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Smart Real Estate News & Commentary by Chris McLaughlin January 2, 2012

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BOA short sale program to expand?

Bank of America’s (BOA) cash-back incentive, which tempted delinquent borrowers to do a short sale over a lengthy foreclosure, ended Dec. 12 with mixed reviews. The Florida-only program offered between $5,000 and $20,000 in relocation expenses to qualified homeowners who agreed to vacate their homes through a short sale in lieu of the average two-year foreclosure process.  But as of early December, only about 3,000 homeowners of 20,000 solicited by the bank had expressed interest in the plan, which one real estate consultant said was unthinkable before the robo-signing scandal heightened the foreclosure chaos.  “A year ago, banks weren’t making offers like this. Now, it’s a complete reversal in that they are proactively soliciting short sales,” said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach. “They are offering unbelievable deals.”

Realtors say banks, including Wells Fargo and JPMorgan Chase, began offering cash incentives about six months ago to homeowners who agree to do short sales. With foreclosures taking an average of 749 days in Florida, according to a November RealtyTrac report, it’s cheaper to pay off an owner than take them to court, Realtors say.  BOA spokeswoman Jumana Bauwens said she couldn’t comment on concerns unless they dealt with a specific case, but that the company was “pleased” with the homeowner response.  Bauwens said Florida was chosen to test the program because of its high number of foreclosures. If it’s ultimately deemed successful, it could be expanded to other states.  To qualify, homeowners had to submit their short sales for approval by Dec. 12 – an extended deadline from an original Nov. 30 date. The homes could not have offers on them already, and the closing needed to occur before Aug. 31.

Ford hits 2 million mark in 2011

The Ford brand passed the 2-million mark, said Erich Merkle, Ford US sales analyst.  Ford’s small cars sales posted an increase of more than 20% this year, while its utility vehicles hit a 30-percent gain, the company said.  Overall, including its Lincoln luxury brand and now-defunct Mercury brand, Ford company sales were up about 11% through November, and the Ford brand’s sales were up about 18%.  As gasoline prices rose in 2011, customers continued to move toward smaller, more fuel-efficient vehicles. In recent years, Ford has emphasized fuel efficiency, including adding its “EcoBoost” engines that include turbocharging and fewer cylinders, particularly on utility vehicles and pickup trucks.  US auto sales in December are expected to top 13 million on an annual rate, J.D. Power and Associates and LMC Automotive said.  Once again, as it has each year for more than three decades, the Ford F-Series pickup trucks are the best-selling vehicle in the US market. Through November, Ford sold 516,639 F-Series pickup trucks, according to Autodata.

Olick – housing’s new hope

“I’m not sure if it’s that usual New Year’s Eve optimism evoked by the generic philosophy that the grass is always greener on the other side of the calendar year, or perhaps the emotional need to dig ourselves out of what has surely been one of the more lugubrious periods in the US economy, but there is some hope in housing.  A few positive readings in home sales and housing starts recently, topped off by today’s 7.4% monthly jump in contracts to buy existing homes, are fueling what I dare say is a spark, albeit not a fire. They are also managing to trump what was a particularly opposing reading in home prices from the number crunchers at S&P/Case-Shiller this week.  Don’t worry, I’m not going to dump a bunch of coal on the numbers and claim they’re all spurious in some way; I’m all prepared to be munificent, while chary (did I mention my new year’s resolution is to improve my family’s vocabulary, as well as banish ‘like’ from my kids’ lexicon.) I will note that even the Realtors, while touting affordability and pent-up demand, note that many of these new signed contracts are the result of delayed transactions.  ‘Contract failures have been running unusually high,’ notes National Association of Realtors chief economist Lawrence Yun. ‘Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,’ he said.

Then there is a big story in the Wall Street Journal [on Friday] of hedge funds putting their money back in housing, suggesting that while the numbers aren’t all there for a big win, these funds are usually ahead of big market shifts, so the housing surge must be on its way. I’ve spoken to some of these hedge fund types as well, and they seem to be playing on the surging rental market for now, getting the bargains but not expecting any big ‘flipping’ returns any time soon.  ‘Bottom line, whether due to even lower prices, historically low mortgage rates, falling inventory and a better tone to the labor market or a combination of all, the housing market is showing signs of stabilizing,’ says Peter Boockvar at Miller Tabak. ‘I say stabilize instead of bottom, as its too early to make that claim just yet with still a huge amount of foreclosures that hasn’t worked its way through the judicial system and prices that haven’t likely stopped going down as a result.’  Some are predicting that foreclosures will push home prices down another five to ten% before hitting a true bottom.

In addition, those rock-bottom mortgage rates that everyone is touting this week may be heading up, as the conservator of Fannie Mae and Freddie Mac today directed the two mortgage behemoths to inform servicers that guarantee fees would rise ten basis points next week. That, if you recall, is to pay for the temporary extension of the payroll tax cut. Yep, that money heads to the US Treasury, not to the troubled balance sheets of Fannie and Freddie. This accused nostrum will likely raise rates a tad, but rates are still close to historical lows. And we should remember that.  It’s all relative. Are things getting a bit better? Probably. I heard (or read…can’t remember) someone today say that housing has gone from a negative to a nothing for the US economy. So when we tout and rave about today’s pending home sales numbers, we mustn’t forget where we’ve been:  ‘It’s not going to keep 2011 from being the worst on record for new home sales, for single family permits and single family housing starts. Next year is going to be better, but that’s not saying much because this has been the worst year, probably since 1945,’ said IHS Global Insight’s Patrick Newport. In other words, housing ain’t exactly fecund, but it’s at least inching off life support.”

Employers offer weird benefits

Pet insurance, at-your-desk meditation services, jewelry discounts and funeral planning — from the quirky to the somber, workplaces are providing a range of unique benefits in 2012.  The options come as many firms try to placate employees frustrated by pay cuts, heavy workloads, high health insurance costs and reduced 401(k) matches.  “Companies are trying to have it feel like it’s not one big take-away,” said John Bremen, a managing director at employer consultancy Towers Watson. “They are trying to find ways to appeal to the workforce.”  Many voluntary benefits — such as reduced-price computers and pet insurance due to group-buying discounts — won’t gouge a corporate budget.  “On the employer side, there’s a recognition that they can’t always add to the benefits program in a way they have in the past,” said Ronald Leopold, national medical director at MetLife. “But they want to offer employees different things and a broader set of (choices).”

Among the many options offered: free tickets to theme parks, cellphone plan discounts and at-work massages.  Benefits at drug manufacturer Allergan include adoption assistance and auto insurance discounts. It also has a free concierge service for workers to acquire theater tickets, drop off laundry and get restaurant reservations.  Firms such as S.C. Johnson, TD Bank and Travelocity provide discounted health coverage for workers’ pets through Petplan Pet Insurance. Petplan “has seen tremendous growth in this area of voluntary benefits,” co-CEO Chris Ashton said. “In this struggling economy, employers are increasingly looking for low-cost options to keep their employees happy.”

WSJ – 2011 ends with near record mortgage rate lows

Average fixed mortgage rates in the US over the past week finished the year near all-time lows, with the 30-year home loan at 3.95%.  According Freddie Mac’s weekly survey of mortgage rates, the rate for a 30-year fixed-rate mortgage has been at or below 4% for the past nine consecutive weeks and only twice in 2011 did it average above 5%.  The 30-year fixed-rate mortgage averaged 3.95% for the week ended Thursday, up from 3.91% the previous week and below 4.86% a year ago. Rates on 15-year fixed-rate mortgages averaged 3.24%, up from 3.21% last week and below 4.20% a year earlier.  Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARM, averaged 2.88%, up from 2.85% yet below 3.77% of a year ago. One-year Treasury-indexed ARM rates averaged 2.78%, up from 2.77% in the prior week and below 3.26% last year.  To obtain the rates, 30-year and 15-year fixed-rate mortgages required payments of 0.7 percentage point and 0.8 percentage point, respectively. Five-year and one-year adjustable rate mortgages required an average payment of 0.6 percentage point. A point is 1% of the mortgage amount, charged as prepaid interest.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin December 29, 2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

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

RealtyTrac:  2012 – the year of the streamlined short sale

RealtyTrac is calling 2011 the year of foreclosure litigation, strategic default, failing foreclosure law firms and shadow inventory.  It also was a year of infighting between regulators, underwater mortgages and the year when Mortgage Electronic Registration Systems faced suits over everything from its business model to its assignment procedures.  Joel Cone, staff writer for RealtyTrac’s Foreclosure News Report, released a lengthy report on what this year brought for the mortgage, real estate and default servicing industries.  So what did we learn in 2011?  Cone says more borrowers learned to lean on strategic default, choosing to walk away from distressed or underwater loans instead of continuing to make payments on their mortgages.  Other borrowers discovered the system is moving at a snail’s pace, giving them more room to float by without making payments on mortgages. As banks struggled to catch up from 2010′s robo-signing-induced foreclosure moratorium, Cone says borrowers learned to gain a strategic advantage from the delays.  Cone writes that “armed with knowledge that the financial institutions are so far behind the eight ball playing catch-up with the delayed foreclosures, homeowners have no motivation to move on.” He added, “There are documented cases now of homeowners who are simply staying in their homes without making a mortgage payment for as long as three years, figuring they can stay until the bank gets around to foreclosing on them. In the meantime, they are living rent-free.”

RealtyTrac data shows it took on average 336 days to complete a foreclosure on properties that made it through the process in the third quarter of 2011, that’s up 180% from the first quarter of 2007 when it took an average 120 days, Cone said.  The states with the longest foreclosure timelines include New York, where it takes an average of 986 days to foreclose; New Jersey, where it takes about 974 days; and Florida, where it can take up to 749 days to complete a foreclosure.  As homeowners and foreclosure firms continue to sort through the mess, Cone noted several major foreclosure law firms shut down and others to pick up new business.  Casualties included heavy hitters David J. Stern in Plantation, Fla., the Amherst, New York-based law firm Steven J. Baum PC (which paid $2 million to settle allegations from a Department of Justice probe into its allegedly misleading foreclosure documents), and Fort-Lauderdale, Fla.- based Ben-Ezra & Katz, which shuttered its foreclosure practice.

While some firms stumbled, others saw an opportunity to grab market share. Cone quotes Law.com data, which shows Atlanta-based McCalla Raymer opening new branches and adding foreclosure divisions in the Southeast to handle up to 5,000 transfer files from foreclosure giants that have shuttered their doors.  So what’s Cone’s take on 2012? He believes short sales will play a huge role.  “The dysfunctional and delayed foreclosure process may finally be leading lenders to usher in the much-anticipated ‘year of the streamlined short sale’ in 2012,” he wrote.

Stock losses hit public pensions

Total investments held by pension systems administered by state and local governments fell 8.5% from the second quarter, although investments did inch up 1.1% from the same period a year earlier.  The total holdings reached $2.5 trillion in what was the eighth consecutive quarter of year-on-year growth.  After being battered by the financial crisis and recession, public pensions had seen four straight quarterly increases starting in 2010.  But in the third quarter, pensions’ corporate stock holdings fell 14.9% from the second quarter to $134.7 billion. That marked a 6.6% drop from the third quarter of 2010.  And international securities declined for the first time since the second quarter of 2010, falling 14.2% from the second quarter to $448.9 billion. It was the largest decline in international securities since the fourth quarter of 2008, in the midst of the Great Recession, according to the Census.

Public retirement systems depend on contributions from employees and employers to pay benefits, but the lion’s share of their revenue comes from investment returns.  A year ago, concerns about public pensions’ soundness reached a fever pitch. Conservative members of the US Congress called for the systems to lower their expected rates of return — a metric that is used to determine the systems’ abilities to meet their obligations — and for states to have the unprecedented option of filing for bankruptcy to escape public employee contracts.  The bankruptcy idea has largely disappeared, although earlier this month a leading Republican US senator, Jim DeMint of South Carolina, hinted other legislation changing public pensions could be coming soon.

Equator sees 1.17 million short sales

Default servicing technology company Equator says nearly 1.2 million short sales were initiated through its module over the past two years.  The company tracks this data through its default servicing platform, which helps mortgage industry clients deal with loan modifications, short sales, deeds-in-lieu, foreclosure processing and REOs.  Los Angeles-based Equator said Wednesday that more than $150 billion in assets have been sold using its technology platform over the past eight years. Analyzing trends from the recent fourth quarter, Equator said servicers heading into 2012 are focused on compliance issues.  “The needs of our clients have focused on the demands for stricter compliance and infrastructure security,” said Chief Operating Officer John Vella.  As the firm transitions into 2012, it’s prepping the launch of the REvolution software program, which will provide real estate professionals with a system to track both distressed and traditional properties.  The company said the software gives agents enough flexibility to automate their daily work-flow cycles from a single portal, removing the need for agents to employ more than one software system to handle various asset types and sales functions.

Jobless claims up

Initial jobless claims rose last week after a few weeks of declines and remain at levels last since in 2008.  The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Dec. 25 increased to 381,000 from 366,000 the previous week, which was revised upward 2,000.  Analysts surveyed by Econoday expected 372,000 new jobless claims last week with a range of estimates between 370,000 and 383,000. Most economists believe weekly claims lower than 400,000 indicate the economy is expanding and jobs growth is strengthening. Initial claims have been lower than this threshold for most of the past two months.  The four-week moving average, which is considered a less volatile indicator than weekly claims, declined by 5,750 claims to 375,000 — the lowest in more than three years — from the prior week’s slightly revised 380,270.  The seasonally adjusted insured unemployment rate for the week ended Dec. 17 inched higher to 2.9% from 2.8% the previous week, according to the Labor Department.  The total number of people receiving some sort of federal unemployment benefits for the week ended Dec. 10 rose to 7.23 million from 7.15 million the prior week.

WSJ – cracked foundation threatens housing recovery

A house is only as good as its foundation.  The same is true of the housing market. Unfortunately, its foundation, the housing-finance system, still has big cracks in it. Until those are fixed, any hoped-for recovery may prove difficult to sustain.  That isn’t to say housing won’t show signs of improvement. Recent data, such as new-home starts and existing-home sales, have offered some glimmers of hope. Tuesday’s release of the S&P/Case-Shiller index for October is likely to show further slippage of prices. But the rate of decline in the index, which tracks home prices in 20 metropolitan areas, is expected to continue slowing, to less than 3% year over year. That trend, some economists expect, presages prices finding a floor in 2012.  Meanwhile, mortgage rates hit a new low last week; Freddie Mac said the average for a 30-year fixed-rate loan was 3.91%. Such super-low rates and the resulting increased affordability of homes may spur more housing activity.

Still, the challenge of housing-finance overhaul remains a long-term headwind. As things now stand, housing finance remains almost completely dependent on government support via proxies like Fannie Mae and Freddie Mac.  That isn’t likely to change soon. Both Congress and the administration essentially punted in 2011 on hard decisions about the future of those firms and are likely to do so again in the coming presidential-election year.  Washington’s inaction is somewhat understandable, if disappointing. Any overhaul will force the government to decide if it wants a housing market where risk is taken by home buyers and private investors, or by the taxpayer. Any action also may threaten the existence of 30-year, fixed-rate mortgages with a prepay option and require a rethink of subsidies such as the deductibility for tax purposes of mortgage interest.

But the dithering isn’t only over big issues. Many small decisions about changes to housing-finance rules haven’t been finalized. Regulators, for example, have yet to give banks concrete guidance about how they will have to handle mortgages if they want to sell them to private investors.  Speaking at a conference earlier this month, J.P. Morgan Chase Chief Executive James Dimon lamented such a lack of progress saying it is “holding back the mortgage market.”  Continued delay means that any gains in housing may be built on shaky ground.

Expanding government role in mortgages

Washington lawmakers, who began 2011 with sweeping plans to shrink the US government’s role in mortgage finance, are heading into 2012 after enacting policies that expand it.  An 11th-hour payroll tax cut extension signed into law last week would for the first time divert funds directly from Fannie Mae and Freddie Mac, the two mortgage-finance companies under US conservatorship, to pay for general government expenses.  That move came after two others that also are expected to increase government involvement: Lawmakers allowed a tax break on private mortgage insurance to expire and raised loan limits for mortgages insured by the Federal Housing Administration. Advocates of private mortgage finance say they are concerned that using fees from Fannie Mae and Freddie Mac is setting a precedent that will keep the government in the mortgage business for a decade or more.  Fannie Mae, Freddie Mac and the FHA currently back more than 90% of loan originations, about double what they did during the subprime lending boom, according to Inside Mortgage Finance, a trade publication.

Earlier in the year, both the Obama administration and members of Congress outlined plans to reverse that trend. In February, US Treasury Secretary Timothy F. Geithner released three options for reducing government’s role in housing finance. Shortly afterward, Republicans introduced bills to wind down Fannie Mae and Freddie Mac, which have cost taxpayers about $153 billion since 2008 because of defaults on loans they guaranteed. The legislation never moved forward because there was no agreement even within the Republican caucus on the best way to proceed.  In December, pushing to find about $36 billion in revenue to offset the payroll tax cut for two months, Congress instituted a decade-long increase in the premiums that Fannie Mae and Freddie Mac charge lenders, known as “g fees,” to guarantee principal and interest on home loans. Lenders typically pass on the cost of the fees to borrowers as higher interest rates.  The move is drawing criticism: It relies on long-term revenues from entities both Democrats and Republicans want to shrink, and the money won’t be spent to offset the risk of loan defaults.  “In effect, this is a tax on Fannie and Freddie mortgages,” said Bert Ely, a banking consultant in Alexandria, Virginia. “When you go to privatize or take any action to wind them down, you have a budget effect that you didn’t have before.”

Fewer delinquencies, more foreclosures coming

Real estate research and marketing firm Trulia said employment figures improved slightly at the end of 2011, making it possible for more borrowers to pay their mortgages next year.  While Trulia says this trend could reduce 2012 delinquencies, the company expects foreclosures to continue to climb as banks sort through a backlog of distressed properties and foreclosures that stalled in the wake of robo-signing and increased regulatory oversight.  The firm says once a settlement between mortgage servicers and state attorneys general is finalized, many delayed defaults will plunge through the process.  As for what this means for real estate agents, Trulia said an increase in “foreclosures will depress prices for several reasons — foreclosed homes are often sold at a discount and used as comps for non-distressed homes.”  In turn, this will kill seller motivation even though buyers stand to benefit from affordable pricing structures.  “Agents should be gearing up with competitive pricing strategies to catch buyers and preparing to counsel their traditional seller-clients about the depressed prices to come in high-foreclosure areas,” Trulia said.  For those Americans now confined to the rental market, costs will be rising in 2012 as people losing their homes move toward the rental model. To resolve the issue, high-cost cities need to address the rental shortage directly by having local governments get rid of restrictions and permitting processes that are too stringent, according to Trulia.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin December 28,2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Foreclosures down, short sales up in 2011

While data on the number of loans either seriously delinquent or in the foreclosure process suggested that an increase in the number of residential properties lost to foreclosure this year was a “slam dunk,” incoming data suggest that in fact the numbers will be down significantly from 2010, and will in fact probably come in at the lowest level since 2007!  Short sales and DILs, in contrast are likely to be up in 2011 compared to 2010, at least according to estimates derived from Hope Now data. Unfortunately, Hope Now data doesn’t allow for an estimate of SS/DILs by occupancy type, and HN didn’t start releasing data that allowed one to derive estimated short sales/DILs until early 2010. Given the number of loans either seriously delinquent or in the process of foreclosure at the beginning of the year, the number of completed foreclosure sales in 2011 is almost absurdly low, reflecting the complete screw-up of the mortgage servicing industry, and the resulting dramatic slowdown in foreclosure resolutions. As of the end of October, 2011 LPS estimated that there were 1.759 million seriously delinquent loans with the average number of days delinquent at 388 (compared to 192 days in January 2008), and there were 2.210 million loans in the foreclosure process that had been on average delinquent for 631 days.

Consumer confidence surges

The New York-based Conference Board says Tuesday that its Consumer Confidence Index rose almost 10 points to 64.5, up from a revised 55.2 in November. Analysts had expected 59.  The surge builds on another big increase in November, when the index rose almost 15 points from the month before.  Improving confidence is in line with retail reports of a decent holiday shopping season. Still, the December confidence reading is below the 90 level that indicates an economy on solid footing.  Economists watch the confidence numbers closely because consumer spending — including items like health care — accounts for about 70% of US

WSJ – 2011 in commercial real estate

For the commercial real-estate market, 2011 was a year that began with a boom and ended with a question mark.  After two years in the doldrums, commercial real estate came to life in the first half of 2011. Values rose in top markets, deal activity increased and financing became more plentiful. But the market hit the brakes in the summer when turmoil in Europe threatened to stall an already-shaky economic recovery. As the year comes to an end, the outlook continues to look uncertain.  But along the way in 2011, there were ups and downs, winners and losers and tears and high-fives. Here is a look at a few standouts:

Biggest Fight

Three years after taking apartment company Archstone private in a $22 billion leveraged buyout, the three owners—Bank of America Corp., Barclays PLC, and the estate of Lehman Brothers Holdings Inc.—spent much of 2011 fighting over how to unwind their soured investment. Now the two banks are trying to sell half their stake to Sam Zell’s Equity Residential, Archstone’s largest competitor, which wants to control all the property. This is unwelcome news to the Lehman estate, which is trying—in court and by raising funds—to block the purchase.

Worst Tenant-Landlord Relations

This fall, giant office landlord Brookfield Office Properties Inc. became the unexpected and extremely reluctant host of the Occupy Wall Street movement in Lower Manhattan. Thanks to its ownership of Zuccotti Park, the small plaza near Wall Street, the firm’s executives wished the movement had chosen to make a home base in a space they didn’t control. Still, they deferred to City Hall, waiting until the mayor gave his okay until they and the New York Police Department put an end to the occupation.

Most-Unexpected Comebacks

Two high-profile names associated with the boom-turned-bust of a few years prior reemerged earlier this year. New York developer Harry Macklowe, who lost his extensive office holdings in 2008 after a poorly timed $7 billion attempt to double down on his portfolio, led ventures to buy and convert two rental apartment buildings on Manhattan’s Upper East Side, totaling over $400 million in investment. Meanwhile Mark Walsh, Lehman Brothers’ head of real estate, whose insatiable appetite for commercial property during the boom helped sink the investment bank, reemerged. His Silverpeak Real Estate Partners won control of the $1.1 billion US real-estate portfolio of Dubai Investment Group.

Off the Beaten Path

While investors spent much of the year climbing over each other to buy apartments and top office towers in major cities, Blackstone Group LP waded deep in the muck of the commercial-property sector: strip malls and suburban office buildings. Put off by the unusually high price tags of the standard fare, the giant private-equity fund put its money into higher-yield major deals such as the $9.4 billion purchase of 588 US shopping centers from Centro Properties Group, a $1.1 billion suburban office portfolio from Duke Realty Corp., and a $473 million shopping-center portfolio concentrated in Florida and Georgia from Equity One Inc.

Best Sovereign Exit

Once big lenders during the real-estate boom, the three largest banks in Ireland all made a near-complete exit from the US market. Starting in the summer, Bank of Ireland, Allied Irish Banks PLC and Anglo Irish Bank Corp., each of which are mostly owned by the Irish government, nearly cleared their books of US loans, totaling sales of more than $12 billion, face value.

Change in Course

Donald Trump went from a public dalliance with a White House run to working on his golf handicap. In what would be its largest US property investment in years, Trump Organization agreed to pay $150 million to buy the Doral Golf Resort and Spa, a deluxe resort near Miami, often a stop on the PGA tour. While the deal isn’t done yet—other bidders could top Mr. Trump in a bankruptcy-court auction—it marks a shift from the years in which the high profile Trump buildings were licensing deals with other developers.

Worst Day in Court

In hindsight, bankruptcy might not have been the clean outcome it seemed for the Extended Stay hotel chain. David Lichstenstein, the New York investor who led the $8 billion purchase of the chain in 2007, put it into Chapter 11 when the investment soured. But this year, lenders went after a “bad-boy” provision, which can subject owners to large recourse penalties if they take certain actions, such as putting properties into bankruptcy. A New York state court ruled against him, exposing him to $100 million in personal liability, which he’s now appealing.

Biggest Optimist

At a time when few are building condominiums or office buildings, New York developer Gary Barnett, president of Extell Development Co., is betting big on a strong recovery in Manhattan. He has two giant Manhattan construction projects underway: the International Gem Tower, a mostly speculative tower aimed at both diamond dealers and traditional office tenants, as well as One57, a 1,004-foot condo tower aimed at a set of super-luxury foreign buyers. Neither started 2011 with a construction loan.

Biggest Ratings Snafu

Just as investors were about to buy bonds on a $1.5 billion batch of securities tied to commercial mortgages, Standard & Poor’s Ratings Services pulled its rating on the deal, being sold by Goldman Sachs Group Inc. and Citigroup Inc., citing potential problems with its ratings formula. The action was a shock to the commercial mortgage-backed securities world, shaking trust lenders and investors had put in the common financing tool.

Looking Ahead

With lenders wary of funding new construction, few major developments are expected to kick off in 2012, although a few developers are trying. Among those seeking to start building are Triple Five, which wants to re-start construction on a retail and entertainment mega-center in New Jersey previously named Xanadu, and Related Cos., which plans to start construction on its first tower in its $15 billion Hudson Yards project on Manhattan’s far West Side.

Iran threatens top block oil – prices rise

A senior Iranian official delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.  The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weapons program.  Apparently fearful of the expanded sanctions’ possible impact on the already-stressed economy of Iran, the world’s third-largest energy exporter, Rahimi said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” according to Iran’s official news agency. Iran just began a 10-day naval exercise in the area.

In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii, where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets.  But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response.  Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.  Oil prices rose above $100 a barrel in trading after the threat was issued, though it was unclear how much that could be attributed to investors’ concern that confrontation in the Persian Gulf could disrupt oil flows.

Freddie delinquency rate up

The delinquency rate of single-family mortgages held by Freddie Mac edged up to 3.57% in November from 3.54% in October, the government-sponsored enterprise said.  The multifamily delinquency rate fell to 0.28% in November from 0.31% the prior month, and the GSE’s total mortgage portfolio decreased at an annualized rate of 6.9% in November. A year ago, the single-family delinquency rate was 3.85% and the multifamily rate was about 0.34%.  Freddie completed 6,886 loan modifications during November, up from 6,571 a month earlier and 6,465 in September.  The single-family guarantee volume hit $27 billion in November, making up 71% of the mortgage giant’s total portfolio. That compares to $24.1 billion in October.  In addition, the unpaid principal balance of Freddie’s mortgage-related investment portfolio decreased by $5.8 billion in November.

Hiring up in 2012?

Employers expect to add new jobs in the new year, but are still cautious about their businesses, according to CareerBuilder‘s annual job forecast. Nearly one of every four hiring managers plans to hire full-time, permanent employees in 2012, similar to 2011 and employers said they expect to raise salaries.  “Barring any major economic upsets, we expect 2012 to bring a better hiring picture than 2011, especially in the second half of the year,” said Matt Ferguson, CEO of CareerBuilder. ”Many companies have been operating lean and have already pushed productivity limits. We’re likely to see gradual improvements in hiring across categories as companies respond to increased market demands.”  Ferguson said companies typically are more conservative in their survey answers than in their actual hiring.  Overall, CareerBuilder said 23% of employers surveyed plan to hire full-time, permanent employees next year, relatively unchanged from 24% for 2011 and up from 20% in 2010.  About 7% of respondents expect to decrease headcount, the same as 2011 and an improvement from 9% for 2010. Another 59% anticipate no change in staffing and 11% are unsure.

Small businesses reported more confidence in both hiring and retaining staff in 2012 with plans to downsize dropping two percentage points across small business segments while plans to hire increased two percentage points among companies with 50 or fewer workers. In that segment, 16% of respondents plan to add full-time, permanent staff in 2012, up from 14% for 2011.  For companies with fewer than 250 employees, 20% plan to add full-time, permanent staff in 2012, up from 19% this year and those reducing headcount fell to 4% for next year from 6% for 2011.  Of companies with 500 or fewer employees, 21% plan to add full-time, permanent staff, on par with 2011; those reducing headcount fell to 4% from 6%.

CareerBuilder said more employers in the West plan to recruit new employees in 2012 than other regions. Twenty-four% of employers in the West reported they plan to add full-time, permanent headcount.  However, the West also reported the highest number of companies planning to downsize in 2012 at 9%, reflecting the uncertainty businesses still feel about the economy.  Employers expect compensation levels to increase for both current staff and prospective employees as recruiting for skilled talent becomes more competitive.  Sixty-two% of employers plan to increase compensation for their existing employee base while 32% will offer higher starting salaries for new employees.  The survey, conducted by Harris Interactive from Nov. 9 to Dec. 5, included more than 3,000 hiring managers and human resources professionals across industries and company sizes.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin December 20, 2011

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Housing starts up

The Commerce Department said on Tuesday housing starts jumped 9.3% to a seasonally adjusted annual rate of 685,000 units, the highest since April last year.  October’s starts were revised down to a 627,000-unit pace from a previously reported 628,000 unit rate.  Economists polled by Reuters had forecast housing starts rising to a 635,000-unit rate. Compared to November last year, residential construction was up 24.3%.  Building permits, a gauge of future construction, rose by 5.7%. The increase was spurred by more apartment permits.  New homes have an outsize impact on the economy. Each home built creates three jobs for a year and $90,000 in taxes, according to the National Association of Home Builders.  Although the overall housing market remains weak, rising demand for rental apartments is boosting the construction of multifamily homes.

Housing is becoming less of a drag on the economy and residential construction has now grown for two straight quarters.  Even home builders are adopting a more optimistic view of the sector, with confidence rising to a 1-1/2 year high in December.  Last month, housing starts for the volatile multi-family homes segment surged 25.3% to a 238,000-unit rate, and groundbreaking for projects with five or more units hit the highest level since September 2008.  Single-family home construction — which accounts for a large portion of the market — rose 2.3% to a 447,000-unit pace.  New building permits unexpectedly increased 5.7% to a 681,000-unit pace in November. Economists had expected overall building permits to fall to a 635,000-unit pace last month.  Permits were pushed up by a 13.9% jump in the multi-family segment. Permits for buildings with five or more units were the highest since October 2008. Permits to build single-family homes rose 1.6%.  New home completions dropped 5.6% to 542,000 units last month.

Still, the total is far below the 1.2 million homes that economists say would be built each year in a healthy housing market.  A full recovery for the sector, which was one of the main triggers of the 2007-09 recessions, remains far off in the future given a glut of unsold homes, weak prices, high unemployment and tight credit.  Housing starts are still less than a third of their 2.273 million rate peak in January 2006.

Tax hike coming?

With a tax cut for 160 million US workers set to expire in less than two weeks, Republicans and Democrats in Congress on Monday were mired in a last-ditch battle over extending it.  In a surprise turnabout, Republicans in the House of Representatives are now pushing for a one-year extension of the payroll tax cut and have rejected a short-term compromise struck by Republicans and Democrats in the Senate at the weekend.  House Republicans had initially expressed concerns over the economic benefits of renewing the tax break, which expires on Dec. 31, and soon-to-expire jobless benefits.  The House is set to vote sometime during the day on Tuesday to formally request negotiations with the Senate on a new bill.  But the path to compromise was far from clear as Democrats took a hardline stance.  Democratic Senate leader Harry Reid said he was unwilling to reopen negotiations. Almost all senators have already left Washington for the holidays and the Democratic-controlled chamber has no legislative business scheduled until Jan. 23.  The stand-off between Republicans and Democrats raised the specter of a $1,000 tax hike on the average American worker and millions of unemployed losing their benefits.

Olick – beware of sale revisions

“We already know the housing crash was bad, perhaps the worst in history; tomorrow we will learn that it’s worse than we thought.  The National Association of Realtors, for a number of reasons I won’t get into because they’ve been widely reported, over-counted home sales during part of the last decade and has spent the better part of this past year figuring out just how badly they did that.  They consulted with economists at the Federal Reserve, Fannie Mae, Freddie Mac, the Department of Housing and Urban Development, the mortgage bankers, the home builders, as well as umpteen other housing specialists, and tomorrow they will release their results.  Expectations are that home sales could be revised down anywhere from ten to twenty%. The Realtors’ chief economist said the revision would be, ‘meaningful.’

The revisions will likely not change the fact that last year saw the fewest homes sold on record. They will not change estimates of home prices, nor the home price drop since the 2006 peak, nor will they change inventories of unsold homes in month’s supply (how long it takes to sell that many homes) although absolute inventories will be revised lower. They will not affect monthly or annual percentage changes in sales recently.  The revisions will also have nothing to do with how many newly built homes sold, nor will they say anything about the health of the nation’s home builders.  Far more importantly, the revisions will have nothing to do with how many borrowers are behind on their mortgage payments or in the process of foreclosure, which is 6.26 million, according to numbers just released from Lender Processing Services.  The Realtors’ revisions will not change the losses at banks, losses to investors, and losses to the now government-owned mortgage giants Fannie Mae and Freddie Mac, nor to the Federal Housing Administration.  The Realtors’ revisions will change perception; they may even change consumer sentiment. Headlines will scream Wednesday morning, and reporters like me will jump in with the ‘breaking news,’ that far fewer existing homes sold over the past four years than previously thought.  The crash will look bigger, as the Realtors are only revising numbers starting in 2007, because ‘they did a side-by-side comparison of the calculations and the drift began only in 2007,’ says an NAR spokesman. ‘So there was no need to revise earlier data. It appears that roughly half of the revisions come from the drop in FSBO’s [For Sale By Owner].’

Let me repeat what I just wrote: The crash will look bigger. Will that change anything in the economy today? Will it affect the housing market going forward? Will it hamper the fledgling recovery (which I’m not 100 percent sure is really taking hold)?  My guess is no, but the revisions, and the hue and cry surrounding them, will hurt consumer confidence, which was beginning to come around ever so slightly.  The home builders reported an increase in buyer traffic and buyer inquiries in December, and said gains in the past months are ‘an indication that pockets of recovery are slowly starting to emerge in scattered housing markets.’ These new numbers will hurt that new-found confidence, not because of anything real on the ground, but because of the perception of just how far we fell.  It is commendable that the Realtors are correcting their miscalculations, but equally distressing that just as our outlook for the future was brightening ever so slightly, and home buying demand was beginning to awaken, we have to be reminded of a very dark past, darker than we knew.  There are still considerable headwinds facing housing’s recovery, not the least of which are foreclosures, and potential buyers have to factor that into their decision making. They should not, however, be spooked by nasty new numbers that really just put an exclamation point on what we already knew … that housing went from an unprecedented boom to an unprecedented bust and took down our economy with it.”

Economy to expand?

The US economy will continue to expand moderately next year and inflation will remain under control, Richmond Federal Reserve Bank President Jeffrey Lacker said on Monday.  While he did not comment specifically on monetary policy, Lacker, an inflation hawk who will rotate into a voting seat in the policy-setting Federal Open Market Committee next year, indicated he does not see the need for further monetary stimulus.  “The macroeconomic experience of 2011 provides vivid illustration. Despite large-scale efforts to provide more monetary stimulus, growth has disappointed and inflation has ratcheted upwards,” Lacker said in remarks before the Charlotte Chamber of Commerce.

Counseling doubles chance of modification

Borrowers who received foreclosure counseling through a national program were twice as likely to receive a modification, according to a study released yesterday.  The Urban Institute evaluated roughly 800,000 homeowners who took help from the National Foreclosure Mitigation Counseling program from January 2008 through December 2009. NeighborWorks America administers the program with federal funds.  The counselors are approved by the Department of Housing and Urban Development. They work on homeowner budgets and guide borrowers through the various options provided by the mortgage servicer to avoid foreclosure.  Those who went through the program were at least 67% more likely to remain current within nine months of receiving a modification, according to the study. Borrowers who went through the program had their payment reduced by an average of $176 per month.

Congress slashed funding for HUD housing counseling programs earlier in the year. The mortgage industry called for lawmakers to restore the money because of the more than 5 million homeowners who are at least 30 days delinquent, according to Lender Processing Services.  In November, Washington restored some of the money, and HUD was allowed to grant $40 million to counselors.  Eileen Fitzgerald, CEO of NeighborWorks America, said the program and others like it help homeowners and servicers alike by reducing redefaults.  “In short, the personalized work nonprofit housing counselors do to help homeowners improve their overall financial situation had the greatest effect on a homeowner not falling behind again on their mortgages in the future,” Fitzgerald said.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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