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$8000 tax credit gets a last gasp

admin — Tue, 06 Jul 2010 00:45:06 +0000

Smart Real Estate News & Commentary by Chris McLaughlin July 5, 2010

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$8000 tax credit gets a last gasp

On Friday President Obama signed a law giving consumers three extra months to close the deal and still get a popular tax credit from the government – assuming they’re already in the process of buying a home. Homebuyers with contracts signed by April 30 who failed to go to closing by the original June 30 deadline will now have until September 30 to complete their purchases. The Senate approved the measure on Wednesday just hours ahead of the earlier deadline and one day after the House of Representatives approved the measure.

The $8,000 tax credit for first time homebuyers and $6,500 credit for others purchasing a new primary residence was a highly popular temporary measure by the Obama administration to jump start home sales during the economic recession. Real estate agents said as many as 180,000 homebuyers would miss the June 30 deadline because banks and settlement offices were struggling to deal with the volume of people rushing to close on their deals signed before April 30. Critics say the three-month extension is an invitation for fraud, providing prospective home buyers time to back date contracts to a date before April 30 and subsequently closing on those contracts by the new September 30 deadline. “The IRS reminds taxpayers that special filing and documentation requirements apply to anyone claiming the homebuyer credit,” the Internal Revenue Service said.

Bankruptcy filings up

Bankruptcy filings surged 14% during the first half of 2010, according to the American Bankruptcy Institute. Filings totaled 770,117 through June, compared to 675,351 during the same period last year. The institute also said that bankruptcies totaled 126,270 in June, a jump of 8.5% from the same month in 2009, when they totaled 116,365. The institute relied on data from the National Bankruptcy Research Center for its information.

Samuel Gerdano, executive director of the institute, says “Years of rising consumer debt and low savings rates, combined with the housing and unemployment crisis, are causing bankruptcy levels not seen since the 2005.” In 2005 Congress amended the Bankruptcy Code, making it harder for Americans to file and sparking a rush to file by October of 2005, when the amendments kicked in. In 2005, bankruptcy filings totaled more than 2 million. By comparison, Gerdano expects there will be more than 1.6 million new bankruptcy filings by the end of 2010.

HAUP now active

As of July 1, homeowners have been able to apply for assistance from the Home Affordable Unemployment Program (HAUP). HAUP provides homeowners a forbearance of monthly mortgage payments, either reducing them or suspending them for at least three months. Servicers can extend the timeline depending on regulatory guidelines. In June, the unemployment rate edged down to 9.5% from 9.7% in May, according the Department of Labor. Homeowners who qualify for the program have a first-lien mortgage originated on or before Jan. 1, 2009. The unpaid principal balance on a single-unit primary residence must be equal to or less than $729,750, and the mortgage has to be in default or in imminent default.

HAMP requires borrowers to be employed with some income for the modification to be reduced down to 31% of the monthly income. But once the borrower finds another job or the borrower is 30 days from the end of the HAUP forbearance period, the borrower can be revaluated for a HAMP modification. Those who have already gone through the Home Affordable Modification Program (HAMP) process are not eligible for the HAUP. HUAP joins the Home Affordable Foreclosure Alternatives (HAFA) program, which provides incentives to servicers for providing short sales and deeds-in-lieu of foreclosure, as another net to catch borrowers who fall out or fail the HAMP program.

Factory orders drop more than expected

The Commerce Department said Friday that orders for manufactured goods decreased 1.4 percent in May. It was the biggest drop since March 2009. Excluding the volatile transportation sector, orders fell 0.6 percent. That number fell 0.7 percent in April, the worst showing in 13 months. Overall orders in April grew a revised 1.0 percent. Orders for big-ticket durable goods were down 0.3 percent, after a 2.0 percent increase in April. Electronics and commercial aircraft were among the weakest performers.

Demand for those goods expected to last less than three months fell 2.1 percent. Lower gas prices were partly to blame. But there were significant losses for makers of clothing, drinks and tobacco, and chemical products. The overall decline in orders was bleaker than the 0.5 percent drop expected by economists surveyed by Thomson Reuters. Manufacturing has been a rare bright spot, helping lead the country out of recession with increased hiring and productivity. However, economists fear joblessness and less demand for exports could sap the sector’s strength in the coming months.

DSNews.com – Delinquencies inch up in May

The seasonal improvement period for delinquencies and foreclosure inventories has come to a halt, according to an industry report released last Thursday by Lender Processing Services (LPS). The Florida-based analytics firm’s monthly Mortgage Monitor report found that the total U.S. delinquency rate jumped to 9.2 percent in May, inching up 2.3 percent from April and 7.9 percent higher than the same month last year. Herb Blecher, VP of LPS Applied Analytics, said the slight increase on the delinquency side was expected as this is the period when rates start to pick up. He said delinquencies will likely continue to increase all the way through the end of the year. The foreclosure inventory rate remained stable from the month prior at 3.18 percent, but it was 13.5 percent higher than May of 2010. Blecher explained that while some stability has been achieved in the foreclosure inventory rate, a further decline over the coming months is unlikely.

The national noncurrent loan rate, which reflects both foreclosures and delinquencies, came in at 12.38 percent. Not including REO properties, nearly 6.3 million loans were noncurrent in May. When REO properties were included, the total jumped to nearly 7.4 million. On a state-by-state basis, Florida and Nevada continued to hold the most noncurrent loans in May, with rates of 22.4 percent and 21.8 percent respectively. On the other end of the spectrum, the lowest noncurrent loan rates were seen in North Dakota, at 4.1 percent and South Dakota, at 5 percent.

Now for our real estate education section…

Life, Liberty, the Pursuit of Happiness & Real Estate

By the time you read this, the entire nation will have once again celebrated another Fourth of July with all of its star spangled glory, hoards of hot dogs and rainy day fireworks. This year it is also a good idea to stop and reflect on what the founding fathers really had in mind when declaring independence and the self-evident concept that all men are created equal. While life, liberty and the pursuit of happiness might seem an odd topic for a real estate investing newsletter…real estate played a critical role in the creation of what was to become the “American way of life”. In fact, real estate is so critical to the plans of the founding fathers that to tamper with ownership is to change the very fabric upon which our society was based.

Throughout history, societies have risen and fallen based upon land rights and ownership. “Free men” were nearly always landowners while serfs, servants and peasants were those forced to eek out a living without the benefit of owning raw assets or the land upon which the based a livelihood. During the formation of this nation, land rights were closely associated with the ability of a man (or woman) to determine their own fate, pursue a life of individual meaning and the very essence of freedom itself. The rights of property ownership include:

The right of possession, the ability to control the property, the right to enjoy the property, the right of exclusion and disposition. Unfortunately, many of these same rights upon which the nation was built are now under attack from a variety of sources. Not only does the erosion of land ownership and property rights impact the individual but also society at large. From runaway zoning regulations to the actions of eminent domain, land rights in the United States have eroded over decades but never to the extent seen in recent years. For example, the same bill that allows a judge to modify a mortgage contract is seen as a potential threat to the very foundation of contractual law…creating a more risky (and therefore more costly) lending environment for future loans. Squatters rights which are plaguing many cities across the nation have severely undercut the foundational right of enjoyment, exclusion and disposition. Even the newly proposed (and passed) regulations concerning required training, licensure and/or certification for everything from lead laws to owner financed properties is expected to have dramatic impact upon the rights of the individual to control and dispose of their own properties.

What does this mean for real estate investors and other property owners?

Change. Perhaps not the exact type of change the nation had in mind during the last election but change just the same. However, change isn’t always bad. In many instances it present unprecedented opportunity for those that are prepared to act. If history is any measure, excessive regulations tend to add ever increasing cost and growing scarcity over the long run. The new lead laws are a prime example; be requiring additional certification for anyone (including the property owner) to perform even rudimentary work on a home built prior to 1978, the cost of renovation is likely to increase even without putting more money into the pockets of the property owner.

Houses built post 1978 just became slightly more valuable if for no other reason than the lack of headache associated with them. Likewise, foreclosed properties plagued by squatters are at a distinct disadvantage…but may represent a golden opportunity for new investors long on time and short on funds. Savvy real estate estate investors would do well to keep an eye out for buying opportunities and price their bids accordingly. In the meantime, congratulations in exercising one of the most fundamental rights enjoyed by every red blooded American throughout the history of our great nation…the right to buy and sell property. It’s the cornerstone of what made this nation strong and what has been the foundation to wealth over the eons.

See you at the top!

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

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About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes. Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
   * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
  * Follow me on Twitter: http://twitter.com/mclaughlinchris
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Smart Real Estate News & Commentary by Chris McLaughlin June 21, 2010

admin — Mon, 21 Jun 2010 15:37:40 +0000

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New Monthly National Housing Scorecard Announced

The Department of Housing and Urban Development (HUD) and the Treasury Department will announce the creation of a new monthly national housing scorecard. The initiative will combine housing market indicators along with the progress of the administration’s homeowner assistance programs, including efforts by the Federal Housing Administration and the Making Home Affordable programs. Last week, senators passed an amendment to the American Jobs and Closing Tax Loopholes Act of 2010 that would extend the June 30 deadline to close on a house sale to Sept. 30 for first-time and existing homebuyers to be eligible for the homebuyer tax credit. The legislation also includes spending on extended unemployment benefits and spending on educational initiatives. New commercial mortgage-backed security (CMBS) issuance was one of the most popular topics discussed during last week’s Commercial Real Estate (CRE) Finance Council’s June convention, according to analysis published by Barclays Capital (BarCap). A number of speakers agreed that the new origination and securitization volume year-to-date is lighter than what was initially expected, BarCap said, adding on the origination side, loan supply remains low, as borrowers’ demand for conduit-style loans is not as high as initially expected and as the availability of properties not encumbered by debt and suitable for conduit securitization remains somewhat limited.

Another concern at the conference was the future of warehousing, as the accumulation of loans for further securitization is still challenging for the conduit platforms, the report continued. On the residential side of the market, it appears residential rental yields are returning to “normal” levels, according to weekly commentary published by JPMorgan. Rental yields bottomed in 2007, but are now back to pre-housing bubble levels, JP Morgan analysts wrote. The impact of this is that as foreclosures force more homeowners to become renters — JPMorgan puts that number at more than 2m during the next three years — the market needs real estate investors. For the second week in a row, the Federal Deposit Insurance Corp. (FDIC) reported only one bank failure over the weekend. The Nevada Financial Institutions Division closed Reno-based Nevada Security Bank.

Is the recovery stalling out?

Economists are more nervous about the chances of another recession. And the Federal Reserve seems to have, “some ammunition left, but it’s not going to pack a lot of punch,” according to Mark Zandi, chief economist with Moody’s Economy.com. As financial problems in Europe led to a sell-off in U.S. stocks in the past six weeks, weaker-than-expected readings on job growth and retail sales have added to concerns that the recovery is stalling out. “Whenever the next recession comes, it is very important that policymakers have had the opportunity to reload their gun to fight the downturn,” said Lakshman Achuthan, managing director of Economic Cycle Research Institute. “Today it’s not clear that there’s a lot more policymakers can do.”

The typical first step to spur a faltering economy is for the Fed to cut the cost of borrowing money in order to encourage spending. But the federal funds rate, its key interest rate used as a benchmark for a wide range of consumer and business borrowing, is already near 0%. Fed policymakers are widely expected to leave rates near zero at the conclusion of their two-day meeting on Wednesday. Longer-term rates set by the market, such as Treasury yields and mortgage rates, are also nearing historic lows. So the Fed can’t make money much cheaper. Achuthan said he is worried that neither the Fed nor Congress have the resources and political will necessary to stimulate the economy if that’s needed. And despite the growing worries about the economy, Fed officials have to be careful not to raise too many alarms. Too much attention to problems that have arisen since the Fed’s last meeting on May 9 could be more dangerous than ignoring the growing threats, according to experts.

Diana Olick – New Hurdle to Housing: No Flood Insurance

Who knew you needed flood insurance in Bergen County, NJ – located on a 100 year flood plain – to get a mortgage? Andrea Mantia, a producer on CNBC’s Street Signs, called to tell me she is supposed to close on a home, but her lender is denying the mortgage without flood insurance. She can’t get flood insurance, because “apparently, all insurers get flood coverage via the government/FEMA. Now that Congress has let it lapse, NO insurers are offering new policies,” she says. “It’s putting a lot of closings in doubt.” 1400 homes per day in the United States require flood insurance and cannot go to closing without it. That according to the Texas Association of Realtors.

The National Flood Insurance Program hasn’t issued a new policy since May 31st, when the most recent extension ran out. Mantia tells me it gets updated every five years, but since it ran out in 2009, Congress has just been issuing temporary extensions. The latest extension is mired in the jobs bill, which is itself still mired in the Senate. “State Farm has had it with the government,” she says. “They just announced it will not write any new flood policies, even if Congress gets their act together.” I found this part of a post put up yesterday by Relocation.com: It’s unlikely that State Farm would begin to write flood insurance policies again, even if the NFIP were extended for a longer amount of time. Phil Supple, a spokesperson for the insurance company, told Insurance Journal that “the flood program distracts and pull[s] resources away from other needs of the company.” State Farm announced on June 3rd that it would stop administering the government policies entirely this fall, but now it can’t anyway because there’s no money. I wonder about all those folks trying to close on homes that they bought with the home buyer tax credit. They have to close by June 30th. The summer market wasn’t going so well as it is. Just more grief for buyers, sellers, and this very tenuous housing recovery.

Minorities hit hard by foreclosure crisis

About 2.5 million homeowners have lost their homes to foreclosure in the housing crisis so far, and black and Latino borrowers have been disproportionately affected, according to a new report released by a nonprofit research group. The study by the Center for Responsible Lending was based on an analysis of government and industry data on millions of loans issued between 2005 and 2008 – the height of the housing boom. It found that whites made up the majority of foreclosures completed between 2007 and 2009, about 56 percent, but that minority communities were affected more.

The disparity holds even when comparing “high-income” borrowers, the report found. High-income black borrowers were 80 percent more likely to lose their homes to foreclosure than their white counterparts, while high-income Latino borrowers were 90 percent more likely. Traditionally, minority communities have fewer financial resources to fall back on during a crisis, making foreclosure a more likely outcome, housing experts have said. The report comes as government foreclosure prevention efforts falter and banks have begun to make their way through a backlog of seriously delinquent homeowners and repossess homes at a higher rate. Economists expect distressed properties to be a drag on the housing market for years, particularly if high unemployment levels persist.

DSNews.com – Lenders Reclaim $10 Billion of Commercial Property: Report

Distressed commercial real estate is being reclaimed by lenders at a rapid pace, but relatively few assets are being marketed and re-sold. According to the research firm Real Capital Analytics, lenders acquired some $10 billion of commercial property during the first five months of this year – via foreclosure or negotiated settlement. But they disposed of just $2.6 billion of commercial REO during the same period. The company’s analysts estimate that commercial REO inventory resulting from this cycle now exceeds $28 billion. Real Capital said in its report, “There is a large amount of capital that is eager to acquire these assets from the lenders, at appropriately discounted prices, but lenders do not have pressure to sell their REO immediately, and most are content to wait for conditions to improve further before selling.”

While a good number of equity funds are seeing problems with their earlier investments and losing assets to foreclosure, Real Capital says a new vintage of equity funds have raised significant capital for opportunistic acquisitions. But one of the uncertainties in the market is how patient that capital will be if distressed opportunities remain scarce, the company says.

Now on to our real estate education section…

Mortgage Interest Tax Deduction On the Cutting Block…Again

Much to the relief of many homeowners, Congress rejected the White House proposal to reduce the home mortgage deduction when it came up for vote last year. Unfortunately, the need to raise taxes in any way possible has put this popular program on this year’s budget agenda.

With nearly $210 Billion at stake, the rhetoric from Washington has a decidedly negative overtone, recently referring to them as “tax entitlements” in an effort to compare these age old strategies to a form of welfare for the rich. Unfortunately, these are not tax breaks enjoyed merely by the rich but rather long held forms of financial planning often worked into the budgets of average middle class American households.

Democrats on the financial commission are currently reevaluating a plethora of permanent tax breaks including the mortgage deduction and corporate deferral, arguing they should be part of the financial reform package and treated just like other entitlement programs such as Medicare, Social Security, Medicaid and discretionary spending packages.

Current proposals for the tax deduction include a tiered approach which would first reduce deduction rates for itemized expenses on those that earn more than $250,000 annually and eliminate or severely reduce mortgage interest tax deductions in general. Critics of the popular mortgage interest tax deductions claim this will further hurt an already weak real estate market by eliminating one of the remaining incentives for people that wish to own a home rather than rent.

Others go so far as to say this will force borderline homeowners to default on their current mortgages…especially those that are struggling to maintain their homes during the current downturn in the economy. Still others believe it is just “bad form” to change the rules of the game after others have locked in long term expenses…and anticipated tax deductions.

Advocates of the bill claim it favors the wealthy and that low to middle income Americans’ rarely benefit from the tax deduction anyway while still others claim it is a tax on the poor that benefit the rich. One thing is certain; Washington is searching everywhere for much needed ways to raise cash…quickly.

When formerly “untouchable” tax deductions are suddenly on the table for two years in a row, it’s time to sit up and take notice. Not only is the home mortgage deduction up for grabs but according to industry insiders, “everything must be on the table” including Social Security and Medicare. The anticipated outrage from SS and Medicare/Medicaid recipients is likely to create such backlash that the mortgage interest issue is likely to get lost in the shuffle…or worse, used as a bargaining chip for those attempting to calm the clamoring masses. Will any of these measures be enough? According to experts…probably not.

See you at the top!

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

http://www.shortsalesriches.com
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About the author:

Chris McLaughlin is widely known as America’s top
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Smart Real Estate News & Commentary by Chris McLaughlin, May 27, 2010

admin — Thu, 27 May 2010 15:24:00 +0000

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Freddie Sees House Prices Down Slightly in Q110

Home prices declined 1.1% in Q110 compared to the same quarter one year ago, according to purchase-only edition of Freddie Mac’s Conventional Mortgage Home Price Index(CMHPI). Compared to Q409, prices are down 2.1%. The purchase-only CMHPI includes property values based on home purchases with a conventional mortgage purchased by Freddie Mac or Fannie Mae by April 30, 2010. The 2.1% decline compares to the 3.2% price decline in the Standard & Poor’s (S&P)/Case-Shiller HPI and the 3% decline in the Federal Housing Finance Agency (FHFA) HPI. “House price measures tend to show a lot of seasonality, with values lower during the slow home-selling months of autumn and winter and higher during the greater-activity months of spring and summer,” said Freddie Mac vice president and chief economist Frank Nothaft. Freddie Mac also produces a CMHPI that includes data from both home purchase transactions and mortgage refinancings basing refinancing values on appraisals. In that index, prices declined 1.5% in Q110 compared to Q109 and were also down 6.7% in Q110 compared to Q409. In three of the nine divisions, prices were up in Q110 compared to the same quarter of 2005. Prices are higher now in the West South Central (16.6%), Middle Atlantic (10.1%) and East South Central (8.7%) divisions than five years ago.

Growth Slower Than Thought as Business Spending Slows

The U.S. economy grew at a slower pace than previously estimated in the first quarter as businesses investment slackened, while hard-hit state and local governments curbed spending at the steepest rate since 1981, a government report showed on Thursday. Gross domestic product expanded at a 3.0 percent annual rate, the Commerce Department said, instead of the 3.2 percent pace it reported last month. Economists are monitoring the U.S. recovery closely to see how well the economy can endure the debt troubles that threaten to slow Europe’s growth. Output in the first three months of the year was revised down as business spending rose at only a 3.1 percent rate instead of the 4.1 percent initially reported last month. Spending grew at a 5.3 percent pace in the fourth quarter. Business spending on software and equipment increased at a 12.7 percent rather than the 13.4 percent rate reported last month. State and local government spending contracted at a 3.9 percent rate, the largest decline since the second quarter of 1981. Consumer spending, which normally accounts for 70 percent of U.S. economic activity, added 2.42 percentage points to GDP last quarter, the largest contribution since the first quarter of 2007.

Diana Olick – Are Home Builders on a Cliff?

“The New Home Sales report today was nothing short of exceptional.The number beat all expectations and beat them by a lot. The home buyer tax credit clearly favored the builders over existing home sellers, as the jump in new construction sales seem far higher. So are the builders back? Not so fast. Before everyone goes calling me a big bad bear, barely 7 minutes after the report was released, the analyst reaction came flooding in. “As seen with the purchase component of the weekly MBA data, the May data will show a sharp decline,” writes Peter Boockvar of Miller Tabak. “We know a hangover is coming, but we don’t know what happens after.” In fact, mortgage purchase applications are at a thirteen year low, falling off precisely post tax credit. Purchase applications are now barely 27 percent of all mortgage applications, with refis surging on low interest rates. Anecdotally, we’re hearing that buyer traffic in new models also slowed dramatically. And even lumber is proving a leading indicator. “We have seen spot lumber prices drop 25 percent since the end of April,” notes Buck Horne of Raymond James. Lumber saw a big run-up in price, 46 percent from January through April, according to Random Lengths data. And at the Chicago Mercantile Exchange, lumber futures have trended sharply lower since late April “on worries that expiration of the tax credit would slow home sales,” according to Reuters. On the other hand, Toll Brothers reported strong order growth of 41 percent year over year. Toll’s high end homes wouldn’t be affected much by the tax credit, so perhaps that’s real organic demand.”

Money runs out for small business loan breaks

It is the Federal Government’s National Small Business Week, but there is little money left for Small Business Administration programs — again. The SBA warned lenders Wednesday that it is opening up its Recovery Loan Queue for the fourth time. For more than a year, the SBA has used money first allocated in last year’s Recovery Act to temporarily reduce fees for borrowers and increase the guarantees banks receive on loans made through the agency’s lending programs. But the funding for them ran out in November. Since then, the agency lives on temporary extensions to keep the loan sweeteners in place. Every time the money runs out, the SBA opens up its Recovery Loan Queue to track applicants hoping to collect the last few remaining dollars.

The latest authorization for the loan incentives expires at the end of this month, and the money for them is likely to be exhausted even sooner. When the funding pool starts to go dry, lenders scramble. Seacoast Commerce Bank, a community bank in Chula Vista, Calif., had pushed five SBA-backed loans through by midday Wednesday. “It certainly puts a lot of strain on the whole process,” said David Bartram, an executive vice president in the bank’s SBA division. Losing the SBA’s fee waiver can make a loan thousands of dollars more expensive for the borrower — and there are some loans banks are only willing to make if they can get the higher SBA guarantee. Without it, those loans become too risky. “Nothing gets through Congress easily these days, even bipartisan legislation,” said Lynn Ozer, executive vice president of government lending at Susquehanna Bank. SBA lending is one of the few bright spots in an otherwise barren credit landscape, but it’s still a small part. A recent government report estimated that SBA programs account for just 4% of all small business lending.

Commercial Real Estate Vacancies to Peak Early 2011

Vacancy rates continue to rise in most commercial sectors and are not expected to level out in most markets until the end of this year or early 2011, according to the National Association of Realtors®.Lawrence Yun, NAR chief economist, said there is one bright spot in commercial real estate. “The multifamily sector can expect increased demand as the economy creates jobs and new households are formed, likely in the second half of this year,” he said. “However, the office, warehouse and retail sectors continue to experience the delayed effects of the recession. These sectors should see gradual improvement after jobs pick up and create additional demand for space, meaning a broader improvement in commercial real estate is likely in 2011.” The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of nearly 700 local market experts, confirms that significant fallout from the recession remains. Looking at the overall market, commercial vacancy rates appear to be approaching a plateau, according to NAR’s latest Commercial Real Estate Outlook. The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.

US Democrats Try Scaled Down Tax Bill

Congressional Democrats cut the cost of a package of spending and tax hikes by nearly a third on Wednesday and delayed action for one more day as they raced to ensure passage before safety-net programs expire next week. With some centrist lawmakers balking at the cost of the original package, House Democratic leaders scaled back unemployment benefits and doctor payments, according to a summary released late Wednesday. A flaw in Medicare’s payment system pays doctors at outdated rates, which would amount to a 21 percent pay cut unless Congress patches it with a periodic payment update. If the legislation stalls, unemployment aid and health benefits will run out for hundreds of thousands of Americans starting next week.

The revised bill would postpone pending cuts to doctors in the Medicare program for 1-1/2 years, down from 3-1/2 years in the original bill. That would push the bill’s total cost down to a level less likely to alarm centrist lawmakers like Democratic Senator Kent Conrad who are reluctant to add to a budget deficit expected to approach last year’s record $1.4 trillion figure. One of the most controversial aspects of the bill would increase taxes on fund managers in private equity and other firms to at least 35 percent from the current 15 percent. The legislation also tightens tax rules for multinational companies and oil companies in particular. Senate Republican leader Mitch McConnell said the cost wiped out savings estimated from the healthcare overhaul that passed earlier this year. “This is fiscal recklessness,” McConnell said. “And that’s why even some Democrats are starting to revolt.” Lobbyists on both sides fanned out across the Capitol on Wednesday and warned that jobs would be at stake if the legislation went through — or did not.

Industry Risk Management Practices That Contributed to Housing Crisis: MBA Survey

Multiple factors including poor data, incomplete performance metrics, and, short-term focus and unrealistic optimism among senior business managers contributed to the collapse in the US housing and mortgage markets, according to a study released today by the Mortgage Bankers Association (MBA). The study entitled, “Anatomy of Risk Management Practices in the Mortgage Industry” which was conducted by Professor Cliff Rossi,a Tyser Teaching Fellow and Managing Director of the Center for Financial Policy at the University of Maryland. of the University of Maryland, and sponsored by MBA’s Research Institute for Housing America (RIHA). “As home prices increased, lenders were pressured to offer innovative products that could help borrowers afford a home.

The resulting increase and expansion of risk layering and change in borrower behavior, left risk managers unable to offer reliable risk estimates,” said Professor Rossi. “According to some empirical analysis, when market conditions changed, mortgage performance models proved unstable, with loans originated in 2006 defaulting at four times the rate of what a model prior to 2004 would have predicted. Moving forward, it will be essential for the industry to develop early warning measures of the level of risk in new originations and less reliance on imprecise historical performance of new loan products.” Key findings from the study talks about, increase in risk layering created a gap in understanding the long-term risk profile of new product combinations, in the wake of changes in subprime loan underwriting criteria. were challenged by limited and changing information and could not build a case for concentration risk limits. With little information in borrower and counterparty behaviour, models using macroeconomic conditions as key inputs to explain mortgage default and prepayment were biased toward lower loss estimates.

Lehman’s Bankruptcy Estate Sues J.P. Morgan

Lehman Brothers Holdings Inc.’s estate sued J.P. Morgan Chase & Co., alleging J.P. Morgan illegally siphoned billions of dollars from Lehman in the days before the troubled investment bank filed for the largest bankruptcy in U.S. history. The lawsuit alleges that J.P. Morgan Chief Executive James Dimon and other top executives used inside knowledge to take advantage of Lehman as its financial state worsened. J.P. Morgan, the suit alleged, coerced Lehman to turn over $8.6 billion in collateral in September 2008, triggering a liquidity squeeze that contributed to Lehman’s collapse.

The estate is hoping to recoup billions in collateral the bank demanded, and billions in other damages. The lawsuit, long expected, contains among the most-significant allegations to date about the interplay between Lehman and its onetime Wall Street brethren. J.P. Morgan served as Lehman’s main “clearing bank,” meaning it acted as a middleman between Lehman and its lenders and investors. In this capacity, it knew more than most market players about Lehman’s financial condition, which was growing more dire in the summer and fall of 2008. A bankruptcy-court examiner found in a recent report that Lehman could pursue a legal claim against J.P. Morgan for making “excessive collateral requests,” though he labeled it “not a strong claim.” The examiner said Lehman could have a legal claim to claw back $6.9 billion of the $8.6 billion pledged to J.P. Morgan.

Now on to our real estate education section…

Commercial Close-Up…Do Mobile Home Parks Make Sense?

While many short sale investors have dealt with isolated mobile home sales, few have ventured into the commercial mobile home market. It’s certainly not for the novice but it does provide an attractive alternative for those investors interested in transitioning from residential real estate into a commercial segment. Find out if mobile homes make sense for your personal portfolio with these quick considerations.

1. Mobiles Homes as a Commercial Investment. Mobile home parks come in all shapes and sizes ranging from small “mom and pop” type parks to major resort type properties making them a viable option for investors at all levels.

2. Make Money a Multitude of Ways. Mobile home parks can generate cash in so many ways it can make the average investors head spin with ideas. Buy a park with existing mobile homes then sell either the lot or the mobile home (or both), lease the land, lease the mobile home, add or enhance income streams via coin operated laundry and other assets plus much more.

3. Tax Advantages. Mobile home parks are treated very favorably for IRS purposes; 15 year depreciation schedules (compared to 27.5 years for single family residential) with a 70 percent land improvement ratio.

4. Low Maintenance. Earlier this week we discussed the advantages of triple net leases but mobile home parks may be a more affordable option for beginners in the commercial arena. Reduce cost and maintenance by “hiring” site management in exchange for free lot rent.

5. Density. The rate of return can be phenomenal; for example, an average five to ten acre mobile home park usually has roughly 40 spaces with an average lot rent of $300 to $400 per month excluding ancillary income sources such as laundry or recreational facilities (ie, wi-fi, part-time RV park rentals, etc.). Secondary sales of mobile homes as well as unit rentals are other common ways to increase total ROI in addition to standard appreciation and cash flow.

7. High Desirability. Tough economic times are increasing the demand for affordable housing options. Mobile homes are an especially attractive alternative to low income earners and others on a fixed budget.

8. Multiplier Effect. A small increase in lot rental rates can create major earnings due to the multiplier effect; for example, increasing the lot rate by just $25 per month on even a small park with only 40 lots still results in an additional $1,000 per month profit.

See you at the top!

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

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
–

Real Estate News & Commentary by Chris McLaughlin, January 11, 2010

admin — Mon, 11 Jan 2010 18:07:29 +0000

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

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

***********

Apartment prices fall 3%, vacancies up 8%

The national apartment vacancy rate rose to 8% in the last three months of 2009, according to Reis Inc., a commercial real estate information provider. That is the highest level Reis has ever reported. The vacancy rate barely inched up from the third quarter — just 7.9% to 8% — but it rose significantly from a year ago, when it stood at 6.7%. Even more dramatic, vacancies spiked 45% from the third quarter of 2006, when they had bottomed out at 5.5%. According to Reis economist Ryan Severino the main culprit is the recession. Not only do people lose their jobs during downturns, many others are afraid of being laid off. And they all feel pressure to reduce their housing costs. “Household formation rates slow down during recessions,” said Severino. “They may move in with their families or rent larger apartments and partner up with friends. They partner with others much more then they do during more prosperous times.” Occupancy rates did climb during the quarter, with nearly 10,000 more apartments being rented than had been three months earlier, according to the report. But vacancy rates still managed to climb because 28,000 newly constructed units hit the market. A total of 120,000 new apartments came online during 2009, the most since 2003.

Americans borrowing less

Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amounts on records going back nearly seven decades. The Federal Reserve said Friday that total borrowing dropped by $17.5 billion in November, a much bigger decline than the $5 billion decrease economists had expected. November’s $17.5 billion drop in total credit was the biggest amount in dollars terms since records began in 1943. That represents an 8.5 percent fall from the October borrowing level. That was the biggest percentage drop since total credit declined 9 percent in May 1980. The borrowing category that includes credit cards fell by $13.7 billion, an all-time record decline in dollar terms. The drop was 18.5 percent from November, the biggest decline in percentage terms since a 29.6 percent plunge in December 1974. The Fed’s credit report excludes home loans and home equity mortgages, only covering borrowing that is not secured by real estate. The drop in overall credit for 10 straight months was a record in terms of consecutive declines, surpassing the old mark of seven straight declines set in 1943 and again in 1991. Americans are borrowing less for a number of reasons. They remain fearful about their job prospects and they are also trying to replenish depleted investments.

DSNews.com – Future of Mortgage Purchase Program?

According to minutes released this week of the Federal Reserve Board’s closed-door December meeting, Fed policymakers have already begun debating whether the program should be extended, to ensure the already-fragile housing recovery maintains its course, but the decision has left a dividing line down the central bank boardroom. The Federal Reserve has said it will end its purchases of mortgage-backed securities (MBS) from Fannie Mae, Freddie Mac, and Ginnie Mae on March 31, but the decision wasn’t unanimous. Over the past year, the U.S. central bank has purchased nearly 75 percent of the mortgages that Fannie, Freddie, and Ginnie have securitized. It currently holds just over $900 billion of these MBS bonds, and says by the time the program ends it will have bought a total of $1.25 trillion.

On Wednesday, federal banking regulators, including the Federal Reserve, issued an advisory to the nation’s financial institutions, warning them to ensure procedures and practices are in place to minimize their risks from loans and an increase in financing costs when interest rates do rise. The government has already moved to reassure the market that the Fed’s withdrawal of its support won’t have as big a sting as some fear. In late December, the Treasury pledged “unlimited support” to Fannie Mae and Freddie Mac, and lifted the mandate that the two companies begin selling off large chunks of the securities they hold. But some investors aren’t convinced. Ronald Temple, portfolio manager at Lazard Asset Management, told the Wall Street Journal that if the Fed stops buying mortgage bonds, we should expect mortgage rates to rise by at least a full percentage point. He says that combined with high unemployment and still large numbers of foreclosures could push home prices down as much as 20 percent.

Redefault Rates ‘Tragic’, Says Amherst

According to Amherst Securities Group, default and prepayment rates on non-agency, private-label mortgage-backed securities (MBS) were constant in November. However, re-performance rates, where payments return to less than two months delinquent, were down and re-default rates “tragic” in November, according to market commentary provided by the firm. The Amherst report, based on November payment data covering 98% of loans backing private-label MBS, said cash flow velocity continued to decline. Based on performance data, Amherst projects that always-performing loans fell to $905bn in November from $930bn in October, as first-time defaults came in at $16bn, from $16.8bn in October.

Prepayments of $8.3bn were unchanged from the previous month. Re-performing loans totaled $117.3bn in November, down from $118.1bn in October. Loans totaling $12.8bn became re-performing in November by getting back within two payments delinquent, down from $13.4bn in October. Total non-performing loans were $484.8bn in November, from $486.1bn in October. Re-defaults after modification were $12.8bn, or 10.9%, up from 10.5% last month. Laurie Goodman of Amherst has said the fundamentals of certain modification programs put them at a disposition for unsuccessful modification. The Treasury Department’s Home Affordable Modification Program (HAMP), for example, is “destined to fail” as it does not address negative equity.

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

Price Impact on ROI

One of the most commonly used valuation models for single family homes and short sales includes the Return on Investment or ROI. Despite the ease associated with using this calculation, the ROI is a robust measure of investment value that is both quick and convenient. However, it is also subject to a high level of volatility based upon the price of the property and type of funding in place. In fact, ROI is so dramatically influenced by funding mechanisms it is frequently considered a cornerstone by investment advisors. Let’s take a look at a few hypothetical short sale situations to demonstrate the impact of price on the ROI as well as how it can be used to your advantage.

Cash is still king and it speaks louder than ever especially with tightening lending standards and other banking irregularities; however, one area where cash doesn’t hold up quite as well as the use of leverage is in the calculation of ROI or return on investment. Let’s assume a short sale investor opts to purchase a property in cash for $100,000. If the property generated a one year rental return of $10,000 the total ROI is a fairly straightforward 10% or perhaps the property was flipped for a $20,000 profit and thereby the ROI was a handsome 20%. Both are completely realistic examples and certainly above and beyond what stocks, bonds or other inferior investments are currently able to deliver but the total return is a bit misleading. This can be due to the cost of borrowing the money in the first place (ie, what interest rate is being paid on the funds borrowed or the “spread” of the borrowed interest rate versus the total ROI received). For example, if the short sale buyer took out a home equity loan or borrowed against a 401-k plan, the interest rate may be a very reasonable 3 to 4 percent versus a total return of 10% – leading to a “spread” or ROI of 6-7 percent.

On the other hand, some properties are truly purchased completely for cash so the entire ROI is theirs to keep…but is this always the best situation? Maybe-maybe not. There are a multitude of reasons to purchase a property for cash – not the least of which is the inability to obtain full financing on a distressed property, the ease and convenience of closing and the cost savings of not having to obtain PMI or other add-ons. However, there are very strong reasons to finance a property or use the maximum amount of leverage possible to maximize ROI. Going back to the former example, let’s assume you financed a property for 80% of the value…$80,000 of the total price of $100,000. You used $20,000 out of pocket and received the same $10,000 annual rental or flipped for a quick $20,000. Instead of a respectable 10% to 20% return, you will now realize an eye-popping 50% to 100% return on your investment!

Now let’s take this one step farther…how important is price when it comes to ROI? The final answer is “it depends”. Certainly buying right is a critical consideration in any short sale deal however, when using leverage, price becomes much less important due to the extreme rates of return generated. In the above examples, every $1,000 addition in cost reflects a significant gain or loss in the final cash ROI but in the leveraged position, paying an additional $1,000 for a property results in a paltry difference in the final ROI. Short sale investors should fully understand how to maximize ROI depending upon the price and funding source to be utilized for the deal. By doing so it is often feasible to pay more for a property while still maximizing the full profit potential of your portfolio.

See you at the top!

Chris McLaughlin

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

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

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

About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

Real Estate News & Commentary by Chris McLaughlin, November 19, 2009

admin — Thu, 19 Nov 2009 20:54:55 +0000

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

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

Land Flipping Finale … Tonight at 8:30 PM ET, 5:30 PM PST:

There was so much excitement about the new strategy in flipping land that we’re holding an encore tomorrow night at 8:30 PM ET, 5:30 PM PST. There’s also a three pay option as well to help with your cash flow needs.

Here’s the link to RSVP:

https://www2.gotomeeting.com/register/530226171

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

WSJ sees foreclosure tidal wave

In a lead story, the Wall Street Journal (WSJ) paints a dismal picture of the housing market in 2010. Uncertainty over the extension of a home-buyer tax credit sent new-home starts in October crashing down a full 10.6% from September, and starts of single-family houses fell 6.8%. That’s the lowest level since April, the Commerce Department said. This news suggests that foreclosures are not only going to keep rolling in, but that they may actually increase. Richard Dugas, chief executive of Pulte Homes Inc., the nation’s largest home builder, warned investors: “As we look out to 2010, we are expecting difficult conditions to continue.” Wednesday’s data prompted some economists to revise their fourth-quarter forecasts down slightly. Macroeconomic Advisers moved its GDP estimate down to 3% from 3.2% and Nomura Securities predicts 3.4% growth, down from 3.6%. The data adds to the suggestion “that the recovery is a little bit rickety,” said Zach Pandl, an economist from Nomura. Given that 3.4% of U.S. households — or about 1.9 million homeowners — are 120 days or more overdue on their payments, and that millions of homes are expected to go through foreclosure over the next few years, adding to supply, it’s a fair bet that foreclosure problem won’t be gone anytime soon.

Unemployment claims flat

The Labor Department announced that initial claims for state unemployment benefits were flat at a seasonally adjusted 505,000 in the week ended Nov. 14 – about the same as analysts polled by Reuters had forecast. Applications have dropped significantly from March’s lofty levels, but remain above the 400,000 mark that analysts say would signal payrolls growth. The four-week moving average for new claims fell 6,500 to 514,000 last week – declining for the 11th straight week. The number of workers still collecting benefits after an initial week of aid dropped 39,000 to 5.61 million in the week ended Nov. 7, the lowest since March, and in line with market expectations for 5.60 million. continuing claims have fallen from a peak of 6.9 million in June and the drop is likely the combination of fewer new applications for unemployment aid and many jobless workers exhausting their benefits. The four-week moving average of continuing claims declined 83,500 to 5.71 million. The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, was steady at 4.3 percent in the week ended Nov. 7.

Surprise! Administration’s job claims “flawed”

This can hardly come as a surprise after the recent fiascos of non-existent congressional districts and wildly inaccurate job estimates, but a new report from the Government Accountability Office (GAO) concludes that the Obama administration’s recent claims about the number of jobs saved or created by stimulus spending are flawed. The White House touted the Recovery Board’s report that claimed approximately 640,329 jobs had been created or saved through contracts, grants and loans in the stimulus package, and while the GAO has not issued corrective numbers, it found a slew of new holes in the data: 3,978 recipients reported jobs created or saved without actually receiving ANY Recovery Act funds, and 9,247 reports showed the receipt of money but NO JOBS were created or saved. In addition, there have been over 100 allegations of fraud surrounding Recovery Act funds, and more than half are still at various investigative phases. In the final analysis, the GAO concludes it has been a “lessons learned process”, and there should be changes to how jobs created and saved are defined, while continuing to work with recipients to accurately report the impact of Recover Act funds. Heck, it would be more accurate to just make up numbers.

Housing slump or not next year?

The National Association of realtors (NAR) expects house prices to rise 4 percent in 2010 with sales hitting 5.7 million units, slightly above the 2007 rate, and that about 15 percent of sales will be the result of the tax credit, which requires a contract by the end of April and closing by the end of June. It’s only fair to present the other side of the argument: “Most of it [the tax credit] is simply shifting sales from one period to another,” says Global Insight economist Patrick Newport. “It doesn’t get rid of the fundamental problem; there’s still a glut of houses.” David Crowe, chief economist at the National Association of Home Builders agrees: “We expect a little stall in 2010…I agree, you do advance demand, so you steal it for the future.” The builders’ group forecasts sales peaking at 5.60 million units in the first quarter and bottoming at 4.50 million in the third quarter, for a 2010 average of 5.15 million. That’s marginally above the 2008 rate of 4.91 million. Most economists see the jobless rate—now 10.3 percent—peaking around 11 percent sometime in early to mid 2010 and then creeping down to around 10 percent by the end of the year, and that certainly drags on both sales and prices too. However, any change in employment, even sentiment, will help sales in general, while a snapback in new household creation will mean the traditional supply of new buyers. Historically low interest rates—which may creep up a full percent over the next 14 months—will still be low enough to keep home affordability high.

More healthcare taxes on the way

Meanwhile, back in never-neverland, while the economy is hobbling along and banks are burning, the government is still fiddling with healthcare. U.S. Senate Democratic leader Harry Reid released a 2,074-page bill, which quickly set off what promises to be a lengthy and bitter debate over President Barack Obama’s top domestic priority. Democrats said the Congressional Budget Office pegged the plan’s 10-year cost at $849 billion — below Obama’s $900 billion goal (well that’s a relief – oh, wait, I missed the “Democrats said” part). The actual analysis from the Congressional Budget Office had not been released by mid-evening on Wednesday, but at least the Senate bill is less expensive than a more than $1 trillion healthcare measure passed on Nov. 7 in the House of Representatives.

Republicans criticized tax increases included in the bill to help pay for the expanded insurance coverage, including a new tax on elective cosmetic surgery they dubbed a “botox tax.” The bill would also raise the Medicare payroll tax on high-income workers, which is used to finance the government health program for the elderly, and impose a tax on high-cost “Cadillac” insurance plans. “This bill has been behind closed doors for weeks. Now, it’s America’s turn, and this will not be a short debate,” Republican Senate leader Mitch McConnell said. “Higher premiums, tax increases and Medicare cuts to pay for more government — the American people know that is not reform.” If the Senate passes a bill, any differences with the House version would have to be reconciled before a final bill can be voted on again in both houses and sent to Obama to sign.

HAMP not working

Only a tiny percentage of troubled homeowners have received permanent modifications under President Obama’s Home Affordable Modification Program (HAMP), raising concerns about the effectiveness of the $75 billion effort. Fewer than 5% of the trial modifications on loans owned or guaranteed by Freddie Mac were converted to long-term adjustments as of Sept. 30. More broadly, the figures are even lower. As of Sept. 1, only 1.26% of all trial adjustments were made permanent after three months, reported the Congressional Oversight Panel, which monitors the government’s use of bailout funds. The preliminary data, which has not been widely reported, underscores the next big problem facing the government’s effort: Officials have leaned on banks to offer more homeowners trial modifications, but the real test will be whether homeowners will receive lasting help.

“No one is really sure why the conversion rate is so low,” said Mike Zoller, assistant economist at Moody’s Economy.com. “We’re concerned these loans will eventually become foreclosures.” Guy Cecela, publisher of Inside Mortgage Finance, a trade publication, says, “Everyone is going to be shocked at the low conversion rates from trial modifications to permanent modifications.” The president’s program “won’t result in a significant number of loans being modified and won’t put a significant dent in foreclosure rates.”

Now on to our real estate investing educational arena …

Finding Cash to Get Started in Foreclosure Investing

One of the most common complaints voiced by those that have never tried a short sale is that they don’t have the funds needed to get going. The reality is that short sales and REOs are within the reach of most average investors – far more so than other funds that can bring a fortune into your life. Here are just a few ways to find the cash to get started in short sales investing:

1. Banks. This is the most common way but of course, it often requires at least a little out of pocket to get going. Keep reading to learn more ideas of where that might come from…

2. Hard Money Lenders. This is a viable option especially for those that intend to re-sell or flip a property quickly. It’s often worth the higher than average interest rates to turn a quick profit the finance your own from that point forward.

3. Line of Credit or Credit Cards. Personal lines of credit or “signature loans” are a super convenient method of obtaining cash for closing costs or repairs. Likewise, credit cards can be quite helpful – just remember to use responsibly.

4. Savings Account. Remember those? Plenty of people still have them and right now, the interest is dismal. Put that money to better use by investing in a short sale. Once the property is re-sold you can stash the cash away for safe-keeping or even add to it.

5. Bonds. Much like savings accounts, these under-performing assets are downright depressing. Consider the opportunity cost then put that money to work.

6. Insurance Loans. If you have whole life insurance it is often possible to borrow from your policy for a fraction of the cost associated with other credit terms. It’s a great way to make your money work for you without reducing liquidity requirements.

7. 401-k. Another popular option for generating quick cash at a relatively low cost.

8. Home Equity Loans. Although more difficult to obtain than in the past, those with good credit are still able to tap into equity. Other options include reverse mortgage loans or loans made with other secure collateral.

9. Friends and Family. While doing business with friends and family can be risky business, borrowing from them need not be if you write up the proper contract. It is often a win-win since you obtain needed funds and they get better than average returns on their money.

10. Join a Professional Group. The “big boys” of investments have used syndicates for a long time but small investors rarely have been able to generate the same types of returns. Today, there are a multitude of options for those seeking the temporary use of funds from others.

See you at the top!

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

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

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

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
–

Foreclosures hit over 1.5 million homes in first half of 2009

Chris McLaughlin — Thu, 16 Jul 2009 20:35:02 +0000

Foreclosures Jump 33% in June Over Prior Year

Real Estate News & Commentary by Chris McLaughlin, July 16, 2009

http://www.shortsalesriches.com

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

How Loan Modification Can Make You Rich:

The Encore Will Be Tonight ONLY!

Join Nathan Jurewicz for an encore presentation of the wildly

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And it doesn’t cost you a cent to find out about it this

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Foreclosures hit over 1.5 million homes in first half of 2009

According to RealtyTrac, foreclosures rose 15% in first half of 2009 compared to a year earlier, impacting over 1.5 million homes. Foreclosure filings increased more than 33% in June compared with the same month last year and rose nearly 5% from May. More than 300,000 households have received foreclosure filings in each of the 4 months till June. About 79,000 homes were repossessed by banks in June, up from 65,000 in May.

Analysts say that the $50 billion in subsidies announced by the Obama administration for tackling the foreclosure crisis has not been effective so far. “Despite all the efforts to date, we clearly haven’t got a handle on how to address the situation,” said Rick Sharga, RealtyTrac’s senior vice president for marketing. Nevada saw the highest foreclosure rate in the first half of 2009 with over 6% of the households receiving a filing. Arizona was next to Nevada, followed by Florida, California and Utah. Analysts say the mortgage modification program announced by the government is mired in inefficiency and mortgage companies are not equipped to handle the program. “They need to automate the process, and they need better technology, and they need to do this quickly,” said Bill Kelvie, chairman of Overture Technologies.

Mortgage securities boost bank profitability

Despite all the gloom and doom in the housing market, mortgage securities are helping banks post better results. An analysis of the second quarter results of banks shows that banks have made hefty gains on account of the recent rallies in the price of mortgage securities. “It’s the mother of all mortgage quarters,” said Meredith Whitney, a banking analyst. Traditionally, mortgage banking has accounted for about 3% of revenues for large banks; it has more than doubled to 6.4% in the first quarter of this year.

According to Inside Mortgage Finance, a publication, lenders issued about $1 trillion worth of mortgages during the first half of 2009. Banks have seen an increase in margins in mortgage lending. New accounting rules which allow banks to book lower losses on troubled loans are likely to help. Jack Ciesielski of The Analyst’s Accounting Observer estimates that the earnings of the biggest banks could have decreased significantly but for the new accounting rule. With the housing sector not showing signs of sustained recovery, some analysts say profits from mortgage business may not sustain. “You might believe that the environment has stabilized, but looks are sometimes misleading,” said Whitney.

7-Eleven’s growth strategy amid weakness in the real estate market

7-Eleven, which has a chain of about 5,700 convenience stores, plans to add more than 200 new outlets this year. This is in contrast with retail chains closing their stores due to economic downturn. The company says the current weakness in the commercial real estate market will help keep its expansion costs low. The company has identified California and New York as the states where it will open most of the new stores. Dan Porter, vice president for real estate and new store development at 7-Eleven, says the company is getting access to retail space which was earlier too expensive. Consumers are trading down to necessities and chains like 7-Eleven are likely to be less-impacted by the recession than chains which sell high-end products. ”While the business is not recession-proof, it’s recession-resistant, and doing well, given the marketplace,” said Mike Friedman, a senior vice president of CB Richard Ellis, a real estate firm which works with 7-Eleven.

CIT Group on the verge of bankruptcy

It looks unlikely that CIT Group (CIT), a troubled commercial lender to small and medium firms, will be rescued by the government. CIT, which has already received $2.3 billion in bailout funds, has not been able to convince the government that its failure will lead to the collapse of financial system. CIT said that “there is no appreciable likelihood of additional government support” in a statement. CIT is facing a significant cash crunch and has to confront $1 billion debt maturing next month. The Federal Reserve, after conducting stress tests on CIT, concluded that CIT will need an additional $4 billion in capital under the worst economic scenario.

Government officials are reluctant to infuse additional funds since they say that the firm has no viable business plan and there is no point in throwing good money after bad. CIT has posted a loss of $3.4 billion across 8 straight quarters. “It’s a killer,” said Sean Egan, president of Egan-Jones Ratings while commenting on government’s refusal to infuse additional funds. “What’s next is that they’re going to have to scrape for capital to meet the next loan payment and it’s highly likely that they’re going to file for protection.”

Goldman’s average employee compensation set to double in 2009

With Goldman Sachs delivering a knockout second quarter profits, analysts say that the bank is on its way to doubling its average employee salary. Goldman’s compensation expense including salaries, benefits and severance payouts, was $11.4 billion in the first half of 2009; this is well above $8.5 billion in the first half of 2008 and $11 billion in the first half of 2007.

The average Goldman employee is projected to make $773,000 for 2009, more than doubling their 2008 salary; this is more than 10 times the typical American family’s income. Given the current mood in Capitol Hill, Goldman’s employee compensation could well become a target of populist anger. Some analysts say Goldman has performed better than its rivals by shedding risky assets, holding adequate cash reserves and raising capital, and hence its employees deserve pay hike. “Look, I hate the corporate welfare,” said David Merkel, chief economist at Finacorp Securities. “But at least Goldman did play all its cards right.”

Now on to our real estate investor education section…

Order of Work By Profit Potential

Whether you are seeking new ways generate the best rates of return or just searching for a bargain basement price to begin building a real estate portfolio, sooner or later you will encounter a property that needs work. The decision on what project to start with is more than an academic question – should you run out of time, or experience a set-back in funding, having the most important work performed first assures the highest selling price. In order of profit potential (or missed opportunity as the case may be) here are the major projects listed by order of importance:

Exterior. Plain and simple…exteriors make or break the bank. Ugly houses bring less money. Pretty houses make more money. Search for ugly homes that are below the standards of the neighborhood then bring them up to par in order to buy low and sell high.
Clean. It’s simple yet effective. Make sure the interior and exterior of the home is clean and freshly painted. Trim hedges, pressure spray walkways and driveways. It’s simple yet effective.
Roof. Undoubtedly the next “biggie” when it comes to selling the home is the condition of the roof. Even the slightest appearance of a potential roof problem turns hot buyers cold. Research shows a disproportionate loss of income potential on a property that requires roof repairs…even if the repairs are relatively modest. Learn how to calculate the cost of roof repairs and submit bids where others fear to tread…and always makes sure the roof of your own property is in good condition to fetch top dollar.
Exterior Doors, Windows & Siding. Exterior doors should be replaced with low cost builder quality models if damaged or aged. Windows must be in working order and should be appropriate for the weather in the given area. You can often repair windows for a fraction of the cost of replacing as long as they aren’t an eye-sore. Repair siding whenever needed – but only after taking care of doors and windows.
Plumbing. The majority of plumbing problems tend to be relatively simple and straightforward but you will likely be surprised how many are neglected. Don’t allow your home to show any leaks or water stains! Invest a few bucks in washers or new faucets then cover or repair any areas that have water stains. Builder quality is sufficient for basic homes as long as it looks clean and fresh. Upscale homes should reflect better quality products and amenities.
Duct Work & Insulation. The emphasis on clean and green has more savvy shoppers paying special attention to air quality and energy efficiency. Have an inspection performed and take care of any known problems in advance. It’s typically a low cost fix.
Lighting, Molding & Other Details. Walk through the house beginning at the front door to make sure each door knob, trim and other details are in acceptable condition. Each should be clean, stable and perform without problem…otherwise, fix/replace it. Luxury homes should evoke a “ahhh” response for each item while modest homes should simple not evoke any response – ie, the items should be invisible.

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com
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.

running 4 different offices, supporting nearly

450 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

Property tax appeals surge across the country

Chris McLaughlin — Mon, 06 Jul 2009 20:03:30 +0000

Foreclosure Crisis Unveiled: Subprime isn’t the real story

Real Estate News & Commentary by Chris McLaughlin, July 6, 2009

http://www.shortsalesriches.com

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

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Property tax appeals surge across the country

As local governments grapple with the problem of dwindling revenues, they now have a new problem to confront: rise in property tax appeals. As home prices fall, homeowners and associations are appealing to the local authorities to have their property taxes revised downwards. “It’s worthy of a Dickens story,” said Gus Kramer, the assessor in Contra Costa County in California. “These people are desperate. They know their home’s gone down in value. They’ve watched their neighborhoods being boarded up. They literally stand in there and say: “When can I have my refund check? I need to feed my family. I need to pay my electric bill.” In some states, property tax values are falling for the first time since World War II. In Atlanta, thousands of people have made appeals for reassessment. In part of Ohio, reassessment appeals have multiplied fivefold. In suburbs of New York, tax lawyers are so busy that they have hired extra employees to go through the paperwork related to property tax reassessments. “We’ve been absolutely getting killed,” said Robert W. Singer, the mayor of Lakewood Township in New Jersey. Singer’s town expects to pay $2 million in tax refunds to homeowners. “We’ve never had this before. Usually they’re undervalued. Now, everyone’s overvalued.”

California seeks to expand its tax-credit program for home buyers

California, in its budget in February, introduced a program by which home buyers could get up to $10,000 credit when they buy a new, previously unoccupied home. The program was aimed at boosting home sales in the state. The program funding, capped at $100 million, was meant to run until March 2010. The response to the program was positive with the state receiving 9,800 applications seeking $94.7 million. California Tax Board, which oversees the program implementation, announced last week that the program would be stopped once it received 12,000 applications.

“We didn’t realize how successful [the tax credit program] would be,” said Bob Dutton, a Republican Senator who sponsored the bill which created the program. Lawmakers in California have now introduced bills proposing the expansion of the program to at least $200 million and extending it by at least one year. Some analysts believe the program has not been effective so far. According to Hanley Wood, a market research firm, new home sales in California in terms of both units and average prices have declined in March and April this year over the earlier year. Robert Kleinhenz, deputy chief economist for the California Association of Realtors, says the program is benefiting first-time home buyers. The impact of extending the program on the state’s $21 billion budget deficit is worrying to some lawmakers. Ira Ruskin, an Assemblyman in California, says, “We have to be very careful what we do with general-fund money” given the state’s budget deficit.

Court approves GM asset sale

In a 95-page ruling, Judge Robert Gerber, of Federal Bankruptcy Court in Manhattan, consented to the asset sale plan proposed by General Motors (GM). The court received over 850 objections to the restructuring plan during a 3-day hearing. Harvey Miller, GM’s counsel said none of the objectors to the sale of assets had a credible plan as an alternative. Miller argued that liquidation would benefit no one. Judge Gerber agreed with GM that the asset sale was critical to keep the company going. “Bankruptcy courts have the power to authorize sales of assets at a time when there still is value to preserve — to prevent the death of the patient on the operating table,” said Judge Gerber. “In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.” Under the restructuring plan, GM’s prized assets, including the Chevrolet and Cadillac brands, will be transferred to a new company which will bear the General Motors name. The majority shareholders of the new GM will include the United Automobile Workers union and the American and Canadian governments. The “old” GM, which will stay in the bankruptcy court for liquidation, stands to receive $1.175 billion, by way of loan from the government, for winding down the estate and settling claims.

Is wage seizure leading to more bankruptcies?

According to research carried out by the Associated Press, states that allow wage seizure by creditors by way of the so-called garnishment laws have much higher individual bankruptcy rates than states that do not. States such as North Carolina, Pennsylvania, South Carolina, Florida and Texas, which prohibit or limit wage seizures, have much lower rates of bankruptcy than their neighbors where economic conditions are similar but do not limit or prohibit wage seizure. The nationwide bankruptcy rate is 42% higher than the rate in those 5 states. When wage seizures happen, collection companies may seize up to 25% of the disposable income of borrowers. The mere threat of wage seizure can force borrowers to file for bankruptcy. David Cherner, a director at ACA International, which represents debt collection agencies, says wage seizure is typically looked at the last resort by collection agencies.”The debt collection industry isn’t necessarily enjoying a lot of success at this point,” due to a rise in personal bankruptcies, Cherner said. “While volume (of credit collection activity) is up, consumers are hurting.”

The rising mountain of debt

Currently, the national debt of the U.S. amounts to $11.4 trillion and it is growing by over $1 trillion each year. At about $37,000 for each and every American, the national debt is likely to cause significant problems if it is not tackled soon. “Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” warned Federal Reserve Chairman Ben Bernanke recently. Interest payments amounted to $452 billion last year. Analysts say debt servicing is crowding out other government spending. In order to reduce debt taxes have to go up or government spending has to come down, or both. President Obama says the debt is “something that keeps me awake at night” and his administration is planning to rein in national debt to “acceptable” levels. Alexander Hamilton, the first treasury secretary of the U.S., once said: “A national debt, if not excessive, will be to us a national blessing.” Not many would say that the current level of America’s debt is a blessing.

Now on to our real estate investor education section…

How to Get the SBA to Finance Your Short Sales Empire

In yet another display of support for the short sales concept, the Small Business Administration recently announced breakthrough changes to the 504 Loan Program in conjunction with the American Recovery and Reinvestment Act of 2009. Small business owners (defined as those that do less than $5 million in business each year) will be eligible to refinance existing loans that were used to buy real estate or other assets. Even better, the 504 program also provides funding to allow small business owners to purchase real estate as well as fixed assets…including short sale real estate.

This is no small boon for those short sale investors searching for a way to obtain financing in a tough market or wishing to expand their short sale empire through the acquisition of additional types of properties. Keep in mind, small business loans may be interested in acquiring many different types of properties including residential real estate, commercial real estate, retail, storage or many other forms of distressed property.

The enhancement of the 504 Loan program to include refinancing and funding for new acquisitions is especially timely for those short sale investors who have taken steps to incorporate their business or who would like to purchase short sale properties as part of their existing small business. Forming a subsidiary or acting like a holding company is one way to allow your small business to cash in on short sale profits and broaden your bottom line holdings with the bank.

In addition to expanding the scope of new and existing financing options, the program has also increased the guarantee level to 90 percent while correspondingly reducing fees and transactions costs. ARC loans have also been made available to companies facing immediate financial hardship.

Eligibility Requirements:

“Expansion” includes any project that involves the acquisition, construction or improvement of land, building or equipment for use by the small business. The following are some of the conditions under which borrowers will be eligible for refinancing:

• The debt being refinanced was incurred to acquire land, to construct a building or to purchase equipment. The assets acquired must be eligible for financing under the 504 program.

• The existing debt is collateralized by fixed assets.

• The existing debt was incurred for the benefit of the small business.

• The new financing provides a substantial benefit to the borrower when prepayment penalties, financing fees, and other financing costs are taken into account.

• The borrower has been current on all payments of existing debt for one year prior to the date of refinancing.
See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

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Chris McLaughlin is widely known as America’s top
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running 4 different offices, supporting nearly

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Home Resales Up 2% in April

Chris McLaughlin — Wed, 27 May 2009 19:38:46 +0000

Real Estate News & Commentary by Chris McLaughlin, May 27, 2009

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Home Resales Up 2% in April

According to a survey conducted by Bloomberg News, resales of home rose by 2% in April from March. Falling prices, tax credits, and low mortgage rates may be contributing to an increase in home resales. The rise in foreclosures also helped home resales. Foreclosed properties accounted for 50% of home resales in March. “Home sales are being boosted by foreclosure sales and that’s helping to keep activity stable,” says Celia Chen, an economist at Economy.com, a provider of economic analysis. Many analysts believe that the market is stabilizing. “Home sales and construction activity are probably at the bottom,” said Chen. Robert Niblock, Chief Executive Officer of Lowe’s Companies, a large retailer of home-improvement products, said in a conference call that “there have been some encouraging signs in recent weeks that suggest perhaps the worst is behind us. Consumer confidence has ticked up. Housing turnover, especially in certain markets, is showing signs of a bottom.”

Mortgage applications drop

According to the Mortgage Bankers Association, its index which tracks applications to purchase a home or refinance a loan dropped 14.2% in the week ended May 22, as compared to the earlier week. Requests for home loan refinance dropped 18.9%. While some believe the market is about to stabilize, housing analysts rule out the possibility of a sustained recovery unless unemployment goes down. Pete Flint, chief executive of Trulia, a real estate website, says, “The housing market is not going to recover until foreclosures stabilize and reduce, which is unlikely in the short run. I would feel a lot more hopeful for the housing market when I see some positive signs in the employment statistics.” The unemployment rate in the U.S. is currently 8.9% and is expected to climb in future.

Irrational exuberance

The Standard and Poor index is up more than 30% since early March. With the economy not showing any signs of sustained recovery, the enthusiasm of the market could well be misplaced. In its latest budget projections, the U.S. government estimated that the economy will grow by 3.2% next year and by the year 2012, the growth will be 4.6%. Many analysts expect the economic growth to be lot lower. The economy has been bolstered by government spending. The question is what would happen if there is a reduction in government spending. Jeffrey Rosenberg, head of global credit strategy at Bank of America Securities Merrill Lynch, says, “When you remove the government stimulus, what the private sector can generate in terms of growth feels like a recession.” According to Rosenberg it would take another 3 years before banks recover from credit crisis and during that period economic growth could be as low as 0.5 to 1%. When the economy grows at a rate as low as 1%, it is susceptible to external shocks such as rise in the price of oil. History suggests that when recession is caused by financial crisis, it takes a lot of time for the economy to recover.

Consumer confidence grows

Data released by The Conference Board, an agency which carries out economic research, suggests that consumer confidence is on the rise. The index of consumer attitudes, published by The Conference Board, jumped to 54.9 in May from 40.8 in April. This is the biggest one-month jump since April 2003. Analysts believe that the jump in the index is an indication of “less of bad news.” Lynn Franco, director of The Conference Board’s Consumer Research Center, says, “Consumers are considerably less pessimistic than they were earlier this year.” Less of pessimism doesn’t exactly denote optimism. The consumers covered in the survey for collecting index data offered mixed response with regard to their purchase plans. The proportion of consumers planning to buy a car in the next 6 months rose to 5.5%, the highest in the last one year. But only 2.3% said they intended buy homes.

General Motors inches closer to bankruptcy

The large majority of bondholders of General Motors (GM) have rejected the company’s offer to trade their $27 billion bonds for a 10% stake in the company’s stock. This effectively negates the possibility of GM’s debt restructuring plan, and pushes the company closer to bankruptcy. Some believe that GM’s bondholders are likely to get a worse deal if the company files for bankruptcy. It looks highly likely that the U.S. government will increase its planned stake from 50 to 70% in GM, in order to reduce the company’s debt burden. The bankruptcy, if and when it happens, will be among the largest and the most complex in the history of American industry.

Now on to our real estate investor education tips section …

Is Your Body Language a Barrier to Short Sale Success?

Let’s face it – everyone is prone to the occasional sigh or less than enthusiastic response especially when dealing with complex or challenging people. Unfortunately, short sale investors must learn how to successfully negotiate with sellers, lenders and others in order to put together the best deals – no matter how positive or negative you feeling are – it’s important to keep your body language under control. Learn how to identify – and correct – the most common body language barriers holding back your success:

Off the Top of Your Head…did you realize that most people tend to look upward in a diagonal position when trying to think of an answer? It’s true – and others are able to pick up on that almost immediately. Stay prepared to avoid negotiating by the seat of your pants.

X-Marks the Spot…crossing your arms is often associated with a defensive posture. Rather than attempting to fix it (which is likely to only make you appear even more uptight), simply learn how to calmly communicate what you don’t like about the current conversation. Practice using a relaxed voice and your body language will follow suite naturally.

Ahead of the Crowd…overt enthusiasm and gestures that display a sense of urgency can be a dead give-away. Learn how to demonstrate a calm demeanor even when excessively excited. If you are absolutely unable to curb your enthusiasm, put it into writing instead. Think of it like a poker game – and keep your cards to yourself.

I Can’t Believe my Eyes…rubbing eyes or constantly turning your face away or indicates doubt and disbelief. Stop and allow the information to sink in slowly or ask questions rather than showing serious doubt or disbelief. It keeps the lines of communication open rather than putting the other party on the defensive.

Nervous Habits…biting nails, tugging at the corner of something, fidgeting with a pen and other time consuming habits either indicate boredom (if they are performed slowly) or impatience. Either one sends the wrong message. Keep track of what nervous habits you tend to display and rather than trying to eradicate them – replace them with something positive instead.

Ask a friend or family member to point out your most common body language pitfalls then make a point of developing successful forms of physical communication. For example, a brisk erect walking manner that portrays confidence or an open palm resting in a relaxed manner when speaking (sincerity, openness). Use “steeple fingers” when negotiating (authority) and a tilted head when listening to others (interest). Film yourself and practice until it becomes second nature. …but most of all, learn how to feel comfortable in your own skin.

See you at the top!

Chris McLaughlin

http://www.shortsalesrichesturbocharged.com

PS:

It’s LIVE! The Launch of the Year has begun .. find

out tonight what all the fuss is about at 8:30 PM ET, 5:30

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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 and Supervising Broker of one of Florida’s
largest Real Estate firms, running 4 different
offices, supporting nearly 450 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
* On twitter: http://twitter.com/mclaughlinchris
* On facebook:
http://www.facebook.com/addfriend.php?id=709199143

What the Smart Money is Doing

Chris McLaughlin — Fri, 07 Nov 2008 17:07:19 +0000

Mid-Day Market News & Commentary by Chris McLaughlin, November 7, 2008
http://www.shortsalesriches.com/welcome.html

I hoped you noticed. For the last two months, the smart money started to cut its losses.

Notice how Kirk and his company “Tracinda” dumped all those shares of Ford stock last month? Seems he bought at over $6 a share, yet shortly thereafter, he dumped it at a little over $2 a share. It trades for around that price right now, a month later.

He took a huge loss and walked away. Now, we all know that a smart guy like him would not take a loss like that unless he thought that he’d take an even bigger loss in the future.

So that points out the obvious: there are few high growth opportunities today for investors, yet everyone keeps watching the Dow every day, waiting for that chance to line up like a lemming, and leap off the cliff.

Sorry, that’s a little too risky for my tastes. And I’m a guy who actually sold his company to Jim Cramer of CNBC fame. I sold SmartPortfolio.com to TheStreet.com back in December 2000. I took the chips off the table, and I was glad I did.

Instead I’ll stick with the shifting real estate market. Real Estate has actually turned into the biggest investment opportunity we’ll ever see in our lifetime.

This “down market” has changed everything.

See, buying and flipping pre-foreclosure houses is now in the “mainstream.” That was the first step towards making real estate the best investment today.

The next step was making it possible to turn real estate investing into a structured BUSINESS. That little stroke of genius led to the next step:

Automating a short sale system so it could run by itself at a high sales volume, allowing many small sales to add up to huge profits.

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Now, on to our real estate investor education section …

Lender or Servicer?

Here’s a little tip that should help short sale investors when working with owners facing foreclosure or default; few homeowners actually try to negotiate a deal or settlement even when facing financial ruin. Of those that do, most don’t understand the difference between negotiating with the lender or servicer. Here is how to explain the benefits and limitations of each when working with homeowners:

Servicer

Since most home loans are not kept ‘in-house’ but rather sold and serviced by a third party, the first point of contact is often the servicer. The servicer often has limited capacity to extend payment terms – usually up to two or three months. They often send “workout packages’ of forms that require the homeowner to fill out information on their current situation and then establish a temporary intervention with repayment arrangements.

The majority of homeowners that have fallen behind on mortgage payments have already contacted the servicer and may have even attempted a temporary reprieve or loan repayment program. Once the temporary provisions “run out” they homeowner often believes there is nothing more that can be done…to an extent they are correct since servicers do not have the authority to approve more extensive modifications to the terms of the loan. This is where the lender comes into play.

Lender

The lender actually owns the loan and will be the final approval for all major negotiations related to repayment terms or short sale offers. Most homeowners fail to distinguish between a lender or servicer. Tracking down lenders isn’t always straightforward especially when a loan has been sold multiple times (a common practice). Servicers are required by law to provide full contact information for all lenders upon request. Since few homeowners even know to ask it’s not surprising they have never been in contact with their lender. Lenders are often more responsive than servicers since they have the final authority required to negotiate more stringent “deals’.

When negotiating a short sale offer, investors will typically work with lenders. By taking the time to explain all available options, it may be possible to convince current owners to consider a short sale rather than other more punitive or damaging choices.

Exploring All Options: Count the Cost

When working with homeowners in financial distress it is often helpful to explore all their options while listing the time and cost associated with each choice. Not only does it help the short sale investor demonstrate why their offer is more attractive to the bank and owner but helps formalize the benefits in the mind of the seller.

1. Bankruptcy. Not only does bankruptcy ruin their credit score and limit their ability to obtain a new mortgage for several years but it is costly and time consuming. The average cost of filing for Chapter 13 is $3,000 to $4,000 while Chapter 7 typically runs between $500 to $2,500.

2. Refinancing. Although most homeowners considering a short sale will not qualify or be interested in refinancing the home for a variety of reasons, there may be a few situations where they might. In addition to understanding the current market value of the home, it is important that homeowners understand the full cost of refinancing a home including extended payment plans, closing costs and other fees frequently “wrapped’ into the loan. In many cases, the monthly payment might be lower but the long term cost of keeping the home is equal to much more than the current value of the home.

3. Foreclosure. Walking away is easy unless you live in a state that allows the lender to sue you for deficiency; then it can become a homeowner’s worst nightmare. While there may be short term financial benefits to be derived from saving up mortgage payments and then simply walking out on the home, the long term consequences easily offset any short-term gains.

4. Short Sales. Short sales often create a win-win for the current owner and new buyer; understand the current needs of the seller then work with them to create a contract that takes their most urgent and pressing concerns into account. From lease-backs to the ability to financially recuperate from the short sale in a fraction of the time of other options most people will be relieved to learn they still have options available.

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.: Are you going to the National Association of Realtors Convention this weekend? Look for us! We’re at booth #2054!

Handling Bankruptcy in a Short Sale Part 2

Chris McLaughlin — Tue, 12 Aug 2008 12:18:07 +0000

After a Chapter 7 bankruptcy is filed, a “341 hearing” is set where the creditors have an opportunity to question the debtor about, and the bankruptcy trustee reviews the list of assets and debts, as well as income/expenses, to ensure accuracy. Creditors are provided 60 days after this hearing to object to the discharge.

Chapter 13, on the other hand, is known as reorganization. This typically is used by individuals who don’t qualify for Chapter 7 or who want to actually keep their non-exempt property. Typically they’ll come up with a plan and then pay into the bankruptcy trustee for a period of 3-5 years. They’ll make one monthly payment to the trustee and then the trustee will pay the creditors.

For a Chapter 13 filing, the debtor will develop a repayment plan, with of course the government receiving all of its money back (considered a priority claim over others). The court will using living standards, provided for by the IRS, to determine what would be considered reasonable for housing, food, and other expenses.

But, after reviewing both Chapter 7 and 13, does it really matter if your client is in preforeclosure and is a short sale candidate?

Let’s remember why they are a short sale … they have no equity, right? In that case, they shouldn’t be a part of the bankruptcy proceeding, as the Trustee would just assume not have this as part of the bankruptcy proceedings if the bank is willing to take the haircut. But the key is dealing with the bank.

Typically the bank will just shut down negotiations. In the case of bankruptcy, you still can make things happen for a short sale, but you have to 1) have a valid offer from someone willing to wait it out, and 2) you need to be in contact with the bankruptcy trustee and explain what’s going on. Often your client just wants to “move on with life,” but in this case it is important to tell them that most bankruptcy reorganizations fail, meaning that they’ll then have both a bankruptcy and foreclosure on their record. That’s not something they want, that’s for sure.

So make sure you can convince the Trustee that there legitimately is no equity. In 2008, that’s probably not hard to do given market conditions. But is bankruptcy a death knell for your deal? It will slow it for sure, but if you know how to maneuver the court system, talk with the trustee, and get a patient buyer, you’re off to make another sale.

Short Sales Riches Blog » bankruptcy

$8000 tax credit gets a last gasp

Smart Real Estate News & Commentary by Chris McLaughlin July 5, 2010

IT’s BACK: NO FLIP RICHES REOPENS TONIGHT!

It’s time to get excited…

********************************************************** $8000 tax credit gets a last gasp

Bankruptcy filings up

HAUP now active

Factory orders drop more than expected

DSNews.com – Delinquencies inch up in May

Now for our real estate education section…

Life, Liberty, the Pursuit of Happiness & Real Estate

Smart Real Estate News & Commentary by Chris McLaughlin June 21, 2010

Tax Lien Certificates: The Guaranteed Solution for Financial Freedom

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**************************************************** New Monthly National Housing Scorecard Announced

Is the recovery stalling out?

Diana Olick – New Hurdle to Housing: No Flood Insurance

Minorities hit hard by foreclosure crisis

DSNews.com – Lenders Reclaim $10 Billion of Commercial Property: Report

Now on to our real estate education section…

Mortgage Interest Tax Deduction On the Cutting Block…Again

Smart Real Estate News & Commentary by Chris McLaughlin, May 27, 2010

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Social Media Marketing Camp – TODAY!

FIX A FLIP WILL CLOSE THIS SATURDAY AT 3 PM ET!

Freddie Sees House Prices Down Slightly in Q110

Growth Slower Than Thought as Business Spending Slows

Diana Olick – Are Home Builders on a Cliff?

Money runs out for small business loan breaks

Commercial Real Estate Vacancies to Peak Early 2011

US Democrats Try Scaled Down Tax Bill

Industry Risk Management Practices That Contributed to Housing Crisis: MBA Survey

Lehman’s Bankruptcy Estate Sues J.P. Morgan

Now on to our real estate education section…

Commercial Close-Up…Do Mobile Home Parks Make Sense?

Real Estate News & Commentary by Chris McLaughlin, January 11, 2010

Apartment prices fall 3%, vacancies up 8%

Americans borrowing less

DSNews.com – Future of Mortgage Purchase Program?

Redefault Rates ‘Tragic’, Says Amherst

Price Impact on ROI

Real Estate News & Commentary by Chris McLaughlin, November 19, 2009

Land Flipping Finale … Tonight at 8:30 PM ET, 5:30 PM PST:

WSJ sees foreclosure tidal wave

Unemployment claims flat

Surprise! Administration’s job claims “flawed”

Housing slump or not next year?

More healthcare taxes on the way

HAMP not working

Now on to our real estate investing educational arena …

Finding Cash to Get Started in Foreclosure Investing

Foreclosures hit over 1.5 million homes in first half of 2009

Foreclosures hit over 1.5 million homes in first half of 2009

Mortgage securities boost bank profitability

7-Eleven’s growth strategy amid weakness in the real estate market

CIT Group on the verge of bankruptcy

Goldman’s average employee compensation set to double in 2009

Now on to our real estate investor education section…

Property tax appeals surge across the country

Property tax appeals surge across the country

California seeks to expand its tax-credit program for home buyers

Court approves GM asset sale

Is wage seizure leading to more bankruptcies?

The rising mountain of debt

Now on to our real estate investor education section…

Home Resales Up 2% in April

What the Smart Money is Doing

Handling Bankruptcy in a Short Sale Part 2

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$8000 tax credit gets a last gasp

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New Monthly National Housing Scorecard Announced