanks to loan-modification efforts and moratoriums, but the danger of a stalled HAMP is that another new wave of foreclosure sales could swamp the market, sending home prices back down and threatening the economic recovery.

Trade deficit narrows

A Commerce Department report shows the U.S. trade deficit narrowed unexpectedly in October as the weak U.S. dollar helped boost exports and demand for imported oil fell to its lowest daily level since January 2000.  The trade gap shrank 7.6 percent to $32.9 billion, from a downwardly revised estimate of $35.7 billion in September. Analysts surveyed before the report had expected the gap to widen to about $36.8 billion.  The smaller-than-expected trade gap is likely to prompt analysts to raise their estimates of fourth-quarter economic growth and is good news for the Obama administration, which sees export growth as an avenue for creating jobs. 

Overall trade volume remains well below last year. But the bigger drop in imports than exports in 2009 could cut the trade gap almost in half from last year’s $696 billion.  The deficit totaled nearly $304 billion through October versus $611 billion in the same period in 2008.  The closely watched U.S. trade deficit with China widened in October to $22.7 billion, the highest since November 2008.  U.S. exports to China rose to a record $6.9 billion, but were still swamped by the highest imports from the Asian giant since October 2008.

Renting up, underwater foreclosures coming

The Wall Street Journal reports that thanks to a rare confluence of factors — mortgages that far exceed home values and bargain-basement rents — a growing number of families are concluding that the new American dream home is a rental.  The U.S home-ownership rate has charted its biggest decline in more than two decades, falling to 67.6% as of September from a peak of 69.2% in 2004. And more renters are on the way: Credit firm Experian and consulting firm Oliver Wyman forecast that “strategic defaults” by homeowners who can afford to pay are likely to exceed one million in 2009, more than four times 2007’s level.

Analysts at Deutsche Bank Securities expect 21 million U.S. households to end up owing more on their mortgages than their homes are worth by the end of 2010. If one in five of those households defaults, the losses to banks and investors could exceed $400 billion. As a proportion of the economy, that’s roughly equivalent to the losses suffered in the savings-and-loan debacle of the late 1980s and early 1990s.  The flip side of those losses, though, is massive debt relief that can help offset the pain of rising unemployment and put cash in consumers’ pockets.  “It’s a stealth stimulus,” says Christopher Thornberg of Beacon Economics, a consulting firm specializing in real estate and the California economy. “The quicker these people shed their debts, the faster the economy is going to heal and move forward again.”

Now on to our real estate investing educational arena …

How to Pick the Perfect Loan

A lot has been written about interest rates and credit scores but few people focus on how to pick the perfect loan. While it might not sound like the most exciting part of purchasing a short sale property, it is one of the most important decisions you are likely to make. As millions of Americans have already learned, obtaining the wrong loan can be a very costly decision. Fortunately, it’s relatively simple to secure a great loan that works well for your individual situation once you are aware of all your options. Follow these quick steps to help find your perfect loan:

1. Determine your down payment. The larger your down payment the more options you will have available but always leave a little additional cash for emergencies and other needs.

• 0-5 Percent Down Payment: VA loans for veterans or Vendee loans for foreclosures.
• 3.5 – 5 Percent Down: FHA or HUD loan for purchase of primary residence only.
• 5 to 10 Percent Down: Conventional Loan with strong credit score.
• 20 Percent Down: Conventional Loan without PMI or inferior credit score.
• 20 to 30 Percent Down: Investment loans, vacation or second homes.

2. Determine the term. Right now fixed rate loans are at or near historic lows so if you intend to hold the property for any length of time, it’s a good idea to take a serious look at 15 to 30 year terms. Interest only and ARM (Adjustable Rate Mortgages) remain a solid investment for those who understand the pros and cons.

• 30 Year Term: Select a 30 year term if you intend to remain in the property for many years, plan to turn it into a rental property at a later date, are on a limited fixed income or are expecting to be on a fixed income in the future and want minimum payments with maximum flexibility. Remember, you can always pay more on the loan should you desire.
• 15 Year Term: Select a 15 year term if you want to obtain the lowest possible interest rate with steady fixed payments, become debt-free as soon as possible, save tens of thousands of dollars over the life of the loan and you have ample yet steady income.
• Interest Only: Select an interest only loan if you want to lock in a great price on a property, want to get started in real estate investments with a modest amount out of pocket, expect to have dramatically higher income within a few years (for example, you are in college, paying off significant debt or will have a spouse/other return to work) or are buying in an area experiencing rapid appreciation.
• ARM/Option ARM’s: Select an adjustable rate mortgage if you plan to use the property for cash flow then sell, need the minimum payment for a  short period of time then expect to have significantly more cash in the future and/or wish to use an alternative to a Jumbo Loan.

See you at the top!

Chris McLaughlin

**************

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

*************************************************

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
    * Add me on Facebook: http://www.facebook.com/mclaughlinchris
    * Join my Fan Page: http://www.mclaughlinchris.com
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