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Fannie Freddie Mortgage Mods Drop 28% in Q1

by admin on June 7, 2011

Smart Real Estate News & Commentary by Chris McLaughlin June 7, 2011

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Fannie Freddie mortgage mods drop 28% in Q1

Fannie Mae and Freddie Mac servicers provided 86,201 modifications in the first quarter, down 28% from the previous quarter, according to the Federal Housing Finance Agency. The drop comes after modifications fell 18% in the fourth quarter. Combined with repayment and forbearance plans, servicers retained nearly 144,000 homes in the period. Servicers also started 260,000 foreclosures, and although that is down from 310,000 from the previous quarter, it’s nearly double the amount of homes retained. Servicers provided 26,000 permanent workouts under the Home Affordable Modification Program, up from 17,000 in the previous three months. Another 64,000 loans were put into active HAMP trials, meaning the majority of the modification activity for Fannie and Freddie mortgages went through HAMP.

Since the Treasury Department launched HAMP in March 2009, Fannie and Freddie servicers permanently modified more than 320,000 mortgages, according to FHFA data. Short sales and deeds-in-lieu of foreclosure remained nearly unchanged from the previous period at roughly 27,500. Roughly 44% of the borrowers said their reason for delinquency was a curtailment of income, compared to 14% who said they had too many obligations and 4% who pointed their continued unemployment. Refinancing through the Home Affordable Refinancing Program totaled 130,204 in the first quarter, down 8% from the previous quarter. However, more than 16,000 of the refinancings were done on loans with a loan-to-value ratio of 105% or higher in the first quarter.

The amount of delinquent loans on Fannie and Freddie balance sheets declined. Mortgages between 30- and 60-days delinquent totaled 553,000 in the first quarter, down 16%. There were 1.3 million loans more than 60-days delinquent, which dropped 7% from the previous period. And loans in serious delinquent or in the foreclosure process dropped to 1.19 million, down 5% from the previous period. Seriously delinquent loans dropped to 4.02% in the first quarter, down more than 20 basis points from the previous period.

GOP says shrink federal workforce 10%

A new bill would shrink the number of government workers by 10% by 2015. For every three retiring federal workers, the government would only be allowed to hire one replacement. The measure would save an estimated $127.5 billion over 10 years if adopted, according to Reps. Darrell Issa of California, Dennis Ross of Florida and Jason Chaffetz of Utah, the bill’s sponsors. “Private sector job creators and families in my district have learned to do more with less,” Chaffetz said in statement. “So should the federal government.” The idea is not exactly a new one. President Obama’s own fiscal commission included the basic plan in its final report, but would reduce the roughly 2 million member workforce at a less aggressive rate. “Washington needs to learn to do more with less, using fewer resources to accomplish existing goals without risking a decline in essential government services,” the report said.

Olick – spring housing season

I don’t know what the official end of the spring housing market is, but it seems as if the experts have called the close, and it ain’t great. Last week, after the folks at the vaunted S&P/Case Shiller Indices put a period on the home price double dip, which others had been reporting for months — and The New York Times did a piece on falling home prices — it seemed like suddenly the housing watchers got nervous again. Over the weekend, JP Morgan Chase’s housing analysts revised their outlook lower for home price recovery, “largely based on existing home sales coming in lower than expected.” While they expect that regional divergences will increase, “Our new base case is down percent from here (Q1 2011) and bottoming in mid-2012. We expect home prices to modestly improve over the summer months.” Soon after, Credit Suisse’s Monthly Survey of Real Estate Agents announced: “Weak ending to the spring season.” CS’s Daniel Oppenheim notes, “A lack of urgency continues as does a fear and hesitation of buying if prices still have further to fall.” This, we knew.

“Most worrisome was the lengthening time needed to sell a home, as there are few qualified buyers and those qualified buyers are waiting for the right price.” Buyer traffic is weak, and distressed markets are showing the best activity. This is a key point because of an argument that was going around the blogosphere last week. Core Logic put out a price report showing that if you remove distressed properties from the equation, home prices are basically flat, not falling, as the rest of the reports scream. Housing bulls, including the former FHA commissioner, Dave Stevens, now head of the Mortgage Bankers Association, pointed to the report as evidence of recovery, but when I Tweeted about the Core Logic report, well-known mortgage analyst Mark Hanson protested: “Why in the world would they discount distressed sales when they are the market, they support the market, and without them as support, house sales volume and sentiment would tumble. Further, MBS [mortgage-backed securities] loss severities and bank loan loss reserves are based on distressed sales not organic sales. In short, distressed sales carry more weight across the things that matter to the housing and financial markets.”

I’m watching a segment on MSNBC right now about how renewed trouble in housing might affect the 2012 presidential election. Suddenly housing is back in the headlines, not that it ever should have left. Politicians may point to a slowdown in new mortgage delinquencies, and claim that the housing recovery is fine, but just slow. That should not be the focus. The focus must be on the more than 11 million underwater borrowers, and not just because some might walk away from their homes. The plain truth is that not all homeowners who owe more on the mortgages than their homes are worth are going to walk away from said homes, and abandon their lifestyles and credit ratings in the process. Not near everyone. But negative equity has a huge effect on lifestyle, spending and mobility. There is an enormous inventory of unsold homes on the market and about to come on the market, and if current homeowners can’t sell their homes, then they can’t buy new ones. That may sound kind of “duh,” but I don’t think enough bankers or policymakers get it. You cannot rely on investors and first-time home buyers to eat up an unprecedented backlog of inventory.

Obama’s economic adviser leaving

President Obama’s top economic adviser, Austan Goolsbee, is leaving the administration to return to the University of Chicago, the White House announced yesterday. The announcement came after a series of reports that showed the U.S. economy struggling to maintain headway after the housing bust, banking crisis and recession. On Sunday, Goolsbee told CNN’s “State of the Union” that despite disappointing employment, manufacturing and housing price figures, the long-term trends remain positive. Goolsbee took over for Christina Romer, who stepped down last September from the job running the White House Council of Economic Advisers. Goolsbee was on the original White House economic team, serving on the council with Romer and Cecilia Rouse, that swept into office in January 2009 at the height of the financial crisis. Only Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke remain of Obama’s original economic brain trust. Rouse left the White House earlier this year to teach at Princeton.

Goolsbee has been an outspoken defender of Obama’s policies as the U.S. economy struggles to find its footing following the steep recession of 2007-09. In a statement announcing Goolsbee’s departure, Obama called him “a close friend” and “one of America’s great economic thinkers.” Last Friday, when dour-than-expected unemployment figures were released, Goolsbee was the first to give them an upbeat spin calling them a “bumps on the road to recovery,” a phrase repeated in Obama’s speech later that day and throughout the weekend.

But the financial markets weren’t so sure. Stocks closed lower again yesterday, as investors remained nervous about the nation’s economic future.

WSJ – mortgage misery

Almost 40% of homeowners who took out second mortgages—extracting cash from their residences to cover everything from vacations to medical bills—are underwater on their loans, more than twice the rate of owners who didn’t take out such loans. The finding, in a report to be released today by real-estate data firm CoreLogic Inc., illustrates the consequences of easy borrowing amid the housing boom’s inflated prices. The report says 38% of borrowers who took cash out of their residences using home-equity loans are underwater, or owe more than their home is worth. By contrast, 18% of borrowers who don’t have these loans were underwater. It’s not clear how much cash withdrawn from homes during the boom was used to acquire luxuries such as expensive automobiles, and how much went to basic necessities, including tuition expenses, or renovations intended to raise a property’s value. What is clear is that home-equity loans, which account for about 10% of the U.S. mortgage market, have been a headache for homeowners and lenders alike. Second mortgages refer to any loan taken out on a property that is subordinate to the first mortgage, and include home-equity loans or lines of credit.

Second mortgages are weighing on a fitful recovery, in which housing has figured as particularly weak spot. The S&P/Case-Shiller National Index last week showed that home prices tumbled 4.2% nationwide in the first quarter, its third straight quarter of price declines after a modest recovery in early 2010. Nationwide, prices have fallen 34% since their peak in 2006. The inventory of unsold homes will take 9.2 months to sell, the National Association of Realtors said recently, about 50% higher than what is considered a healthy level. CoreLogic found that borrowers with second mortgages had deeper levels of negative equity—an average of $83,000 compared with $52,000—than borrowers without second mortgages. In many cases, borrowers withdrew cash from their properties using home-equity loans or lines of credit, a type of second mortgage. The CoreLogic report doesn’t include cash-out refinancing, a common practice during the boom, where borrowers opted to extract cash while refinancing their first mortgage. According to Federal Reserve Board data, homeowners took out a total of $2.69 trillion from their homes at the height of the housing boom between 2004 and 2006. That tally includes cash-out refinancing. Overall, the CoreLogic report found that the percentage of underwater homeowners declined slightly in the first quarter. About 10.9 million Americans who borrowed to buy their homes, or 22.7% of all homeowners with a mortgage nationwide, were underwater in the first quarter, down from 11.1 million, or 23.1%, in the fourth quarter of 2010. The modest decline wasn’t a sign of an improving market. Rather, the change reflected completed foreclosures, which reduced the total number of homeowners in the market, CoreLogic said.

Second mortgages have made it more difficult for troubled borrowers to negotiate loan modifications with lenders. Economists say borrowers with second mortgages on homes that are underwater are far more likely to walk away from their homes. Homeowners seeking a “short sale,” in which they sell their property for less than the value of the outstanding mortgage, have a much harder time doing so when they have a second loan, because all the lenders involved must agree to take losses on the sale, and second-lien holders take the first losses in such a situation.

See you at the top!

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

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About the author:

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

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

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

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

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

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

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

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

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Housing Messages Mixed…and The Next Shoe to Drop

by Chris McLaughlin on April 27, 2009

Real Estate News & Commentary by Chris McLaughlin, April 27, 2009
http://www.shortsalesriches.com/welcome.html

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Housing messages mixed

The Obama administration keeps telling us things are looking up, but the real players in both the economy and real estate are all over the map in both results and predictions. The National Association for Realtors has pulled together some of those confusing housing indicators from last week:

- The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, reported that home prices rose 0.7 percent from January to February 2009.

- The February 2009 RPX Monthly Housing Market Report said home sales increased month over month in 22 of 25 key metropolitan statistical areas and 13 of these areas posted the largest gain in February 2009 since 2006.

- The National of Association of REALTORS® reported that existing home sales dropped in March 2009, and median prices fell 12 percent from a year earlier.

- First American CoreLogic announced that national housing prices declined 12.2 percent in February from a year earlier and have been in decline for 24 straight months. It predicted that home prices would continue to decline through 2010.

Clarification or more mixed messages?

Just to keep up the confusion by trying to explain it, The National Association of Home Builders reported that production of single-family homes is unchanged, despite falling housing starts. “Today’s numbers are right on target with NAHB’s forecast, which anticipates that housing starts will bottom out in the second quarter, after new-home sales have stabilized,” said NAHB Chief Economist David Crowe. “Single-family starts remained virtually unchanged over the past three months, indicating that we are closing in on a bottom. Multifamily starts – which tend to bounce around from month to month — were responsible for the decline in total starts as they readjusted following a substantial gain in February.” But he warned, “A substantial recovery in housing of the kind that’s required to help get the national economy back on its feet will not happen until the logjam in acquisition, development and construction financing has been broken.

Swine Flu hits the market

World stocks tumbled after seven weeks of gains, and both oil and the euro fell on Monday as concerns intensified the spread of swine flu would hit the global economy. Mexico seems to be the center of the outbreak, although cases have spread to countries around the world. As many as 103 deaths in Mexico are thought to have been caused by swine flu, CNN reported. In the United States, the largest number of cases has been reported in New York City. “The swine flu seems to be one of those ‘Black Swan’ events that has caught the market by surprise. This is a concern as to whether it might impact any potential…recovery chances,” said Martin Slaney, head of derivatives at GFT Global Markets. The MSCI world equity index fell 0.7 percent. The U.S. government plans to issue a travel warning later Monday urging Americans to avoid all “nonessential” trips to Mexico because of an outbreak of swine flu, a U.S. official said.

GM slashes jobs, debt, and dealerships

In its latest bid to stay out of bankruptcy, General Motors announced plans to drop Pontiac, cut 23,000 U.S. jobs by 2011, and slash 40% of its dealer network. GM is also offering bondholders 225 shares of its stock for every $1,000 it owes the bondholders in principal. GM’s first plan was turned down by President Obama’s auto industry task force in February, but this restructuring announcement goes much further.

The company had announced many of the job cuts in February, but Monday’s news that GM would have about 38,000 hourly U.S. employees by 2011 represents an additional reduction of 7,000 to 8,000 jobs beyond what GM disclosed in its previous viability plan. The Obama administration’s task force said today that the new plan “reflects the work GM has done since March 30 to chart a new path to financial viability,” but added that it “has made no final decision regarding the treatment of its current loan to GM or with respect to any future investments in the company.” Not exactly a rousing endorsement, is it?

Wall Street Journal explodes at regulators

In perhaps its harshest language yet, the Wall Street Journal takes a crack at mismanagement by Paulson and Ben Bernanke. Here’s how the article opens: “The cavalier use of brute government force has become routine, but the emerging story of how Hank Paulson and Ben Bernanke forced CEO Ken Lewis to blow up Bank of America is still shocking. It’s a case study in the ways that panicky regulators have so often botched the bailout and made the financial crisis worse. In the name of containing “systemic risk,” our regulators spread it. In order to keep Mr. Lewis quiet, they all but ordered him to deceive his own shareholders. And in the name of restoring financial confidence, they have so mistreated Bank of America that bank executives everywhere have concluded that neither Treasury nor the Federal Reserve can be trusted.”

Now on to our real estate investing education section…

Derivatives – The Next Shoe to Drop?

About the time short sale investors have started to grow weary of watching the evening news a new economic threat is beginning to rear its ugly head – derivatives. While most of the media has been content to talk about falling real estate prices (which are beginning to look good in comparison to other investment options), faltering currencies, corporate bankruptcies and bail-outs only the most fearless dare to mention what is on everyone’s mind…the dreaded derivative market.

To get a perspective on the situation consider these startling facts:

The total value of residential real estate in the United States is estimated to be roughly $10 Trillion.

The annual GDP of the USA is roughly $15 Trillion.

The global GDP for the entire world is roughly $50 Trillion.

The total value of all real estate in the entire world is roughly $75 Trillion.

The derivative market is roughly $516 Trillion…excluding private transactions between non-reporting entities.

Obviously the problem is huge which is one reason big banks are eager to settle the real estate related problems as soon as possible in order to position themselves – with cash in hand – for the next stage of the economic playbook. By now there should be one burning question on the minds of every savvy short sale investor; “Which banks are heavily invested in derivatives?”…well, that is a good question and one in which we have an answer. In order of shock and awe are the derivative investments of some of the biggest names in the banking industry as of the end of 2008 as represented by a percentage of their risk based capital is as follows:

Wachovia: Approximately 53 percent

Bank of America: 194 percent

Citibank: 258 percent

JPMorgan Chase: 430 percent

HSBC: 595 percent

Scary isn’t it? This means that for every dollar of capital held by HSBC, they have nearly $6 of exposure to the derivative market however, all of these banks are above the suggested maximum of 25 percent exposure so at what point does it even matter? This type of scenario is what has many economic experts calling for the end of the historic strategy of buying and holding stocks, bonds and even dollar based currency for the foreseeable future as one bubble after another continues to burst.

Remember, the entire global GDP is only $50 trillion….which would not even be enough to “bail-out” Citibank alone should the derivative market collapse. Now ask yourself, where do you intend to park your hard earned money over the coming years? Stocks? Bonds? Currencies backed by governments forced to bail-out one bad investment after another?

How about putting it into the one tangible asset that provides the fundamentals required for a great return, flexible financing, long term tax breaks and a historical precedent unlike all others…real estate. The choice is yours – listen to the same media pundits that lead you down this path and believe the rhetoric about the market moving upward or cash out while you still can and invest in something safe for the long haul. Just remember, when the derivative shoe finally does drop…you heard it here first.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

Don’t miss our webinar Tuesday night at 8:30 PM ET, 5:30 PM PST:

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Finally, a blog for Real Estate professionals
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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 flipping 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

—

{ 2 comments }

$50 Million in AIG Bonuses Returned

by Chris McLaughlin on March 24, 2009

Real Estate News & Commentary by Chris McLaughlin, March 24, 2009
http://www.shortsalesriches.com/welcome.html

——–

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Up and…down.

The Dow Jones industrial average jumped 498 points yesterday, or 6.8 percent, and the S&P S&P 500 rallied 7.1%, on news that Treasury Secretary Timothy Geithner would buy a trillion dollars worth of toxic assets, and an unexpected 5.1% rise in existing home sales. The jump was the biggest since October 28 of last year. Not surprisingly, the markets opened lower today on profit taking. “There’s a feeling that we’re getting to the end of the worse of the news,” said Ken Wattret, economist with BNP Paribas in London, but noted that there’s still plenty to be pessimistic about, including skepticism over whether the toxic assets at the center of the government’s plan will ever rise in value.

AIG – the saga continues

15 of the top 20 bonus recipients at AIG have agreed to return their bonuses, for a total of $50 million of the $165 million originally paid out. Whether it has more to do with altruism, or angry mobs with torches, is open to speculation. Just about everyone in the United States is outraged over the payouts, including congress, the president, and New York Attorney General Andrew Cuomo. Today Chairman Ben Bernanke got into the act by claiming in testimony to congress that he too wanted to sue AIG, but declined because if he had lost it would have added punitive damages to the bonuses.

Real estate rebounding? Sort of.

In housing markets around the country, there are signs that the bottom may have been reached, and sales are beginning to come back up. First-time buyers are coming back into the market thanks in part to federal incentives, which include a $8000 tax credit for first-time, residential buyers. Real estate search firm Trulia found that the greatest rise in internet searches occurred in Florida, where investors and retirees are snapping up bargains. Sales for Lee County, Florida, which includes Fort Myers and Cape Coral, were up nearly 80 percent from 2007 to 2008, says Mark Washburn, a realtor at Island Coast Realty in Ft. Myers. “That’s pretty impressive. The caveat is the prices are half.” That’s a caveat indeed.

Detroit troubles.

Car dealerships are going broke across the US. Nationally, the United States lost about 900 car dealerships last year, according the National Automobile Dealers Association. About 66% percent of the dealers that closed last year were single-brand dealers. The losses are greatest among dealers selling Detroit brands, said Jim Appleton, president of New Jersey Coalition of Automotive Retailers. Big dealerships with deep pockets are snapping up some of the smaller dealerships at fire sale prices, but many small dealerships are just closing up shop, unable to service the financing on the automobiles sitting idle on their lot.

Now on to our real estate investing education section…

It Can’t Happen Here – or Can it?

In the famous satirical novel written in the midst of the last great economic Depression by Sinclair Lewis, the election of a new president spurs the fanatical rise of “true believers” to propel the newly elected leader to the height of government. After gaining control of Congress and the Supreme Court the nation is radically altered as the dictator attempts to save the nation from financial cheats, crime and other societal woes through a series of ever more severe restrictions on the lives of citizens.

While the story might center around a fascist regime, the similarities are otherwise well worth noting; a charismatic presidential candidate that runs on a platform of “reform” and claims to be a champion to the causes of the average citizen while still maintaining close ties with big business. A media darling who is elected during a time of financial crisis, greed and the growing distress of the masses, he soon has the support of the populace in exchange for their freedom. Notice any similarities yet? Whether you love him or hate him, one thing is certain…going on late night television to proclaim up to 90 percent taxation plus retroactive implementation of taxation is one way to get the attention of every hard working American in the nation. Even the host admitted the prospect was of more than passing concern.

So, what does this have to do with Short Sales? Take a look at the state of the nation; from Wall Street to Main Street people are searching for someone to bail them out and fix things. The repeated refrain is “This is America”…things are supposed to turn out just fine and recovery is just around the next corner. But what if it isn’t? What if the economy continues to falter in a Japanese style lull that lasts for years as economist Nouriel Roubini predicts? Worse, what is the USA goes the way of the former USSR as predicted by Dmitri Orlov? What if income taxes are suddenly increased with little to no warning? What if your prior earnings are retroactively taxed at rates as high as 90 percent?

Consider this, while domestic automobile manufacturing companies beg for bail-out funds even while slashing payroll and cutting back on benefits, car sales continue to decline and obtaining financing to purchase a depreciating asset like a new vehicle becomes even harder…meanwhile, it’s now possible to purchase a home – complete with lot and land – in Detroit for less than the cost of even a modest compact car. In fact, most people could pay in cash simply by charging it on a credit card. Now, we aren’t suggesting this is the right road to wealth but it does point out some of the underlying assumptions and mixed-up priorities currently being perpetuated by the mainstream media. As little as two years ago real estate was considered the road to wealth by everyone – so why the sudden change of heart?

During tough economic times it is more important than ever for investors to think for themselves rather than follow the masses. Real estate is a tangible asset that allows you to secure additional sources of cash flow when and how you want. Have a high income year? Take time to fix up the place to secure some additional write-offs. Need a little extra cash this year? Sell a property while you are in a lower tax bracket. Searching for a regular supplement to a fixed income? Rent or lease a property. Want to sell but retain a long term steady income? Hold a note. Whatever your situation, real estate has the flexibility to provide the financial returns you need to ride out the economic storm. While most American’s agree that it can’t happen here – some already think it did. Either way, learn how to profit while others panic by coming to our webinar this evening at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/982247811

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

Don’t miss out webinar tonight at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/982247811

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 flipping of distressed homes. Owns
      portfolio of nearly 100 high-value, high-profit
     properties

     * 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

—

{ 0 comments }

Bernanke Says Interest Rates to Stay Low

by Chris McLaughlin on March 18, 2009

Real Estate News & Commentary by Chris McLaughlin, March 18, 2009
http://www.shortsalesriches.com/welcome.html

——–

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
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———

Interest rates will stay low

Economists predict Fed Chairman Ben Bernanke and his colleagues will hold the lending rate between zero and 0.25 percent for the rest of this year and for most, if not all, of next year to combat the recession we’ve been in since December 2007. Of course with a lending rate this low, the Fed is just about powerless in the face of recession, but that’s not stopping them from meeting to talk about it. The options still remaining are: 1) buying long-term Treasury securities, and 2) boost its purchases of debt issued or guaranteed by mortgage giants Fannie Mae and Freddie Mac. Both options would help depress mortgage rates. Hopefully they won’t adopt the latest fad on Wall Street as option number 3 — voting themselves bonuses.

Homebuyer tax credit now law

The homebuyer tax credit, one is one of 10 key provisions of the so-called American Recovery and Reinvestment Act, was signed by President Obama into law yesterday. The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence between January 1, 2009 and December 1, 2009. Home buyers won’t have to repay the credit, which they can apply dollar for dollar against 2009 taxes, and if there happens to be an unused portion of the credit, it will be mailed to the purchaser.

Inflation rears its head

The Labor Department says gasoline prices and clothing costs leaped the most in nearly two decades in February, driving a rise in consumer inflation of 0.4 percent in February. Core inflation, which excludes food and energy, rose 0.2 percent in February, slightly higher than the 0.1 percent rise economists expected. Can anyone guess what it’s called when interest rates stay low while prices go up?

Mortgage applications jump – sort of

Mortgage refinancing applications jumped 30 percent in the week ended March 13 as the borrowing rate dipped 0.07 of a percentage point to 4.89 percent, tying the record low reached in early January in a survey that dates to 1990. Of course purchase applications only rose 1.5 percent. Refinancing requests represented about 73 percent of all mortgage applications last week.

Foreclosures up

Foreclosure filings are up 30 percent from a year ago. The states with the highest foreclosure rates so far are Ohio, Oregon, Georgia, Illinois, Michigan, Idaho, Florida, California, Arizona, and Nevada, where a whopping 1 in every 70 households are in foreclosure. Viva Las Vegas!

Merrill Lynch on the hot seat

As if AIG wasn’t enough, now Merrill Lynch is under the gun for $3.62 billion in 2008 year-end bonuses. Rep. Edolphus Towns (D., N.Y.), chairman of the House Committee on Oversight and Government Reform, in an effort to determine whether the committee had been misled about the bonuses, sent letters to Bank of America requesting records of the incentive payments.

Now on to our real estate investing education section …

Top Ten Foreclosure States & Investing In Short Sales

Getting started in short sales and real estate foreclosures doesn’t need to take months; with a little help from your friends here at the ShortSalesRiches.com blog you can be making an offer on your first property in less time than it takes to open a new bank account to stash all that cash and big profits. But should you focus your efforts on foreclosures or short sales? Does it really matter? Maybe more than you think.

First, let’s take a few minutes to find out where all the foreclosures are taking place. While every state has its fair share of foreclosures and potential short sale properties, according to Forbes, the top ten foreclosure states are currently:

1. California

2. Florida

3. Arizona

4. Nevada

5. Illinois

6. Michigan

7. Ohio

8. Texas

9. Georgia

10. Virginia

Now, back to the main question; foreclosures or short sales? While both may offer a real estate investor major profit potential, short sales provide the unique perspective of less competition. Never underestimate the hype and hysteria that takes over an otherwise sane buyer in the heat of the moment or during an auction. Fear and greed plus a good healthy dose of competition can drive a would be cash cow into the ground when dealing with auctions and foreclosure sales. Bidding wars are not unusual so be prepared well in advance. On the other hand, short sales often rely upon individual negotiations where time is on your side.

Additionally, buying a property prior to foreclosures results in reduced prices since the lender hasn’t been required to deal with months of unpaid mortgages, vandalism, paper-work and other problems. In general, the sooner you claim a property the more is saved – savings that pass directly to you. Short sales can sometimes generate greater profit potential than foreclosures although there are exceptions to every rule…and trust me, I’ve seen plenty of short sales end up as REOs after stubborn lenders refuse to drop their prices, only to see the property eventually sell for $100k less than was offered as a short sale! Lucky for us banks are getting a little smarter. But notice I said a “little” smarter. They are still pretty dumb.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

Don’t miss out webinar this coming Thursday night at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/995947853

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 flipping of distressed homes. Owns
      portfolio of nearly 100 high-value, high-profit
     properties

     * 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

—

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The Village Idiot Still Works at AIG

by Chris McLaughlin on March 16, 2009

Real Estate News & Commentary by Chris McLaughlin, March 16, 2009
http://www.shortsalesriches.com/welcome.html

——–

“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 Tuesday night at
8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/661793179

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/661793179
———
Ah, we have spent a lot of time talking about the poor idiots over at AIG, the insurance giant that is now 80% owned by Uncle Sam. This is the company that spent weekends at the St. Regis charging up crazy spa packages and the bill went to the taxpayer. What have they done lately? Well, they lost $61.7 billion last quarter. But that’s not really what we’re going to talk about …

How about recently handing out $165 million in bonuses … all of which come directly from our taxpayer money. Now the truth is that these are bonuses were under contract during 2008, so it wasn’t a recent decision, but after a review by their attorneys the current AIG executives said they had to pay them out.

And that didn’t leave our President very pleased. “It’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay,” a noticeably angry President stated. “How do they justify this outrage to the taxpayers who are keeping the company afloat,” he stated.

President Obama instructed Treasury Secretary Timothy Geithner to figure out a way to rescind the $165 million in bonuses. And the pressure was also mounting from Congress. Representative Barney Frank, Chair of the House Financial Services committee, suggested that anyone was took the bonus ought to be terminated. “These people may have a right to their bonuses. They don’t have a right to their jobs forever,” said Frank.

The National Association of Home Builders/Wells Fargo Housing Market Index stood at 9, just 1 point above a record low. If the index is lower than 50 it indicates there is negative sentiment about the market. Regionally the index was steady throughout the US but in the Northeast there was a single point bump upward.

The financial markets were higher today after Fed Chairman Ben Bernanke gave an optimistic forecast on CBS’s 60 Minutes over the weekend where he suggested that the recession would probably end this year. And, like many of us, Bernanke shows certain disgust over AIG. The nation’s economist in chief said he “slammed the phone more than a few times on discussing AIG.”

Now on to our real estate investing education section …

Short Sales, Infinite Stupidity and Savvy Investors

“Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.” Albert Einstein

Best known for his theory of relativity, Einstein had a way with words. In his distinctive style, the quote above applies as much to the laws of nature as it does the laws of investing; in both cases human stupidity can appear limitless. Take for instance the current opportunities afforded by short sales. If history has a way of repeating itself then it would seem only natural for savvy investors –especially those that have taken a major beating in the stock market – to examine the past in search of likely outcomes and time tested trends.

While a few stout hearted souls may have already done so, the vast majority of the population dutifully follows whatever they hear on the major media outlets. The same people that persuaded low-income homebuyers to take advantage of variable interest rates rather than some of the lowest fixed interest rates in history are probably not the first place to turn for reliable real estate advice.

By now everyone knows the 1950, 60’s and 70’s represented some of the most prosperous times for the American household…especially those that owned real estate. Many became wealthy beyond their wildest dreams while others steadily increased the lifestyle of their entire family simply by having had the foresight to buy right. Much of the original buying opportunity began during the economic crisis now known as the Great Depression.

Only time will tell whether or not that title stands after the current financial fiasco settles down but one thing is certain – the timeline between now and then deserves more than a passing interest. Use this checklist to compare the past to the present…then give serious consideration to purchasing short sale real estate as a way to preserve purchasing power and regain wealth in the same way others did in former years. Remember, there are always a few people that make money even during the worst economic times…the only question is whether or not you will be one of them or join the ranks of those that start all over again.

General Comparison between 1920’s and Today

Federal funding expanded by three times…Yep. Thanks to Congress it has taken less than 3 months to match the combined budget of a generation – or two (or three).

Bank failures. Again, yes. Although fewer banks are failing it is due in large part to the dramatic consolidation of major banking institutions throughout the nation.

Organized labor declines. Yes, organized labor has been in a state of survival only for years with workers working harder for less spending power.

Mergers, Mergers, Mergers. The 20’s saw unprecedented numbers of mergers between banks and other corporations responsible for influencing millions of Americans. Likewise, modern day media, banking and even utilities have grown “too big to fail.”

Dramatic stock market rise…yep, the American investor knows the highs – and recent lows – only all too well….and then begins to fall/decline.

Federal Reserve begins cutting interest rates in an effort to curb losses…especially in labor, real estate and inventory. Ouch – beginning to have a familiar ring isn’t it?

The GNP falls even as the unemployment rate rises – yes, we are still speaking about past history although the comparisons are admittedly grim.

By 1932 GNP falls over 13 percent as unemployment reaches over 23 percent. Stocks lost 80 percent of their value and international trade declined by 2/3’rds. Income Taxes are increased from 25 percent to 63 percent and Congress passes the Federal Home Loan Bank Act.

In 1933 the working wealthy are subjected to even more taxes in order to pay for massive government spending programs designed to make work and stabilizing the economy including the real estate market.

So, what can the average investor learn from this series of unfortunate events? A few considerations to keep in mind:

Working for a living can become very expensive. The public backlash against high wage earners has already started. Expect higher and higher income taxes as the federal government raises taxes in order to pay for everything from Social Security to the newly proposed universal health care plan (estimated to add another 10 percent tax to wages). Earned income has always been the most expensive form of revenue – instead, seek out short sales as a way to generate revenue that qualifies for hefty deductions and future appreciation.
The cost of credit experiences exponential increases. Interest rates are at near historic lows – just as anyone that purchased a home in the late 70’s or early 80’s about the cost of credit. Double digit mortgages combined with rapid inflation was the end result of inflation. Experts across the nation agree the time will come when the government will be forced to monetize the current debt…when it does the big buying spree will be over.
Buy for pennies on the dollar. During the Great Depression one of the most significant ways people prospered was by having the foresight to invest in hard assets for pennies on the dollar. Homes that sold for 3, 4 or even 10x’s the current price may not have cash-flowed for the original owner but that doesn’t mean you can make a profit while gaining valuable assets.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

P.S.

Don’t miss out webinar this coming Tuesday night at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/661793179

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 flipping of distressed homes. Owns
      portfolio of nearly 100 high-value, high-profit
     properties

     * 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

—

{ 0 comments }

ben bernanke

Fannie Freddie Mortgage Mods Drop 28% in Q1

Fannie Freddie mortgage mods drop 28% in Q1

GOP says shrink federal workforce 10%

Olick – spring housing season

Obama’s economic adviser leaving

WSJ – mortgage misery

Housing Messages Mixed…and The Next Shoe to Drop

$50 Million in AIG Bonuses Returned

Bernanke Says Interest Rates to Stay Low

The Village Idiot Still Works at AIG

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