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Smart Real Estate News & Commentary by Chris McLaughlin August 25, 2010

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You asked for it. You get it: Part 2 of

“Demystifying Fraud in the Short Sale Fog.”

https://www2.gotomeeting.com/register/862050594

Chris McLaughlin, Florida attorney and short sale expert,

and Ron Ballard, best known as The California Short Sale

Lawyer, return to continue clearing the fog surrounding

issues of legality and fraud in short sales TODAY at

2 PM ET, 11 AM PT in a LIVE webinar.

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

MBA – refinances increase

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 4.9% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 4.5% compared with the previous week.  The Refinance Index increased 5.7% from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 0.6% from one week earlier. The unadjusted Purchase Index decreased 1.1% compared with the previous week and was 38.8% lower than the same week one year ago.  “The volume of refi applications last week was up 26% over their level four weeks ago.  Mortgage rates dropped to their lowest level in the survey, going back to 1990, as incoming data continue to indicate that economic growth has slowed,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

“We are at a new 15 month high for the Refinance index.  With rates this low, many borrowers who refinanced in the past two years may well have an incentive to refinance again, and this is likely increasing refi application activity.”  The four week moving average for the seasonally adjusted Market Index is up 5.0%.  The four week moving average is down 0.3% for the seasonally adjusted Purchase Index, while this average is up 6.2% for the Refinance Index.  The refinance share of mortgage activity increased to 82.4% of total applications from 81.4% the previous week, which is the highest share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity increased to 5.8% from 5.7% of total applications from the previous week.

10 year yield sets new low

The yield on the benchmark 10-year note was 2.49% at 4:30 p.m. yesterday in New York. That’s down from 2.6% late Monday and is the lowest level since the 10-year yield closed at 2.4% on January 20, 2009, according to data from the Federal Reserve.  The yield on the 2-year note dropped to 0.48%, holding near an all time-low, while the 5-year yield slid to 1.33%. The yield on the 30-year bond was 3.56%, down from 3.66%.  The flight to safety boosted demand for the $37 billion worth of 2-year notes that the government sold Tuesday, with investors submitting bids totaling $115 billion for the notes. 

The bid-to-cover ratio, a measure of demand, was a relatively strong 3.12. But the ratio was higher at the last 2-year sale in July, and has averaged 3.17 so far this year.  It was the first of three auctions this week totaling $102 billion in U.S. debt. On Wednesday, the U.S. will offer $36-billion in 5-year notes and will offer $29 billion in 7-year notes on Thursday.  Treasuries are widely considered one of the most secure assets available. As a result, prices often rise when investors are nervous about the economic outlook. Stocks, however, fell sharply after the housing report came out.

Low home sales could sink the recovery

With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the recovery.  Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Two months after the end of the tax credit, sales are 34% below April’s tax incentive-induced peak.  “Home sales were eye-wateringly weak in July,” said economist Paul Dales of Capital Economics. “It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse.” 

The sales pace of all homes — single-family homes, town homes, condominiums, and co-ops — is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.  Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.  The housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.  “Falling housing prices strain the overall confidence in the economy and discourage Americans from spending,” Dales said. “They also mean that banks lose money on their investments and curtail lending, meaning there is less money out there to invest and boost the economy.

Durable goods fall more than expected

The Commerce Department reports that new orders for long-lasting U.S. manufactured goods, excluding transportation equipment, posted their largest decline in 1.5 years in July, while overall booking rose far less than expected.  The report was the latest to indicate subdued U.S. economic growth and an increased risk of a slide back into recession, though most analysts still do not believe a double-dip recession is imminent.  The Commerce Department said durable goods orders excluding transportation dropped 3.8%—the biggest fall since January 2009—after rising 0.2% in June. Overall orders rose 0.3% following a revised 0.1% fall in June.  Analysts polled by Reuters had forecast orders increasing 2.8% last month from June’s previously reported 1.2% fall.

Orders excluding transportation had been forecast to increase 0.5% from a previously reported 0.9% fall.  Defense aircraft orders dropped 8.3 after rising 5.7% in June, while motor vehicle orders rose 5.3% after June’s 4.0% rise.  Orders outside transportation were depressed by weak bookings for machinery, electrical equipment and computers and related products and Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 8.0% last month after a 3.6% increase in June. Markets had expected a 0.4% rise last month.  Durable goods inventories rose 0.6% after increasing 1.3% in June. It was the seventh straight month of gains in inventories.  Shipments, which go into the calculation of gross domestic product, last month rose 2.2%, adding to June’s 0.2% gain.  Unfilled orders slipped 0.1% after rising for three straight months.

DsNews.com – 2/3s of mortgages untouched

According to a new report from state attorneys general and bank supervisors from across the country, more than 60% of homeowners with seriously delinquent loans are still not involved in any form of loss mitigation with their servicer.  The ratio is disconcerting considering the group also found that one of servicers’ primary loss mitigation options today, loan modifications, are resulting in significant payment reductions with fewer redefaults.  The State Foreclosure Prevention Working Group says loans modified in 2009 are 40 to 50% less likely to be seriously delinquent six months after modification than loans modified at the same time in 2008.  “This improvement in loan modification performance suggests that dire predictions of high redefault rates may not come true,” the group said in a paper released Tuesday. “This positive trend suggests that increased use of modifications resulting in significant payment reduction has succeeded in creating more sustainable loan modifications.” 

The consortium of state regulators and chief attorneys also found that recent modifications that significantly reduce  the principal balance of the loan have a lower rate of redefault compared to loan modifications overall, suggesting that servicers should strategically increase their use of principal reduction modifications to maximize prospects for success.  Principal writedowns, though, have been slow in finding their way into the mod equation. The group’s study shows that only one in five modifications reduce the loan principal, and in fact, some 70% actually increase the loan amount by adding servicing charges and late payments to the loan balance.

Credit card debt lowest in 8 years

The average combined debt for bank-issued credit cards — like those with a MasterCard or Visa logo — fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.  The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.  More borrowers also made payments on time. The rate of cardholders past due by 90 days or more fell to 0.92 percent in the second quarter, from 1.17 percent last year.  That’s the first time the delinquency rate has been below 1 percent since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in TransUnion’s financial services unit.

The rate fluctuates during the year, he said, but the improvement is more evidence that consumers are working to make sure their credit cards remain in good standing.  Becker said the foreclosure crisis could be helping to improve the timeliness of credit card payments and lower balances. When people don’t make mortgage payments, he suggested, they have a short-term cash boost.  “That can provide extra money to pay down credit cards,” he said.  Besides paying down debt, consumers are getting fewer new cards. Nationwide, the number of new accounts opened dropped almost 6.5 percent from last year.

Now for our real estate education section…

Does Your Marketing Use a Microphone or Megaphone?

Let’s face it, if you are like most real estate agents or investors, chances are your Internet marketing efforts either resemble a microphone or a megaphone. Both get the word out, but one does it a lot more effectively than the other. Find out if your message is loud and clear with this quick quiz:

1.Hub versus business card. Is your website a one stop shop for everything related to real estate in the area or a glorified business card?

Tip: A glorified business card may be sufficient for some endeavors but real estate is all about relationships. Even if someone isn’t able or willing to do business today, they might be tomorrow. Even more importantly, they probably know someone else who is ready to wheel and deal. Make your online presence felt by providing the information and tools needed to establish a long term relationship; become a central hub for communication.

2. Look Who’s Talking. What you say isn’t as important as what others are saying about you!

Tip: Find out what your reach is with social media and other websites. What good does it do to have a website if people aren’t sharing information with others? Make it simple to share and take the time to monitor what is being said about you from time to time.

3. Check the Pulse. Does your website even have a pulse?

Tip: Many people have no idea where their website or blog ranks, how many visitors they have or even who bothers to visit. Sign-up for some basic tracking software that provides some insight into who is visiting, when and what they are reading…then provide some more of it to keep them coming back. Add an RSS or other feed to allow users to get automatically updates without having to repeatedly visit.

4. What’s Your Grade?

Tip: If you have no idea where you measure up, visit www.website.grader.com (free) and www.37signals.com to see important details about your site or find terrific tools that are simple to use and have already been evaluated by others. Remember, the actual number of visitors isn’t as important as the sharing of information and long term relationships built online.

Make it easy for prospective clients to find you by expanding your total reach through a combination of blogs subscribers, social media websites, links to your site and of course…city specific keyword content.

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
–

Smart Real Estate News & Commentary by Chris McLaughlin August 17, 2010

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

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

Fix A Flip Re-Opens … all new content, all new case studies.  This is

one webinar that you don’t want to miss!

When: Thursday, August 19th at 8:30 PM ET, 5:30 PM PST

Where: https://www2.gotomeeting.com/register/618365627

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

More mortgages behind on payments, but increase rate has slowed

Credit reporting agency TransUnion said today that in the three months ended June 30, the number of mortgage holders 60 days or more behind on their payments was 6.67%, Tuesday. That’s a big jump from 5.81% in the second quarter of last year, and well above the historical norm of 1.5% to 2%.  One positive sign is that the statistic reveals a slower rate of increase from the pace seen a year ago.  What’s more, it marks a marginal improvement from the rate of 6.77% recorded during the first three months of the year. It’s also below the 6.89% record reached in the fourth quarter of 2009. “We’re seeing signs of recovering in terms of delinquency,” said FJ Guarrera, vice president in TransUnion’s financial services unit. 

The data comes days after foreclosure listing firm RealtyTrac Inc. said the number of U.S. homes lost to foreclosure in July surged 6% from last year. That jump indicates that more banks stepped up repossessions to clear out their backlog of bad loans.  “A lot of foreclosures continue to work their way through the system,” Guarrera said. Although the delinquency data does look back a few months, it shows a slight improvement that could indicate foreclosures will start to slow, he said.  Witness to that there were 12 states that showed increased delinquency rates in the second quarter, whereas a year ago the figure worsened in nearly every state, Guarrera said.  Driving up the national rate are the four states hardest hit by the foreclosure crisis: Nevada, Florida, Arizona and California. In each of these, the rate is above 10%, with Nevada leading at 15.86%, compared to 13.8% a year ago. In Florida, the delinquency rate rose to 15%, from 12.3% last year.  The rates in Georgia, New Jersey, Maryland and Illinois are also above the national average.  North and South Dakota remain at the low end for the nation, at 1.61% and 2.23%, respectively.  Some states, however, have more trouble ahead, including Arizona, California, Florida, Georgia, and Nevada: The rate is expected to start falling by the end of this year, but remain above 10% through 2012.

New home construction rises as demand weakens

The Commerce Department says housing starts rose 1.7% from June to a seasonally adjusted annual rate of 546,000 last month.  Economists were expecting housing starts to rise to 555,000, according to a consensus estimate from Briefing.com.  On a year-over-year basis, starts fell 7% from July 2009.  Applications for building permits, a gauge of future construction activity, fell over the month. Single-family starts in July fell 4.2 percent in July, the lowest level in more than one year. 

Permits for new construction, a leading indicator of future building activity, fell 3.1% to 565,000 from 583,000 one month earlier — reaching the lowest level since May 2009. Economists had expected permits to post a figure of 580,000 for July.  “Starts are still well below the 630,000 plus level we were seeing right before the homebuyer tax credit expired at the end of April,” said Paul Ashworth, senior economist at Capital Economics.  “The bad news is that activity in the housing market is likely to remain depressed for several years,” he said in an email. “The ‘good’ news, however, is that housing is so depressed it is hard to see activity falling much further from such a severely depressed level.”  Meshing with the new home sales data, the National Association of Home Builders on Monday said that its index of home builder sentiment fell to a 17-month low amid growing concerns about the nation’s economy.

Big banks loaning to small business again

According to the Federal Reserve’s quarterly survey of senior bank loan officers, demand for business and consumer loans was unchanged, but large banks — those with assets greater than $20 billion — are easing their lending conditions.  But the July survey showed the first sign that credit was loosening for small businesses, a sector especially hard-hit during the recession.  Over the last quarter, small companies — those with sales of less than $50 million a year — found loan standards relaxing for the first time since 2006. 

Lending generally eased for consumers, but credit card loans were the exception, the Fed report said.  Changes in standards for credit card loans varied widely. Big banks — and a few other card issuers — generally eased up, while others said they tightened conditions.  In addition, a small fraction of banks said they had reduced the size of credit lines for existing customers. Still, the report said, “that fraction has decreased noticeably over the past few surveys.”

Olick – Reform Fannie and Freddie now?

“Financial industry leaders, academics, economists and dozens of TV cameras will meet in a room at the Treasury Department for the first public forum on reforming the two mortgage giants which have been bleeding cash while still controlling 70 percent of today’s mortgage market.  No question these two entities, Fannie Mae and Freddie Mac, which have cost the taxpayers at the very least $148 billion on paper, not to mention irreparable, continuing and costly damage to consumer confidence in housing, must not exist in their current state for the long term.  I just wonder if now, or even January, 2011, when the Treasury Secretary has promised to deliver a reform proposal to Congress, is the right time to take this on? The housing market is still in deep hangover from the home buyer tax credit, job losses and lack of improvement in the job market are pushing foreclosures back up, and consumer confidence is so low right now that even in economically healthy local markets, potential home buyers are sitting tight on the fence.  Granted, much of Tuesday’s motivation is political.

The administration, heading into the fall elections, has to look like it’s on top of the one big remaining issue in the financial collapse.  But politics have a funny way of wreaking havoc on the markets, and I don’t just mean the stock market, I mean the housing market as well. What we need now, above any more money thrown at housing, is a return of consumer confidence.  Americans need to believe in housing and in the ability of our economy to support housing. Taking down the only secure bastions of liquidity in today’s mortgage market, immensely flawed as they are, or at least having big public forums that generate headlines that make Wall Street traders think these two behemoths are coming down imminently, is, I believe, dangerous. Yes, government needs a plan for Fannie and Freddie, and no they should not exist as they are in the future. But is now really the time?

Producer prices rise

The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate rose 0.2 percent, in line with Wall Street analyst expectations, after dipping 0.5 percent in June.  In the 12 months to July, producer prices increased 4.2 percent after rising 2.8 percent in May. The year-on-year increase was also in line with forecasts.  Separately, the Federal Reserve reports that output at the nation’s factories, mines and utilities increased 1.0 percent last month.

But it says June’s results were revised to a loss of 0.1 percent, reflecting the economy’s sluggishness.  Factory output grew by a robust 1.1 percent in July, helped by auto plants that kept operating when they normally shutter for summer renovations. Factories are the largest single component of industrial production.  The strong manufacturing growth should ease fears that the economy could begin to shrink again. The nation emerged a year ago from its deepest recession since the Great Depression.

Now for our real estate education section…

How to Access & Use the LIHTC

Never heard of the LITHTC? Don’t worry…even many seasoned real estate professional rank as mere novice users when it comes to the Low Income Housing Tax Credit data. However, not only is this a robust resource but also a potentially valuable one for those investors or professionals interested in applying for low income tax credits.

How to Access the LIHTC Database

To access the Low Income Housing Tax Credit database or learn more about the various programs, visit http://litch.huduser.org

Users can select from a variety of variables including a specific city, range, dates or other pertinent search queries.

Research

The LITHTC database contains over 31,250 different projects with over 1,840,000 units. Available research information includes project location, census tract, longitude/latitude, geo codes, county, state, zip, contact information for each project sponsor, total number of units and form of credit eligibility, unit distribution by rooms, type of construction, for profit or non-profit status, tax exemption plus much more.

Who may be interested in this? Obviously researchers interested in social service needs as well as small business owners, developers and even investors searching for historic norms that compare to their own area.

Other Cool Features

Take a few minutes to look around while on the site because there is a lot of terrific information available. For those interested in building or rehabilitating real estate in accordance to low income tax credits, find out if your building is eligible or to apply visit http://www.hud.gov/offices/cpd/affordablehousing/training/web/lihtc/basics/

To learn more about income and rent limits in your area, visit:

http://www.danter.com/TAXCREDIT/getrents.HTML

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
–

Smart Real Estate News & Commentary by Chris McLaughlin August 11, 2010

Forward this e-mail to your friends! 

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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Join us tonight at 8:30 PM ET, 5:30 PM PST:

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

MBA – no major change in mortgage apps

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 0.6% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 0.4% compared with the previous week.  The Refinance Index increased 0.6% from the previous week and the seasonally adjusted Purchase Index increased 0.3% from one week earlier. The unadjusted Purchase Index decreased 0.3% compared with the previous week and was 34.1% lower than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 1.2%.  The four week moving average is up 1.8% for the seasonally adjusted Purchase Index, while this average is up 1.0% for the Refinance Index.  The refinance share of mortgage activity increased to 78.1% of total applications from 78.0% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9% from 5.4% of total applications from the previous week.

Fed pessimistic about growth 

At the conclusion of its meeting yesterday, the Federal Reserve warned that the U.S. economic recovery is weakening.  “The pace of recovery in output and employment has slowed in recent months,” the Fed said in its statement. It said while it still expects the economy to grow, the improvement will be “more modest in the near term than had been anticipated.”  The Fed also announced its plan to buy additional long-term Treasurys. The purchase was seen as moving “one step closer to reinstituting a more aggressive policy,” according to a note from Deutsche Bank economists.  Yesterday’s statement was seen as the strongest statement of concern yet by the Fed. 

As expected, the fed funds rate, the central bank’s key tool to spur the economy, remained near 0%, where it has been since December 2008, and it repeated its outlook of the last 17 months that weakness in the economy will keep the fed funds rate at “exceptionally low levels” for an “extended period.”  The Fed made a modest change in that policy at Tuesday’s meeting as it announced it would not allow its balance sheet to shrink as securities reached maturity. Instead, it will reinvest principal payments into long-term Treasuries, concentrating on purchases of 2-year and 10-year Treasuries. Paul Ashworth, senior U.S. economist for Capital Economics, said the reinvestment announcement is “a largely symbolic gesture, designed to reassure the markets rather than boost the economy.” He estimates that it will amount to about $100 billion in additional Treasury purchases a year, a modest amount in the scheme of the Fed’s overall holdings.

Olick – lower rates no major impact on mortgages

“Are you kidding?  What do you mean mortgage rates mean nothing to housing?  Well, we’ve been sitting around record lows on the 30-year fixed for many many months now, and while the refinance market has certainly seen a boost, the home purchase market has not.  A full 78% of residential mortgage applications today are for refis, not purchases. Would things be worse if rates were higher? Of course. I’m just saying they wouldn’t be much better if rates dropped another 40 or even 50 basis points.  Today the Fed Funds rate remained unchanged, which doesn’t tie directly to the 30-year fixed, but in the additional comments, Fed governors said they would put proceeds from maturing mortgage bonds into treasury debt.  So much for an exit strategy. 

The Vanguard Group’s Ken Volpert said he reads in that: ‘Mortgage rates are low and being lower is not going to make a difference.’  Capital Growth Management’s Ken Heebner adds of the Fed and mortgage rates, ‘They don’t need to drive them lower. You could see mortgages go lower but I think this action reinforces their commitment to drive stimulus.’  But I guess I didn’t need all these learned Wall Street types to tell me that, as I spent the morning with a real estate agent, as he prepared for a Realtor’s open house on a Chevy Chase, Maryland property that just dropped in price by more than $200,000.  Mortgage rates? ‘It is a piece of the equation; it is relatively small though in the big picture of things,” he tells me. “Issues like stability of employment, cash that the buyers may be pulling out of the stock market in order to pay for the home, and just the insecurity they may have regarding what is the price or the value of the home going to do after they go to settlement? The cumulative of those different issues, I think, have created some timidity for the purchasers out there.’  He also added something a little more startling to hear in this upscale neighborhood: ‘They are coming in the door with definite interest in buying a home, but there is a concern: Are they going to have the ability to keep the house?’”

US trade gap widens

The Commerce Department reported yesterday that the monthly trade gap totaled $49.9 billion, or 18.8%, in June on a surge of consumer goods from China and other suppliers, suggesting U.S. second-quarter economic growth was much weaker than previously thought.  That deficit was wider than any of the 67 Wall Street forecasts collected before the report, and is likely to prompt analysts to ratchet down estimates of second-quarter gross domestic product growth.  U.S. imports of goods and services grew 3% in June to $200.3 billion, the highest since October 2008, in a show of strengthening domestic demand. Imports of consumer goods hit a record $43.1 billion and imports of non-petroleum goods were the highest since August 2008.  Imports from China soared to $32.9 billion, the highest since October 2008.  The closely watched U.S trade deficit with the East Asian manufacturer widened to $26.2 billion, also the highest since October 2008, while U.S. exports to China fell slightly.  The big jump in the U.S. trade deficit follows Chinese government data on Tuesday that showed China’s trade surplus surged to $28.7 billion in July, an 18-month high.

Short Refinance not very effective according to Amherst

Last week, the US Department of Housing and Urban Development (HUD) announced that the Federal Housing Administration (FHA) Short Refinance program would provide additional refinancing options to underwater homeowners starting Sept. 7.  According to Amherst Securities Group though, the number of mortgage loans eligible for the new program will be “relatively few,” given debt-to-income restraints and that it’s a volunteer program.  To be eligible for the new loan, the homeowner must be underwater but still current on the mortgage. A credit score of 500 or better is required, and once refinanced and insured by the FHA, the new refinanced loan must have a loan-to-value ratio of no more than 97.75%. 

The borrower’s existing first-lien holder must agree to write at least 10% of the unpaid principal balance, and it must bring the borrower’s combined loan-to-value ratio to no more than 115%. The existing refinanced loan cannot be an FHA-insured one.  But in order for the servicer to avoid litigation from investors for the write-down, or achieve safe harbor, they must prove the loan is in imminent default. Few servicers would be willing to label a consistently current borrower as in danger of default and needs to have the principal written down, according to Amherst.  “The true use of this program will be for loans that were once delinquent, and have been modified,” according to Amherst.

Now for our real estate education section…

Real Estate – Literally Too Good to Be True?

While most of America sit on the sidelines waiting for a full economic recovery, savvy short sale and real estate investors that recognize a good thing when they see it are reaping huge economic rewards. It’s easy to understand why they are optimistic; exceptional interest rates, huge discounts and plenty of properties to choose from…why doesn’t everyone join in?

In what might seem like a contradiction, real estate might be suffering from the perception that it is too good to be true. Rather than take the time to really crunch the numbers, most Americans rely upon the media for most of the financial information (and then wonder why they aren’t ready to retire sooner). Aside from the somewhat dubious value of that strategy, they simply don’t understand how good the current market really is; when they hear about a successful short sale transaction or investment, the reaction is disbelief or denial. For the benefit of those who are sitting on the sidelines or perhaps trying to talk a bit of sense into a friend or family member, let’s take a few minutes to run a few simple calculations and comparisons.

House Price Illusions – One of the benefits of long term real estate holdings is the inflation hedge provided…it is also a major reason more people don’t fully understand how to properly value real estate. For example, the median purchase price of a house in 1964 was roughly $19,000. As of 2009 (the last full year of data), the median purchase price was roughly $206,000…a seemingly sizable increase in nominal terms. However, when adjusted for inflation, the 2009 house would equal only $30,000 in 1964 terms.

Bargains Galore – Of course, in 1964 there were not as many houses on the market. Today it is a buyer market with many homes selling well below the $200,000 level. In many areas of the nation it’s possible to find relatively newer homes selling for less than half that amount…or the equivalent of only $15,000 in 1965 terms.

Better Rates – The savings don’t stop with prices. Interest rates really make a difference in the total cost of a house; with 30 year fixed interest loans below 5% and relatively low down payment, houses remain even more affordable today than at almost any time in the past 4 decades. Combined with a higher minimum wage, it’s possible for two minimum wage earners with decent credit to purchase an affordable starter home for roughly the cost of a car payment…and lock in that great monthly payment for a full 30 years. It’s one of the most simple yet effective ways to storm-proof a portfolio for years to come. Young people have an especially great reason to turn to short-sales to purchase their first home or begin investing early; great prices, great rates and plenty of time on your side. It’s a win-win proposition. Not sure it can be done…take the time to tune-in and see the short sale kid in action. Young or old this is an equal opportunity venture you can’t afford to miss.

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
–

Smart Real Estate News & Commentary by Chris McLaughlin July 20, 2010 

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Fix A Flip Re Opens … If you want your deals funded beyond 1 day,

this is the webinar you need to be on this TONIGHT at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/618365627

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Housing starts down

The Commerce Department says housing starts dropped 5.0% to a seasonally adjusted annual rate of 549,000 units, the lowest level since October.  It was the second straight month of decline in activity and was well below market expectations for a 580,000-unit rate.  May’s housing starts were previously reported as a 10.0% drop, but are now revised down to show a 14.9% decline.  Compared to June last year, starts were down 5.8%, the biggest decline since November.  Driving the June decline was a more than 20% drop in the volatile condominium and apartment market. Construction of single-family homes, the biggest part of the market, was down slightly by 0.7%.  The only positive sign in the report was an unexpected 2.1% rise in applications for building permits to a 586,000-unit pace in June. 

That followed a 5.9% drop in May and compared to analysts’ expectations for a slip to 570,000 units.  Still, the slumping job market and competition from foreclosed properties have forced builders to limit construction, especially after tax credits that spurred sales expired at the end of April.  “Despite record low mortgage rates, housing is at risk of a double dip unless job growth strengthens soon,” said Sal Guatieri, senior economist at BMO Capital Markets.  Economists had had predicted that construction would fall to a rate of 580,000 and had projected that building permits would sink to a rate of 570,000, according to Thomson Reuters.  In a typical economic recovery, the construction sector provides much of the fuel. But not this time. While developers have cut back on construction and the number of new homes on the market has fallen dramatically, they still must compete against foreclosed homes selling at deep discounts. 

Consumers will pay for new rules

Up until recently, bankers have remained mum on particular reform measures, saying that regulators will first need to write specific rules.  But Bank of America broke ranks on Friday, detailing the impact of several provisions, including the so-called Durbin amendment, named after sponsor Sen. Richard Durbin, D-Ill., which will limit the fees banks collect from debit card swipes.  Bank of America executives said the new rule would reduce fees earned from debit cards anywhere between 60% and 80% starting in the second half of 2011. This year, the company said it expects to produce $2.9 billion in revenue from that business.  “We now fear that the Durbin bill could have a great negative impact on bank revenue than we had originally estimated,” BMO analyst Lana Chan wrote in a note to clients Monday. 

Even though BoA is hit hard, , the biggest hit was expected to fall on major regional players such as Regions Financial, KeyBank and Fifth Third. Each institution generated over 3% of their overall revenue from interchange fees last year, compared to Bank of America’s 2%, according to Chan.  Analysts suggested that perhaps the company most exposed to the new measure was the Minnesota-based lender TCF Financial.  In 2009, more than 10% of its revenue came from interchange. FBR’s Paul Miller projected Monday that TCF’s earnings could fall by as much as 40 cents a share as a result.  Banks have not been sitting idly by. A number of major financial institutions have reportedly started to eliminate free checking accounts, as well as imposing new or higher fees, ultimately putting the cost of the forthcoming new laws on the consumer.  “That is probably what is going to happen here,” said TCF Financial CEO Bill Cooper said during a conference call with investors last week.  The bad news is that the Durbin rule is just one small piece of an ongoing effort to rewrite the rules of the road for the financial services by this administration and congress.

Olick – Jumbo loans are back

“After several years of stagnation in high-end housing, thanks to the disappearance of the jumbo market, things are moving yet again.  A quick check on Bankrate.com shows the 30-year fixed jumbo at around 5.50%, and Citibank last week reported applications for jumbos up 30% just over the last 60 days.  “It is the overall weak economy driving the 10 year lower, which is the proxy for most mortgage loans,” says FBR’s Paul Miller. “This is still probably the best of the best getting loans at these low rates, but Jumbo activity is still very, very low.” Miller says it’s good for the market, but only “marginally better,” as banks are desperate to find good loans to put on their books.  But how long will it last? Probably only as long as investors remain nervous about the economy.  “Preliminary signs of life in the secondary market are a good indication that the narrower spread between jumbo and conforming loans will stick around,” says Bankrate.com’s Greg McBride. “However, the level of mortgage rates will hinge more than anything on the demand for Treasuries.”  Bank of America tells me that applications and fundings for jumbo loans rose over 10% from May to June. They say they’ve always been the leader in jumbos, which could be why Citi is getting more aggressive.”

Home Builder Confidence Plummets

Builders have been feeling increasingly pessimistic of late. The National Association of Home Builders (NAHB) said yesterday that its monthly reading of builders’ sentiment about the housing market sank to 14 — the lowest level since March 2009. Readings below 50 indicate negative sentiment about the market.  “We continue to see a lull in home buying activity following the expiration of the federal home buyer tax credit program, as many of the sales that would have occurred this summer were likely pulled forward to meet that program’s deadline,” said NAHB chairman Bob Jones, a homebuilder in Bloomfield Hills, Mich., in a press statement. “In addition, builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job markets.” 

Paul Dales, a US economist at the Toronto-based Capitol Economics concurred that the tax credit’s expiration is impacting the housing market.  “It is becoming increasing clear that without the government’s artificial support, the US housing market is struggling to stand on its own two feet,” Dales wrote in commentary Monday. ” The fall in the NAHB housing index…shows that demand for new homes has weakened further.”  Specific factors contributing to the negative view include hesitation on the part of homebuyers, tight consumer credit and continuing competition from foreclosed and distressed properties, according to NAHB chief economist David Crowe.

Now for our real estate education section…

Mortgage Overhaul & What is Means for You

By the time you are reading this, the new 2300 page financial reform bill is likely to be making the headlines. The Senate has already approved the new bill and President Obama is expected to sign it into law this week ..despite the fact that many of the provision related to specific regulations have yet to even be written. If that sounds faintly disturbing, don’t worry…your concern is noted and shared by many experts through the nation. However, there are sweeping changes that are already apparent despite the lack of specific details.

Although broad in scope, home buyers and sellers are likely to be among the first impacted by the new provisions. They represent one of the most comprehensive – top to bottom  changes to the finance, valuation, types of mortgage products offered and how lenders are compensated to take place in decades. In fact, there are even new rules for investors that provide capital for the purchase of mortgages.

A few of the most important points likely to make immense impact to buyers, sellers and investors is the language dealing with any type of mortgage outside of the “traditional” or “plain vanilla” category. Unfortunately, regulators have yet to fully define what will constitute a “traditional” mortgage under the new plan but it is clear that the line will be drawn to reduce the number of sub-prime borrowers as well as offerings of owner finance and other alternative forms of finance. Experts predict an immediate severe impact on many minority and low income borrowers; many who have already been impacted by far less severe measures. For example, according to FHA, rejection rates for African American and Latino borrowers have substantially increased among non-FHA loans.

The new FDIC and other regulatory oversight standards contained in the bill are expected to provide safer mortgage(s) instruments but at a higher cost and more stringent requirements for both banks and individuals. It is estimated that only five banks currently control more than 65% of the current mortgage market; the new bill is expected to further consolidate this trend by favoring big banks over small. In part, this is due to the belief that big banks are easier to regulate. However, at the same time, new controls and rules regulating private investors are also expected to take another two to three years to fully define…leading many to believe the bulk of mortgages will still be backed by the United States government for the foreseeable future.

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
–