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Smart Real Estate News & Commentary by Chris McLaughlin November 10, 2010

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Lawsuits against banks increase

JPMorgan Chase, PNC Financial, and Ally Financial disclosing suits yesterday in a growing number of banks under investigation by state and federal officials for sloppy or even fraudulent foreclosure paperwork.  They face suits from both borrowers and investors in mortgage-backed securities.   JPMorgan faces two possible class action lawsuits related to foreclosures, the No. 2 U.S. bank said in a regulatory filing.  The suits allege “common law fraud and misrepresentation, as well as violations of state consumer fraud statutes,” JPMorgan said in the Securities and Exchange Commission filing, without disclosing who filed them.  Ally Financial said it has been sued by hedge fund Cambridge Place Investment Management, which has ramped up a legal scrap with Wall Street to recoup money lost on subprime mortgages.

PNC Financial has been sued by the Federal Home Loan Bank of Chicago, alleging misrepresentations and omissions in connection with the sale of mortgage-backed securities.  Goldman Sachs is reviewing the practices of its Litton Loan Servicing unit and has temporarily suspended evictions and foreclosures in several states, and Bank of America, JPMorgan, and Ally’s GMAC Mortgage voluntarily imposed brief moratoriums on foreclosures to review their practices but have begun to resume evictions of delinquent borrowers.  U.S. attorneys general for all 50 states are jointly investigating whether banks failed to review documents properly or submitted false information to evict delinquent borrowers.

MBA – mortgage applications up

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 5, 2010 increased 5.8% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 5.4% compared with the previous week.  The Refinance Index increased 6.0% from the previous week.  The seasonally adjusted Purchase Index increased 5.5% from one week earlier. This is the third consecutive weekly increase in purchase applications. The unadjusted Purchase Index increased 3.1% compared with the previous week and was 33.9% higher than the same week one year ago. The conventional purchase index increased 5.4% to its highest level since May of this year, on a seasonally adjusted basis. On a non-seasonally adjusted basis, the conventional purchase index was at the highest level observed since early October.  “Although mortgage rates were little changed following the Federal Reserve’s decision to purchase $600 billion of Treasury bonds over the next eight months, mortgage applications increased last week,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “The increases in purchase applications we have seen over the past couple of weeks align with the better than expected news from October’s employment report and other data indicating some improvement in the economy’s growth prospects.  Refinance applications increased as rates continued to hover near record lows.”  The four week moving average for the seasonally adjusted Market Index is down 1.9%.  The four week moving average is up 1.0% for the seasonally adjusted Purchase Index, while this average is down 2.6% for the Refinance Index.  The refinance share of mortgage activity increased to 81.7% of total applications from 81.3% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3% from 5.4% of total applications from the previous week.

Jobless claims up

According to the Labor Department, the number of initial filings fell to 435,000 in the week ended Nov. 6 from 459,000 the week before. The number was better than Briefing.com expected.  It was also the lowest since the 427,000 claims reported for the week ended July 10.  Overall, though, the weekly number has been stuck in a tight range since last November, hovering in the mid to upper 400,000s and even ticking slightly above 500,000 in mid-August.  The four-week moving average, calculated to smooth out volatility, totaled 446,500, down 10,000 from the previous week’s revised average of 456,500.  The number of people filing unemployment claims for a second week or more fell to 4,301,000 for the week ended Oct. 30, the most recent data available. That’s down 86,000 from last week’s revised average of 4,387,000.  Some states fared better than others. Two states — Florida and South Carolina — reported initial claims numbers that improved by more than 1,000 in the week ended Oct. 30.  Florida’s claims decreased by 3,450 due to fewer layoffs in the construction, trade, and service industries.  But jobless claims in ten states rose by more than 1,000 over the same time period. Claims in California rose the most — by 6,387 — which the state attributed to an increase in service industry layoffs.

Olick – jumbo loans and banks

“An interesting article in the Wall Street Journal today looks at the new trend of banks, and most notably smaller, regional banks, getting back into the business of jumbo mortgages (that’s anything $417,000 or over in most markets, up to $729,000 and over in higher-priced markets).  The chatter over the jumbo market, though, makes me wonder what kind of buyer exists today for available jumbo loans. During the first six months of the year, home prices were artificially inflated by the sales boost from the home buyer tax credits. Now that prices are correcting again, we are losing the move-up market in droves. Think about it: The number of borrowers with negative equity (owe more on the mortgage than their home is worth) is rising. That immediately prices a vast number of potential move-up buyers out of the market, because they can’t sell their homes for enough to pay off the mortgage. Even if the sellers aren’t underwater, they likely can’t make enough profit on their current home to have the 20-30% down payment for the move-up home.  Sales data from the National Association of Realtors show the $500,000+ market was improving steadily over the summer, which obviously had nothing to do with the home buyer tax credit, due to income caps and the fact that an $8000 or $6500 credit isn’t going to mean much to a buyer considering a $500,000 home.  In August, the $500,000-750,000 buyer made up 7% of all home purchases.  $750-$1million made up 2% and $1m+ made up 1.9%.” 

“Now the share was affected by the decreased volume of tax credit-induced lower-priced buyers who fell out of the market in July, but sales still rose on their own in the higher brackets. In fact, in August, it was the higher priced homes that pushed the overall sales numbers up, because sales actually fell in all price ranges, year over year, except the $750,000+, which rose 4.6% and the $1m+ which rose 11.5%.  Then came September, and the higher-priced share suddenly drops off, as regular buyers come back.  But not only does the share of total sales drop off, total sales of the $500-$750,000 range fall nearly 16%, $750-1m drops 2% and the $1m+ barely holds on at a 0.4% gain.  Granted, you can’t make a truly valid case for something with just two months of data, but I believe that as home prices firmly fall into a double-dip, as the latest data confirms for the past three months (Clear Capital today reports prices down 5% y/y for the three months ending Oct. 31) the rising number of homeowners with negative equity will stall the move-up market, making the already-lean jumbo loan market increasingly leaner.”

GM reports excellent quarter

GM reported it earned $1.96 billion in the third quarter, compared to a loss a year earlier when it was still in the process of emerging from bankruptcy. It’s the third straight quarter that the automaker has reported a profit.  The last time GM reported a profit this large was the first quarter of 1999, when it earned $2.05 billion. But by 2005 the company’s declining market share and uncompetitive cost structure had plunged it into a series of annual losses that culminated in its 2009 federal bailout and bankruptcy filing.  What emerged from that was a new company without much of the debt, labor obligations and excess capacity of the old GM. Wednesday’s earnings report put the company in position to post its first annual profit since 2004.  The results were in the middle of the earnings range the company signaled last week, when it said it would earn between $1.9 billion and $2.1 billion. The details released Wednesday showed most of the profit coming from its North American operations, where it made an operating profit of $2.1 billion. 

The company said it expects to be profitable again in the fourth quarter, although it cautioned income would be a “significantly lower run rate” than it earned in the first three quarters of the year. It cited a different production mix in the fourth quarter.  Also cited as reasons the fourth quarter will be weaker were new vehicle launch costs, particularly for the Chevrolet Cruze and Volt, and higher engineering expenses for future products.  The earnings report came about a week before GM will start selling shares to the public for the first time since it emerged from bankruptcy in July 2009.  The company expects to raise about $13 billion selling shares, putting it on course to be the third-largest initial public offering in U.S. history. That stock price target would value the company at about $52 billion, comparable to rival Ford Motor Company.

Now for our real estate education section…

Biggest Real Estate Investing Blunders

Novice real estate investors are prone to making a lot of different mistakes; some are more forgiving than others so it can be helpful to do some homework and remain alert to the biggest real estate investing blunders. Learn how to recognize a good deal from a mistake in the making with a bit of insight into investment traps and tragedies like those below:

1. New Construction Confidence – Investing in new construction real estate can be quite lucrative if you understand all the in’s and out’s. Fewer repairs, high desirability of great locations and no headaches or hassles associated with lead laws and other outdated materials are just a few of the reasons new construction makes sense. However, that doesn’t mean there aren’t potential problems. One major drawback is the inability to  obtain permanent financing (aka, a mortgage) once the work is completed. During periods of rapid price appreciation this may not be a problem but it can become a major ordeal during periods of price depreciation or falling home prices. Not only is it possible to lose your deposit but you may actually be sued by the builder for additional loan amounts and obligations. Make sure you have the financial reserves and wherewithal to close the deal when investing in new construction.

2. Failure to Figure the True Cost – Real estate investors are a lot like fishermen…the story tends to grow over time. It’s not uncommon to ask an investor “how much did you make?” only to receive a positive but generic sounding response in return. The problem is complicated; taxes, insurance, repairs, advertising costs, agency fees and other expenses add up fast…and are not always immediately apparent until the final transactions and taxes are completely calculated. Likewise, what may initially seem like a profitable property can become a money-pit if not managed well in terms of both time and money. It’s often difficult to determine the true cost and profit of a particular property (ie, the net versus the gross) until after tax time has rolled around. Learn how to budget for all contingencies including tax advantages and payments in order to maximize profits and minimize losses.

3. Due Diligence – Anyone familiar with real estate knows there are a lot of legal loopholes to jump through especially when investing in short sales. It can seem so time consuming that it’s only natural to try to take a few short-cuts in order to expedite the process. Besides, just a precursory glance at the odds indicate many so-called risks are highly unlikely to happen…then again, should just one of these “unlikely events” take place it could wipe-out all your profit. Don’t gamble on luck when it comes to zoning, EPA, material risk and other isolated but important concerns. Perform due diligence on each and every property especially when first starting out. New real estate investors are often not able to rebound from a problem nearly as easily as an established professional investor. Unsure where to begin? Take time to join a free webinar for weekly insights and important information on real estate investing made easy.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

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

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

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

http://www.shortsalesriches.com

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live Sunday at
8:30 PM ET, 5:30 PM PST:

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Why would I do that for no charge?  Because
I want a chance to tell you about the other
high-income opportunity, too.

And I can’t do it in an email.

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early.  See if there’re any spots left:

https://www2.gotomeeting.com/register/920491379

Mortgage rate drops; will it stay low?

Freddie Mac said the rate for 30-year fixed mortgage dropped 0.21% to an average 5.38% for the week ending June 18. Mortgage rates have been on the rise in the last few weeks, and had reached their highest since last November in the previous week. Mortgage applications dropped as the rates increased, and analysts were concerned if the rise in rates will kill housing recovery. “Concerns about eventual inflation drove bond yields and mortgage rates higher in recent weeks,” said Greg McBride, analyst at Bankrate.com. “That has been tempered by the reality of continued weakness in the economy.” The drop in rates comes as a relief to the industry. McBride believes that the rate will stay range-bound until the economy recovers and the borrowing rate will not be an impediment to home buyers. The Federal Reserve plans to buy up to $1.25 trillion of mortgage-backed securities this year in order to keep mortgage rates low. “Make no mistake, these rates are low and they’re going to stay low,” said McBride.

Inflation not yet a threat to economic recovery

The Consumer Price Index (CPI), which measures inflation, rose 0.1% in May from April, according to the Labor Department. The small increase was on account of higher gasoline prices. On a year-over-year basis in May, the CPI declined 1.3%, the largest decline since 1950. So far, the movement of the CPI has not supported the view that the government spending for fiscal stimulus is inflationary. “There is no sign that there has been widespread inflation because of the Fed’s quantitative easing regime. In fact, long-term inflation expectations haven’t budged and the Fed is still ahead of curve on inflation,” said John Canally, an economist at LPL Financial. Yields on treasury securities have been rising in the recent past and analysts have said it is an indication of the market pricing potential inflation. Are analysts’ concerns regarding inflation needless? “We could have an inflation problem going forward, but it’s going to have to wait until we get a resuscitation of the banking system,” said Bianco Research’s Howard Simons. Steven Ricchiuto, chief economist at Mizuho Securities, says, “Bond market participants should be more concerned with the risks of deflation than the acceleration in inflation.” Deflation can be deadly, given the negative impact it can have on the economy. The Federal Reserve has a lot to worry about.

Will reforms hurt banks’ profitability?

President Barack Obama unveiled financial reforms this week with the objective of strengthening regulatory authorities and preventing another credit crisis. The reforms call for greater capital restrictions and increased supervision on investment vehicles, leading to reduced leverage and risk in the banking system. Analysts are concerned that the proposed reforms may impact profitability and competitiveness of banks. “These regulations are so sweeping, so comprehensive and so expensive there’s no question about the fact that they will lower the profitability of the industry,” says Richard Bove, banking analyst with Rochdale Securities. “As part of these regulations there’s a demand to increase capital almost consistently, which lowers the leverage of the bank and lowers its potential profitability.” Standard & Poor’s, a credit rating agency, has cut its ratings for 18 banks since it expects volatility to remain in the financial sector and the industry to face tighter regulatory supervision. Some analysts say that the government is attempting to increase its control over the entire economy. “These regulations strike me as a floor not a ceiling,” said Dave Lutz, managing director of trading at Stifel Nicolaus. “They’re going to continue to over-regulate as they see fit and branching out from banks to everybody that has systemic presence in the marketplace.”

Venture capitalists want exemption from new regulations

The Obama administration proposes to include the venture capital industry in its financial overhaul plan. The plan requires hedge funds and venture capital funds to register with the Securities and Exchange Commission, and make certain disclosures and become subject to inspections. The venture capital industry believes that equating it with hedge funds is not correct, and they are not part of the problem which led to the current crisis. “Hedge funds may be different, because they short sell and time the market,” said Robert Stefanowski, Chairman of 3i Group PLC’s North America unit. “But private equity focuses on more long-term investment.”The National Venture Capital Association (NVCA), the industry association of venture capitalists, says the industry is “relatively inconsequential” in the financial industry, and does not contribute to systemic risks which the reforms are supposed to tackle. “We believe that the entrepreneurial risk associated with the venture capital industry is not relevant to the systemic risks which the Administration is hoping to mitigate with this reform,” said Jennifer Connell Dowling, vice president at NVCA.

Never too big to fail

In the current economic downturn, there is no real comfort in size. Bankruptcy of large U.S. companies has been rising in the recent months. In the last 4 weeks, 8 companies with assets of more than $1 billion have filed for bankruptcy. In the previous 4 weeks, there were 5 bankruptcies of large companies. “Corporate revenue is down in the United States and when topline revenue is down, there’s less money to spread through expenses,” said Brian Hamilton, co-founder and chief executive officer of Sageworks, a financial information company. Hamilton expects to see more bankruptcies, particularly in the auto and real estate sectors, in days to come. According to Bankruptcydata.com, a provider of bankruptcy data, over 20 public companies with asset size of over $2 billion each have gone bankrupt this year so far. The 2 largest bankruptcies this year are General Motors and Chrysler with combined assets of over $130 billion.

Now on to our real estate investor education section…

Short Sales & Number Superstitions

Are you superstitious? Ever buy a home – or refuse to buy – based upon some “lucky” number or bad omen? Even if you aren’t, chances are others might be so take the time to review these numerical oddities to understand the mindset behind superstition and how it can impact your short sales without even knowing it! Remember, nearly 80 percent of Americans would are mildly superstitious.

The Number 3…for many cultures like Russia, the number three is considered “lucky”. It represents holiness in the form of a trinity as well as wholeness.

The Number 4…Nokia and other Asian based companies avoid using the number for or naming products with any association for four since it is considered very unlucky. The word “four” actually sounds like “death” in Chinese, Japanese and Korean. Avoid this number if trying to sell in heavily Asiatic areas.

The Number 5…Five is a fortunate number within the Islamic faith since it represents the five tenants or Pillars of Islam. Followers pray five times a day and there are five major prophets as well as five types of law.

The Number 7…Lucky number 7 is considered to have magic powers – at least that ‘s the way the story goes if you were of Irish Ancestry. Judeo-Christian faiths as well as others consider the number 7 a sign of perfection.

The Number 13…Friday the 13^th and other films have made millions playing off the fear of the 13^th. Originating with ancient Romans that believed the 13^th was a sign of destruction, Christians carried forward the trend to the modern day.

The Number 666….Perhaps no number has a more negative connotation in Western society than 666. Often termed the “mark of the beast” this number was mentioned in the book of Revelation (New Testament) as associated with the end of the world and a time of great suffering. However, 666 is considered one of the luckiest numbers in China.

The Number 888…Originating as a sign of Jesus among the ancient Greeks, 888 is still considered a lucky number in many parts of the middle east as well as China.

The Number 328…When spoken in the Chinese dialect, this sounds a lot like ‘business will prosper” and is associated with success as well as good fortune.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com

PS:

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live Sunday night at
8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/920491379

Why would I do that for no charge?  Because
I want a chance to tell you about the other
high-income opportunity, too.

And I can’t do it in an email.

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early.  See if there’re any spots left:

https://www2.gotomeeting.com/register/502677691

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalesrichesturbocharged.com (SOLD OUT)

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.reoempire.com (NEARLY SOLD OUT)

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

About the author:

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting 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
* Add me on Twitter: http://twitter.com/mclaughlinchris
* Add me on Facebook: http://www.facebook.com/mclaughlinchris

Housing inventory drops in May

Real Estate News & Commentary by Chris McLaughlin, June 10, 2009

http://www.shortsalesriches.com

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live on Thursday night at
8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/372845123

Why would I do that for no charge?  Because
I want a chance to tell you about the other
high-income opportunity, too.

And I can’t do it in an email.

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early.  See if there’re any spots
left:

https://www2.gotomeeting.com/register/372845123

Housing inventory drops in May

According to data compiled by ZipRealty Inc., a real-estate brokerage firm, the supply of homes available for sale in 28 major metropolitan areas dropped 3.9% in May from April. The data published by ZipRealty include condominiums, single-family homes, and town houses listed on local multiple-listing services. The inventory in May dropped 24% year-over-year. The figures compiled by ZipRealty may not be presenting the exact level of supply since half of foreclosed homes are not included on multiple-listing services at any given time on account of such homes awaiting repairs or being subject to litigation. Thomas Lawler, a housing economist, says the decline in housing inventory indicates “that home prices in many parts of the country could be nearing a bottom.” However, some economists have a different view and expect home prices to continue to drop for many years to come. Robert J. Shiller, a professor of economics and finance at Yale, believes that the housing market’s poor performance may linger even if there is a quick end to the current recession. Shiller, in a recent article, pointed out that after the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997. Shiller says, “Something is definitely different about real estate. Long declines do happen with some regularity.”

Will the Fed hike interest rates?

Given the economic downturn, an interest rate hike by the Federal Reserve (Fed) was unthinkable even a few weeks ago. But with yields on treasury bonds surging in the recent past, one wonders if the market is pricing a potential interest rate hike ahead of time. According to some economists, the lower than expected job loss in May is an indication that the economy is coming out of recession and a change in Fed’s outlook is quite likely. “If the Fed is likely to tighten it could mean that growth outlook, profit outlook has gotten a little bit better,” said Zach Pandl, an economist at Nomura Global Economics. However, some feel that the Fed will not hike interest rates until unemployment drops. Quincy Krosby, chief investment strategist for The Hartford, said, “The Federal Reserve is going to watch the consumer’s behavior and the ability of the consumer to get jobs before they begin the upward path of removing liquidity. I think it is premature for the market to obsess about the Fed.” The Federal Reserve is too important a factor for the market to ignore. Market gyrations are caused as much by perceptions as by Fed’s action on the ground.

Small business sentiment improving

According to a survey conducted by the National Federation of Independent Business (NFIB), its index measuring sentiment among small business owners rose for the second consecutive month reaching 88.9 in value. Incidentally, a value of 90 in the index would indicate an expectation of positive growth and not merely a slowdown in recession. Of the 10 indicators in the NFIB survey, 9 were either flat or positive. The survey said small business owners are concerned about tightening of credit availability in the coming months. Among the survey participants, 12% said they expect the economy to improve sharply in the coming months. Businesses are also planning to raise the level of their inventories, indicating a more optimistic sales outlook. Unemployment continues to remain a concern. The survey indicates that there is no improvement in the number of number of companies planning to hire. “We’ve been suggesting that we will be slightly negative this quarter and push through to positive in the third,” said NFIB Chief Economist William Dunkelberg.

Lenders not warming up to the idea of providing “America’s Recovery Capital”

The U.S. Small Business Administration (SBA) launched “America’s Recovery Capital” (ARC) loan program on June 15 to make small, government-backed loans available to viable companies hit by the recession. So far, lenders haven’t showed enthusiasm to participate in the loan program citing lack of clarity on the terms of the program. “While we have received a few requests from our customers, we are still leaning against it,” says John Handmaker, president of Quadrant Financial, a small business lender. “We don’t feel we have a solid grasp of the standard operating procedures and rules, and we’re not going to jump in until we really understand it,” said Handmaker. ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. The SBA will pay lenders an interest rate of prime plus 2%, which some lenders say is lower than the rate SBA offers for its other loan programs. “The SBA provided for a variable but fair rate,” says SBA spokeswoman Hayley Matz. The sooner the lenders participate in the program, the better it is for small business owners.

Unsettling times for the debt settlement industry

The debt settlement industry is in crisis. Almost everyone – consumers, credit card companies and consumer advocates – is suspicious of settlement companies. There are about 2,000 settlement companies that offer advice to troubled borrowers on paying off a percentage of their credit card debt and avoiding bankruptcy. The common complaint is that many debt settlement companies are more interested in their fees than helping their clients. At a conclave of settlement professionals this week, companies called for getting rid of the “bad apples” in the industry. According to some, the industry has not been understood well by regulators. Peter McLaughlin of Preferred Financial Services said regulators and attorneys general “don’t understand what we do and how we do it, and the benefits we provide for consumers.” The barriers to entry in the industry are low and anyone can set up a settlement company. “The bottom feeders are ruining our reputation,” said John Ansbach, the general counsel for EFA Processing. “The good stories are not being told.” Jeffrey Tenenbaum, a lawyer representing dozens of settlement firms, warned that many companies could be “legislated, regulated or litigated out of business” if the industry doesn’t reform itself.

Now on to our real estate investor education section…

The End of an Economic Era and Security via Short Sales

The current economic crisis has many experts predicting the end of an era; indeed, everyone from Marc Faber (who recently predicted a 100 percent chance of the nation experiencing “Zimbabwe style” hyper-inflation) to more conservative doomer’s like Nouriel Roubini are predicting little more than doom and gloom for the coming years. In fact, many believe America’s best days are all but over well into the foreseeable future. Can things really be that dire and if so – is there any solution? Keep reading to find out for yourself how short sales may be one of the last safe havens for building or preserving wealth during your lifetime.

A Perfect Storm

The current economic crisis is only a symptom of problems that have been brewing for a very long time. Like a house with a cracked foundation, shifting sands have only increased the rate of damage while exposing the underlying problem that was previously hidden from view. In his newly released book “Managed by the Markets – How Finance Reshaped America” by Gerald Davis (a superb book!) he has outlined the most pressing societal problems facing the nation during the next decade. Savvy short sale investors and others seeking to preserve wealth would do well to take notice:

Less mobility, more inequality. The end of “corporate feudalism” has resulted in a situation where economic mobility is more randomized and obscure. No longer are the rules of the game so assured; work hard, go to college and get a good job is not a sure-fire way to success or financial security. Worse, economic inequality is more pronounced than ever making it even more difficult to climb the corporate ladder and improve one’s lot in life.

Educational insecurity. There was a time in the not so distant future when college prepared you for a career…today, all that has changed. In fact, many skills are nearly obsolete by the time the diploma is in hand. Training is becoming more flexible, shorter in duration and continuous just to stay up to date. It’s also exhausting and expensive. Fortunately, real estate can be harnessed to create money in all types of environments and situations.

The end of the corporate safety net. Healthcare and retirement benefits? Don’t count on it. Pension with dental and vision…don’t make us laugh. Even if you think you have benefits those are likely to change – just look at the recent rash of bankruptcies and failed pension plans to see how well retirees faired. Worse, state and local governments are beginning to buckle under their own obligations. From all sides of the equation, millions of American’s that believe they are covered will suddenly find themselves lacking basic benefits in the future. Millions upon millions more will never even be under the expectation of a ‘safety net’ in the first place. Bottom line – plan on making your own retirement happen without the help of corporations or government security systems. You are the only person that can be counted upon to plan for your financial wellbeing and survival into the future.

Dangerous financial services. Here on the shortsalesriches.com blog you have heard the danger of financial services, stocks, bonds and other supposedly “safe” instruments long in the past but the current situation goes far beyond anything experienced during anyone’s current lifetime.

Debacles like Enron, the mortgage melt-down and Maddox clearly demonstrate this is more than a mere accident – the apple is rotten from the core. Rating agencies, inept regulatory agencies and boundless loopholes make it all but impossible to ‘invest’ while encouraging little more than mere speculation and gambling. On the other hand, short sales provide a way to leverage favorable funding, take a direct look at a real asset then make your own mind up as to the value or worth of any given property. It’s under your control, not that of some advisor thousands of miles away.

The road to wealth has changed in this nation – perhaps forever. Counting on government, corporations or even a college education is no longer a predictor of financial security. Instead, it is now necessary to build your own safety net both today and into the future. Real estate is local, tangible and performs well as a hedge during periods of rapid inflation and monetary easing. Listen, learn and look out for your financial future.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com

PS:

Short Sales Riches Turbo Charged is SOLD OUT. We are still working through just a few orders with credit cards that declined. To place your name on a waiting list, please e-mail Peggy Harbuck your name, e-mail, and phone number to: lossmitigationtraininginst@gmail.com.

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalesrichesturbocharged.com (SOLD OUT)

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.reoempire.com (NEARLY SOLD OUT)

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

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

About the author:

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting 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

—

Real Estate News & Commentary by Chris McLaughlin, May 26, 2009

http://www.shortsalesrichesturbocharged.com

Short Sales Riches Turbo Charged … the VIP

event of the year. Tonight at 9 PM ET, 6 PM PST.

Go now to:

https://www2.gotomeeting.com/register/756333291

Foreclosures are on the rise this year

As the unemployment rate threatens get into double digits from the current rate of about 9%, analysts expect foreclosures to go up significantly in future. The new wave of foreclosures will include not only sub-prime borrowers, but also borrowers who were once financially healthy but are falling into bad times as a result of job loss. Mark Zandi, chief economist at Economy.com, a provider of economic analysis, has said that “loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

According to Economy.com, unemployment will account for 60% of mortgage defaults this year. The Obama administration announced a $75 billion incentive program for mortgage companies that reduce payments for troubled homeowners, in February. The program was estimated to help at least 4 million homeowners facing foreclosure. With the employment situation not showing any signs of improvement, experts are now wondering how effective the plan will be. Alan Ruskin, chief international strategist at RBS Greenwich Capital says he doesn’t “think there’s any chance of government measures making more than a small dent.”

Home price decline to continue

Home prices continue to decline on account of record foreclosures, tighter lending standards, and a significant supply of unsold properties. According to Standard & Poor’s/Case-Shiller Home Price Indices released today, home prices in the U.S. fell by 18.7% in March from a year earlier. On a month-over-month basis, home prices, as measured by an index of 20 metropolitan cities, fell 2.2% in March from February. David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said, “Declines in residential real estate continued at a steady pace into March.” Over the past 3 months, the index has declined at an annual rate of 25%. According to Adam York, an economist at Wachovia, “Home price declines will likely continue into 2010, considering the weakness in both the housing market and the broader economy, but hopefully the pace of decline will moderate over the next few quarters.”

FDIC announces a one-time fee to strengthen its finances

With the increase in bank failures, the deposit insurance fund of the Federal Deposit Insurance Corporation (FDIC) has been taking a hit. FDIC has announced that it will be charging banks a one-time fee this year, in order to replenish its insurance fund. The charge will be calculated on the basis of a bank’s asset size minus its Tier 1 capital. John Dugan, the Comptroller of the Currency, voted against the proposal and called it “perverse.” Dugan argued that the deposit insurance fund has been largely drained by the failure of smaller banks and it would not be correct to penalize larger banks by imposing a charge on the basis of their asset size. Sheila Bair, the Chairman of FDIC, has defended the fee. “A lot of large banks haven’t failed because of massive government assistance,” said Bair. “If it weren’t for those, some big banks would have failed and there would have been costs.” The special fee, which will bring in $5.6 billion, will serve FDIC well. The expected loss for FDIC’s insurance fund is estimated to be $70 billion over the next 5 years.

Dead banks walking

A large majority of the 8000 odd small banks in the U.S. are still functional. The question is how healthy they actually are. With non-performing assets (bad loans) at over 10% of the total assets in many of the banks, one wonders if such banks are actually dead banks posing as living ones. The Federal Deposit Insurance Corporation (FDIC) will be publishing a report in which it will provide an assessment of the banking industry, next week. The report is expected to throw some light on the problem. As of 2008, the number of “problem” banks, published by FDIC, stood at 252. The number is expected to be higher in 2009. Experts believe FDIC should have been lot more proactive in closing down troubled banks. Recent reports published by the Office of Inspector General attached to FDIC have charged that FDIC was “not timely and effective” in addressing problems affecting some of the banks that failed last year. FDIC has initiated a number of steps to strengthen its internal mechanisms to tackle the banking crisis. However, the job of FDIC is not likely to get any easier in the months to come, given the dwindling interest of buyers in the assets of failed banks.

Accounting sleight of hand?

When banks acquire troubled assets, the bad loans acquired seem to become income. Bizarre as it may sound, banks, by using the so-called “accretable yield” concept, can book revenues after they acquire bad debts. Accretable yield refers to the difference between the value of the loans on the banks’ balance sheets and the cash flow they are expected to produce. The practice is what is commonly called Purchase Accounting. JPMorgan bought Washington Mutual for $1.9 billion last September, and by using purchase accounting, it marked down $118.2 billion of assets by 25 percent. As borrowers repay their debts, the bank expects to make $29.1 billion in pretax income, over the life of the loans. “One of the beauties of purchase accounting is after you mark down your assets, you accrete them back in,” says Gerard Cassidy, an analyst at RBC Capital Markets. “Those transactions should be favorable over the long run.” Some analysts are worried about banks stretching purchase accounting to smooth out earnings. Chris Armbruster, an analyst at Al Frank Asset Management Inc., says, “There’s definitely going to be some marks that were taken that were too extreme.”

Now on to our real estate investor education tips section …

Squatters versus Short Sales

Squatters. They are appearing everywhere. No longer banished to abandoned homes, squatters are organizing in order to move into recently foreclosed and vacant properties in newly built neighborhoods all over America. In fact, community action groups like ACORN and others are stepping in to help – in part to provide homes for the homeless but also to help stabilize neighborhoods from becoming accosted by an influx of drug users and others that could ravage property values. Rather than allow just anyone to move into foreclosed homes, this new breed of community organization at least attempts to screen would be “neighbors” before placing them into homes.

Still, there are many unanswered questions; who is responsible for maintenance and upkeep of the homes? What liability does the lender or owner have if a squatter (or their family member) is hurt while on the property? Will insurance coverage step in should a fire or other damages take place in what is supposedly an unoccupied dwelling? These are other important questions are growing concerns for lenders, current homeowners and potential short sale investors….and given the rapid escalation of squatters plus organized movements to place people into un-occupied homes, it’s a problem likely to impact police as well as other homeowners in the neighborhood.

Short sale investors should learn how their state and local authorities are dealing with squatters – although some will treat it as a trespass violation and remove unauthorized persons, many areas actually require the current owner to file for eviction in order to remove a squatter. This means real estate agents and investors must take a proactive approach when purchasing a home with existing squatters in place…or make sure to take steps to prevent access.

One of the easiest methods to help prevent squatters from taking possession of a property and having to file for eviction is to simply transfer utilities into your own name or the name of your business/trusted organization. This is an important step because one of the most common ways squatters gain control of a property is by turning on the utilities. Most utility companies require little more than a security deposit in order to begin service and once they are in- squatters can be tough to get out.

However, not all squatters even bother with utilities; in fact, the worse the squatter situation the more likely there will not be any utilities installed. It doesn’t take a lot of imagination to understand why squatters are becoming banks biggest nightmare; rather than fear this, savvy short sale investors should use it to their advantage. Inform banks, neighbors and others dealing with high vacancy areas about the risk involved in allowing squatters into an area. Instead of dealing with the liability, maintenance and other issues, they can simply settle with a short sale instead. Especially with banks trying to sit on their non-performing assets, vacant homes are increasingly becoming more than a mere eyesore – squatters are moving in before real estate agents or other bank agents have performed a property inspection to place it on the market. Rather than fight it, let it work for you when submitting your next short sale offer….accept or run the risk of squatters moving in. Hmmmm…seems like a no-brainer especially with the latest incentives by the federal government to encourage lenders to accept short sale offers or other foreclosure alternatives.

See you at the top!

Chris McLaughlin

http://www.shortsalesrichesturbocharged.com

PS:

Don’t miss out!

Short Sales Riches Turbo Charged … the VIP

event of the year. Tonight at 9 PM ET, 6 PM PST.

Go now to:

https://www2.gotomeeting.com/register/756333291

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

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

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

About the author:

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes. Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner 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