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Foreclosures to persist

According to authors at the Federal Reserve Bank of Cleveland, the nation’s high foreclosure rate is likely to persist.  The Fed article looks at the changes in foreclosure and unemployment rates across states, noting the differences in the timing of the movements.  The conjecture that the high foreclosure rate will persist is based in part on the observation that states that experienced boom-bust housing cycles in the past (Texas, Oklahoma, Massachusetts and California) had elevated foreclosure starts for years after the peak in foreclosure starts and inventory.  These previous boom-bust cycles “were small in comparison to the current cycle,” the article said.  While the recession has left deep scars in the housing and labor markets — with the unemployment rate doubling and the foreclosure start rate roughly tripling — the timing of the movements differs over the cycle, according to the abstract, written by Timothy Dunne, a vice president at the Federal Reserve Bank of Cleveland, and Kyle Fee, a research assistant.

Credit scores down

According to FICO Inc., 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. With scores like that it’s unlikely they’ll be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.  FICO’s latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO’s 300-to-850 scale weren’t as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis.

Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.  On the positive side, the number of consumers who have a top score of 800 or above has increased in recent years. At least in part, this reflects that more individuals have cut spending and paid down debt in response to the recession. Their ranks now stand at 17.9 percent, which is notably above the historical average of 13 percent, though down from 18.7 percent in April 2008 before the market meltdown.  There’s also been a notable shift in the important range of people with moderate credit, those with scores between 650 and 699. The new data shows that this group comprised 11.9 percent of scores. This is down only marginally from 12 percent in 2008, but reflects a drop of roughly 5.3 million people from its historical average of 15 percent.

Olick – NYT caught with its pants down

The other way we posted an article claiming the rich were the worst defaulters.  Diana Olick says it ain’t so:  “The data show that while one in 12 mortgages under a million dollars are delinquent, “more than one in seven homeowners with loans in excess of a million dollars are seriously delinquent.”  Shall I wax on about how the rich care less about their credit ratings than the not-so-rich, or how many of these luxury homes are second homes that the owners don’t really need, or how rich folks don’t give a hoot about their communities and see these homes purely for their investment value?  

Nah, I’d rather do a little math. Here’s my problem with the thesis of this article: A little less than 14 percent of the loans outstanding in the U.S. are “jumbo,” meaning over $417,000, according to government statistics (FHFA). The number of loans that are over $1m are even less than that.  So when we’re talking about rates of default, you have to factor in the share of the market that you’re looking at and the bottom line numbers.  Yes, the rate is higher, but it’s a far smaller share of borrowers, and that makes the numbers far more volatile.   Just 1.7 percent of all home sales in May were of homes over one million dollars.  That just gives you an idea of how small that marketplace is.  Yes, we can always find the odd celebrity that squandered away all their millions and defaulted on the loan, but I would take a big step back before I come to the conclusion that the ‘rich: are more likely to default on a loan than the “unrich.’”

CMBS Delinquency Rate Exceeds 8%

The US commercial mortgage-backed security (CMBS) delinquency rate ticked up 17 basis points to 8.14% in June, according to Fitch Ratings.  It marked the smallest increase in 11 months, and the fifth straight month of loan resolutions in excess of $1bn. Fitch noted $1.5bn of loans leaving the index helped to offset the $2bn of new delinquencies, bringing the total net increase in delinquencies to $512m of loans.  Newly delinquent loans in June bore smaller average balances of $10.1m than the index’s overall $13.1m average. No loans with a balance in excess of $100m became newly delinquent in June.  “While delinquencies slowed for the month, this trend is not expected to continue,” said Managing Director Mary MacNeill. “The number of distressed properties continues to grow, and if borrowers are unable to access capital for leasing costs or are unable to restructure their loans to a leverage level commensurate with sustainable property values, they may stop subsidizing debt service payments.”  Loans continue to transfer to special servicing at an elevated rate, with a net increase of $4.2bn in performing specially serviced loans in June. In total, $23bn of loans in special servicing remain less than 60 days delinquent but face an increased risk of default.  The multifamily delinquency rate rose to 13.82%, from 13.65% in May, while the office delinquency rate grew to 4.84% from 4.59%. The retail delinquency rate grew 16 basis points to 6.19% from 6.03% in May, while the industrial delinquency rate grew 41 basis points to 5.48%, from 5.07% in May. The rate of delinquency in hotel loans grew a single basis point to 18.62%.

Now for our real estate education section…

Stats, Facts & Other Social Media Solutions

Are you putting the power of social media marketing to work for your real estate business? If not now-when? If you have been sitting on the sidelines waiting for the perfect time to take the plunge, here are a few stats and facts that should provide all the inspiration required:

Inclusive…

77% of Internet users rely upon blogs for information…roughly 80% of real estate buyers and sellers make first contact with an agent via by reading their blogs first.

The average social media user has 195 friends they routinely communicate with an average of 1 to 2 x per week.

Mobile Facebook users are twice as active as non-mobile users. Only one of every four Twitter users interact via the web interface.

Exclusive…

Over 60% of Twitter users are outside of the USA.

Over half of YouTube users are under 20 years of age.

Take Away’s…

1. Make mobile a priority when using social media websites. Mobile users on both Facebook and Twitter are more active, linked to more people and increasingly interact exclusively via applications outside of the web interface.

2. International real estate sales and market must use Twitter.

3. UTube is especially geared toward a younger audience.

4. Blogs are a ‘must have’ for building relationships.

5. Put an “I” in social media marketing. Effective marketing is an extension of your professional “voice” but that doesn’t meant it must take a lot of time and effort. Learn how to put the power of social media marketing to work for your real estate endeavors by joining one of our webinars or other informational sessions.

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
-

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

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

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

TONIGHT Learn How To Generate Massive Leads … with Facebook, Twitter, YouTube, LinkedIN, and

Social Media!  Come watch what everyone is excited about … the Proven Social Media Lead Machine!

When: Wednesday, February 17, 2009 at 9 PM ET, 6 PM PST

Where: https://www2.gotomeeting.com/register/698867362 

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

Delinquencies up

According to credit reporting agency TransUnion, 6.89% of mortgage payments were 60 or more days past due in Q409 – up from 4.58% in the final three months of 2008. The previous record delinquency rate was 6.25% in the third quarter of 2009.  FJ Guarrera, vice president of TransUnion’s financial services business unit, says the fourth-quarter uptick was due in part to normal seasonal spending shifts. Consumers are more likely to have trouble paying bills during the last few months of the year as they run low on cash because of holiday spending.  But he says that even accounting for normal season patterns, there is some reason to be concerned about the pace of increase moving higher. “To see continuing growth in the first quarter would certainly raise an eyebrow.” 

TransUnion tracks mortgages that are two months past due as an indicator of potential foreclosure, because of the difficulty involved in coming up with three payments to bring an account current. The agency said the delinquency rate stayed highest in Nevada, at 16.2%, and Florida, at 14.9%. Arizona and California, the other two states hit hardest by the housing crisis, were third and fourth, at 11.3% and 11% respectively.  The highest growth rates compared with the third quarter were in the District of Columbia, Louisiana and Delaware.  Guarrera noted that many homeowners still have adjustable rate mortgages written in late 2006 or early 2007 due to reset to higher rates in coming months, and that could drive foreclosures even higher, especially in areas where home prices have fallen to the point where values are lower than mortgages. “We’re not out of the woods yet,” he said.

Government jobs ballooning

Amity Shlaes at Bloomberg.com points out the growth of government.  In the 1990s, former President Bill Clinton and House Speaker Newt Gingrich managed to reduce the federal workforce to less than 2 million, excluding the postal service.  But from January 2000 to January 2010 — first under President George W. Bush after Sept. 11, then under Barack Obama — the number of non-postal employees in the federal government grew 15 percent, to 2.18 million from 1.89 million. The rise came in Homeland Security positions, Veterans Administration jobs, Justice Department posts, and so on.  This increase would mean less if the private sector had grown as well. But over the same period, private-sector employment decreased by 3 percent, to about 107 million from about 110 million. In short, the relative picture changed. 

Jobs with Uncle Sam aren’t just more numerous than they used to be. They’re better. Wages and benefits for federal civilian workers were more than double the average total compensation in the private sector: $119,982 versus $59,909. In the treacherous period between December 2007 and mid-2009, the number of federal employees earning more than $100,000 doubled, rising to 66,500 or so.  The new relative appeal of a government job sends a message that private-sector work, especially self-employment or a job at a start-up, may not be worthwhile. Recent wipeouts of big businesses and the recessionary struggles of smaller ones only reinforce that message. So do politicians’ occasional disparagement of “risk.”  Shlaes concludes:  Today, the U.S. economy has more competition than it did in the 1950s.  So the kind of policy change that would affect the jobscape, such as eliminating the capital-gains tax and simplifying the income tax, is necessary.  But you won’t hear about those radical measures in the Reid-McConnell jobs debate of February 2010. That’s a shame, because right now there are young people deciding whether they will be employers or mere employees.

DSNews.com – 33 months of coming foreclosures

The Standard & Poor’s (S&P) report we mentioned yesterday in connection with short sales also said the hidden supply of REOs and pending foreclosures will likely take 33 months – or nearly three years – to clear if liquidation rates hold steady.  Even more unsettling is that S&P called its estimate “conservative” because the company’s analysis was based on the number of properties the company believes to be lurking in the shadows right now – repossessed homes that banks have not put on the market and already delinquent mortgages that will likely turn into foreclosures. S&P’s assessment does not take into account any loans that have yet to show serious signs of distress. The ratings agency did not give a specific number of loans in its calculated shadow supply, but said the original balance of currently seriously delinquent and REO loans stands at $426.3 billion. An earlier study by Amherst Securities estimates the dark cloud to hold about 7 million loans, while First American CoreLogic puts it at 1.7 million.  Analysts at Standard & Poor’s said in the report, “It is our opinion that recent positive housing reports should not be construed as a sign that the distress in the residential housing market is abating, but rather should be attributed to the temporarily limited supply of homes on the market.”

New home construction up

The Commerce Department announced today that construction of new homes climbed to an annual rate of 591,000 during the month, up 2.8% from December’s revised rate of 575,000.  Economists surveyed by Briefing.com expected January housing starts to rise to an annual rate of 580,000. The number of building permits issued during January fell 4.9% to a seasonally adjusted annual rate of 621,000. Economists had predicted building permits would fall to 620,000.  “It’s a positive surprise on all fronts and shows that overall demand has moved higher. That’s an important element to watch as we move through a cycle going from incentive-based to more organic growth,” said Craig Peckham, equity trading strategist at Jefferies & Co. in New York. 

Groundbreaking for single-family homes rose 1.5 percent last month to an annual rate of 484,000 units after declining 3 percent in December. Starts for the volatile multifamily segment increased 9.2 percent to a 107,000 unit annual pace after rising 12.6 percent in December.  New building permits, which give a sense of future home construction, fell 4.9 percent to 621,000 units last month after rising to a 14-month high of 653,000 units in December, the Commerce Department said. That’s compared to analysts’ forecasts for 620,000 units.  The inventory of total houses under construction fell 2.3 percent to a record low 503,000 units last month, while the total number of units authorized but not yet started eased 0.9 percent to 94,300 units.

MBA – loan applications down

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, decreased 2.1 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 0.5 percent compared with the previous week.  The Refinance Index decreased 1.2 percent from the previous week and the seasonally adjusted Purchase Index decreased 4.0 percent from one week earlier.  The unadjusted Purchase Index increased 1.0 percent compared with the previous week and was 18.4 percent lower than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is up 1.1 percent.  The four week moving average is down 1.2 percent for the seasonally adjusted Purchase Index, while this average is up 1.8 percent for the Refinance Index.  The refinance share of mortgage activity decreased to 69.3 percent of total applications from 69.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.4 percent from 4.5 percent of total applications from the previous week. The survey covers over 50 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990 = 100.

Now on to our real estate investing educational section…

Are YOU a Broker and Not Even Know It?

When it comes to taxes, the Internal Revenue Service defines a Broker differently than most state or business regulations; in fact, you do not even need a Broker’s license for the IRS to classify you as a broker for tax purposes. Take the following quick quiz to find out if you are a broker and not even know it according to the IRS:

1. Do you routinely sell, exchange, purchase, rent or lease real property?

2. Do you offer to sell, exchange, purchase, rent or lease property for others on a regular basis?

3. Do you negotiate the terms of real estate contracts for yourself or others on a regular basis?

4. Do you list real estate for sale, lease or exchange on a repeat or regular basis?

5. Do you procure prospective buyers and/or sellers on a consistent basis?

If you answered “yes” to the above questions then you might be considered a real estate broker for tax purposes. To determine if you qualify as a “real estate professional” you must satisfy three independent tests including:

1. The 51% Test. Do you spend more than half your working time each year toward your real estate business or activities?

2. 751 Hour Test. In addition to spending 51% or more of your work time in real estate related activities, do you spend at least 751 hours annually in the same pursuit?

3. Material Participation Test. Do you activity participate in the activities related to your real estate profits and losses?

If you answered “yes” to all three of the above questions, you may qualify as a real estate professional by IRS standards and are therefore eligible to take the real estate professional exemption which provides more than $25,000 offset for losses. All real estate related losses or deductions can be claimed including an offset against other earnings, exclusive of income limits, making this an extremely valuable tax strategy for high income earners.

See you at the top! 

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

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

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

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

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

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

About the author:

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

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

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

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

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

Generate Massive Leads … with Facebook, Twitter, YouTube, LinkedIN,
and Social Media!  Come watch what everyone is excited about … the

Proven Social Media Lead Machine!

When: Wednesday, February 17, 2009 at 9 PM ET, 6 PM PST

Where: https://www2.gotomeeting.com/register/698867362

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

WSJ – studies show more short sales opportunity

Two separate studies by John Burns Real Estate Consulting Inc. and Standard & Poor’s Financial Services LLC, both conclude that most efforts to modify loans with easier terms will delay, not prevent, the loss of homes to foreclosure.  The John Burns study estimates that five million houses and condominiums will go through foreclosure or related procedures that put them on the market over the next few years. That would represent the bulk of the estimated 7.7 million households behind on their mortgage payments.  The problem is concentrated in Arizona, California, Florida and Nevada. The shadow inventory is equivalent to 27 months of sales in Orlando, 24 months in Miami and 18 months in Las Vegas, the study estimates.  John Burns, chief executive of the consulting firm, said investor demand for foreclosed homes remained strong. Thus, he said, prices were likely to be about level over the next few years, despite the looming foreclosure supply, if the economy continued to recover and mortgage interest rates didn’t rise sharply.

But if the economy slumped anew and interest rates jumped, he said, “that’s going to cause prices to fall further.”  The S&P study also says that the “overhang” of foreclosed homes expected to go on the market points to lower home prices.  Some borrowers are catching up on payments after having their loan terms modified, but S&P says current trends suggest that 70% of such borrowers eventually will redefault. Loan servicers, firms that collect payments and handle foreclosures, seem to have “nearly exhausted the supply of plausible candidates for loan modifications” and will find that many loans are “unredeemable,” the S&P study says.  As a result, servicers increasingly are looking to arrange “short sales,” in which homes are sold for less than their loan balances.

Carter’s jobs bill

Increasingly the name “Jimmy Carter” pops up when President Obama is being discussed, and Obama’s jobs bill isn’t going to put a stop to the comparison.  The centerpiece of the bill — a tax break for companies that make new hires — is a play straight from Carter’s economic policy circa 1977?  Then, as now, the economy looked anemic and unemployment was high: 7.8% when Carter entered office, compared with 9.7% now. So just eleven days after his inauguration, the president proposed giving companies a temporary tax break if they hired new employees, calling it the New Jobs Tax Credit. The law went into effect for 1977 and 1978, over which time the unemployment rate fell 2%.  Economists today are divided on whether it was a success, and their reasons get at the heart of the current jobs bill debate. The goal of any jobs tax credit is to spur a company to hire when it otherwise wouldn’t. The trouble is, it’s impossible to distinguish exactly which companies have plans to hire anyway.

Lawmakers can only do their best to design a bill with the right incentives.  Critics of Carter’s plan — and Congress’ now — say that the problem with any jobs credit is the potential for waste. It’s estimated that of the companies that claimed the tax credit under Carter’s plan, two-thirds would have hired those employees regardless of the tax break.  Rea Hederman, a senior policy analyst at the Heritage Foundation, says the big beneficiaries of the tax credit this time around would be companies in the big-growth areas of health care and education.  Another problem with the 1977-78 effort is that many companies, especially small businesses, didn’t even know about the tax credit. A survey by the National Federation of Independent Business found that only 43% of their members knew of the law in January 1978.  Unfortunately everyone agrees the latest version of the jobs bill on the Hill isn’t going to do much. Bartik estimates that with its $13 billion price tag, the law would create 350,000 jobs at best — a drop in the bucket compared with the over eight million jobs lost since the end of 2007.

DSNews.com – Moody’s forecasts 8% decline in prices

Moody’s Investors Service is forecasting another 8% decline in home prices over the course of 2010 before a bottom in residential property values is reached, largely because of the “underwhelming” success of the administration’s Home Affordable Modification Program (HAMP).    When all is said and done, the ratings agency predicts a peak-to-trough drop of 34% in national home prices. That’s actually an improvement over Moody’s estimates last month, when the agency was expecting a total peak-to-trough decline of 37 percent. However, it’s the duration of depreciation that’s the headline grabber. Previously, Moody’s analysts were predicting the price floor to be reached in the third quarter of this year. Now they say it won’t be hit until the end of the fourth quarter.  The reason for the extended freefall is the timing of foreclosure sales hitting the market. Market barometers such as the S&P/Case Shiller index and the National Association of Realtors’ existing-home median price have, in fact, shown improvements in recent months, but Moody’s says the progress is short-lived.  “We believe that the recent improvement in house prices is a temporary reprieve,” Moody’s said in its latest ResiLandscape report. “A decline in distress sales-including foreclosure, deed in lieu, and short sales-as a share of total home sales is a driving contributor to the gain in house prices.”

Capital One reports rise in defaults

Capital One said the annualized net charge-off rate—debts the company believes it will never collect—for U.S. credit cards rose to 10.41% in January from 10.14% in December.  Accounts at least 30 days delinquent—an indicator of future loan losses—were up marginally to 5.80% from 5.78%.  Capital One is the third-largest U.S. issuer of Visa branded credit cards, and the fifth-largest issuer of MasterCard branded credit cards.  For U.S. auto loans, Capital One’s charge-off rate was 4.27% in January, down from 5.68%in December, and the delinquency rate fell to 9.61% from 10.03%.  In credit card international operations, including Canada and Britain, the charge-off rate fell to 9.03%from 9.58 percent, while the delinquency rate rose to 6.66% from 6.55%. Capital One routinely kicks off the monthly reporting of credit card charge-offs. JPMorgan Chase, Bank of America, Citigroup, American Express, and Discover Financial Services are expected to report the monthly performance of their credit card portfolios on Tuesday.

Freddie Mac – fixed rate mortgages more popular

Freddie Mac reported yesterday that 95% of refinance loans during the last quarter of last year were of the fixed-rate variety.  while traditional 30-year fixed-rate mortgages are still the most preferred product among refinancings, 15-year fixed-rate mortgages gained favor among borrowers who previously held 30-year fixed-rate mortgages, balloon mortgages and ARMs, the GSE said in a statement.  “The lowest fixed-rate interest rates in more than a generation, coupled with the comfort that a constant monthly principal and interest payment provides the homeowner, are important drivers in fixed-rate product choice,” said Frank Nothaft, vice president and chief economist for Freddie Mac.  “While homeowners are choosing the safety of fixed-rate mortgages in large numbers, at the same time many borrowers are now looking at paying down their mortgage balances faster by choosing a shorter mortgage term of 15 or 20 years instead of 30.”  Borrowers also chose to pay down principal during refinancing at a record clip in the fourth quarter. Freddie reported at the end of January that 33% of borrowers paid down their original principal by $1,000 or more during the process of refinancing their mortgage — the highest such “cash in” refinancing volume in the history of the GSE’s survey.  “When you can only earn a very low interest rate on your CD or money market accounts, and returns on other investments remain extremely uncertain, it can make sense to pay yourself 4.5 or 5% by eliminating some mortgage debt whether by making extra payments or going for a shorter loan term,” Nothaft said.

Now on to our real estate investing educational section…

Double Your Income in Real Estate

Sick and tired of “feel good” motivational books that promise the world but deliver little in terms of your net worth? Good. Perhaps you are ready to make real profits rather than listening to empty promises. Real estate has historically been one of the leading roads to wealth for average American’s seeking a better life but it also has more than its share of casualties lost along the way. Survey’s show the average real estate professional makes less than $50,000 a year…many as little as $15,000 annually….a comparable rate to just one or two quick short sales done right.

Is it really possible to double your income in real estate? Absolutely. The key to any type of sales related area is word of mouth marketing. Duh right…of course! But we aren’t talking about just any word of mouth marketing…no, we are talking about WORD OF MOUTH on steroids; developing the type of “A” list others would only dream about. Creating such demand for your services that the “B” list becomes a secondary source of referral income simply because you are too busy to handle it.

Before we get into the nuts and bolts of what it takes to double your income in real estate, let’s first define what this isn’t…

1. This isn’t a spiel about how “service is its own reward”. Let’s face it, if service were its own reward you could spend more time at the local volunteer center any day of the week. Hard work deserves a real reward – the type you can take to the bank.

2. This isn’t a long term process that promises to pay off in ten, twenty or thirty years. Chances are you have been taught time and time again that there are “no shortcuts in selling”. Bunk! Of course there are shortcuts in selling and they are used all the time by those that thrive rather than barely survive! The rest of the crew is kept in line by scavenging the bottom for the few that fall through the cracks. Move up the food chain and learn to play the game like the big boys.

3.  This isn’t about toxic attitudes or how to “win friends and influence people”; the system works just as well whether you are an untamed punk or stodgy old fart.

4. This isn’t about the history of real estate – knowing that never made anyone richer but it’s bored a lot of people along the way.

What this is about is generating an “A” list that would be the envy of every real estate agent in the nation. The type of list other spend an entire career to generate. Plain and simple it’s all about your sphere of influence – it’s a numbers game in the most literal manner. Numbers don’t lie but they are tough for the average agent to muster.

Y’know the rules; begin with friends and family then hit up church groups and social clubs…then wait for others to hopefully mention your name when the time comes for someone to buy or sell. That’s not a strategy – it’s an antiquated popularity contest. Fortunately the rules have been re-written thanks to technology and social networking that expands your reach far beyond anything possible during the days of “business cards”. True exponential growth isn’t just possible but actually probably when used properly. Find out more by registering for our webinar on Proven Social Media Riches this Wednesday:

https://www2.gotomeeting.com/register/698867362

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

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

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

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

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

About the author:

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

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

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

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

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Fannie and Freddie failing

Freddie Mac and Fannie Mae were among the first big financial institutions to receive massive federal bailouts after the financial crisis hit in 2008. Government officials have been racing to fix bailed-out car makers and banks and are pushing to reshape the financial-services industry. But Fannie and Freddie remain troubled wards of the state, with no blueprints for the future and no clear exit strategy for the government.  Nearly a year and a half after the outbreak of the global economic crisis, many of the problems that contributed to it haven’t yet been tamed. The U.S. has no system in place to tackle a failure of its largest financial institutions. Derivatives contracts of the kind that crippled American International Group Inc. still trade in the shadows, and investors remain heavily reliant on the same credit-ratings firms that gave AAA ratings to lousy mortgage securities. Fannie and Freddie, for their part, remain at the core of a housing-finance system that inflated a dangerous housing bubble.

After prices collapsed, sending shock waves around the world, the federal government put America’s housing-finance system on life support and it has yet to decide how that troubled system should be rebuilt.  On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion. The government is “running Fannie and Freddie as an instrument of national economic policy, not as a business,” says Daniel Mudd, who was forced out as Fannie Mae’s chief executive in September 2008 when the government took control.  Other housing experts contend that prolonged government intervention will make it more difficult and costly to eventually wean the companies off government support. “The more aggressively we continue kicking the can down the road, the larger the losses become and the harder it becomes” to address the companies’ future, says Joshua Rosner, managing director at investment-research firm Graham Fisher & Co.  As mortgage delinquencies rise, Fannie and Freddie are required to set aside more capital to cover anticipated losses. Each quarter, if their revenues are insufficient to meet those financial needs, the Treasury has to kick in more money.  With delinquencies still rising, the outlook is grim. At Freddie, 3.87% of single-family mortgages were at least 90 days past due at the end of December, up from 1.72% a year earlier. Fannie is worse: 5.29% were 90 days past due in November, up from 2.13% a year earlier.

Olick – Obama shifting from HAMP to HAFA (short sales)?

Diana Olick picked up on something Seth Wheeler, Senior Advisor to the Treasury Department, said last week.  According to Olick:  “In discussing the Obama Administration’s Home Affordable Modification Program (HAMP), which is arguably less successful than anyone intended, Wheeler made a comment leading some to believe that the Administration may be shifting focus from modifications to another program which simply gets troubled borrowers out of their homes as quickly and cleanly as possible.  Wheeler told ASF members and guests, ‘Short sales, deeds in lieu are other ways to prevent foreclosures to help achieve stability [in housing].  Modifications are only for a certain subset of distressed homeowners.’”  Olick points to the widely acknowledged failure of HAMP and suggests that Wheeler’s mention of the Home Affordable Foreclosure Alternatives program (HAFA) is indicative of a shift in emphasis for the Obama administration. 

HAFA specifically targets short sales and deeds in lieu of foreclosure. According to the directive: Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days of the date the borrower: Does not qualify for a Trial Period Plan; Does not successfully complete a Trial Period Plan; Is delinquent on a HAMP modification by missing at least two consecutive payments; or requests a short sale or DIL.  According to Olick:  “My guess is that last one is the most popular.  The HAFA program offers incentives in this program “upon successful completion of the short sale” or Deed in Lieu. They include borrower relocation assistance of $1500, a servicer incentive of $1000 to cover administrative and processing costs and investor reimbursement of $1000 for subordinate lien releases. That’s when the investor allows up to $3000 in short sale proceeds to go to subordinate lien holders.  ‘It is my belief that the success of HAFA will be vastly greater than HAMP,’ says Mark Hanson, a mortgage consultant in California.  ‘Going forward, figuring out exactly what this means for foreclosures, REO, house sales, housing inventory, values, bank balance sheets, second mortgages, RMBS prices, the builders, the mortgage insurers, and sentiment is where the focus will be.’”

Tax rate balloons

Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies.   The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold.  Many of these hikes happened automatically as prolonged joblessness triggered state laws governing their unemployment insurance systems. But at least seven states voted to raise their taxable wage bases, the level of income subject to unemployment tax. And another 10 are looking at upping the wage bases or tax rates.  In addition, employers pay federal unemployment taxes. If states don’t repay their federal loans, businesses could see their this federal tax go up as well in coming years, said Rich Hobbie, executive director of the National Association of State Workforce Agencies.  Higher taxes dampen employers’ ability to hire new workers, crimping any nascent economic recovery. Companies pay taxes on each employee on the payroll.  “There’s no doubt it discourages hiring,” said Douglas Holmes, president of UWC-Strategic Services on Unemployment and Workers’ Compensation, an employers’ trade group. “In fact, it leads to increased unemployment.”  Texas, Hawaii, and Florida are the hardest hit.

Consumer credit falls

According to the Federal Reserve, total consumer borrowing fell a seasonally adjusted $1.8 billion, an annual rate of 0.8%, to $2.456 trillion in December 2009.  Economists predicted a decline in total borrowing of $10 billion in December, according to a consensus survey from Briefing.com. November saw a downwardly revised 10.6% decrease, or $21.8 billion, in total consumer borrowing.  Sean Maher, associate economist at Moody’s Economy.com said he expected November to be revised upward, but instead it was even more negative — so December’s more upbeat data “doesn’t mean we’re out of the woods.”  For all of 2009, consumer debt dropped by 4% to $2.46 trillion from $2.56 trillion in 2008.  Revolving credit, which includes credit card debt, fell in December by $8.5 billion, or an 11.7% annual rate, to $866 billion. 

But nonrevolving credit, which includes car and student loans, bucked the trend. It rose by $6.8 billion, or a 5.2% annual rate, to $1.59 trillion.  The data’s recent volatility and large revisions make it difficult to make predictions, Maher noted, but he expects revolving credit will fall substantially in the coming months but will start to taper off around June.  “Consumers are still finding it tough to get credit, but there are some signs we’ve reached a bottom,” Maher said. The credit crunch should begin easing now, he said, “with breakeven around the middle of the year — and we’re looking for a pretty quick rebound by the second half of 2010.”

DSNews.com – Home ownership at lowest point in a decade

Home ownership in the United States hit a 10-year low during the fourth quarter of 2009. According to data released by the Census Bureau last week, the homeownership rate fell to 67.2% at the end of last year.  That’s down from 67.6 percent the previous quarter and 67.5 percent one year earlier. It represents the lowest percentage of Americans who owned a home since the second quarter of 2000. Homeownership has been on a steady downward slope since 2006, when it became evident that more and more borrowers were put into loans they couldn’t afford and housing woes began to eat away at the government’s long-time push to make the American Dream a reality for anyone that wanted it.

Regionally, homeownership rates are highest in the Midwest (71.3 percent) and in the South (69.1 percent) where housing is considered relatively affordable. They are lowest in the West (62.3 percent) and the Northeast (63.9 percent) where home prices are on the higher end of the spectrum.  Relative to a year ago, the biggest decline, though, was in the South (down 0.7 points) and in the West (down 0.4 points), where you can find the foreclosure hotspots of Florida, California, Arizona, and Nevada.  The Census Bureau also reported that the percentage of vacant homes in the U.S. rose from 2.6 percent in the third quarter of last year to 2.7 percent in the fourth. All told, there were 2.09 million homes sitting empty and available for sale at the end of last year, up from 1.99 million three months earlier, the agency said. As Bloomberg explained, this number includes both listed properties and those that banks have repossessed and have not yet listed.

Now on to our real estate investing educational section…

Sooner or later every short sale investor encounters a sale in danger of dying. Fortunately, with a few simple steps it’s possible to dramatically reduce the risk of spoiling a sale.

1. Get Smart. Prequalify and prepare from first contact. Everyone has an “A” list and a “B” list when it comes to prospective buyers but it’s still necessary to put things into proper perspective before spending a lot of time and effort on dead-ends. Remember, the internet helps to eliminate and reject prospects through the use of well placed questions and comments.  For example, asking a simple question such as “Is there another home you wished you had bought?” can explain a lot; price range, comfort zone and readiness just for starters.

2.  Value-Driven. Tough economic times have led most buyers to become more price conscious than ever; it’s no longer enough to simply show a few over-priced homes to prep for an attractive in-house alternative…instead, be prepared to demonstrate real value with low risk. Buyers want to know they won’t lose money in the long run by buying a given house or property.

3. Don’t Shut Doors on any Deal. Some buyers are just the opposite – they have money and when presented with the right opportunity – are willing to go substantially above and beyond their traditional budget. Don’t automatically exclude higher priced properties for those that have the means to make ends meet at a larger than life level. In this situation, recognize the price is not the prime motivator but rather the “right”  property. Determine what constitutes a desirable deal then make it happen.

4.  Time Right. Timing is everything but it takes time to learn how to distinguish valid help from harassment when working with prospective clients. Too soon and you can quickly cool even the hottest prospect…too long of a delay and you risk having others step in to fill your shoes.

5. Preferred Status. Everyone likes to feel special and as a short sale professional it is your duty to given individualized attention to every prospect….of course, some clients are just a bit more special than others especially when it comes to sealing the deal. Find a few ways to express that little extra something when working with your “A” list clients; meet at a local coffee shop then foot the bill (don’t worry – it’s a legitimate write-off) or schedule exclusive “preview” showings to the most promising prospective buyers before the big announcement. Remember, it’s the thought that counts not necessarily the size of the status symbol.

6. Teach sellers to think like buyers and vice versa. Yes, it’s easier said than done but it’s all in the wording. By teaching sellers to act like buyers and buyers to act like sellers you assure they will present and demand more reasonable offers. Think of it as a small investment that pays big dividends at closing time.

7. Have a contingency plan in place. Every good investor identifies the “out” long before buying into the given investment – it’s no different with short sales. Know when and how you plan to exit the property then have a contingency in place should something go amiss. It’s one additional layer of protection that allows short sale investors to sleep easy by knowing they have plenty of outlets for every property.

See you at the top!

Chris McLaughlin
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Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

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

Now on to real estate investing education …

Do You Hear What I Hear?

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

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

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

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

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

Five Favorite Facebook Tips to Build Your Short Sale Empire

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

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

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

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

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

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

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

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/blog

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

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