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Smart Real Estate News & Commentary by Chris McLaughlin March 13, 2012

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Settlement to boost short sales

The government’s $25 billion settlement with the nation’s five biggest mortgage servicers over so-called “robo-signing” practices could boost short sales, as loan servicers will receive credit when they approve sales that include forgiveness of a portion of underwater homeowners’ debt.  Although the settlement is only expected to help a fraction of homeowners who owe more their properties are worth — perhaps one in 20, according to one estimate — it will also help bring certainty back to housing markets by removing some of the obstacles that have been keeping homes stuck in the foreclosure pipeline.  Announced last month, detailed terms of the agreement between mortgage servicers and a coalition of state attorneys general and federal agencies were filed today.

Broadly, the settlement calls for mortgage servicers to pay $5 billion in fines and commit to a minimum of $17 billion in homeowner relief, including principal reductions. Another $3 billion is earmarked for helping underwater borrowers refinance. “We will see an increase in short sales, because lenders and loan servicers will get the same credit for doing a short sale, as if they did a loan modification or principal reduction,” said Rick Sharga, executive vice president of Carrington Mortgage Holdings LLC.  Allowing debt forgiveness on approved short sales to count against the required $17 billion in principal reductions helped secure a settlement that will reach more borrowers, the paper said. Loan servicers will also get partial credit even when it’s investors, rather than the banks themselves, taking the loss.

Also, if the remaining six to 14 loan servicers sign on to the settlement, it would grow to about $30 billion with more than $45 billion in benefit to homeowners, HUD said.  Cade Holleman, executive director of the Irvine, Calif.-based National Association of Women REO Brokerages, said the day is fast approaching when brokers and agents who have concentrated heavily in real-estate owned properties will have to diversify.  Short sales, refinancings, and loan modifications are each “pulling REO inventory out of the game,” he said.  “You’ve got to keep your eye on that process,” Holleman said.  “You can no longer be 80% REO,” but must diversify into short sales and property management.

Retail sales up

Total retail sales increased 1.1%, the Commerce Department said, after an upwardly revised 0.6% rise in January.  Economists polled by Reuters had forecast retail sales rising 1% after a previously reported 0.4% gain in January.  Sales last month were buoyed by a 1.6% rise in sales of motor vehicles, reflecting pent-up demand by households and growing confidence in the economy as job creation speeds up.  Excluding autos, retail sales advanced 0.9% last month, adding to January’s upwardly revised 1.1% gain.  Gas prices rose 20 cents last month, according to government data.  Sales at gasoline stations surged 3.3%, the biggest gain since March last year, after rising 1.9% in January. Excluding autos and gasoline, sales rose 0.6% in February after increasing 1% the prior month. Gasoline accounted for 11.5% of retail sales in February.

Outside autos and gas stations, details of the report were fairly upbeat, suggesting recent solid gains in employment were supporting consumer spending.  Last month, clothing store receipts jumped 1.8%, the largest increase since November 2010, while sales at building materials and garden equipment suppliers advanced 1.4%.  So-called core retail sales, which exclude autos, gasoline and building materials, were up 0.5% after advancing 1.0% in January.  Core sales correspond most closely with the consumer spending component of the government’s gross domestic product report.   Sales at restaurants and bars rose 0.8%, while receipts at sporting goods, hobby, book and music stores increased 1.0%.  Sales of electronics and appliances rose 1.0%, while receipts at furniture stores fell 1.2%.

Olick – rent bubble?

“Typically when rents go up, more renters turn to home buying.  When home prices go up, more turn to renting, but today’s housing market is anything but typical.  Rents were up 3% nationally in January, year-over-year, according to a soon-to-be released new rental index from Zillow.com. Home prices, however, were down 4.6% annually.  When you look locally, the numbers are more dramatic.  In some markets, rents rose almost as much as home values fell. Take Chicago, for example, where rents were up just over 9% annually while home values were down just over 10%. The same is true for Minneapolis, where the divide is nearly the same. In San Francisco and Detroit, rents are up around 5% while home prices are down the same. It begs the question, as the rent vs. own divide grows, will the rental bubble suddenly burst?  Right now investors are rushing to get in on cheap foreclosures, hoping to turn them around for quick rental income. The regulator of Fannie Mae and Freddie Mac, the FHFA, is in the midst of a pilot program to sell 2500 foreclosed properties to investors as rentals. The bulk of these properties are already rented, which means buyers get a turn-key investment with instant returns.  In the meantime, multi-family housing starts were up over 14% in January from December and have been rising steadily as developers look to cash in on high rental demand and relatively low supply. Multi-family REITs are seeing big returns.

So what exactly is the tipping point, given that mortgage availability is still tough, consumer confidence in housing is still weak, and employment, while improving, is still not where it needs to be to spur strong buyer demand?  ’While it seems that rents are rising at the expense of home values, the opposite is true. A thriving rental market will stimulate home sales, as investors snap up low-priced inventory to convert to rentals. That, in turn, will lower the number of homes on the market, which will eventually help put a floor under the value of all homes,’ says Zillow chief economist Stan Humphries.  More supply of rental homes, especially single family, could slow the upward trajectory of rent rates, which in turn would make renting more attractive and buying less so. It just raises a red flag to see home affordability at a record high, investors rushing in, and rents so strongly outpacing home values.”

Banks to face tough reviews

Banks will face stiff penalties and intense public scrutiny if they fail to live up to the standards of a $25 billion mortgage settlement with state and federal authorities, according to court documents filed as part of the deal Monday in federal court in Washington.  While the broad outline of the deal was announced last month, the mechanics of the agreement that took more than a year to negotiate were laid out in Monday’s filing, including exactly how much credit the five banks would receive for varying levels of loan forgiveness and just what kind of conduct from the past is off-limits to future investigations.  Banks must review their adherence to the new rules every quarter through a random sampling of cases, with a maximum threshold for errors at 1% in some cases if they are to avoid fines. “Any error that is found during the sampling process will have to be corrected,” the official said.  In some cases, servicers would face civil penalties of up to $1 million for each violation of Monday’s consent order.  Repeat violations could bring fines of $5 million each. An independent monitoring and enforcement office is being set up under the agreement, to be paid for by the banks, that will be led by Joseph A. Smith Jr., the former North Carolina banking commissioner.

The complaint, which specifies the terms of the settlement, comes nearly 18 months after reports of “robo-signing” and other abuses in the foreclosure process set off a nationwide furor, and marks another legal milestone in the wake of the bursting of the housing bubble and the financial crisis of 2008-9.  The five banks covered by the settlement - Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally - engaged “in a pattern of unfair and deceptive practices,” according to the complaint. Besides failing to perform modifications for borrowers seeking to ease the terms of their loans, the documents also cite what consumers have been complaining about for years: lost applications and other paperwork, inadequately trained staff and wrongfully denied modification requests.

WSJ – rise in Phoenix housing shows the way to recovery

As home prices continue to drop in most cities, a nascent real-estate rebound here holds lessons for the rest of the country.  This sprawling desert metropolis was one of the hardest hit housing markets during the bust. Phoenix home prices declined 55% from 2006 through the end of 2011, and Arizona’s foreclosure rate jumped to No. 3 in the nation in 2009. Hundreds of thousands of homeowners are underwater.  Now real-estate economists across the country are studying an early but surprisingly broad Phoenix turnaround. The sharp drop in home prices has brought new buyers into the market. Unlike other markets where housing recoveries have been snuffed out by big overhangs of homes for sale and foreclosed properties, inventories are lean here.  “Phoenix has hit a bottom,” says Thomas Lawler, an independent housing economist who was one of the first to warn six years ago that prices in overbuilt metros were poised to fall.  The nation’s hard-hit housing markets face a tough act: engineering a housing recovery without traditional trade-up buyers, many of whom are either unwilling or unable to sell because of huge price declines.

Phoenix has found a viable formula. Low prices are igniting demand from first-time buyers and investors who are converting the homes to rentals. The local economy is on the upswing with several big employers like Amazon.com Inc. and Intel Corp. hiring again, which is further increasing demand for housing. And the region is benefiting from a surge of buyers from Canada who are using their favorable exchange rate to scoop up bargains in the desert.  Local mom-and-pop investors are also playing key roles in soaking up supply. Out-of-state buyers accounted for one-quarter of all purchases last month. One in every 25 sales went to a buyer that listed a Canadian address when registering the sale, according to the Cromford Report, a local real-estate publication. Many are flush with cash from a real-estate boom of their own in Canada and an exchange rate that has given Canadians unusual buying power.

Nationally, housing demand still remains weak and bank-owned sales are expected to rise this year, putting more pressure on prices. Many economists say they expect home prices nationally could fall by another 3% or so this year before hitting a bottom next year. Most expect that prices will rise little for several years.  US home prices fell another 2% in the fourth quarter on a seasonally adjusted basis, according to the Standard & Poor’s/Case-Shiller index tracking 20 cities. But prices rose by 2% in Phoenix, the biggest increase of any metro area in the country. Over the past year, prices in Phoenix are down by 1.2%, the smallest drop since its prices started falling in 2006.  Big price drops, like those in Phoenix, are another key. In Detroit, prices are down by 46% over the past six years and have fallen to levels last seen in 1994. Sales have picked up in Miami, where prices are down by 51% over the past five years.

But low prices alone haven’t been enough to so stabilize other epicenters of the housing bust where job growth still lags. In Las Vegas, where prices have tumbled 62% since 2006, including 8.9% over the past year, the local economy is heavily dependent on tourism and gambling, both industries that haven’t recovered. “A lot of markets in the country have hit a bottom, but I just don’t see them coming back the way Phoenix has,” says John Burns, a homebuilding consultant in Irvine, Calif.  The improving housing market in Phoenix isn’t much comfort to anybody who bought a home there a few years ago. More than 52% of mortgage borrowers owe more than their homes are worth, according to CoreLogic, a real-estate data company. And not everyone in Phoenix is convinced that the improvements will last, especially if the economy falters or oil prices soar.  Phoenix saw a small run-up in prices three years ago when federal tax credits spurred a buying frenzy, but prices dropped again once the credits expired. Others worry that banks have delayed foreclosures and will begin to saturate the market with more properties in the coming year.

Small business optimism up

Optimism among small business owners may be increasing at a “glacial” pace, but it’s “mostly headed in the right direction.”  That’s according to William Dunkelberg, chief economist of the National Federation of Independent Business and keeper of the Small Business Optimism Index. The latest survey of 819 NFIB members showed indications that small business owners are starting to spend, and could even ramp up hiring in some sectors over the next few months.  Respondents to the February survey expressed optimism about their expectations for higher real sales, an increase in inventories and positive earnings; these three things taken together helped push the index up 0.4%, to 94.3, the sixth straight increase in the monthly index.  Inventories have decreased for many business owners in the past month – 20% of respondents reported reductions – which is good news for an economy that needs spending to make it grow.

Capital outlays, too, are being planned, according to the survey. “The capital spending number keeps going up,” he noted. “It’s the highest we’ve seen in years.” While still far from normal, he said, “Even if it’s just to fix a leaky roof, business owners’ capital expenditures are rising.”  In the past month, more business owners also added workers – 12% of owners added 3.4 workers per firm.  The November elections, as well as the uncertainty surrounding health-care reform, are causing some business owners to remain on the sidelines, said Dunkelberg, waiting to see the outcome of both before committing to spending and expansion. “There is a lot of political uncertainty between now and November,” he said.  Still, the trend, at least for now, is upward. And for many business owners, even a slow improvement is better than movement in the other direction.

Foreclosures to jump in 2012

Analysts expect between 900,000 and 1 million homes will move from delinquency into REO in 2012, back to levels seen before the robo-signing slowdown.  Servicers moved roughly 800,000 properties through the foreclosure process and into REO liquidation in 2011, according to RealtyTrac. After resolving affidavit problems late last year, banks began moving more properties through the process. JPMorgan Chase analysts expect repossessions to reach as high as 900,000 even with a wave of new alternatives to foreclosure.  “Several major policy changes in the last few months have sped up resolution of the pipeline. Of course, new delinquencies will ensure that full resolution will still take years, but the pace may be faster than we expected,” analysts said.  Daren Blomquist, vice president of RealtyTrac, said that pace could return this year.  “For 2011 we hit 804,423, not quite the 825,000 we were on pace for because of a slowdown in November and December,” Blomquist said in an interview. “We are expecting close to 1 million REOs in 2012 as some of the delayed foreclosures finally complete the process this year.”

The pace began to pick up in January but is still down from 2011. Servicers repossessed 66,500 homes that month, up 8% from December but down 15% from one year ago.  Just because a property moves into REO doesn’t mean it will be resold that year, either. For instance, Freddie Mac data shows the GSE had to wait an average of nearly 200 days to unload an REO. According to Blomquist, there were nearly 538,000 REO sales in 2011, roughly two-thirds of all homes repossessed that year.  About 2.6 million loans, or half of the total delinquency inventory, will be removed either through modification, short sale or a traditional repossession in 2012, Chase analysts said.  The AG settlement guidelines released yesterday could result in 500,000 modifications, according to Chase.  The Treasury Department expanded the Home Affordable Modification Program in January to allow more borrowers to qualify and provide higher incentives for principal reduction.

Analysts still expect the changes to result in relatively few additional modifications, roughly 140,000 added to the 220,000 permanent workouts under the program estimated this year.  If so, HAMP workouts may outnumber the 270,000 proprietary modifications, which have routinely outsized HAMP in the past.  Chase analysts also expect the Fannie Mae and Freddie Mac bulk REO sales and rental programs to reach as high as 100,000 properties. A pilot program began in February to sell just 2,500 Fannie-owned homes.  Roughly 500,000 short sales could occur in 2012, roughly one-third of all liquidations — which include the 900,000 expected repossessions and the new rental program as well.

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 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

* 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 March 9, 2012

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BofA in side deal with US govt on mortgage foreclosures

Bank of America will make deeper and broader cuts than other banks, which will allow it to avoid as much as $850 million in penalties and give more than 200,000 financially strapped households the opportunity to sharply reduce their mortgage balances. The side deal is unique to Bank of America, said the Wall Street Journal, citing a senior administration official. It added that many of the write-downs will be made on loans originated by Countrywide Financial Corp, which Bank of America bought in 2008, and then packaged into securities. Investors in those securities could then be affected by the side deal. Bank of America said on Feb. 9 that under the government settlement, write-downs will be made on loans originated by Countrywide Financial Corp prior to and for a period following the bank’s acquisition of that lender. The other banks accused of abusive mortgage practices that settled with the government were Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc and Ally Financial Inc.

Restructuring bails out Greece

Greece’s private sector creditors agreed to a historic restructuring of the government’s debt early Friday, setting the stage for the nation to secure more bailout money and skirt a messy default. Investors agreed to restructure €172 billion worth of Greek bonds, which represents 85.5% of the total €206 billion held by the private sector, said the Greek finance ministry. Another 69% of investors that own Greek bonds not issued under Greek law agreed to restructure roughly €20 billion. Greek Finance Minister Evangelos Venizelos welcomed the agreement, saying the restructuring will help Greece get out of debt and revive its ailing economy. Greece is widely expected to activate so-called collective action clauses, which the government retroactively added to its bond contracts a few weeks ago, to make the restructuring binding for all holders of Greek bonds issued under domestic law. The use of the clauses should bring the total participation rate in the restructuring to more than 90%, the threshold Greece needs to cross in order to meet all the conditions of its second €130 billion bailout from the European Union and International Monetary Fund. Euro area finance ministers are expected to discuss the restructuring during a conference call later Friday, when they could approve the final portion of the bailout.

Banks foreclosing on churches in record numbers

Banks are foreclosing on America’s churches in record numbers as lenders increasingly lose patience with religious facilities that have defaulted on their mortgages, according to new data. The surge in church foreclosures represents a new wave of distressed property seizures triggered by the 2008 financial crash, analysts say, with many banks no longer willing to grant struggling religious organizations forbearance. Since 2010, 270 churches have been sold after defaulting on their loans, with 90 percent of those sales coming after a lender-triggered foreclosure, according to the real estate information company CoStar Group. In 2011, 138 churches were sold by banks, an annual record, with no sign that these religious foreclosures are abating, according to CoStar. That compares to just 24 sales in 2008 and only a handful in the decade before. The church foreclosures have hit all denominations across America, black and white, but with small to medium size houses of worship the worst. Most of these institutions have ended up being purchased by other churches. The highest percentage have occurred in some of the states hardest hit by the home foreclosure crisis: California, Georgia, Florida and Michigan. “Churches are among the final institutions to get foreclosed upon because banks have not wanted to look like they are being heavy handed with the churches,” said Scott Rolfs, managing director of Religious and Education finance at the investment bank Ziegler. Church defaults differ from residential foreclosures. Most of the loans in question are not 30-year mortgages but rather commercial loans that typically mature after just five years when the full balance becomes due immediately.

Unemployment holds in February

Hiring remained strong in February, but the overall job market is not out of the woods yet. Employers added 227,000 jobs in February, the Labor Department reported Friday, a pinch slower than in January, when the economy added 284,000 jobs. Meanwhile, the unemployment rate remained at 8.3%, in line with expectations. Private businesses were the main driver of job growth, and have been adding jobs consistently since March 2010. In February, they added 233,000 jobs. But government job losses have been offsetting some the private sector gains, with most of the bleeding at the state and local level. Last month, 6,000 were lost. The American economy lost 8.8 million jobs in the financial crisis.

Freddie asks for $146M in aid

Government-controlled mortgage giant Freddie Mac has requested just $146 million in additional aid after posting a smaller loss in the fourth quarter. That’s far less than in the third quarter, when Freddie received $6 billion from the government. It received $7.6 billion for all of 2011. Freddie Mac says it lost $1 billion, or 32 cents per share, in the October-December quarter. That compares with a loss of $1.72 billion, or 53 cents a share, in the same quarter of 2010.
Freddie’s losses are decreasing because of a drop in the number of homeowners paying less interest as they refinance at lower mortgage rates. The government rescued McLean, Va.-based Freddie Mac and sibling company Fannie Mae in September 2008 after massive losses on risky mortgages threatened to topple them.

Economy faces years of reforms – Timothy Geithner

At home and abroad, Treasury Secretary Timothy Geithner said the economy is on the mend but faces years of painstaking reforms. He pushed a new highway bill making its way through the Senate that would invest in infrastructure and streamline the approval process. Geithner called the bill “employment intensive.” One of the major headwinds, Europe, seems to be gaining progressive and positive momentum. A Greek debt-swap program made major progress Thursday, which would grant the sovereign access to a second bailout package. He praised foreign officials and the European Central Bank for setting aside politics in favor of “preventing the equivalent of lighting the continent on fire.” Averting disaster will cost years of reform. Geithner said there is a need to streamline regulatory changes in the U.S.

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 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

* 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 March 6, 2012

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

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

January on a high for repeat foreclosures

Repeat foreclosures hit an all-time high in January, representing 47% of all starts. Foreclosure starts rose in January suggesting the pipeline is starting to move, according to the latest mortgage monitor report from Lender Processing Services. LPS said foreclosure starts in the first month of 2012 rose 28% from December but fell 11.5% from a year earlier. The data firm says 203,458 starts were recorded in January, compared to 230,023 in January 2011. LPS sees positive changes in the foreclosure pipeline, but  says it’s too soon to call it a trend. When looking at new problem loans, the ratio of troubled mortgages is relatively low nationally but the states with the most seriously delinquent home loans in January included Nevada, Florida, Mississippi, Arizona and Georgia. Nationwide more than 40% of loans in foreclosure are more than two years past due. LPS estimates that refinance opportunities under the new HARP 2.0 are possible for 27.6 million borrowers, but only 6.8 million are probable.

Big Names Rally to Romney

Leading members of the Congress and influential conservatives are showing signs of rallying around Mitt Romney in the presidential race signaling that a coast-to-coast burst of voting on Super Tuesday should mark a moment to start concentrating on defeating President Obama. The endorsements come as the Romney campaign is pressing elected officials and activists in the 10 states that are voting Tuesday and those that do so in the following weeks to help nudge the contest toward a conclusion. A methodical effort is under way among governors, donors and top Republicans to make the case that a long nominating fight could weaken the party’s chances to win the White House, maintain control of the House and gain a majority in the Senate. It is a significant moment for Mr. Romney, but also a critical one for Rick Santorum, who is scrapping for delegates but also trying to win the popular vote in Ohio to revive doubts about Mr. Romney’s appeal among conservative and working-class voters. Newt Gingrich is also fighting to stay in the race, staking the future of his candidacy on a victory in Georgia. Here in Ohio, where voters have developed a well-earned reputation as a bellwether that captures national political sentiments, the primary will help determine the length of the presidential race and the direction of the Republican Party. The state could also provide one of the best opportunities for Mr. Santorum to slow Mr. Romney’s march to the nomination.

Olick: Buying Foreclosures – One Investor’s Key to Success

With potentially millions of foreclosed, bank-owned homes coming to the housing market over the next few years, cash-heavy investors are poised to profit, especially when buying in bulk. The Federal Housing Finance Agency, regulator of Fannie Mae and Freddie Mac, recently announced a pilot property sale program of 2500 foreclosures now on the books of Fannie Mae. Phoenix investor Geoffrey Jacobs is hoping to get in on it. “The ability to buy in bulk adds to our ability to grow our portfolio in a meaningful way in a short period of time,” says Jacobs, principal at Empire Group, which has already bought over 1000 Phoenix-area homes in the past two and a half  years. “When you look at how well these properties lease and the type of  rental yields, it’s a compelling investment.”  When Empire Group first began buying foreclosures in 2009, it farmed out the property management to smaller companies and individuals. Jacobs quickly learned that method was costing precious profit. Just twenty percent of the nation’s 8.7 million single family rental properties are managed by professionals, according to Steve Cook of Real Estate Economy Watch. Individual owner/investors do the bulk of the rest. Owners, according to Cook, may be spending too much time and money on maintenance. Jacobs’ group, however, is very profitable, with 8-9 percent annual returns on his properties. His renters stay, he says, with a 65-70 percent re-up rate. He credits good management and hopes, someday, that his long-term renters will become buyers. Unfortunately, that may take a while, as so many of them need to rebuild their credit. Empire Group has already passed the first round of pre-qualification for the FHFA REO to Rent program and is hoping to clear the second round and start bidding on bulk properties in the next few weeks.

Factory orders fall, as economy staggers once again

New orders for U.S. factory goods dropped in January by the most in over a year as businesses cut orders. The Commerce Department said on Monday orders for manufactured goods fell 1 percent, a less steep decline than the 1.5 percent drop expected by private forecasters in a Reuters poll. Still, it was the biggest decline since October 2010. Many economists think the expiration of some tax breaks on capital spending at the end of 2011 led businesses to bring forward investments. Orders for non-defense capital goods, excluding aircraft fell 3.9 percent in January. This is a closely watched category because it is taken as a sign of businesses’ future spending plans. Shipments for this category declined 3 percent. Business spending and manufacturing have been drivers of the recovery since the 2007-2009 recession.

Home prices fall by smallest margin: Clear Capital

National home prices fell by the smallest margin in 10 months in light of REO saturation increases, a trend that Clear Capital calls “unusual and encouraging.” Prices declined 1.9% year-over-year, according to the firm’s Home Data Index market report. Short-term prices remained stable, falling only 0.6% quarter-over-quarter, highlighting short-term stability over the last few months. All regions showed improvements in yearly and quarterly price drops, while three out of four saw upticks in real estate-owned properties for sale. Clear Capital found that the nation’s top 15 performing metropolitan statistical areas were resilient against higher REO saturation, with six of them showing quarterly price appreciation greater than 2%. Alex Villacorta, Clear Capital’s director of research and analytics, said markets such as Atlanta and Tucson, Ariz., hit hard by the foreclosure epidemic, are filled to the brim with REO properties for sale and will see a falloff in 2013 — if not before.

Ds News: Consumer Credit Points to End of Housing Downturn

Consumer credit data suggests spending will increase and the housing market will begin to emerge from its slump this year, according to Equifax and Moody’s Analytics. Both companies note that as key market data align with pre-recession totals, consumers should anticipate steady economic growth for major credit sectors. Looking across the full spectrum of consumer credit, Equifax and Moody’s found that delinquency rates for auto, bankcard, and consumer finance are back to pre-recession levels. These sectors are expected to contribute to the U.S. economy’s nascent recovery.  The home mortgage lending sector continues to see the highest percentage of delinquencies, the companies’ report notes, even with outstanding mortgage balances (including first liens and home equity lines and loans) having declined by $1 trillion since 2008 and continuing to drop. The companies also note that tighter lending guidelines are reflected in loans made to the prime risk segment. Consumers that fit the bill of a prime risk now account for more than 80 percent of all new mortgage originations.

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 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

* 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 March 2, 2012

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U.S. Housing stepping towards recovery

After several false starts, housing is flashing the strongest signals yet of a sustainable rebound. While foreclosures continue to depress prices, buyers are wading back into the market, lured by rising employment and record-low mortgage rates. Six years into the biggest real estate collapse since the Great Depression, housing may become a net contributor to the U.S. economy for the first time since 2005. “There are definitely green shoots in the housing market, no argument about that,” said Peter de Bruin, an economist at ABN Amro Group Economics in Amsterdam. Speculation that new home sales will rebound has boosted shares of homebuilders, with the 11-member Standard & Poor (SPY)’s 1500 Homebuilding index up 17 percent this year, compared with a 9.3 percent gain for the Standard & Poor’s 500 Index.

Apply stimulus vigorously: Fed Williams

Recent signs of improvement in the U.S. economy are encouraging but the rebound has been anemic and the Federal Reserve must “keep applying monetary policy stimulus vigorously,” San Francisco Federal Reserve President John Williams said on Thursday. Despite a recent drop in the unemployment rate to 8.3 percent, Williams said he expected it to remain above 8 percent into next year and to be “well over” 7 percent for several years to come. Strained household finances, a weak housing market and tight credit conditions are likely to hold down spending growth for some time, he added. The economy should grow about 2.25 percent this year and 2.75 percent in 2013, he said, adding the main threat to his forecast was the debt crisis in Europe. The San Francisco Fed chief is known as a monetary policy “dove” who is more concerned with the threat of high joblessness than high inflation.

Olick – Negative equity traps one third of American borrowers

As home sales begin a slow recovery and potential buyers dip their toes back in real estate’s still-troubled waters, many of them face a huge barrier to entry: Negative equity, that is, borrowers who owe more on their mortgages than their homes are currently worth. One point 1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011, according to a new report from CoreLogic. Combine negative equity and near-negative equity, and about one third of all borrowers cannot sell their homes without either putting up some cash to pay off the mortgage or the closing costs or without the bank agreeing to a short sale. That’s when the home is sold for less than the value of the mortgage. The prime culprit in rising negative equity is falling home prices, and home prices are falling because distressed property sales are rising. Sales of properties in some stage of foreclosure made up a full 24 percent of all home sales in Q4, up from 20 percent in Q3, according to RealtyTrac. As previously noted, home sales are rising, but largely on the backs of investors buying distressed, low-end properties. With one third of borrowers stuck in their underwater homes, there is unlikely to be much movement at all this spring in the move-up market.

Economy awaits liftoff

A flurry of economic reports issued Thursday captured some solid recent gains in the U.S. economy.  But Thursday’s reports also showed that a healthier job market hasn’t translated into bigger paychecks for workers or a surge in consumer spending. And the progress of the past few months is now threatened by a rise in gasoline prices. “When you get this sort of hodgepodge and not-so-good results, you start to see the true nature of this recovery,” said Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness. A healthier job market hasn’t produced bigger paychecks or a surge in consumer spending. The housing market is still weak. A European recession threatens to hold back U.S. growth. The economy grew at a 3 percent annual rate at the end of last year. “It’s a very subpar recovery,” said Beth Ann Bovino, senior economist at Standard & Poor’s. “Historically, after a recession ends, we would see 5 percent growth.”

Government foreclosure to rental pilot programs not needed

Housing markets are complex and varied, and a government pilot program to turn bank-owned properties into rentals could be disruptive and counter productive in some markets, according to the National Association of Realtors. NAR urges the Federal Housing Finance Agency (FHFA) to proceed cautiously with its Real Estate-Owned (REO) Initiative pilot program to sell homes repossessed by government agencies to private investors to convert into rental units. According to a recent NAR analysis, while the overall visible inventory of foreclosures has been trending down across the country, there is a noticeable difference in foreclosure inventories in states that require judicial proceedings to foreclose on a property versus inventories in states that do not require the court’s intervention. NAR urges that a national advisory board be created to ensure that current and future REO-to-rental pilot programs truly benefit the local community, minimize taxpayer losses and stabilize home values, and suggests substantial participation of local market experts, especially licensed real estate professionals, who have unparalleled knowledge of local market conditions.

Fannie REO inventory declines 27% in 2011

For the first time since the collapse, Fannie sold more REO than it repossessed. In 2011, the government-sponsored enterprise acquired nearly 200,000 properties and sold more than 243,000, the most in the company’s history. Total repossessions of REO homes declined nearly 24% from the year before, due mostly to the slowdown caused by servicers correcting affidavit and other documentation problems. The Federal Housing Finance Agency began a pilot program in February to more efficiently sell bulk REO held by Fannie and Freddie Mac to investors. About 23% of Fannie Mae’s REO inventory is located in California followed by 11.5% in Florida.  According to the filing, the average amount of days between the last mortgage payment and the completion of the foreclosure process was 890 days in Florida on Fannie Mae loans. California, a nonjudicial state, was second at 529 days.

DSnews.com – Rise in Underwater Homes

Negative equity homes known as underwater homes shot up to 22.8 percent, during the fourth quarter of 2011, according to CoreLogic. Third quarter numbers showed 10.7 million properties to be in negative equity, or 22.1 percent. Borrowers with less than 5 percent equity in their homes, also known as near-negative equity, stood at 2.5 million for the fourth quarter. In total, those with negative equity and near-negative equity equaled 27.8 percent of all residential properties. Nationally, the total mortgage debt outstanding on underwater properties stood at $2.8 trillion in the fourth quarter, compared to $2.7 trillion in the previous quarter. The states with the highest level of negative equity were Nevada (61 percent), Arizona (48 percent), Florida (44 percent), Michigan (35 percent) and Georgia (33 percent). These five states had a combined average 44.3 percent of the share of negative equity, whereas the remaining states have a combined average negative equity share of 15.3 percent. CoreLogic included 48 million properties with a mortgage, which accounts for over 85 percent of all mortgages in the U.S., when putting together the report.

See you at the top!
Chris McLaughlin

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About the author:

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

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

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

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

* In 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

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

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