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Lenders Make Short Sales Even More Attractive

by admin on June 17, 2011

Smart Real Estate News & Commentary by Chris McLaughlin June 9, 2011

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Lenders make short sales even more attractive

CitiMortgage, the mortgage servicing arm of Citigroup is paying borrowers an average $12,000 after completing a short sale this year.  Justin Rand, the senior vice president of loss mitigation at the bank, said servicers are putting more of an emphasis on streamlining the process and pursuing a short sale ahead of foreclosure. The short sale process in 2009 took an average 120 days from listing to close. But by reaching out to borrowers instead of waiting for them to ask the bank, short sales now take an average 83 days to complete, Rand said at a panel for the REO Expo Conference in Fort Worth, Texas, earlier this week.  “For Citi-held portfolio loans today, we have a little over 16% of delinquent loans in a short sale program,” Rand said, adding that increased from roughly 4% two years ago.

Not only are the timelines shrinking to complete these deals, but the incentives paid to qualifying borrowers – again only on loans owned by Citi – increased in recent years as well.  In early 2009, Citi offered an average $1,500 to qualifying borrowers. That went up to between $3,000 and $5,000 in 2010 and finally up to an average $12,000 so far in 2011, Rand said.  “Incentives will be offered to customers experiencing financial hardship who need funds to proceed with the short sale,” a Citi spokesman said. “The amount, which is agreed upon up front, varies according to the borrower’s individual circumstances and loan characteristics. It is disbursed to the homeowner when the sale is completed.”

The key to a successful short sale, just like modifications, is the timely collection of financial documents. Regulators helped move the process along with guideline changes to programs like the Home Affordable Foreclosure Alternatives initiative, which lessened the amount of documents required.  “It took us about 30 days to collect documentation in 2009 to now less than 10 days,” Rand said. “A lot of the time, for seriously delinquent loans, all we need is just a letter of authorization from the homeowner.”  David Sunlin, the operations executive for short sales at Bank of America (BOA) was on the same panel as Rand. He said the entire industry is becoming more proactive. BOA completed more short sales than REO every month for the last year and a half. The short sale department at BOA grew from 150 people to now over 3,000. Each employee handles roughly 75 cases.  “We’re past the point where we’re bumbling around losing files,” Sunlin said.

Rand said the big shift began in 2009 as the Treasury Department was putting together plans for the HAFA, which would launch in April 2010.  “In 2009, we started a proactive approach, reaching through MLS services and reaching out to real estate agents and customers with underwater mortgages, distressed loans,” Rand said. “We’re not going to turn anybody away if the short sale meets the net requirement we’re looking for.”

IMF lowers outlook for US

In the latest update to its World Economic Outlook, the IMF said it expects the US economy to expand at an annual rate of 2.5% this year and 2.7% in 2012. That’s down from projected growth rates in April of 2.8% and 2.9%.  The US government said last month that the economy grew at an annual rate of 1.8% in the first quarter of 2011, down sharply from 3.1% in the final three months of 2010.  The slowdown in the first quarter was due partly to “transitory factors,” the IMF said, including higher commodity prices, bad weather and supply chain disruptions due to the March earthquake and tsunami in Japan.  The report said “heightened potential for spillovers” from the fiscal challenges facing indebted nations on the periphery of Europe have grown since April. In addition, the IMF pointed to concerns in the financial markets about the slowing US economy.  “If these risks materialize, they will reverberate across the rest of the world — possibly seriously impairing funding conditions for banks and corporations in advanced economies and undercutting capital flows to emerging economies,” the report reads.  The IMF also called on policymakers in advanced economies to come up with “credible and well-paced” plans to bring down long-term deficits.  In the United States, the IMF said it is “critical” to immediately address the debt ceiling, which was exceeded earlier this year and has yet to be raised by Congress.

Olick – foreclosures down, but far from out

“Delays in foreclosure proceedings and a new push by big banks and servicers to find foreclosure alternatives are drawing a new, albeit still troubling picture of the nation’s real estate market.  New notices of default, the first step toward foreclosure, fell to a level in May not seen since the end of 2006, according to a new report by online foreclosure site RealtyTrac. Bank repossessions, or REO, the final stage of foreclosure, also fell on a monthly basis for the second straight month. That pushed total foreclosure activity down 33% from a year ago.  ‘I really wish I could say that looking at a 42-month low in foreclosures action means that the housing market is recovering, and the foreclosure problems are all going away and we should all go about our business and be happy,’ says RealtyTrac’s Rick Sharga. ‘Unfortunately, those would all be lies.’

The numbers have been on a roller coaster since the so-called ‘robo-signing’ foreclosure paperwork scandal that unfolded last Fall.  Now there are big discrepancies in the numbers state to state, depending on which states practice judicial foreclosures and which don’t.  The foreclosure timeline is also increasing as more banks and loan servicers focus on short selling distressed properties, which is when the sale price is less than the value of the mortgage.  REO activity was down 6% overall in non-judicial foreclosure states month-to-month, but some non-judicial foreclosure states posted substantial month-over-month increases.  Bank repossessions jumped 79% in Georgia, 36% in Virginia, and 19% in Michigan.  In judicial states, bank repossessions actually rose 1% month to month, as courts finally begin to get new paperwork and work through lawsuits.  In New York, REO activity jumped a whopping 97% and 21% in New Jersey.

While the usual suspects, California, Arizona and Nevada still lead the nation in foreclosure activity, the pain is still spreading nationwide.  The sheer volume and share of distressed properties in the current market continues to push home prices to new lows since the worst of the housing crash.  Some states may see higher numbers, but the effect is the same.  ‘It’s a little bit like saying that aside from that one unfortunate incident with the iceberg, the Titanic had a really wonderful cruise,’ describes Sharga.  ‘What we’re talking about are really markets that drive a lot of the real estate market, a lot of the economy. And these are states that have had really severe foreclosures. But beyond that, 72% of the top 200 markets saw an increase in year over year foreclosures activity in the last year.’”

ING sells US unit to Capital One

Capital One Financial Corp plans to buy ING Groep NV’s US online bank for $9 billion in cash and stock, freeing the Dutch bank to repay bailout funds and sever its state ties.  ING is in the throes of a wrenching restructuring, forced on it as a condition of a 10-billion-euro state bailout during the 2008 financial crisis.  The European Commission and ING agreed on a restructuring plan in late 2009, the most surprising part of which was a mandate that ING sell its US online banking operations.  But ING has made clear it wants to be freed of its state shackles, as that would lift restrictions on making acquisitions and give it more flexibility on pricing and allow it to compete more easily.  The Capital One deal caps a long list of divestments by the Dutch banc assurer.  It has raised at least 5.4 billion euros from the sale of assets including its Asian private banking assets and insurance operations in Canada, Taiwan, Australia and Chile, and agreed to sell most of its real estate investment management operations to CB Richard Ellis and other parties in a deal worth $1.1 billion.  But it still must complete the sale of ING Direct USA, and spin off its US European and Asian insurance operations in two separate IPOs next year. It also plans to divest its Latin American insurance business in the next few months.  Last month, ING paid 3 billion euros to the Dutch state, which included a 50 percent premium, and said at the time that it would repay the remaining 3 billion euros by May 2012.  With the proceeds from selling its US unit to Capital One, ING could repay the remainder sooner, but Chief Executive Jan Hommen said any decision on early repayment could be dictated by the outcome of a European court case, with a hearing set for next month.

NAR – home prices drop

According to the National Association of Realtors (NAR), the median home sale price in May dipped 1.6% compared to April, down to $188,900, according to one real estate listing website.  , May’s median price was about 2.1% below a year earlier when government tax incentives were still driving consumer demand. The drop in price could be attributable to seller uncertainty of a double-dip in home prices.  “The modest pull-back that occurred in May 2011 could signal seller concerns over widespread reports of a ‘double-dip’ in the housing market based on sales results for the first quarter of 2011,” according to the website Realtor.com. “However, unless there is further retrenchment, the results for the past three months could be viewed as a positive indicator of future home pricing trends.”

Median prices fell in 126 out of 146 markets covered by Realtor.com. Twenty-three markets experienced a more than 5% decline in home price, 14 of which were in Florida. Chattanooga, Tenn. witnessed the largest price drop, down 17.8% between April and May to a median $145,000. That price is down 16.9% compared to May 2010.  As prices fell, sale inventory grew. Realtor.com reported a 3.5% growth in inventory to a total 2.3 million listed properties in May. That figure is down 14.3% compared to one year earlier, however.  The average number of days a home spent on the market decreased to 92 days in May from April. The age of market inventory has been gradually decreasing since the beginning of 2011 and is now roughly equal to the age seen last summer.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.

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.smartrealestatenews.com

(subscribe to this newsletter)

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

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 150 high-value, high-profit

      properties

    * Owner of one of Florida’s largest Real Estate firms,

     running 4 different offices, supporting over

     420 agents, uniquely positioning him to help

     thousands of investors make money in the

     biggest market opportunity ever!

   * In 2010, Chris’ 4 Central Florida real estate offices

      closed 2,786 sides for a closed sales volume of

      $392,912,927!  

    * 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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Diana Olick – Home prices being slashed, more coming?

by admin on July 16, 2010

Smart Real Estate News & Commentary by Chris McLaughlin July 15, 2010

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Then they can subscribe directly at the following link: 

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Fix A Flip Re Opens … If you want your deals funded beyond 1 day,

this is the webinar you need to be on this coming Thursday at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/618365627

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Diana Olick – Home prices being slashed, more coming?

“As of July 1st, 24 percent of sellers on the market had cut their asking prices at least once, according to Trulia.com.  That’s up 9 percent from the previous month and represents about $27 billion worth of vanished national home equity (or home equity hopes).  “The market is going to maintain a relatively flat trajectory, if not more like a saw tooth trajectory, for the near future, and meaningful recovery may not happen until some time in 2011, 2012,” says Trulia’s Heather Fernandez.  We knew the price stabilization was largely due to increased buying activity on the low end from the home buyer tax credit. The issue now, front and center, is foreclosures. We’ve already seen a few reports, and I expect we’ll see more, that show new foreclosures “stabilizing,” while bank repossessions are increasing. 

Let’s face it, banks don’t want to be homeowners, and they certainly don’t want to shell out even more of their dwindling cash on lawn services and handymen. Whatever incentives there are out there to turn these properties over to homeowners who can actually afford them are certainly welcome.  The trouble is that there appears to be a dangerous disconnect in the housing market right now: Housing stats are at an all-time low and yet the home vacancy rate is rising. The only way that can happen is if the number of households is shrinking more than we know. Add bank repossessed homes to that mix, and I’m guessing home prices will dip more than some are expecting.”

Foreclosures fall as bank repossessions quicken

According to RealtyTrac, the number of foreclosure filings of all types — including notices of delinquency, auction notices and repossessions — fell during the first six months of 2010.  There were 1,654,634 properties with foreclosure filings during that time, a 5% decline compared with the previous six months. That equates to 1 out of every 78 homes.  However, the pace of bank repossessions quickened, creating nearly 270,000 homes lost to foreclosure during April, May and June, a 5% increase over the three winter months.  James Saccacio, CEO of RealtyTrac, called the report a “tale of two trends.”  He pointed out that the filings data showed improvement because fewer properties were entering the foreclosure process. Part of that is because lenders are now more committed to modifying defaulting mortgages or allowing homeowners to sell their homes for less than they owe.  

However, there is still much inventory to move through the system and experts aren’t sure how big it will be.  “While the foreclosure problem is being managed on the surface,” Saccacio said, “a massive number of distressed properties and underwater loans continue to sit just below the surface, threatening the fragile stability of the housing market.”  One in 17 Nevada households, or 64,429, received a filing. That’s the highest rate of any state.  The number of California homes with filings came to more than 340,000, the highest total of any state.  Florida had more than 277,000 filings, or 1 for every 32 households; Arizona had more than 91,000, or 1 in 30 homes.  Lenders repossessed 45,000 Calif. homes during the three months ended June 30, more than in any other state. Nevada, with a much smaller population, had nearly 11,000 repossessions, about twice the rate of the Golden State.

Business vs Obama

A letter posted to the US Chamber of Commerce’s site slammed President Obama’s economic policies yesterday, saying administration officials “took their eyes off the ball” and “neglected” to focus on job creation.  The letter further pointed out that the administration “vilified industries while embarking on an ill-advised course of government expansion, major tax increases, massive deficits and job-destroying regulations.”  The letter also included “some different approaches to unlock frozen capital and jolt our economy back to life.”  The six suggestions are: create a growth and jobs tax policy; restore fiscal health; expand trade and export-driven jobs; rebuild and expand infrastructure; ease regulatory burdens; and eliminate uncertainty for business owners.  In a speech at a jobs summit of 500 business leaders, Chamber president Tom Donohue focused on what he considers a glut of recent legislation, including financial reform and health reform.  “We must address the cumulative job-killing impact of over-regulation,” Donohue said, stressing the uncertainty he considers rampant in U.S. businesses.  Donohue also said lawmakers were “spending at astronomical levels — we’re setting ourselves up to be the next Greece.”

Lost decade coming?

Disappointing job reports, weakness in housing and consumer spending, and problems in world financial markets have raised concerns about the U.S. economy stalling out later this year. Now some economists are starting to talk about an even worse fate: a prolonged period of very weak growth, a so-called “lost decade.”  “The probability of a lost decade is significantly greater than a double dip,” said Sung Won Sohn, economics professor at Cal State University Channel Islands. 

“We don’t have too many engines of growth functioning right now — housing, consumer spending, exports are all sputtering. I have a hard time seeing where we can get 3% economic growth back.”  A lost decade, or something like it, could feel like a never-ending recession to many Americans, as the economy does not grow fast enough to recoup lost jobs, and investments like homes and stocks continue to lose value.  The most famous lost decade occurred in Japan in the 1990s. From 1992 through 1999, the Japanese economy grew by less than 1% a year. It has yet to fully recover from the economic weakness and falling prices it suffered during that period.

1 in 200 mortgages may be fraudulent?

According to projections in the July 2010 edition of the CoreLogic, one in 200 conforming loan applications could still contain misrepresentations in the file that could lead to default.  Overall mortgage fraud peaked in Q306, CoreLogic said. But when subprime mortgages were removed from the equation, the peaked shifted to Q309. CoreLogic said its data shows mortgage fraud in prime lending was still on the rise through the peak in Q307, even when many of the largest subprime lenders were going out of business. Since that time, non-subprime mortgage fraud is down 25% at the end of 2009.

The timeline below tracks non-subprime mortgage fraud, along with various milestones in the industry.  “Lenders’ aggressive stance against fraud is having an impact. Our 2010 Fraud Index indicates that mortgage fraud risk is on the decline. But with an estimated $14bn in fraud losses experienced in 2009 alone, fraud is still a major issue for the mortgage industry,” said Tim Grace, CoreLogic senior vice president of Fraud Analytics, said in a press statement.  “While the industry has done good work there is evidence that fraud patterns are changing and becoming increasingly better hidden,” Grace added. “By sharing fraud patterns with each other through CoreLogic fraud consortium members’ meetings and by statistical pattern recognition fraud scoring, lenders can help stay on top of these new trends and keep risk down.”  CoreLogic said its research finds a correlation between fraud risk and subsequent default rates. Of the 12 states with the highest instances of mortgage fraud in 2007, nine were among the top 12 states with the highest mortgage default rates in 2009. Florida, South Carolina, North Carolina, California and Georgia are the highest-ranking states for mortgage fraud, CoreLogic said.

Jobless claims and wholesale prices drop

The Labor Department said Thursday that new claims dropped by 29,000 to 429,000, the lowest level since August 2008. But much of that was the result of seasonal factors. General Motors and other manufacturers skipped their usual summer shutdowns.  It was the second straight week that initial claims dropped sharply and the third drop in the last four weeks. Claims fell by 17,000 in the previous week. 

Separately, the Labor Department said that wholesale prices fell for a third consecutive month, pulled down by another drop in energy costs and the biggest plunge in food costs in eight years. But excluding those two volatile commodities, inflation was relatively flat.  Normally, such a sharp drop in jobless claims would be seen as a positive sign that the job market is improving. But economists will need to see the downward trend continue for several more weeks before drawing conclusions.  Another concern is that the latest drop may be the result of temporary seasonal factors. A Labor Department analyst said manufacturing companies reported fewer temporary layoffs than usual this time of year.

Now for our real estate education section…

Becoming an Angel Investor

Do you have what it takes to become an angel investor? Perhaps it’s time to take your own portfolio to the next level by multiplying the returns of both time and money while helping others realize their own dreams. Find out if you have what it takes to become an angel investor with this quick quiz:

1. I have a desire to give back to others. Research found that 15% of angel investors had a strong desire to simply give back to others; altruism is its own reward for those that have gained so much in life. The satisfaction of seeing others realize their dreams and make a difference in their lives…and the lives of their family…is integral to a significant number of angel investors.

2. I have the desire to remain involved in an industry I love…but at a different level. Retirement is a terrific way to enjoy life once you have made your mark on the world but that doesn’t mean you don’t miss the energy and vitality of wheeling and dealing. Angel investors often find the mentoring (and money) provides the perfect balance between involvement and independence.

3. I have the desire to network in a new industry. High net work individuals may benefit from becoming an angel investor by the ability to network in a new industry while still generating impressive returns for their own portfolio. Real estate is an exceptional area to try out since it appeals to such a wide spectrum of other professionals.

4. I have a desire to maximize profits while minimizing involvement. For those that are not satisfied by average returns (and who is these days?), becoming an angel investor is the perfect way to obtain the profits you seek without the excessive time and energy required to do it yourself.

5. I have the desire to make a difference in society. Many angel investors provide funding to entrepreneurs or investors that adhere to a specific societal function, outlook or other value near and dear to the heart of the angel investor. Whether it’s affordable housing for the elderly, eco-friendly sustainable living for the urbanite or something else in between, make the world a better place by supporting those on the cutting edge.

6. I am able to deal with risk and loss. Sometimes you win, sometimes you lose and sometimes you just break even…successful angel investors understand their personal level of risk and are able to emotionally and financially handle it.

7. I have a financial fitness plan in place and can stick to it. Finally, and perhaps most importantly, a successful angel investor has a personal plan in place for their own portfolio and the determination to stick with it. Don’t be swayed by every investment, instead, wait for those that meet your criteria. According to research, the most successful angel investors obtain more than just a return on their money…they enjoy and take personal satisfaction from the entire process.

See you at the top! 

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

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.smartrealestatenews.com (subscribe to this newsletter)

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