Chrysler

Real Estate News & Commentary by Chris McLaughlin, April 6, 2009
http://www.shortsalesriches.com/welcome.html

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Mortgage refinances up

Fannie Mae said on Friday that its mortgage refinancing volume nearly doubled in March from the prior month to $77 billion. Tom Lund, executive vice president of Fannie Mae’s single-family mortgage business, said “A majority of our business volume in March was in refinanced loans, and we anticipate that volumes will increase even more as millions of additional homeowners become eligible to refinance under the President’s Making Home Affordable plan.” Under the program, Fannie Mae can refinance loans up to 105 percent of a home’s value, allowing borrowers, some of whom owe more than their home is worth, to refinance.

Treasury Department extends deadline for PPIP

The Treasury Department says it will extend the deadline by two weeks, until April 24, for private fund managers to participate in the administration’s Public-Private Investment Program (PPIP), to purchase distressed assets from banks. Department officials also say fund managers will not have to satisfy all three criteria released last month to participate in the program, which provides government capital and guarantees to spur purchases of the toxic assets.

Bailout goes surreal

Ok, this is getting weird. Now several U.S. banks that have already been bailed out by the government because of toxic assets, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are thinking about buying more toxic assets — the assets about to be sold by rivals under the Treasury’s $1 trillion plan. John Mack, Morgan Stanley’s chief executive, told staff his bank was considering how to become “one of the firms that can buy these assets and package them where your clients will have access to them,” according to the Financial Times. Spencer Bachus, the top Republican on the House financial services committee, said it would mark “a new level of absurdity” if financial institutions were “colluding to swap assets at inflated prices using taxpayers’ dollars.” For some reason the banks have declined to comment.

Speaking of gaming the system, GM’s new CEO Fritz Henderson keeps changing his mind about bankruptcy, depending on the day of the week, or the weather, or whether he needs taxpayer money or not. Last week it was bankruptcy, this week it’s not. Henderson said on CNN’s State of the Union that there would be more job cuts and plant closings, but that bankruptcy was not inevitable. GM has already received $13.4 billion and requested an additional $16 billion. Says Henderson: “We are planning to get the job done. Our preference would be to do it outside of the bankruptcy process, [but] if it cannot be done outside a bankruptcy process, it will be done within it.” Thanks Fritz — good to know you have a plan.

Chrysler and Ford

Chrysler has also asked for a new round of aid. David Axelrod, a senior adviser to President Barack Obama, said, “We want these to be going concerns — not wards of the state.” Is it just me or is decorating the nursery and offering billions of dollars worth of baby food NOT the best way to encourage independence in potential wards of the state? The only bright spot in all of this is that Ford says it completed a tender offer and reduced its debt by $9.9 billion. The auto maker says an offer to purchase notes from its financing arm produced $3.4 billion in securities tendered. Ford Motor Credit will use $1.1 billion to purchase that debt. But don’t start jumping up and down quite yet — U.S. auto sales fell by 37 percent in March, the 17th month in a row of declines.

Now on to our real estate investing education section…

Big Bank Losses & the Future of Short Sales

Recently released data by the Office of the Comptroller of the Currency (OCC) reports commercial banks lost well over $3.4 billion in interest rate derivatives during the last quarter. This is an especially unsettling number when you realize this is the first time in the history of the USA that bets on interest rates have failed.

To understand the significance of this it is important to first realize the CDO or credit default swaps represent less than 8 percent of the derivatives market…with over 80 percent of the remaining portion of the derivative market represented by interest. To date, most of the banking crisis has been concerned with bad mortgage loans and even a few credit default swaps…together they comprise only a small portion of the total derivative market which represents an estimated $200 Trillion (yes, trillion!).

So, how does this relate to short sales and other investments? In plain language…

Banks are losing money from betting on interest rates. If banks and other lenders can’t make money from current business practices what is the likely outcome? Change of course. Change is likely to come in the form of higher rates, tougher lending standards and more stringent down payment or other requirements…it won’t happen overnight so savvy short sale buyers will recognize the writing on the wall to take action now.

The current national (and even global) financial melt-down is likely to grow worse before getting better. Yes, the Federal Reserve was put into place to prevent a major banking crisis from wrecking havoc on the nation in a 1929 style run but keep in mind, despite the stabilizing efforts of the Fed, inherent differences also place the system at risk. For example, derivatives were all but non-existent. According to the Office of the Comptroller, the five biggest banks in America control 96 percent of the total derivatives. This means a new round of failure, bail-outs and banking crisis could hit the nation at any moment should even one of these banks be exposed to major losses. Remember, banks must “make good” on those losses but with only 10 percent or even less of the capital required to pay out a claim, banks are simply unable to do so; creating the risk of a domino like default scenario.

This is another reason banks are not lending – they are frantically attempting to hoard as much cash reserve as possible in order to hedge against the risk of a default looming in the future. Again, savvy short sale investors should recognize the ongoing threat of tighter lending standards far into the future –without government intervention (and even with it), purchasing a home for decades into the future may simply be out of reach for many Americans.

Make sure you are doing business with a solid bank. Short sales investors have two options; deal with small local banks that have strong bottom lines, didn’t engage in derivatives or other risky investments and are able to work with you personally…or, work with one of the A rated big banks. To find out how your bank is rated, visit www.TheStreet.com or www.MoneyandMarket.com with publishes a list of the best and worst banks across the nation.

See you at the top!

Chris McLaughlin

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

P.S.

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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

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Mid-Day Market News & Commentary by Chris McLaughlin, December 19, 2008
http://www.shortsalesriches.com/welcome.html

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President George Bush decided to throw out a lifeline to the automakers, a possible retreat from his “orderly bankruptcy” comments yesterday. Bush noted that with the country in a severe recession, “Allowing the auto companies to collapse is not a responsible course of action.” Bush has approved $17.4 billion in rescue loans, part of which comes from the $700 billion TARP, with the government having an option of becoming a stockholder in the automakers.

Now on to real estate investing education …

Do You Hear What I Hear?

During this most festive of holiday season, the sound of “cha-ching” normally rings just as loudly as that of the carolers and party-goers but this year is different. In fact, instead of singing and the sound of cash registers ringing the average short sale investor is more likely to hear wailing and gnashing of teeth from investors both near and far as the Federal Reserve reports that Americans have lost $2.8 Trillion in Net Worth…since last quarter!

Meanwhile, charge-off and delinquency rates for residential real estate loans have reached 1.45 for all banks and a whopping 1.66 for the 100 largest banks. Delinquency rates for residential real estate have now surpassed 5.08 for Q3 of 2008; the highest rate for residential real estate in over 25 years. With the economic news at home sounding so lackluster, it might lead some to seek returns in the foreign exchange markets. So, should potential short sale investors sink funds into global money market accounts or continue to pursue opportunities here at home in the current “buyers market” for real estate?

If the news domestically is hard to hear then consider the global perspective; entire nations are going bankrupt. Iceland, Hungary, the Ukraine, Pakistan and others are either facing bankruptcy or in the midst of a massive bail-out by the International Monetary Fund (IMF). Lest you think “it can’t happen here” consider this; Argentina went bankrupt as recently as 2001 as did Russia in 1998. Once an economic powerhouse, Germany has gone bankrupt twice in the recent past including 1923 and 1945. With interest rates in excess of 20 percent, Argentina is attempting to inspire investors to take a chance on investing in their nation; to date, there has been an apathetic response at best.

According to Stephen Jen, a currency specialist with Morgan Stanely, a 1 percent drop in growth could reduce the flow of capital to “threshold countries (those in a financially precarious situation) by more than half! Should this transpire, the IMF would not have enough reserves to “bail-out” each individual nation resulting in Argentina style cycle of events including frozen bank accounts, withdrawal caps, hyperinflation and social unrest. Dare to guess which nation “guarantees” the IMF slush fund should it run dry? Yep-the good ole USA. So much for “Plan B”. As these threshold nations face economic disaster, the trading partners and surrounding nations would be exposed to further strain…setting the stage for a global economic meltdown.

Experts such as Nouriel Roubini are already calling for the most severe global crisis since the Great Depression while others like Ron Paul are openly questioning the Federal Reserve about contingency plans in the event of global economic collapse. Plain and simple; fiat currency around the world is risky business even with the prospect of double digit returns. On the other hand, real estate has historically fared well even during dollar devaluation.

Five Favorite Facebook Tips to Build Your Short Sale Empire

Whether you are a novice real estate agent or veteran short sale investor you probably realize the power and influence the Internet holds in building your success. With over 80 percent of buyers beginning their search online, the Internet is a vital tool that few can afford to ignore. However, when it comes to the use of social media applications, far fewer people understand how to put these powerful resources to use for more than just socializing. The fact is, with a little tweaking and adjusting, Facebook and other social media sites have the potential to provide powerful – and free- tools to help with your day to day business or investing needs.

Contrary to popular opinion, Facebook isn’t just fourteens; here are some of the best business applications you can use to build your short sale empire:

1. Demographic Research. This little known Facebook nugget is a fun twist to standard demographic research. Find the Facebook “Insight Corner” to locate advertising information and find out how many people reside in a specific zip code or other identified demographic data.

2. Syndicate Yourself. Set up a Facebook page then import the RSS feed from your blog to the notes application and distribute to all your friends and associates.

3. Send Video Messages. Showcase homes, send out a video blast of recent news or simply make a personalized greeting. It’s a simple, personalized and cost effective way to make a big impression with a small budget.

4. Collaborate. Combine Facebook with Google documents to collaborate in a secure environment. Share everything from text to excel spreadsheets with ease while tracking changes, making comments and sharing information.

5. Picture It! Use the mobile application to upload photographs from your cell phone automatically. It’s a great way to capture information on prospective short sale properties on the spur of the moment or simply share information with others in real time.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/blog

P.S.: Don’t miss our webinar tomorrow, Saturday, at 2 PM EST! We’re holding this Recession Proof Real Estate Investing webinar once again on a weekend to accommodate all those who are unable to join us at night! Click here, there are only 17 spots left:

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Bank Bailout Goes Surreal

Another Bailout: Bush Gives $17 Billion to Big 3 Auto

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