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20% still underwater

According to real estate website Zillow.com, more than 20% of the nation’s mortgage borrowers owe more than their homes are worth.  At 21.5% for the third quarter, it is a small improvement over the previous quarter, when 23.3% of loans were underwater, and in any event most of the improvement comes because so many people lost their homes to foreclosure.  Negative equity is a hotly watched statistic because it is a prime predictor of foreclosure — second only to loss of income.  In some markets, residents were helped by improving home prices. As prices rise, it narrows the gap between what home owners owe and what they could sell for. As a result, hard-hit metro areas such as Merced, Calif., and Orlando, Fla., recorded huge declines in the number of underwater borrowers.

Merced was down to 40% while Orlando fell to 64.6%.  In fact, most markets trended up. Only 25 of 142 markets surveyed lost ground, led by Lansing, Mich., where negative equity grew to 31.5%.  Neighboring Detroit also worsened, jumping up to 31.4%, as did Grand Junction, Colo., where the it grew to 31.2%.  Las Vegas continued to lead the nation, with 73.9% of all mortgage borrowers owing more than their properties are worth. In Phoenix, that total is 66.8%; in Orlando, 64.6%; and in Reno, 61.9%.

Wall Street Journal: Is Obama going to cancel debt on underwater mortgages?

DON’T JUST STAND THERE, DO SOMETHING. That’s the increasingly nervous vibe going through Washington as the economy slows and November’s mid-term elections quickly approach.  The latest trial balloon would have Fannie Mae (FNMA) and Freddie Mac (FMCC), the mortgage giants operating under Treasury conservatorship, forgive the portion of loans that exceed the now-deflated value of the properties to which they’re attached. Or Fannie and Freddie could loosen the standards for current mortgage borrowers to refinance.  A mortgage-forgiveness “Hail Mary” pass could put hundreds of dollars a month into pockets of some of the 15 million underwater homeowners with negative equity totaling $800 billion. That would come 100 days before November’s election in which Democrats face even bigger than usual midterm losses with President Obama’s approval ratings languishing at lows. All without additional “stimulus” funds that would expand the federal deficit.  Sounds like a great idea, win-win for everybody. Except for the unfortunate principle of economics known as TANSTAAFL—There Ain’t No Such Thing as a Free Lunch. And the Treasury denied Thursday that any such changes are afoot.  Just as well.

Suddenly changing to make it easy to refinance, either through principal forgiveness or lowering lending standards for Fannie and Freddie, would cause chaos in the mortgage-backed securities market. The Fed, with a massive MBS position, would be a big loser. So would be Fannie and Freddie. And that ultimately means the American taxpayer.  Moreover, a plunge in the MBS market would mean huge losses for other investors, including those with stakes in mutual funds with big MBS exposure. And a plunge in mortgage securities prices could wind up pushing up mortgage rates in the end, conceivably pricing out some prospective buyers trying to get their proverbial foot in the door of their first house.  And politically, it could backfire. There could be many more folks resentful that they couldn’t get a special deal to reduce their mortgage because they did the right thing—put down an ample downpayment on a house they could afford with a margin of safety.

Fannie Mae Finds No Merit in HAMP Whistleblower Allegations

Caroline Herron, a consultant who told National Public Radio she was fired after revealing the company was hindering progress for the Home Affordable Modification Program (HAMP), says the Treasury Department hired Fannie to run HAMP for $113 million. After she left Fannie, she returned as a consultant for the HAMP project, but said the company ran HAMP to push its own bottom line, not to help borrowers. She’s now suing Fannie Mae, alleging the company fired her for pushing HAMP reform.  Fannie Mae says there is no merit to the allegations, and says Herron, through her attorney Lynne Bernabei, notified the company in early March of her potential allegations. Fannie then hired the law firm Fried Frank, which specializes in corporate matters, to conduct an independent investigation into the allegations.

Former Inspector General of the Department of Justice Michael Bromwich led the investigation, according to Fannie Mae.  “Ms. Herron was invited to participate in that investigation but she declined to do so. The investigation found no merit to her allegations,” Fannie Mae said.  The Treasury launched HAMP in March 2009 to provide servicers incentives for the modifications of loans on the verge of foreclosure. To date, participating servicers have provided 389,198 permanent modifications, just over 13% of the mark set by the 3m to 4m by 2012 set by the Obama Administration when the program launched last year.  Not to jump to any conclusions, has anyone fallen down in shock at the news that Fannie investigated itself and found no merit to an allegation against it?

Unemployment

With a 9.5% jobless rate and 15 million Americans looking for work, a surprising number of employers say they are having trouble filling open positions.  “This is as bad now as at the height of business back in the 1990s,” says Dan Cunningham, chief executive of the Long-Stanton Manufacturing Co., a maker of stamped-metal parts in West Chester, Ohio, that has been struggling to hire a few toolmakers. “It’s bizarre. We are just not getting applicants.”  Employers and economists point to several explanations. The Democrats extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work.  Millions of homeowners are unable to move for a job because the real-estate collapse leaves them owing more on their homes than they are worth.  The job market itself also has changed. During the crisis, companies slashed millions of middle-skill, middle-wage jobs. That has created a glut of people who can’t qualify for highly skilled jobs but have a hard time adjusting to low-pay, unskilled work like the food servers that Pilot Flying J seeks for its truck stops. 

Longer-term trends are at play. For one, the U.S. education system hasn’t been producing enough people with the highly specialized skills that many companies, particularly in manufacturing, require to keep driving productivity gains. “There are a lot of people who are unemployed, but those aren’t necessarily the people employers are looking for,” says David Autor, an economist at the Massachusetts Institute of Technology.  Manufacturers of high-precision products such as automobile and aircraft parts are in a particularly tough spot. Global competition keeps them from raising wages much. But they need workers with the combination of math skills, intuition and stamina required to operate the computer-controlled metalworking machines that now dominate the factory floor.  At Mechanical Devices, which supplies parts for earthmovers and other heavy equipment to manufacturers such as Caterpillar Inc., part owner Mark Sperry says he has been looking for $13-an-hour machinists since early this year. The lack of workers is “the key limitation to the growth of our business and to meeting our customers’ expectations,” says Mr. Sperry.

He estimates the company could immediately boost sales by as much as 20% if it could find the 40 workers it needs.  Trips to several job fairs yielded almost nothing, so the company set up a 10-week training program to create its own machinists. Out of the first group of 24 trainees, 16 made it to graduation.  Mr. Sperry sees extended jobless benefits as one of the main culprits behind his company’s hiring difficulties. Many of the applicants he saw at job fairs, he says, were just going through the motions so they could collect their unemployment checks.  Some workers agree that unemployment benefits make them less likely to take whatever job comes along, particularly when those jobs don’t pay much. Michael Hatchell, a 52-year-old mechanic in Lumberton, N.C., says he turned down more than a dozen offers during the 59 weeks he was unemployed, because they didn’t pay more than the $450 a week he was collecting in benefits. One auto-parts store, he says, offered him $7.75 an hour, which amounts to only $310 a week for 40 hours.

DSNews.com – Recouping money from GSEs

Leaders of the House Financial Services Committee say they are looking for ways to recoup the billions of dollars the federal government has sunk into the GSEs over the past two years.  Taxpayer support to shore up the nation’s two largest mortgage companies – Fannie Mae and Freddie Mac – stands at $145 billion so far. Estimates from the federal government put the tab for subsidizing the two GSEs at $389 billion, when all is said and done – the costliest bailout of the crisis.  Rep. Barney Frank (D-Massachusetts), chairman of the House Financial Services Committee, and his lieutenant, Rep. Paul Kanjorski (D-Pennsylvania), have summoned their committee members for a series of hearings in September on the GSEs and the housing finance system.  And Kanjorski says they will explore possibilities for recovering the costs that taxpayers have incurred from the 2008 decision to place Fannie Mae and Freddie Mac into conservatorship.  “Twenty years ago, we found a way for industry to pay back the sizable U.S. Treasury payments for resolving the savings-and-loan crisis. We can do it again,” Rep. Kanjorski said.

The congressman also plans to look into the Federal Housing Finance Agency’s (FHFA) recent efforts to recoup funds from the issuers of underwater securities purchased by the GSEs, as well as whether Fannie and Freddie are accurately pricing guarantee fees to cover risks and provide a reasonable return.  Chairman Frank says now that the GSEs have been under government control for two years and financial reform legislation has been enacted to prevent reckless, predatory lending in the private sector, it’s time to “move to the next phase, a complete restructuring of the tangle of housing finance tools so that we move forward in a way that protects taxpayers, prevents economic turmoil, and appropriately serves all aspects of the housing market.”  That’s certainly putting lipstick on a pig, given that the last two years of government control are responsible for so much of the problem and so much of the money sunk into the GSEs.  But hey, that’s Barney Frank for you.

Now for our real estate education section…

The Grapes of Math: What’s Better – Fine Wine or Short Sales?

What’s better? Exotic alternative investments like fine wine or short sale real estate? Unlike many of our former “what’s better” scenarios, this one has a distinct advantage…fine wine grows better with age just like real estate! Let’s face it, unless the property has a vineyard, it also tastes better than real estate. But, to be perfectly fair, we will take the time to actually crunch the numbers in order to arrive at the most unbiased conclusion possible.

Investing in Liquid Assets

Investment grade wine may not be a part of the average portfolio but it does provide a fair estimation of many forms of alternative investments enjoyed by the affluent such as art, wine, jewels and other investments. All tend to hold their value or increase over time (good inflationary hedge) just like real estate. For example, consider a 1961 Chateau Latour which originally sold for 25 Pounds…and which now would fetch an estimated 35,000 Pounds…over a 15 percent annualized return (Not Bad!) which decimates long term returns in the stock market, bonds or cash holdings. But, how does it hold up against short sale real estate?

While fine wine may be the winner in the “liquid assets” category when taken literally, there are some very real limitations. Not only is it subject to breakage or spoilage (egads!) but it has zero residual value when not in use. Unlike real estate, wine rarely generates cash flow…in fact, once it’s used, the value is all but gone. In short, it’s an all or nothing proposition. Fine wine is difficult to impossible to leverage in order to purchase additional assets, requires a specialized type of buyer and is subject to additional costs including storage fees. Comparatively, real estate is easily rented when not in use, can be leveraged or refinanced to purchase additional assets and is also subject to additional costs but with the advantage of strong tax incentives/write-offs.

What about downturns? Believe it or not, there is a fine wine index (actually a couple of them) including the Liv-Ex based Fine Wine 100 Index tracked via Bloomberg which is up just over 14 percent annually since summer of 2001…an impressive feat given the current economy. The U.K. based Wine Investment Fund found that investment grade wines generate about 15 percent per year in average returns. However, fine wines also degrade (literally and fiscally). For example, during the most recent global downturn, the LivEx index lost roughly 22% (a surprisingly similar percentage as that experienced in the real estate market) but has since rebounded and out-performed the stock market by a substantial margin.

So…which is the better investment? There is plenty of room for both in a well balanced portfolio but for those just starting out, real estate provides the flexibility, tax incentives and “real life” access that will allow you the means to fully enjoy that fine wine once the time is right.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

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

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

Then they can subscribe directly at the following link:  http://www.smartrealestatenews.com/

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

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

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7.3 million Mortgages Non-Current: LPS

More than 7.3 million mortgages in the US are non-current or in REO status through March 2010, according to the Lender Processing Services (LPS) Mortgage Monitor report. Data and analytics firm LPS reported the modest improvements in the amount of loans becoming current has been overshadowed by this large pool of non-current assets, which represent more than 12% of all active loans in the country. The volume of distressed mortgages is up 19.3% from a year ago. The amount of REO in the US as of March reached its highest levels since 2008, according to the data. Since the beginning of 2008, when LPS measured more than 675,000 REO, the volume has increased 62.2% to more than 1.09m properties. The amount of delinquencies in March decreased 10.3% from February but remains 15.7% higher than levels measured a year ago. The foreclosure rate in March also dropped 3.27% from the month before but increased 32.9% from last year. In addition, LPS reported a positive impact from the Home Affordable Modification Program (HAMP). The amount of early-state cures – meaning loans that are brought from 30-or 60-days delinquent to current status – increased, indicating a higher rate of self-cures.

Muted Sales from Home-Buying Tax Credit

The expiration of a federal tax credit for home buyers has spurred some consumers to hurry to ink deals, but the last-minute activity has been more muted than some brokers and builders anticipated. To qualify for the credits of up to $8,000, home buyers must sign purchase contracts by midnight Friday, and those purchases must be completed by June 30. Some sellers were preparing for a possible 11th-hour rush, but a few do say that business has surged as the deadline neared. So far, the credit has been most effective with first-time buyers not stuck with an existing home to sell. The end of the credit has stirred fears that the housing market, which has showed signs of stabilizing in much of the country over the past year, might face further steep price declines. Meanwhile, many of the same headwinds remain: Unemployment is high, and the foreclosure crisis continues to dump more distressed properties on the market. Congress initially passed a $7,500 tax credit for first-time buyers two years ago, which had to be repaid over 15 years. Then, last spring, Congress extended the credit, expanded it to $8,000 and waived the repayment requirement. When that was set to expire Nov. 30, Congress extended it again and added a $6,500 tax credit for some repeat buyers.  But, the credit won’t be extended—for now, at least. The National Association of Home Builders has said it currently isn’t lobbying for another round. Some forecasters expect foreclosure activity to put further pressure on prices and inflate inventories in troubled markets, but Lawrence Yun, chief economist with the NAR, said he is not worried about distressed homes, “We know that foreclosures will remain high” he said. “We’ve had this shadow inventory coming on, and it is being absorbed.”

Economy grows

The Commerce Department says gross domestic product, the broadest measure of the nation’s economic activity, rose at a 3.2% annual rate in the three months of this year – down from the 5.6% growth rate in the fourth quarter, and slightly below economists’ forecasts for a 3.3% increase.   In the fourth quarter, most of the growth was due to businesses no longer making the deep cuts in inventories that they had made early in 2009 when they were concerned about a sharp fall-off in demand. But the rise in consumer spending was fairly modest in the fourth quarter, increasing at only a 1.6% annual rate.  This time inventories made only a modest contribution to growth but spending by households grew at a 3.6% annual rate, and accounted for the overwhelming majority of the improvement in the economy.  Still, while there may be signs of greater strength, the report also detailed some of the headwinds facing the economy.  Investment in residential real estate fell nearly 11%, ending a two-quarter rebound in that battered sector and subtracting from overall growth. And commercial real estate investment dropped at a 14% rate, although that was a slower pace than in the fourth quarter.  While federal government spending increased 1.4%, that was outweighed by a 3.8% spending cut by state and local governments dealing with budget crises.

Diana Olick – Geithner Slams Loan Servicers

“The servicers slam the Treasury and the Treasury slams the servicers and more and more homes move to foreclosure as the housing recovery spits and sputters. A few weeks ago members of the nation’s large banks told the committee overseeing the TARP that the Treasury’s Home Affordable Modification Program was seeing pitiful results because it was so slow in coming. Today the Treasury Secretary Timothy Geithner fired back in testimony to the Senate Committee on Appropriations: “I want to be clear that we do not believe servicers are doing enough to help homeowners – not doing enough to help them navigate the difficult and often frightening process of avoiding foreclosure. We are troubled by reports that servicers have foreclosed on potentially eligible homeowners, or that they have steered these borrowers away from HAMP and into the bank’s own modification program.” That they have lost documentation, or claimed to. That they are not responding to the needs of responsible and increasingly desperate homeowners. The home buyer tax credit has expired. This was a program that helped people buy homes, plain and simple, and it served to stabilize home prices at least temporarily. I’m not saying I’m a huge fan of government intervention in the housing market. But I’m a bigger fan of getting the housing market back on its feet than I am of helping certain troubled borrowers get back on their feet, when we know, owing to their tenuous financial situations, that they will likely fall again.”

DSNews.com – Those Facing Foreclosure Can Stay On As Renters

Homeowners facing foreclosure get support through a bill that gives them the “right to rent.” The bill would allow a family receiving a foreclosure notice to petition a judge to stay in their home as renters under a 5-year lease. The judge would appoint an independent appraiser to set fair market rental value, which would be allowed to rise with inflation. In a statement to the press, the bill proposers cited the latest market data from RealtyTrac, which showed that foreclosure activity nationwide rose by 19% in March, setting a new monthly record of 367,000 filings. RealtyTrac also found that for the first three months of 2010, foreclosures are up by 60% compared to 2009 and roughly 6 million mortgages are at least 60 days delinquent.  Along with Home Affordable Modification Program (HAMP), the nation’s mortgage problems, could see a solution with “the Right to Rent which can be a fair and sensible solution for struggling homeowners. Banks will still get reliable rental income, and families will be able to stay in their homes and significantly lower their monthly housing costs,” said Rep. Raúl M. Grijalva, one of the proposers of the bill. To prevent use of the program by speculators, eligibility for the “right to rent” initiative would be limited to homes purchased at or below the median price for their metropolitan statistical area, and must have been the homeowner’s principal residence for no less than 2 years.

More Homeowners Consider Strategic Defaults

More homeowners are willing to walk away from their homes voluntarily, according to new research released by the University of Chicago and Northwestern University. About 31% of foreclosures in March were considered “strategic defaults,” in which homeowners walk away when the value of a mortgage exceeds the house value — even if they can afford the mortgage. That’s up from 22% in March 2009. “With more and more homeowners believing that lenders are failing to pursue those who default on their mortgages, there is a risk that a growing number of homeowners will walk away from their homes even if they can afford monthly payments,” said Paola Sapienza, a finance professor at Northwestern’s Kellogg School of Management.  The latest research was released late Thursday with the two universities’ Financial Trust Index, which tracks public trust in the financial system. Their survey showed that the likelihood of strategic default increased by 23% when homeowners learned that a neighbor with negative equity received a partial loan for forgiveness. It increased by 29% if homeowners could find alternate financing for a new home. “A key deterrent to strategic default is the fear of losing a good credit score,” Zingales said. About 74% of homeowners “believe it is very important to maintain good credit and this can be a factor in encouraging them not to walk away.”

Now on to our real estate investing education section …

Friday File – Your Google Resolution

This week we have taken the time to tackle the tough topic of Google ratings. As the largest search engine, Google is an essential aspect to the success of every real estate agent or short sale investor. For this week’s Friday File, take 15 minutes to review the basics about your relationship with Google.

1. Where does your website rank for desired keywords? Visit www.google.com then type in the desired keywords to see where your listing comes up in the natural ratings (not Adwords or paid listings). To find out your grade use the following rough guidelines:

A – Your website is listed among the top three results. Assuming these are desirable search terms that people actually use, Good job! You have earned an “A”.

B – Your website is listed on the first page or top ten results. Once again, assuming this is for a keyword or phrase that is frequently used, you have a good chance of securing a decent sized response.

C – Your website is listed on the second page or top twenty search results. You are barely hanging in there but will sporadically receive some attention. Evaluate what it would take to move up the ratings.

D – Your website is listed on the third page or beyond. If it’s not on the first 20 results (two pages) then you are missing more than 80% of prospective visitors.

2.  Discover your directory links. Directory links are a quick and easy way to secure valuable links. For a short-cut of accessible directory listings visit:

http://info.vilesilencer.com

Click the Excel download link located in the upper right hand corner then save to your computer. It contains an up-to-date listing of some of the most friendly directory listing sites available today.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

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

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
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 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
–

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

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

********************************************************
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 MBA – 1.2 million households lost

 According to the Mortgage Bankers Association (MBA), 1.2 million households were lost from 2005 to 2008, despite the population increase of 3.4 million in the study area.  This decline in households is likely what contributed significantly to the excess supply of apartments and single family homes on the market.  The study, “What Happens to Household Formation in a Recession,” was conducted by Professor Gary Painter of USC and sponsored by the Research Institute for Housing America (RIHA).  It analyzes the impact of economic and housing conditions on household formation and how the recent recession has affected Americans’ propensity to form new households, mobility trends, and changes in the rate of overcrowding.  Key trends are:

-  In a recession, the likelihood that a young adult will form an independent household falls by up to 4 percentage points depending on the age of the person and severity of the changes in unemployment rates. In this particularly severe recession, this prediction has been borne out with data through 2008 revealing a reduction of nearly 1.2 million households nationwide despite the continued increase in population and likely even more households lost in 2009.

-  Though the national homeownership rate has fallen from a peak above 69% to

just over 67%, this decline may be understating the magnitude of the change when we take into account the simultaneous drop in renter household formation. In fact, the rental market saw a steeper decline in new households formed than the homeownership market. As a result of this drop, the denominator in the homeownership rate calculation has been reduced, mitigating the decline in homeownership.

-  This recession has also caused a dramatic increase, almost five-fold, in the rates of overcrowding (defined as having more than one person per room in the household), indicating that many families are doubling up in response to the downturn.

-  Overall, there was a greater impact on the creation of new households among native born Americans over new immigrant households. The data show native born Americans experienced a larger decline in household formation and a larger increase in overcrowding rates than immigrants.

- Children whose parents have higher incomes are more likely to remain at home, with this effect largest for youths moving into the rental market. However, children whose parents have higher financial wealth are more likely to form their own new rental households.

Retail sales up

Sales tracker Thomson Reuters, which looks at monthly same-store sales for 28 chains, said 10 of the first 12 retailers due to report beat estimates for sales.  If the other reports continue this trend, it will mark the seventh straight month of improving sales, according to data from Thomson Reuters. Last year, retailers posted a 5% decline in March.  Analysts have forecast that discount retailers would report an 8.5% increase in March, the most of any group.  Department stores, among the worst hit during the downturn, were expected to report gains of 8.2%, led by Kohl’s Corp with a forecast 12.4% jump.  Teen retailers are expected to show the most dramatic turnaround, with a 7.4% rise.

That would be a marked improvement over the year-earlier plunge of 13.6%.  Other retailers, including Macy’s Inc, TJX Cos Inc, JC Penney Co Inc and Saks Inc, are set to report March sales later on Thursday morning.  On average, analysts are expecting same-store sales to be up 6.2% in March.  But analysts and some retailers have warned that much of the boost came from an early Easter holiday that may have simply shifted sales to March from April.  And in a sign of how Wall Street expectations may be getting ahead of actual performance, Abercrombie & Fitch came in short of forecasts with a 5% rise.  Family Dollar Chief Executive Officer Howard Levine warned on a conference call on Wednesday that the timing of the holiday would hurt April sales.  And retailers were grappling with the worst consumer spending slump in decades in March 2009, when same-store sales fell 5%, making comparisons easy.

Changing mindset about strategic default 

Mortgage-holding homeowners that owe more than their homes are worth show a greater tendency toward mortgage delinquency behavior, according to a recent Fannie Mae housing survey of more than 3,400 Americans.  While this may not be jaw-dropping news to most of you, the survey points to a changing mindset among homeowners that may be significant.  Although Fannie found that two-thirds of survey respondents prefer owning a home to renting — even in the face of economic challenge and the downturn in housing prices — the mentality of strategic default is spreading.  A contagion effect within communities is leading borrowers to consider default as an acceptable option in the face of financial hardship, Fannie found.

Both delinquent and current mortgage borrowers are more than twice as likely to have seriously considered stopping payment if they know someone who has already defaulted.  Despite a growing acceptance of strategic default on the community level, thinking about walking away and actually walking away are separate events, according to Kathleen Day, a representative at the Center for Responsible Lending.  Slightly more than half (53%) of respondents to Fannie’s survey believe homeowners bear the responsibility for taking out loans they cannot afford. But 58% of delinquent borrowers believe the mortgage lender is to blame, since the lenders “know better what people can afford and should help guide people.”  A separate poll recently found that 24% of mortgage borrowers believe they are underwater.

Jobless claims jump

According to the Labor Department’s weekly report, there were 460,000 initial jobless claims filed in the week ended April 3, up 18,000 from an upwardly revised 442,000 the previous week.  Economists surveyed by Briefing.com expected new claims to fall to 435,000 in the week.  The number of new claims were just below the level reached in the Feb. 27 week, when initial claims totaled 466,000.  The Labor Department also tracks the 4-week moving average of initial claims, and that number was 450,250 for the week, up 2,250 from the previous week’s downwardly revised average of 448,000.   The report also said that 4,550,000 people filed continuing claims in the week ended March 20, the most recent data available.  The 4-week moving average for continuing claims was 4,648,250, a decrease of 36,000 from the preceding week’s revised average of 4,684,250.  But keep in mind that continuing claims data exclude people whose benefits expired or those who have moved to state or federal extensions. It only reflects those filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks.

2MP program slow to launch

The Home Affordable Foreclosure Alternatives (HAFA) program launched this week, but a much longer-anticipated mortgage aid program, the Second Lien Modification Program (2MP) is yet to get off the ground.  Details of 2MP released recently by the US Treasury Department disappointed first lien investors, in part because the program requires the borrower’s consent, according to analyst commentary from Amherst Securities Group. An automatic enrollment in the second lien program when the trial modification on the first mortgage begins would increase the success rate on both.  “[W]e strongly recommend that the second lien be modified (or placed in a trial modification) automatically, with the borrower simply informed that the modification has occurred,” Amherst analysts wrote in commentary this week. “The second lien modification would become ‘official’ at the same time the first lien modification is made permanent, and incentive payments could begin on that date.” 

According to the Amherst team it is also unclear what happens to the second liens when principal is forgiven on the first lien. Laurie Goodman, who heads up the mortgage-backed strategy group at Amherst, notes that initial guidance from the Treasury seems to indicate that, if principal is reduced on the first lien, then the second would be reduced by at least the same proportion.  But language urging the “extinguishment” of second liens carries the effect of principal forgiveness, rather than forbearance. And Goodman writes that “it is unlikely” the Treasury has decided whether 2MP will implement proportional or complete forgiveness.  Late in March, Citigroup became the fourth big lender to sign up for the 2MP. Bank of America first signed on in January.

Now on to our real estate investing education section …

Seven Reasons Women Are Turning to Real Estate  in Record Numbers

Think short sales and real estate investing is a guys game? Think again. Women are making in-roads into real estate in a big way. Forget clipping coupons or trying to save up for a vacation, research shows that women have been making the majority of home buying decisions related to the purchase of a family home for several years but now many are taking it one step further. Women are now making investment decisions on a regular basis including the purchase of short sale real estate and other investment assets. In fact, nearly 1 out of every 4 real estate transactions are conducted by women buyers.

Below are the most important reasons women are turning to real estate in record numbers 

1. Profits. Women have historically lagged behind men in earning capacity even with the same education and job experience. Short sale real estate provides an exceptional opportunity for women to supplement income without having to work second or even third jobs.

2. Retirement. Even after the most recent rebound, many investment portfolio’s are far from healthy. A few well-timed short sale deals are able to replace much of that lost income.

3. Convenience. Real estate is flexible allowing women the time to interact with family and friends without sacrificing a life they love.

4. Security. A few well timed deals or rental properties afford women an independent means of income aside from those of their spouse or significant other. Statistically women live longer than men which often results in a dramatic decline in their standard of living towards the end of life. Holding a few long term assets that appreciate over time can assure access to funds at any time of life.

5. Empowered. Not surprisingly, men have been harder hit by the recent downsizing and lay-off’s than women. Experts believe higher overall income levels are acting as an inverse incentive to eliminate men while keeping less expensive staff. The shift in income is increasingly shifting the focus of power in the household.

6. Credit Changes. Gone are the day when women must have a co-signer but lower income levels combined with children and more obligations often resulted in a practical need for two income applications. As women earn more and build solid credit reputations independent from their spouse or significant other, they are asking for…and getting…more favorable terms. Combined with federal incentives such as tax breaks, it’s a winning combination.

7. Fun. Women have learned to enjoy the freedom, prestige and game of negotiation once thought to be the exclusive domain of men. Of course, communication skills combined with social savvy, independent wealth and a bit of encouragement has resulted in a record number of women learning that wheeling and dealing is not only a great way to make money but a lot of fun!

See you at the top!

Chris McLaughlin
************** 

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

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

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
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 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
–

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

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

********************************************************
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Inmates are running the asylum at Bank of America

Bank of America is starting a program to offer homeowners who owe significantly more than their homes are worth the opportunity to have their loan balances reduced.  The program, which starts in May, would potentially help about 45,000 homeowners nationwide. In launching the effort, Bank of America is jumping into the debate about how to address the millions of homeowners whose mortgages exceed the value of their homes and who have complicated industry and government efforts to prevent foreclosures. The Bank of America plan is limited in scope. Borrowers must have missed at least two mortgage payments and be severely underwater to qualify, owing 20 percent more than their homes are worth. It is also limited to borrowers with certain types of risky loans, including subprime mortgages or other loans with a two-year adjustable rate.  Bank of America expects to forgive about $3 billion in principal on loans as part of the program. The effort expands a settlement agreement that the bank made with several state attorneys general in 2008 to modify thousands of mortgages and settles a Massachusetts investigation of lending practices by Countrywide Financial, which Bank of America acquired in 2008.  So what happens now?  Joe Sixpack, who up till now has managed to make all his payments in time, reads that he doesn’t qualify precisely BECAUSE he has made all his payments on time, and guess what he does?  This is pure insanity.

Initial job claims down

The Labor Department said today that initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 442,000.  report included annual revisions to the weekly unemployment claims seasonal factors going back to 2005.  Using the old seasonal factors, claims would have dropped only to 453,000, a Labor Department official said. Analysts polled by Reuters had expected claims to slip to 450,000 from a previously reported 457,000 the prior week.  The decline in initial claims last week pushed them into a range that analysts reckon signals labor market stability.  The labor market has lagged the economy’s recovery from its worst downturn since the 1930s, but payrolls are expected to grow this month as the government steps up hiring for the 2010 census. About 8.4 million jobs have been lost since December 2007, when the recession started.  The number of people still receiving benefits after an initial week of aid fell 54,000 to 4.65 million in the week ended March 13, the lowest since December 2008, the Labor Department said. The so-called continuing claims data included the household survey week, from which the unemployment rate is derived.

Mortgage rates up

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.99 percent for the week ended March 25, up from the previous week’s 4.96 percent, according to a survey released by Freddie Mac the second-largest U.S. mortgage finance company. Mortgage rates are expected to rise when the Fed—the U.S. central bank—stops buying mortgage-related securities at the end of March. The rate for the latest week is also above the year-ago level of 4.85 percent and the record low of 4.71 percent in early December. Freddie Mac started the survey in 1971. “Mortgage rates inched up slightly this week as bond yields rose even further,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Exit is dangerous

John Taylor, a Stanford University economist and author of a key central banking rule of thumb, will testify before the House Financial Services Committee that the Federal Reserve has not been clear enough about how it intends to unwind its unprecedented monetary easing campaign, and some of the tools it expects to use may not work.  He says the Fed’s unorthodox approach has not only threatened its independence but also made policy making more difficult.  ”By taking these extraordinary measures, the Fed has risked losing its independence over monetary policy,” said Taylor, arguing that such steps veered too far into the arena of fiscal policy.  “Unwinding them involves considerable risks,” said Taylor, who was a Treasury official during the Bush administration, in prepared testimony made available on the House committee’s website on Wednesday. Federal Reserve Chairman Ben Bernanke will be the first to testify before the committee, starting at 10 am ET.  The Fed has taken pains to assure investors and the public that it can and will pull back on its zero percent interest rate policy when the times comes, probably through a mixture of draining credit from the banking system, raising the interest it pays on bank reserves, and selling some of its assets. But this approach has serious shortcomings, Martin Goodfriend, a professor of economics at Carnegie Mellon University, will testify.

Social Security underwater

Social Security will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.  Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.  The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax. Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency, unless Congress strengthens the program’s finances.  “When the level of the trust fund gets to zero, you have to cut benefits,” Alan Greenspan, architect of the plan to rescue the Social Security program the last time it got into trouble, in the early 1980s, said yesterday.

Now on to our real estate investing educational section…

Online Real Estate Research

Whether you are interested in buying a short sale across town or across the nation, learning how to use online resources to perform basic research is simple and cost effective. Here are some of the most popular and easy to use sites that buyers and agents alike tend to use when evaluating potential properties.

1. Request a copy of the Homeowners Association guidelines (or condo). Not only will you find out important information about community restrictions, limitations and use patterns but many HOA packages include a welcome letter informing newcomers about utilities, cable, phone and other service providers as well as neighborhood clubs and events. Make a copy to present to potential buyers.

2. Obtain crime statistics. Without a doubt, one of the most important predictors of property value over the long term is the safety of the community. Contact the local police department to request an up-to-date report on types of crime (property crimes, violent crimes etc…) for the zip code in question. Follow up by performing a predator search courtesy of the free search tool at www.familywatchdog.com.

3. Contact the Chamber of Commerce to request a Calendar of Events and learn about local tourist attractions, restaurants, entertainment and other amenities.

4. Rate the schools or request a school report card by visiting www.greatschools.net. Homes in preferred school districts sell for an average of 10% more than comparable homes in less desirable districts!

5. Rate hospitals. Easy access to preferred hospitals also increases the desirability of homes by an average of five to ten percent compared to similar homes in other areas. Determine how good the hospitals are in your new area by visiting non-profit organizations like www.LeapFrog.org  or www.HealthGrades.com.

6. Sign-Up for State and Local Website Information. It’s important to keep up with local trends, events and other pertinent information. Most communities have online newspapers and city/county government websites tend to post everything from tax information to information about small business concerns. Learn about bank branches, major employers, recreation and parks plus much more by having it fed directly to your email or phone.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

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

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
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 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, March 27, 2009
http://www.shortsalesriches.com/welcome.html

——–

Brand New Investor Makes It Happen!  If you

missed the amazing testimonial from a newbie

real estate investor who made $51,000+ on her

first deal, go here now to watch this video:

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Then grab a spot for yourself before they all

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———

Taxman cometh

Tax reform is next up on Obama’s massive do-to list.  He’s planning to set up a task force to reduce the estimated $300 billion-a-year tax gap — the difference between what individual and corporate taxpayers owe and what they actually pay.  “Managing to make headway to reduce that gap often means difficult reforms,” said James Poterba, president of the National Bureau of Economic Research.  While compliance is high for small businesses reporting wages paid to workers, compliance is much lower in cases when there’s no third-party reporting, like small business owners who do mostly cash transactions.  The cash economy may account for over $100 billion of the annual tax gap, according to testimony from Nina Olson, the National Taxpayer Advocate.  The members of the task force will come from the Presidential Economic Recovery Board, headed by former Federal Reserve Chairman Paul Volcker.  We’ll get to hear its proposals on Dec. 4.  I can’t wait.

Good news…no, wait…less bad news

At least one home builder is less unhappy with the market.  KB Home, of California, slashed its quarterly loss by 78 percent, more than expected, reporting a 26 percent increase in new home orders as cost-conscious buyers flocked to the builder’s smaller, more affordable models.  For the quarter ended Feb. 28, KB Home reported a net loss of $58.1 million, or 75 cents a share, compared with a net loss of $268.2 million, or $3.47 a share, in the same period the year before.  The company has stepped up its rollout of smaller, more affordable homes called The Open Series aimed at competing with foreclosures and other previously occupied homes.  New home orders totaled 1,827, and the cancellation rate dropped from 53 percent to 28 percent in the year-ago quarter.  You’ll notice these are still losses we’re talking about here…just less of them.

US heads for inflation

While Japan tips into deflation and Europe coasts at near zero inflation, U.S. prices edged up in February.  Excluding food and energy, the index rose 1.8 percent after gaining 1.7 percent in January.  “The core price index was on the high end of expectations.  This will fan inflation fears.  The Fed is sowing the seeds of future inflation,” said Scott Brown, chief economist at Raymond James & Associates in St Petersburg, Florida, speaking of the massive money printing exercise taking place in the US.  Obama is set to quiz leaders of the biggest U.S. financial institutions on Friday about the economy and their businesses as his administration seeks broader power to regulate the financial system.  It’s a good thing China is still willing to grudgingly buy the US dollar…or is it?

Spending up, income down, saving up

The Commerce Department reported Friday that consumer spending edged up 0.2 percent in February following a 1 percent jump in January.  But the report says incomes fell by 0.2 percent in February, the fourth drop in the past five months — declines that reflected the sizable number of job layoffs because of the recession.  After-tax incomes also fell in February, edging down by 0.1 percent.  We’re doing a bit better at saving though…the personal savings rate dipped slightly to 4.2 percent in February, compared to 4.4 percent in January, but it’s the first time the savings rate has been above 4 percent in more than a decade.  Isn’t it ironic that overdrawn credit caused the problem, but saving will make it worse?

Now on to our real estate investing education section…

Make or Break Short Sale Deals with BPO’s

BPO’s or brokers price opinions are just one of the tools every short sale investor and real estate pro should become intimately familiar with; they can literally make or break a borderline deal. In a nutshell, as a short sale buyer you are searching for a low BPO – in fact, the lower the better in most cases.  This provides the justification necessary to submit a low…or ultra-low…offer on a home; after all, lenders are not likely to just take your word for it that the property is worth only x amount. They want a reliable estimate on the current market value of the property including reasons why it is less than previously sold or assessed for in the past.

On the other hand, the BPO is typically representing the interest of the bank or lender – since the bank isn’t likely to send employees all over the nation to ascertain the current value of each and every property facing foreclosure or reduce resale value they contract with local brokers to do it for them. The BPO must maintain a feasible rationale for the lower value or risk hurting their own hard earned reputation.

So, how can a buyer work with the broker to obtain the lowest possible BPO? Start with these simple steps:

Open communication. Let the broker know the purpose of the evaluation. Remember, a BPO is a brokers price opinion – although they have expertise in the area, opinions are highly subjective. The very fact that the property is likely to go into foreclosure or other adverse status can actually influence the price by thousands of dollars – especially if there are other pending foreclosures in the area.

Don’t make improvements yet. While you want the property to appraise for a higher value after making repairs and renovations resist the urge to improve or even clean it before the sale. Cosmetic blemishes are easy to fix but may dramatically alter the price point of a home.

Walk & Talk. Take time to introduce yourself and show up when the property is being evaluated. Be sure to point out easy to miss items and share any negatives they might have missed. This is where it can really pay to do your homework in advance; even bus schedules or annoying neighbors might further detract from the value of a home.

Make it Easy. As you might imagine, BPO’s are in hot demand right now so make their job a little easier by pulling up comp’s on your own. Especially if you are new to short sales this is a great way to further familiarize yourself with the area and learn even more about the property – plus, it helps strengthen your position and makes the brokers work easier.

See you at the top!

Chris McLaughlin

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

P.S.

Don’t miss out webinar Saturday at 3:30 PM ET, 12:30 PM PST:

https://www2.gotomeeting.com/register/610039586

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

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

http://www.shortsalesriches.com/blog

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

About the author:

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

    * 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

—

Real Estate News & Commentary by Chris McLaughlin, March 19, 2009
http://www.shortsalesriches.com/welcome.html

——–

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I’ll tell you about one of these for fr*ee
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And I can’t do it in an email.

But if you’re finally ready to blast out of
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up a day or so early.  See if there’re any spots
left:

https://www2.gotomeeting.com/register/995947853
———
Floods of money:  Recovery or inflation?

The Federal Reserve was widely expected to hold the short-term bank lending rate at between zero and 0.25 percent, so it came as no surprise when it did.  The decision to dump money into the economy to try to buy us out of the recession was only slightly more surprising, but the amount — $1.2 trillion — took everyone by surprise.  Hoping to lower mortgages rates and consumer debt, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

Market reaction

The immediate market reaction was good:  the Dow bounced 90 points, the S&P soared, and all market indicators were generally positive.  Government bond prices leaped too, since mortgage rates will be going down even further than before.  If, and it’s a great big if, this can help stabilize credit markets and get us all spending, the economy may start to climb out of recession this year.  But is there a catch?  You bet.

 Inflation

Some economists — the ones with more than 10 minutes training in economics 101 — say the $3.9 Trillion slated for the budget can’t help but create galloping inflation the minute the economy starts to recover.  In fact, inflation may not even wait for the recovery; the dollar took an immediate tumble against other major currencies with the Fed announcement.  The Wall Street Journal’s Judy Shelton doesn’t mince words:  “How can capitalism find its footing when the monetary foundation is shifting with each new government bailout — each new infusion of deficit-financed government expenditure?  American families deserve better than to be punished by wasteful public spending and ruinous inflation.”

More free eco-cash

So you didn’t qualify for freebies from the mortgage bailout?  Cheer up — Washington is on a spending spree, and you can get up to $19,000 in upgrades to your house.  Expanded tax incentives in 2009 and 2010 for energy-efficient and renewable-energy home improvements include $1,500 in tax credits for qualifying windows, doors, insulation, roofs, heating and cooling equipment, water heaters, and even wood and pellet stoves. You’ll get a tax credit of 30% with no upper limit through 2016 for installing qualifying solar technology, small wind-energy systems, or geothermal-well systems.

AIG again

The House will vote today on a bill to levy a 90 percent tax on bonuses paid to employees with family incomes above $250,000, who work at companies that have received at least $5 billion in government bailout money.  Edward Liddy, brought in last year by the government to run AIG, told a House subcommittee Wednesday that the company was contractually obligated to pay the bonuses but added that many of them had already returned part of all of the bonuses.  The saga continues.

Now on to our real estate investing education section …

Fast Facts About the Stimulus Bail-Out

Short sale investors are likely to encounter clients that want to hold out for a big fat government paycheck rather than walk away from a home. After all, the media is filled with reports about big checks, bail-outs and “free money.”   Of course, scams and other fraudulent schemes abound making it tough to educate consumers about the facts versus fiction of the stimulus plan. Here to help is a quick primer about the proposed bail-out:

Fact: In order to refinance homeowners must be up to date on their current mortgage yet still demonstrate that they are “at risk” of facing foreclosure. The government anticipates up to 4 million households will fall into this delicate balancing act in order to qualify for funds…and it’s not limited to just owner occupied homes.

Fact: Mortgage modification clauses are much more difficult to obtain. Homeowners will have to satisfy the following stipulations in order to qualify:

Second lien holders must agree to waive or write-off obligations.

The home must be worth 80 to 105 percent of the current mortgage.

The primary lien holder must agree to modify principle, extend the duration of the loan and/or reduce interest rates to as little as 2 percent…or a combination of all of the above.

The homeowner must agree to credit counseling if they have extensive household debt in addition to high mortgage obligations.

Homes must be the primary residence and currently occupied. Homes cannot be vacant, in need of extensive repairs or otherwise hindered.

Up to $1,000 annual incentive payments will be made for up to five years – but only if the homeowner isn’t late on payments.

A new inspection may be required as well as the following documents:

Recent tax return and 2 to 4 recent pay stubs. Self-employed borrowers will need copies of quarterly estimated tax returns and prior year return.

Copies of all bank statements.

Proof of income from Social Security, alimony, child support or other income that you intend to use for the purpose of qualifying.

Current mortgage and liens including second mortgages.

Completed copies of Form 4506-T…a Request for Transcript of a Tax Return.

Completed copies of Form 1126 – a Borrower Financial Information form.

Proof or documentation of hardship, job loss, or other factors that may have influenced your current financial situation.

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

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

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

http://www.shortsalesriches.com/blog

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

About the author:

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

    * 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

—

One more word of advice…

You really don’t want to come in too pushy. The last thing you would want to do would be “I need this number to come in at this number”. You have to make them think that they are the expert and are the boss and use “jedi” mind tricks to make the bpo agent think that it was their idea to give you the number that you want.

A lot of these bpo agents are only doing bpo’s because the market crashed and they need their $65 bpo to put food on the table. They don’t like investors that are going to make a substantial amount of money on the deal. Sometimes it will be an REO agent that has an agreement with the bank that says that they have to do a certain number of bpo’s for free in exchange for getting reo listings handed to them on a silver platter. Sometimes they think that if they screw up your deal then when the house goes to auction they will get the listing so its important you tell them the hardship of the seller so that they have some sympathy for the situation.

What to say when you meet the bpo agent or appaiser?

First off you have to determine who you are. If you’re an investor you woudn’t want to tell them your trying to buy the house for 50k so you can flip it for 100k but you want to make sure you don’t directly misrepresent yourself. Tell them your trying to work with the sellers bank to try and work a short sale and sell the house so the sellers credit does not get ruined (which is absolutely true). If you’re the realtor or sometimes I have my bpo agent meet the banks bpo agent they can tell the banks realtor or appraiser that they are a realtor and are trying to work a short sale with the bank. WORD OF CAUTION!!… make sure this person understands what is trying to be accomplished. It’s best to start out doing bpo’s yourself. This is the hardest thing to outsource in this business!. The script for when you 1^st meet the appraiser at the bank would go something like this…..

You: Hello sir how are you today. I bet you’re doing a lot of these preforeclosure bpo’s. These dang things are everywhere!

BPO agent: Yeah you’re telling me. This is my 12^th one this week.

You: I bet (go ahead and be semi passive and let them into the house also its usually better if you arrange it so the seller is not present when the house is being appraised)

You: I am trying to work out something with the homeowner so they don’t lose their house to foreclosure. It’s really a sad story; the seller got laid off 3 months ago and can’t find any work. He just wants out of this house so he can move on. I sent an offer to the bank for 150k. We have the house listed to try and get a higher offer but have had no success. You can see that its been on the market 45 days. We have only had one showing. I had initially thought it would have been worth more but now I’m not so sure. This market keeps getting worse and worse!

BPO agent: Yes I know it’s really tough. Good news is I have plenty of work as long as I start knocking these things out.

You: Good. I have some comps and market condition that I have here for you. You will see that a few of these comps had seller concessions which kid of brings the true value of the property down. I already called the listing agent to verify this for you. The comps are coming in at around the 170’s but with the market where it is now and the fact that we have had very little action I think it may be difficult to sell the property for much more.

BPO agent: Ok I appreciate the indo

You: Thanks! Call me if you have any questions.

And that it. Now obviously it’s not going to go that smooth very time. Sometimes the agent/appraiser will be very stand offish and other times they will just ask you “where do you need this to come in at?”. It’s impossible to close every short sale deal and assuming you have your short sale business set up properly the ones that you don’t close will normally be because the bpo came in too high.

-Nathan

Most real estate agents are happy to give you that info over the phone. When you are sifting through your sold comps pay close attention to “sold terms”. If its cash don’t even waist your time calling because odds are there were none. If its conventional call and especially if it FHA definitely call.

Almost all FHA loans have a concession and sometimes have 6% of purchase price and 3% down payment assistance. On a 200k house that’s an adjustment of $18,000 on your bpo. If you don’t have a bpo prepared when you meet the appraiser out there make sure you write down the amount of the concession right next to the sold price. This can be just a little hand written note that says “200k purchase price, 12k concession 188k “true” purchase price.

A lot of times the agent or appraiser will thank you for doing all of this leg work for he/she.

-Nathan

- Contract

- Hardship letter

- Active Listing of subject property

- 3 lowest comparable active listings in area

- 3 lowest comparable pending sales

- 3 lowest comparable sold mls comps

- Any other low fsbo comps if applicable

- An estimate of repairs (unless the house is immaculate)

You can also have your own bpo done by a qualified agent. You want to make sure that you don’t do anything unethical that would bring the value at an unrealistic low number. You would give your bpo agent (the one that works for you) some comps and tell them to appraise it and make remarks somewhere in the bpo that the value is a 30 day quick sale value. Make sure they make adjustments for everything (especially declining market conditions) on the house.

- Nathan