bankruptcy

wwwSmart Real Estate News & Commentary by Chris McLaughlin February 24, 2012

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WSJ – The case for rentals

Lewis Ranieri, the co-inventor of the mortgage-backed security, authored a research paper with University of California economist Kenneth Rosen that lays out the case for using federal entities to support private investors who are already converting foreclosed properties into rentals.  The foreclosure-to-rental model can be developed in “most every market in the United States,” write Messrs. Ranieri and Rosen. But they also highlight their “top 10” markets where such a program makes the most sense. Those markets generally have high levels of foreclosures and strong apartment fundamentals. They include Chicago, Denver, Detroit, Oakland, Seattle, Minneapolis, and Los Angeles.  Some markets, such as San Francisco, aren’t great candidates because while they have strong rental conditions, they don’t have high levels of bank-owned foreclosures. Others, such as Las Vegas, aren’t well suited yet because they have poor rental fundamentals despite a glut of bank-owned inventory.

The paper argues that existing industry and government effort to modify mortgages, while necessary, won’t alone be enough to deal with the problem of already vacant properties and those that may not qualify for modifications.  So why is the government needed? There’s two reasons: First, Fannie Mae, Freddie Mac, and the Federal Housing Administration sit on nearly half of all foreclosed properties, making them key sellers to investors that are converting properties into rentals.  Second, Mr. Ranieri says investors could soak up the overhang of distressed properties even faster if Fannie or Freddie expanded their investor financing programs.  The paper addresses many of the logistical challenges involved with building the infrastructure needed to acquire and manage scattered-site rental homes. “I’m always asked is this kind of a program scale-able? The answer is there are already people who are already doing a reasonable job with it,” Mr. Ranieri said in a speech last year.

The paper includes a series of other interesting ideas that build on the rental-conversion idea:

- Employ a “rent-to-own” option that would allow tenants to allow some tenants to ultimately purchase their rental homes. Mr. Ranieri has already employed that option through his company, Selene Finance, which invests in distressed loans and homes.

-  Raise the ceiling on the number of loans that Fannie and Freddie will guarantee to a single buyer. Currently, those limits are set at 10 and four, respectively, but Mr. Ranieri has argued that investors who make large down payments of 30% or 35% should be able to take out 25 mortgages. That would allow smaller investors to get more involved in repairing their local markets, even as federal officials consider structured sales of bulk properties to larger outfits.

-  Change appraisal rules for investor purchases to evaluate the value of properties based on the rental income, rather than the traditional metric of “comparable sales.”

Other influential housing analysts, including Laurie Goodman of Amherst Securities, have also strongly backed policies that would convert bank-owned foreclosures and other distressed properties into rentals.  But the idea remains unpopular with the National Association of Realtors and major real-estate brokerages, which say that foreclosed properties are selling briskly and don’t need to be taken off the market.

Jobs recovery, or not?

Based on weekly jobless claims, the February jobs market is bearing out to look very much like January, which saw 243,000 net new jobs and the unemployment rate at 8.3%, down from December’s 8.5%.  Thursday’s weekly jobless claims were unchanged at 351,000 for the week ending Feb. 18, the same week that the Bureau of Labor Statistics will use for the February monthly employment report survey week. Continuing claims fell by 52,000, to 3.4 million, with the four-week average falling to 359,000, its lowest level since March 2008.  “[The] bottom line is claims have been improving. The trend in layoffs is improving. That tells you firms are more optimistic about the outlook and they continue to lower the amount of cost cutting,” said Credit Suisse economist, Jonathan Basile.  While that’s a good sign, Basile said it may be some time before the trend can be trusted as signs of a sustainable jobs recovery.  “We do know this is a very warm winter, and in recent months, there’s been a lot more construction jobs showing up than usual,” said Basile. “These are the times of year when there are construction layoffs. I think we’re going to have to get through the March, April, May data to sort out whether this strength in jobless claims is a weather phenomena or a fundamental move.”  Economists at Barclays Capital said they are now looking for a total nonfarm payroll addition of 225,000 jobs in February and a decline in the unemployment rate to 8.1%. The February employment report will be released March 9.  The economists note that the ongoing improvement in the weekly claims data and other indicators indicates improvement in private employment across a variety of sectors.  But they also note: “Favorable weather conditions are also likely to support hiring in construction-related sectors.” They also see federal and state governments continuing to cut jobs.

BOA: no more mortgages for Fannie

Bank of America (BOA) is faced with numerous reps and warrants challenges on the mortgage front, and as a result of growing uncertainty, it will no longer sell certain mortgage refinances into Fannie Mae mortgage-backed securities.  “The issue is tied to ongoing disagreements between Bank of America and Fannie Mae in regards to repurchases,” said Dan Frahm, spokesman for BOA.  Specifically, Bank of America will no longer place non-Making Home Affordable Program (MHA) refinance first-lien residential mortgage products into Fannie mortgage-backed securities.  Making Home Affordable is the Obama administration’s initiative to help struggling homeowners get mortgage relief through a variety of programs.  “We continue to deliver MHA programs, including loan modifications and refinancing through HARP to our customers whose loans are owned by Fannie Mae,” Frahm said, adding mortgage origination levels will not drop at the bank. “We’re adequately prepared for this, there will be no impact to our customers.”

BOA will likely do more business with Freddie Mac and Ginnie Mae as a result of this decision.  The bank says the risk of repurchases on non-MHA mortgages is too great, and hedging repurchase risk is now too difficult.  “We are not able to predict changes in the behavior of the GSEs based on our past experiences,” BOA reports in a regulatory filing with the Securities and Exchange Commission. “Therefore, it is not possible to reasonably estimate a possible loss or range of possible loss with respect to any such potential impact in excess of current accrued liabilities,” the filing states.  “The ultimate resolution of these exposures could have a material adverse effect on our cash flows, financial condition and results of operations,” the filing said.  At the heart of the decision is recent changes in mortgage insurance policies. The filing notes Fannie Mae policy where MI rescission must be resolved in a timely fashion. As of Dec. 31, 2011, 74% of the MI rescission notices received had not been resolved, and Fannie began exercising repurchases with Bank of America.  “We have informed FNMA that we do not believe that the new policy is valid under our relevant contracts with FNMA and that we do not intend to repurchase loans under the terms set forth in the new policy,” BOA states. “If we are required to abide by the terms of the new FNMA policy, our representations and warranties liability will likely increase.”

Oil hits $108

Oil prices rose to a fresh nine-month high above $108 a barrel Friday in Asia amid signs the US economy is improving against a backdrop of elevated tensions in the Middle East over Iran’s nuclear program.  Benchmark crude for April delivery was up 59 cents to $108.42 per barrel late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.55 to settle at $107.83 in New York on Thursday.  Brent crude was up 55 cents at $124.17 per barrel in London.  The government said Thursday that the number of people seeking unemployment benefits last week was unchanged and that the four-week average was the lowest in four years.  Traders brushed off evidence that crude demand in the US remains weak. The Energy Department’s Energy Information Administration said Thursday crude inventories rose 1.6 million barrels last week and that oil demand has dropped 6.7% from a year ago.  “The ability of crude to post new highs in the face of what appeared to be a bearish EIA report attests to the underlying strength of this price advance,” energy trader and consultant Ritterbusch and Associates said in a report. “The oil market has evolved into somewhat of a self perpetuating cycle in which new highs beget new buying that forces new highs.”  Crude has jumped from $96 earlier this month amid growing tension over Iran’s nuclear program and fears global crude supplies could be disrupted. Some analysts expect economic sanctions by the US and Europe and countermeasures by Iran will help keep crude prices elevated this year.  “There is a relatively high and growing probability to a scenario in which there is no resolution in 2012, in which oil prices grind higher along with a gradual escalation of tension,” Barclays Capital said in a report.  In other energy trading, heating oil fell 0.5 cent to $3.29 per gallon and gasoline futures were steady at $3.29 per gallon. Natural gas fell 0.2 cent to $2.62 per 1,000 cubic feet.

Frustration with Florida’s foreclosures

Florida courts continue to struggle with a backlog of more than 368,000 pending cases, according to Jane Bond, a Florida foreclosure attorney at McCalla Raymer. It’s a nightmare, attorneys say — one with no end in sight.  “It’s not as bad as it seems. It’s much, much worse,” said David Rodstein, a foreclosure attorney with the Rodstein Law Group.  Bond and Rodstein chaired a panel at the Mortgage Bankers Association annual mortgage servicing conference in Orlando, Fla. The state is suffering from an ailing housing market. Home prices dropped 41% from 2006. Nearly half of all borrowers are underwater. Distressed properties abound. Unemployment is at 9.9%. And as it tries to clear the backlog of foreclosures, the state is going nowhere fast.  “The judges are frustrated. The attorneys are frustrated. The servicers are frustrated. Everyone is frustrated,” Bond said.  The average foreclosure in Florida takes nearly 800 days to complete, more than twice the national average, according to RealtyTrac.  Rodstein said 40% of foreclosures filed by servicers are contested by the borrower because of a very efficient bar system in the state. It’s helped create a cottage industry of delays, displacing an earlier system not any fairer.  “Borrowers can hire these attorneys for a small monthly payment — much less than the mortgage — and the attorney can come in and easily delay the case for year plus,” Rodstein said.

But the delay recently has much to do with some attorneys’ own mistakes.  Massive firm David J. Stern ceased foreclosure work in March after coming under investigation for robo-signing and other document problems. The entire firm crashed later in the year. Several other firms came under investigation as well.  The result was almost a complete freeze on the system. What had been a 60,000 foreclosure filings per month pace slowed to less than 19,000, according to Bond.  The Florida Bar News reported in November that the court system, which operates almost entirely on foreclosure fees since the crisis, had to take out a bridge loan to continue operating as the robo-signing correction paused the process.  An accelerated “rocket docket” that had made some progress through the backlog closed in the summer when funding ran out.  Servicers had to spread out the Stern cases among many more firms. Consent orders signed with regulators in April capped the amount of files a servicer could have with one law firm. One bank, Bond said, went from having six representatives in the state to more than 26 after Stern folded.  Defense attorneys aren’t letting up for what they claim to be a system still under abuse by the servicers. According to a survey released Wednesday by the National Consumer Law Center, 90% of defense attorneys claimed clients were foreclosed on while waiting for a modification, a practice banned by consent orders last year.  “Until rigorous national mortgage servicing standards that are enforceable by homeowners are put in place by the federal government, banks will continue to seize homes illegally and routinely,” said NCLC attorney Diane Thompson.

The problems aren’t over for Florida or the rest of the country either. According to Lender Processing Services, roughly 1.7 million mortgages are more than 90 days past due but not yet in the foreclosure process.  “Unless you’re a servicer with a very geo-centric model, you’re having to deal with different state policies that are changing month to month,” said Rick Sharga, executive vice president at Carrington Mortgage Services. “The tendency is to almost throw your hands up in the air.”  The state legislature is working on speeding up the process. The Florida Senate passed H.B. 213 last week to allow servicers to use an alternative court process that could potentially limit the amount of hearings per foreclosure and would loosen affidavit requirements.  After delaying the bill last week, a second committee in the Florida House of Representatives passed the bill Wednesday for the floor to vote.  If signed into law, the bill would take effect in July. Servicers and the courts will need more time to implement it as well. Until then, the backlog remains.  “We don’t have a paradise,” Bond said at the conference, which is being held next to the Walt Disney World. “We have the opposite.”

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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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 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

* 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

Smart Real Estate News & Commentary by Chris McLaughlin February 22, 2012

Forward this e-mail to your friends!
Then they can subscribe directly at the following link:

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Foreclosure abuse rampant

A report this week showing rampant foreclosure abuse in San Francisco reflects similar levels of lender fraud and faulty documentation across the United States, say experts and officials who have done studies in other parts of the country. The audit of almost 400 foreclosures in San Francisco found that 84% of them appeared to be illegal, according to the study released by the California city on Wednesday. “The audit in San Francisco is the most detailed and comprehensive that has been done – but it’s likely those numbers are comparable nationally,” Diane Thompson, an attorney at the National Consumer Law Center, told Reuters. Across the country from California, Jeff Thingpen, register of deeds in Guildford County, North Carolina, examined 6,100 mortgage documents last year, from loan notes to foreclosure paperwork. Of those documents, created between January 2008 and December 2010, 4,500 showed signature irregularities, a telltale sign of the illegal practice of “robosigning” documents.

One of the major problems that has emerged in the foreclosure crisis is that it is far from clear that many lenders foreclosing on properties actually own the loans and have the right to take action against them. In many cases during the housing bubble that burst in 2008, original mortgages were repackaged and sold to so many investors that it is now unclear who actually holds the loans. In the San Francisco study, which studied properties subject to foreclosure sales between January 2009 to November 2011, 45 per cent were sold to entities improperly claiming to be the owner of the loan. “It is not impossible that there are homeowners who are alleged to have defaulted on loans to which they never fully agreed to and, further, are being foreclosed upon by lenders that might not even own such loans,” the report stated.

One factor that probably caused the particularly high 84 per cent rate of illegal foreclosures in San Francisco is that California is a “non-judicial” foreclosure state. In other words, the foreclosure process does not need to be overseen by a judge. That left the conduct of lenders in California – one of the hardest-hit states in terms of foreclosures – largely unscrutinized until the robosigning scandal gained prominence in late 2010. In judicial foreclosure states such as New York, some judges have been taking banks to task for submitting faulty foreclosure paperwork. But Ray Brescia, a visiting professor at Yale Law School and an expert in housing law, said foreclosure fraud had been as rampant in judicial states as non-judicial ones. “This number around 80% is not a number we have not seen before,” Brescia said, referring to both the issuing of faulty loans during the housing bubble and the foreclosure crisis that followed. “There have been a very high level of irregularities across the country.”

Businesses brace for new “fair” tax plan

The Treasury Department will roll out a corporate tax reform plan today from President Barack Obama, administration officials said yesterday, with expectations low for any major tax code overhaul in an election year. The Obama plan will follow such principles as “fairness” that the president laid out in his State of the Union address to Congress last month, the officials said. A cut in the corporate tax rate, which presently tops out at 35%, may be included, as well as a proposal for a minimum tax on overseas profits, analysts said. After the presidential and congressional contests are decided in November, however, a number of major tax and budget issues will converge on Washington and new momentum for comprehensive tax reform may follow. Potomac Research analyst Greg Valliere said: “Even if Geithner floats something and members of both parties say they’re interested, I simply cannot see a reform bill passing before the election, close to a zero% chance.” He added: “I suppose anything would be possible in a lame-duck session in December, but something this huge and complex will require a thorough vetting, and that could take a year – or much longer.” The last major rewrite of the tax code came in 1986 under Republican President Ronald Reagan.

Republican Representative Dave Camp, chairman of the US House of Representatives tax-law writing Ways and Means Committee, wants to slash the top corporate rate to 25%. Obama last week unveiled a $3.8 billion budget-and-tax proposal that called for aggressive government spending to boost the economy and for higher taxes on the rich. On Friday, Congress approved extending a payroll tax cut through the end of 2012. Its expiration will coincide with several other fiscal earthquakes: the expirations of individual tax cuts enacted under President George W. Bush, and $1.2 trillion in automatic budget cuts across all government programs imposed as part of last year’s deal to raise the debt ceiling. After these events and others, analysts said, thorough tax reform may be a realistic prospect. For now, they said, tax proposals will largely amount to political messaging. Republican presidential candidate Mitt Romney on Tuesday called for a flatter, fairer and simpler tax code. He is scheduled to make a major economic speech on Friday in Detroit. Details of his tax plan may emerge before then.

Mortgage applications down

The Mortgage Bankers Association (MBA) said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.5% in the week ended Feb 17. The MBA’s seasonally adjusted index of refinancing applications gave up 4.8%, while the gauge of loan requests for home purchases slipped 2.9%. The refinance share of total mortgage activity dipped to 80.1% of applications from 81.1%. Fixed 30-year mortgage rates averaged 4.09%, up 1 basis point from 4.08% the week before. The survey covers over 75% of US retail residential mortgage applications, according to MBA.

Eurozone at the brink of recession

The euro zone economy is in danger of tipping into recession, with the services sector shrinking this month along with manufacturing, tempering a wave of optimism after a new bailout deal for Greece struck this week. Surveys of purchasing managers published on Wednesday showed unexpectedly weak activity in the region’s most powerful economy, Germany, and in France. This is as well as in the bloc’s floundering debtor states, such as Spain, where unemployment is running at 23%, and Greece where the euro debt crisis began more than two years ago and continuous cuts have provoked riots. The Markit Eurozone Composite Flash PMI, a good leading indicator of overall economic growth, fell to 49.7 in February from 50.4 last month, below expectations for a rise to 50.6 and under the 50 line that divides growth from contraction. That weakness was echoed in China, whose PMI showed export orders falling in their worst performance in eight months. Europe is China’s biggest export market. Older data published on Wednesday, official figures on euro zone industrial orders for December, showed there had been some stabilization at low levels. Manufacturing orders in the 17 countries that share the euro rose 1.9% on the month, beating the 0.7% predicted in a Reuters poll and reversing a 1.1% fall in November. But with euro crisis curtailing on British business with the bloc, two Bank of England policymakers voted earlier this month for an even bigger stimulus to the economy in February than the extra 50 billion pounds ($79 billion)that their colleagues agreed to pump into the economy, minutes to the BoE’s February 8-9 meeting showed.

Olick – will gas prices be the spoiler?

“I spent Sunday afternoon at a Toll Brothers neighborhood in Northern Virginia called ‘Dominion Valley.’ It’s a planned community about 45 miles from the heart of DC that sprung up in 2000 and has sold 2500 homes, with another 1,000 still planned. My mission was to get a sense of buyer traffic as the President’s Day weekend unofficially kicks off the spring home selling season. As I was driving back toward DC, I noticed the price of gas (for the cheap stuff) was $3.75 a gallon. Ouch. (They’re higher in other parts of the country). That can’t be good for sales. Some of the potential buyers I spoke with worried about the drive time, but hadn’t seemed to give gas prices as much thought. Many people who live in Dominion Valley commute into the city, or just outside to the Pentagon and surrounding contractor base in Crystal City. Commutes in this area are often long, but when gas prices spike they become more costly, too.

The sales center and model homes bustling with potential buyers. With a weather forecast for snow and the ‘National Sales Event’ advertised by Toll Brothers was mostly discounts on upgrades, I was surprised to see a steady crowd. John Elcano, Toll’s VP for Virginia Sales, told me they’ve raised prices four times since October. Several of the potential and actual buyers I spoke with were eager to move, one from a condo in the same community, another a first time home buyer, and another who was downsizing from a bigger house with a bigger yard. Scott Genburg and his wife, who live near Dominion Valley, already sold their existing house, without even putting it on the market. A realtor canvassed their neighborhood and they accepted the offer. So they ended up needing to buy something fast and bought a new home. But none of the folks I spoke with were looking for a bigger house with a longer commute, a stable of the boom times. With the federal government a steady source of jobs, the Washington, DC, and Northern Virginia markets have shown resilience in the face of the great recession. Builders seem to be responding. Metrostudy reports that finished, vacant housing inventory rose more sharply than any other market it studies in the last quarter, up 17.7%. At the same time, the inventory of existing homes for sale is low. Ken Croisetiere, who just got married, expressed frustration with the house hunting process ‘it feels like a great time to buy, but what we’re finding out is that the houses that appeal to us are not as abundant as we would like to find. Toll’s Elcano says, ‘people are relocating to the area, they can’t find a resale to move into so they‘re moving more toward the new construction.’ But will people still move to new construction in the suburbs if it cost $100 to keep the tank full on a weekly basis? ISI home building analyst Steve East says higher gas prices will impact builders, with a ‘modest effect’ on the entry level market.”

Oil hits $106

Oil prices hovered above $106 a barrel Wednesday in Asia amid concern that conflict over Iran’s nuclear program could lead to global crude supply disruptions. Benchmark crude for April delivery was up 11 cents to $106.36 per barrel late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $2.65 to settle at $106.25, the highest since May, in New York on Tuesday. Brent crude was down 16 cents at $121.50 per barrel in London. Oil has jumped from $96 earlier this month amid escalating tension between Western powers and Iran. On Tuesday, Iran Gen. Mohammed Hejazi warned his country is prepared to carry out a pre-emptive strike against any nation that threatens Iran. His comments followed Iran’s announcement of war games to practice protecting nuclear and other sensitive sites — viewed as a message to the US and Israel that the Islamic Republic is ready both to defend itself and to retaliate against an armed strike. Iran said over the weekend that it will stop selling oil to Britain and France in retaliation for a planned European oil embargo this summer. The move was mainly symbolic — Britain and France import almost no oil from Iran — but it raised concerns that Iran, which produces almost 4 million barrel a day of crude, could take the same hard line with other European nations that use more Iranian crude. “A real stoppage of 4 million barrels a day will send crude markets to at least $130,” Carl Larry of Oil Outlooks and Opinions said in a report. “A stoppage longer than a month will push that number to $150. Damage to oil fields or transport areas will add even more premium that will not go away for years.”

WSJ- should mortgage rates be even lower?

Mortgage rates are the lowest on record. But by a key historical measure, they should be even lower. Over the past year, a wide gap ripped open between the mortgage rates house hunters see and a benchmark interest rate investors demand to buy bonds backed by home loans. In normal times, this obscure metric would only be of interest to bankers, brokers and traders of mortgage-backed securities. But with housing still dragging on the economy, the spread is potentially slowing the recovery—and important to everyone from top Washington policy makers to strapped homeowners who could use a few extra dollars each month.

For months, a key interest rate on mortgage-backed securities—known as the current coupon yield—has tumbled faster than average US 30-year mortgage rates. In recent weeks, the difference between the two has flirted with levels seen in the aftermath of the financial crisis. Some say the wide spread shows the large banks that dominate the mortgage market are flexing their muscle by keeping prices relatively high. Others argue the gap reflects increased regulatory costs, risks and new realities of mortgage making. Either way, the spread is wide. Tuesday afternoon, it was 0.96 percentage points—almost double its average over almost 30 years. It has been as high as 1.20 percentage points this year.

If history is any guide, it should be a lot lower. With yields on mortgage-backed securities at these levels, the 30-year fixed rate mortgages would be roughly 3.40% if the spread was around its historical average of 0.50 percentage points. That rate would save a US homeowner with the average outstanding loan balance of $155,000 about $41 in mortgage payments each month, versus the current rate. Over the seven-year period someone usually holds a 30-year mortgage, that translates into a roughly $3,446 difference, according to numbers provided by trade publication Inside Mortgage Finance. Wider spreads generally translate into better margins for banks and brokers. And some lenders have seen profitability on mortgage origination improve as the spread has widened. Some mortgage-finance observers suggest that increased concentration among the large banks that dominate the mortgage market better helps explain the wide spreads. They argue that because there are fewer banks doing the bulk of the mortgage lending than in years past, it is easier for them to capture market share without offering rock-bottom prices. “It’s a lack of competition. We really haven’t seen a competitive marketplace since 2008,” said Guy Cecala, publisher of Inside Mortgage Finance.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin February 21, 2012

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

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

Florida foreclosure bill moving along

The state Senate version of the controversial Florida Fair Foreclosure Act, which proponents say protects homeowners and opponents claim is far from fair, passed the Senate Judiciary Committee on Monday and appears to be on a fast track to the Legislature floor.  The bill to streamline foreclosures, introduced to the Legislature by Rep. Kathleen Passidomo, R-Naples, has roused the passions of those who say it’s needed to revive the foundering real estate industry and those who say it’s just plain unconstitutional.  “I think it’s one of the most important pieces of legislation we have the potential to pass this year,” said Sen. Jack Latvala, R-St. Petersburg, who sponsored Senate Bill 1890. The Senate measure is a combination of two House bills, the first sponsored by Passidomo and a second, companion bill sponsored by Rep. Greg Steube, R-Parrish.

The bill contains a provision of finality of judgment, which means that once a home is foreclosed upon and sold in a short sale to a new owner, that new owner holds clear title to the property even if it turns out that the home was foreclosed upon fraudulently by the lender. The original homeowner can’t get his home back, but he can sue the lender for damages.  Passidomo, who is a real estate attorney, said that some people are misunderstanding the finality of judgment provision. It is meant to protect an innocent third party who buys the foreclosed home, she said. If it turns out that a lender didn’t really hold the note, and a different lender comes forward with the real note and tries to foreclose, the third party is protected, she said.  “The bankers don’t like this bill because it makes them produce all kinds of stuff,” Passidomo said. The point is to hold lenders’ feet to the fire and make sure they have the proper paperwork, she said. “Don’t file your complaint until you have your ducks in a row.”

Under current uniform commercial code, the lender isn’t barred from foreclosing if it can’t produce the note, Passidomo said. “If you have a car title and by mistake, the dog eats it, you can go up and get a new title,” she said. “The fact that you’ve lost it doesn’t mean it’s gone.”  Rather, the lender must provide an affidavit that says they do have the right to foreclose. A judge may require the lender to put up a bond, possibly for the amount owed on the mortgage, so that if another lender shows up with the real note, the borrower won’t be foreclosed upon twice. Instead, the second lender that holds the note can go after the first lender for the mortgage.  The bill advanced 5-2, along party lines. The measure goes next to the Senate Banking and Insurance Committee, chaired by Sen. Garrett Richter, R-Naples. The House bill goes to the Judiciary Committee.

Greek’s new deal

Euro zone finance ministers sealed a 130-billion-euro ($172 billion) bailout for Greece on Tuesday to avert a chaotic default in March after persuading private bondholders to take greater losses and Athens to commit to deep cuts.  By agreeing that the European Central Bank would distribute its profits from bond buying and private bondholders would take more losses, the ministers reduced the debt to a point that should secure funding from the International Monetary Fund and help shore up the 17-country currency bloc.  But the austerity measures wrought from Greece are widely unpopular among the population and may hold difficulties for a country which is due to hold an election in April.  Further protests could test politicians’ commitment to cuts in wages, pensions and jobs.  Every government in the currency union will also have to approve the package.  Northern creditors, such as Germany, had pressed for even tougher measures to be placed on Greece, but Finance Minister Wolfgang Schaeuble said he was very confident a majority in parliament would approve the package.

Some economists say there are still questions over whether Greece can pay off even a reduced debt burden.  A return to economic growth could take as much as a decade, a prospect that brought thousands of Greeks onto the streets to protest on Sunday.  The cuts will deepen a recession already in its fifth year, hurting government revenues.  A report prepared by experts from the European Union, European Central Bank and International Monetary Fund said Greece would need extra relief to cut its debts near to the official debt target given the worsening state of its economy.  If Athens did not follow through on economic reforms and savings to make its economy more competitive, its debt could hit 160% by 2020, said the report, obtained by Reuters.  “Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it,” the nine-page confidential report said.

LPS “first look” report

Lender Processing Services, Inc. (NYSE: LPS), a leading provider of integrated technology, data and analytics to the mortgage and real estate industries, reports the following “first look” at January 2012 month-end mortgage performance statistics derived from its loan-level database of nearly 40 million mortgage loans.

Total US loan delinquency rate (loans 30 or more days past due, but not in foreclosure):​  7.97%​

Month-over-month change in delinquency rate:​  -2.2%​

Year-over-year change in delinquency rate:​  -10.5%​

Total U.S foreclosure pre-sale inventory rate:​  4.15%​

Month-over-month change in foreclosure presale inventory rate:​  1.1%​

Year-over-year change in foreclosure presale inventory rate:​                 -0.1%​

Number of properties that are 30 or more days past due, but not in foreclosure: (A)​  3,998,000​

Number of properties that are 90 or more days delinquent, but not in foreclosure:​                1,772,000 ​

Number of properties in foreclosure pre-sale inventory: (B)​  2,084,000​

Number of properties that are 30 or more days delinquent or in foreclosure:  (A+B)​  6,082,000 ​

States with highest percentage of non-current* loans:​  FL, MS, NV, NJ, IL​

States with the lowest percentage of non-current* loans:​  MT, AK, WY, SD, ND​

*Non-current totals combine foreclosures and delinquencies as a% of active loans in that state.
Notes:
(1) Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets
(2) All whole numbers are rounded to the nearest thousand.

Home depot increases income

Home Depot Inc.’s fiscal fourth-quarter net income rose 32% as homeowners spent more on renovation projects and mild weather in the US helped results surpass expectations.  Shares rose 3% in premarket trading.  Home-goods sellers like Home Depot and others are facing cautious consumer spending and prolonged weakness in the housing market. They’ve had to adjust to fewer consumers making large-scale home renovations by cutting costs and improving services such as online shopping and customer service.  But Home Depot’s sales increase shows there may be some pent-up demand for home improvement, even during the winter.  “We had a strong finish to 2011, and with favorable weather, our business delivered results that exceeded our expectations,” Chairman and CEO Frank Blake said in a statement.  The largest US home-improvement company reported Tuesday that it earned $774 million, or 50 cents per share, for the period ended Jan. 29. That’s up from $587 million, or 36 cents per share, a year earlier.  The earnings topped the 42 cents per share that analysts surveyed by FactSet expected.

Doubt that the settlement will end foreclosure woes

Even as government officials prepare to unveil new standards this week for how banks treat millions of Americans facing foreclosure, housing advocates and homeowners are skeptical the rules will be able to do something past efforts have not: provide a beleaguered borrower with one individual to help them navigate the mortgage maze.  So the promise of a single point of contact has emerged as a crucial element in the much-ballyhooed $26 billion settlement reached earlier this month involving state attorneys general, the federal government and the five biggest mortgage servicers. These rules will apply nationwide and come with commitments of strong enforcement by federal and state authorities, but they carry a familiar ring for those experienced in the foreclosure process.

Last April, the industry made many of the same pledges under a consent order with the Office of the Comptroller of the Currency and since then, consumer representatives say, there has been barely any improvement, adding that loan files continue to be handed off from one agent to another, sometimes weekly, and that even when a single person is assigned to their cases, one phone call after another goes unreturned.  “It doesn’t seem like much has changed,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, or Nedap, a resource and advocacy center that works with community groups in New York. “We’re still seeing the same systematic problems.”

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes.  Owns
portfolio of nearly 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin February 20, 2012

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New bill to speed up short sales

Senators Lisa Murkowski, Scott Brown, and Sherrod Brown are proposing a bill requiring mortgage lenders to make a prompt decision on whether to allow a short sale at the request of a home buyer. The bill, “Prompt Notification of Short Sales Act,” will require a written response from the lender no later than 75 days after the receipt of the written request from the buyer. This bill will require that the lender’s written response to the buyer must specify whether the request was approved, if more time is required, and, if they do need more time, the servicer must estimate a date a decision will be reached. The loan servicer is limited to one extension no longer than 21 days. This will give the distressed homeowner a more definite timeline for when the short sale will be completed so they can plan their move better.

Back in April 2011, Representatives Thomas Rooney of Florida and Robert Andrews of New Jersey introduced a similar version of the bill but it never came up for debate before a House committee before the legislative session ended. The previous version said that that if a borrower submitted a written request for a short sale of a home and if they didn’t receive a written response within 45 days, the request would be considered approved. This new version extends the response time for lenders but includes a penalty if they fail to comply. If the loan servicer doesn’t respond to a buyer’s request within the 75 day period, the buyer may be awarded $1000, plus reasonable attorney fees, per violation of the Act (this Act does not apply to mortgages where the borrower and the servicer have entered into a written agreement before the date of the enactment of this Act). The new bill would hold banks accountable to specific standards that they must follow, streamlining the process for everyone involved in the short sale transaction. It would make short sales more attractive to buyers and eliminate the uncertainty related to buying a short sale, resulting in more sales of distressed properties. This reduction of housing inventory will assist the stabilization of home prices and the real estate market.

Greece – again

Euro zone finance ministers are expected to approve a second bailout for Greece today to try to draw a line under months of uncertainty that has shaken the currency bloc, although work remains to be done to make the numbers add up. Diplomats and economists say they do not expect the package to resolve Greece’s economic problems. That could take a decade or more, a bleak prospect that brought thousands of Greeks onto the streets to protest against austerity measures on Sunday. French Finance Minister Francois Baroin said all the elements were in place to reach an agreement and Greek Finance Minister Evangelos Venizelos said he expected a deal. The finance ministers are scheduled to meet at around 1500 GMT. Euro zone ministers need to agree new measures to make the financing work, given the ever-worsening state of the Greek economy. But they say an agreement on Monday will help restructure Athens’ vast debts, put it on a more stable financial footing and keep it inside the 17-country euro zone. Senior Greek finance ministry and European Central Bank officials held a conference call on Sunday to go over the final details of the 130-billion-euro ($171-billion) program, including a report assessing the likelihood of Greece lowering its debt which is critical to the International Monetary Fund. While there is skepticism in Germany and other countries that Greece will be able to meet its commitments, including implementing 3.3 billion euros of spending cuts and tax increases, officials said momentum was building for a deal.

Olick – fewer foreclosures mean lower prices?

“For years now we have been harping on how distressed home sales put downward pressure on home prices all around them. Close to twelve million borrowers are now in a negative equity position on their homes because so many other borrowers were unable to afford their mortgages. The logical assumption would then be that as foreclosures ease, organic home prices will rebound. But what if the current, unique state of the housing market turns that assumption on its head? Foreclosure sales now make up a full one third of the market nationally and far higher percentages in states like California, Florida, Nevada, and Georgia. The supply of these properties has actually been dropping, pushing prices higher, even in the distressed category. There is huge investor and first-time home buyer demand for distressed properties at the low end of the market, and that has helped stabilize prices. ‘We believe the distressed part of the housing market has already bottomed,’ said Morgan Stanley analyst Oliver Chang on CNBC’s Squawkbox. ‘The bid that we see from the investor is the reason for this bottom.’ He sees further declines in organic home prices. Why?

Banks have been very slow to release their repossessed (REO) inventory onto the market, not to mention that foreclosure processing delays have literally millions of properties still sitting in foreclosure limbo. There is a dwindling supply of foreclosures and rising investor demand. Analysts keep pointing to overall falling inventories, but the current existing home sales pace doesn’t account for that drop. The fact is that with so much of the supply distressed, and so few organic sellers putting their homes up for sale, the inventory drop is artificially skewed to the recent lack of movement in foreclosures and a crisis of confidence among potential organic home sellers. Okay, so what about the fact that banks are ramping up the process now, which could put more properties on the market? That could boost supply, were it not for a new government program to sell foreclosures in bulk to large investors. Chang says over $1 billion in investor capital has been raised over just the past six weeks to take advantage of this new program, and he claims this could add up to 1.8 million jobs. Property managers, renovators, rental agents, he says would benefit from these bulk rental investments.

Mortgage analyst Mark Hanson, however, disagrees. He claims that individual investors will likely spend more on upgrades/renovations than bulk investors and will then sell to owner-occupants at a higher price, thereby not only stabilizing but increasing overall home values, while also juicing jobs. ‘Due to epidemic effective negative equity (not having enough equity to pay a Realtor and put a down payment on a new house) the repeat buyer cohort has been cut in half since 2007. They now make up the minority of national resales,’ says Hanson. ‘Investors and first-time buyers ARE the real estate market,’ he adds. ‘Investors and first timers want REO and short sales. Anything done to prevent the flow of distressed property will hurt the volume of existing home sales and all of the economic benefit that comes along with them. An REO-to-rent program will bring about record lows in monthly existing home sales volume. And volume precedes price.’ Hanson believes that when the distressed supply is choked off, by selling REO in bulk to rent, not re-sell, then the only thing you have left is meager organic sales. ‘The housing market will implode,’ he adds.

Yes, lower supply, in a normal market, would generally mean a return to home price appreciation, but that’s not the way today’s market is working because organic demand is still so weak and is hampered by tight credit. There is even less demand for mid- to higher-priced homes. ‘$200K to $300K is the new normal for home builders,’ says Rick Palacios of John Burns Real Estate Consulting. ‘Since new home prices peaked in 2007, new single-family sales of over $500K have been more than cut in half, dropping from 13% to just 6% of all new home transactions. The existing home market is much the same, with the bulk of sales and demand in the very low price tiers. It just goes to show that in the historic recovery from an historic housing crash, the usual rules just don’t apply.”

Iran drives oil higher

Oil prices jumped to a nine-month high above $105 a barrel on Monday after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country’s nuclear program. By early afternoon in Europe, benchmark March crude was up $1.91 to $105.15 per barrel in electronic trading on the New York Mercantile Exchange. Earlier in the day, it rose to $105.21, the highest since May. The contract rose 93 cents to settle at $103.24 per barrel in New York on Friday. Markets in the United States are closed Monday for the Presidents Day holiday. Iran’s oil ministry said Sunday it stopped crude shipments to British and French companies in an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran’s crucial fuel exports. They include a freeze of the country’s central bank assets and an oil embargo set to begin in July. Iran’s Oil Minister Rostam Qassemi had warned earlier this month that Tehran could cut off oil exports to “hostile” European nations. The 27-nation EU accounts for about 18 percent of Iran’s oil exports.

The EU sanctions, along with other punitive measures imposed by the U.S., are part of Western efforts to derail Iran’s disputed nuclear program, which the West fears is aimed at developing atomic weapons. Iran denies the charges, and says its program is for peaceful purposes. Analysts said Iran’s announcement would likely have minimal impact on supplies, because only about 3 percent of France’s oil consumption is from Iranian sources, while Britain had not imported oil from the Islamic republic in six months. “The price rise is more a reflection of concerns about the further escalation in tensions between Iran and the West,” said commodity analyst Caroline Bain of the Economist Intelligence Unit. “Banning the tiny quantities of exports to the U.K. and France involves very little risk for Iran — indeed quite the opposite, it catches the headlines and leads to a higher global oil price, which is something Iran is very keen to encourage.”

Mortgage-backed bonds making a comeback

Some Wall Street investors made money as the mortgage market boomed; others profited when it fell apart. Having reaped big gains during both of those turns, Greg Lippmann, a former star trader at Deutsche Bank, is now catching the next upswing: buying the same securities built from mortgages that he bet against before the financial crisis erupted. Mr. Lippmann is joined by other big-money investors — mutual funds like Fidelity as well as hedge funds — in riding a wave of interest in the same complex loan pools that nearly washed away the financial system. The attraction is the price. Some mortgage bonds are so cheap that even in the worst forecasts, with home prices falling as much as 10 percent and foreclosures rising, investors say they can still make money. “Given its significant underperformance in 2011, we believe the product is as cheap to broader markets as it has been in a long time,” Mr. Lippmann, whose portfolio is heavy with subprime mortgage securities, wrote in a recent letter to investors.

Yet the tide could turn again and wipe out investors. Chief among the risks is Europe: the Continent’s banks still hold a significant amount of United States mortgage securities, and if they are forced to sell assets, it could wreak havoc on the market. Washington is a question mark, too. If banks have to pay for loans they issued under dubious circumstances, it would be a home run for investors, who could receive full payment for a mortgage in a security they bought at a discount. But if borrowers whose houses are worth less than their mortgages are able to reduce their principals on a large scale, bond investors could suffer because the securities would be worth even less than they paid. “As a money manager, you can’t close your eyes to that potential outcome,” said Jeffrey Gundlach, a founder of DoubleLine Capital, who has been buying mortgage securities since 2008. “To believe that this time we are really out of the woods and the prices will not drop again is dangerous. People made that argument a year ago.”

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month

* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 150 high-value, high-profit
properties

* Owner of one of Florida’s largest Real Estate firms,
running 4 different offices, supporting over
420 agents, uniquely positioning him to help
thousands of investors make money in the
biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

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

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