federal reserve

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

* Join my fan page:  http://www.mclaughlinchris.com 

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

MBA – 3Q09 Commercial and Multifamily Mortgage Performance Falls

According to the Mortgage Bankers Association’s (MBA)

Commercial/Multifamily Delinquency Report, delinquency rates for most commercial/multifamily mortgage investor groups continued to increase in the third quarter.  Commercial and multifamily mortgages continued to feel stress in the face of the weakened economy,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research.  “The deterioration in commercial and multifamily loan performance is generally in line with what is being seen in other parts of the economy, with loans backed by commercial properties continuing to perform far better than construction and development loans.”   Between the second and third quarters, the 30+ day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 0.17 percentage points to 4.06 percent.  

The 60+ day delinquency rate on loans held in life company portfolios rose 0.08 percentage points to 0.23 percent.  The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.11 percentage points to 0.62 percent.  The 90+ day delinquency rate on multifamily loans held or insured by Freddie Mac remained unchanged at 0.11 percent.  The 90+day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.51 percentage points to 3.43 percent. Based on the unpaid principal balance of loans (UPB), delinquency rates for each group at the end of the third quarter were as follows: CMBS:  4.06 percent (30+ days delinquent or in REO); Life company portfolios:  0.23 percent (60+days delinquent); Fannie Mae:  0.62 percent (60 or more days delinquent); Freddie Mac:  0.11 percent (90 or more days delinquent); Banks and thrifts:  3.43 percent (90 or more days delinquent or in non-accrual).  Construction and development loans are not included in the numbers presented here.

Stop Spending, Washington

Several groups of citizens and experts across the country, part of the Concord Coalition’s Fiscal Stewardship Project, delivered a report to their lawmakers on Capitol Hill detailing their suggestions for how best to address the long-term fiscal storm facing the United States if lawmakers do nothing.  To solve the country’s fiscal problems, the gross domestic product would need to increase by double digits on average for the next 75 years, on an inflation-adjusted basis, according to estimates from the Government Accountability Office, lawmakers are left with three unpopular choices: cut spending, raise taxes, or stop making promises the country can’t afford.  Here are a few of the concrete suggestions made by one or more of the councils: Shore up Social Security’s long-term shortfalls: The range of suggestions included raising the retirement age, applying means testing to benefits, raising more revenue and ensuring by a “date certain” that projected revenue is sufficient to cover projected expenses; Simplify the tax code: The aim should be to reduce taxpayer aggravation, increase voluntary compliance and reduce enforcement costs; Raise taxes when necessary: The Atlanta council suggested a combination of an income tax and a federal consumption tax. 

The Northern California council recommended that the additional tax burden “be spread in a way that ensures everyone will contribute at least something in return for the government services they receive”; Make everyone curb growth in health spending: That includes the government, medical providers, insurance companies, lawyers and consumers; Form a bipartisan fiscal commission: The goal is to have a commission willing to make tough recommendations about how to address long-term budgetary shortfalls and put those recommendations up for a yes-or-down vote in Congress; Think long-term: Lawmakers should consider the costs and effects of a bill beyond the 10-year window they usually use. And they should think about the consequences of their actions on younger generations; The Atlanta council put it this way: “If Americans don’t make the hard decisions now, it will have a devastating impact on the quality of life for our children a and grandchildren.”

Interest rates to stay low

Fed Chairman Ben Bernanke says the Federal Reserve is still looking at an “extended period” for low interest rates because the economic recovery remains tentative and inflation continues to be stable.  “Right now we are still looking at the extended period, given that conditions remain, low rate utilization…and stable inflation expectations, that remains where we are now,” Bernanke said in response to a question at the Economic Club of Washington. “We continue to look at the economy, obviously there have been signs of strength recently.” 

As is becoming a habit in Washington these days, he tagged on this:  “We still have some way to go before we can be assured that the recovery will be self sustaining.”  The Fed chief repeated his belief that the recovery will continue at least into next year. But he cautioned that the economy is confronting some “formidable headwinds” — including a weak job market, cautious consumers and still-tight credit. Those forces “seem likely to keep the pace of expansion moderate,” he said.  Under one Fed forecast released last month, the jobless rate would remain stubbornly high next year — ranging from 9.3 to 9.7 percent. The Fed has warned that it could take five or six years for the job market to return to normal.

BOA – 2/3s of HAMP borrowers will lose homes

Mr. Schakett, Credit loss mitigation strategies executive at Bank of America (BOA) says that of the 65 thousand trial modifications set to expire Dec. 31st with (BOA), a full two thirds of the borrowers, while current on their payments, have not submitted the full documentation required to turn a trial mod permanent under the HAMP guidelines.  “We don’t really know the major reason why the customers are not returning the documentation,” Schakett claims. Diana Olick says:  “Well I can tell you why (and I’m sure he knows this too). The trial modification process only requires oral verification of income to begin, but to go permanent, you need to prove your income, submit your tax returns, and basically come clean with all your finances. I’m guessing a lot of folks who took out their initial loans with false or non-existent documentation aren’t eager to let the government know that.”  Schakett says that Treasury is now considering upping the ante on the trial modifications, requiring much more documentation up front, so that banks won’t have all these trial mods going with borrowers who inevitably won’t reach permanent modification status.  As Olick says:  “…I get a lot of email from borrowers, telling me that the banks are holding up their paperwork, losing faxes, messing up modifications and leaving those borrowers in the lurch. I don’t dispute that, but I can’t fully dismiss the banks when they tell me that 2/3 of the borrowers won’t submit the paperwork. I also happen to know that a huge percentage of borrowers being offered modifications are rejecting them. They don’t want to pay. Many are already gone.”

Jobs outlook getting worse?

According to Mike “Mish” Shedlock, author of Mish’s Global Economic Trend Analysis and an investment advisor at SitkaPacific Capital Management, the November jobs report that got everyone excited was an “outlier” and “almost looked fabricated.” Looking beyond the November jobs data, Shedlock says the odds of the unemployment rate coming down anytime soon are remote.  Even based on generous assumptions of 150,000 new jobs per month, no double-dip recession and a declining participation rate as Baby Boomers retire, “the best I can do is suggest the unemployment rate will be over 10% all the way through 2015 and never dip below 8% all the way out through the end of 2020,” Mish says.  “In the absence of a war outbreak in the Middle East or Pakistan — and/or Congress going completely insane with more stimulus efforts — I think oil prices are likely to drop, the dollar will strengthen or at least hold its own, and the best opportunities are likely to be on the short side,” he writes. “2010 is highly likely to retrace most if not all of the ‘reflation’ efforts of 2009. If things play out as I suspect, 2010 will be the year of the great retrace as the economic recovery disappoints.”

Now on to our real estate investing educational arena …

How to Pick the Perfect Loan

A lot has been written about interest rates and credit scores but few people focus on how to pick the perfect loan. While it might not sound like the most exciting part of purchasing a short sale property, it is one of the most important decisions you are likely to make. As millions of Americans have already learned, obtaining the wrong loan can be a very costly decision. Fortunately, it’s relatively simple to secure a great loan that works well for your individual situation once you are aware of all your options. Follow these quick steps to help find your perfect loan:

1. Determine your down payment. The larger your down payment the more options you will have available but always leave a little additional cash for emergencies and other needs.

• 0-5 Percent Down Payment: VA loans for veterans or Vendee loans for foreclosures.
• 3.5 – 5 Percent Down: FHA or HUD loan for purchase of primary residence only.
• 5 to 10 Percent Down: Conventional Loan with strong credit score.
• 20 Percent Down: Conventional Loan without PMI or inferior credit score.
• 20 to 30 Percent Down: Investment loans, vacation or second homes.

2. Determine the term. Right now fixed rate loans are at or near historic lows so if you intend to hold the property for any length of time, it’s a good idea to take a serious look at 15 to 30 year terms. Interest only and ARM (Adjustable Rate Mortgages) remain a solid investment for those who understand the pros and cons.

• 30 Year Term: Select a 30 year term if you intend to remain in the property for many years, plan to turn it into a rental property at a later date, are on a limited fixed income or are expecting to be on a fixed income in the future and want minimum payments with maximum flexibility. Remember, you can always pay more on the loan should you desire.
• 15 Year Term: Select a 15 year term if you want to obtain the lowest possible interest rate with steady fixed payments, become debt-free as soon as possible, save tens of thousands of dollars over the life of the loan and you have ample yet steady income.
• Interest Only: Select an interest only loan if you want to lock in a great price on a property, want to get started in real estate investments with a modest amount out of pocket, expect to have dramatically higher income within a few years (for example, you are in college, paying off significant debt or will have a spouse/other return to work) or are buying in an area experiencing rapid appreciation.
• ARM/Option ARM’s: Select an adjustable rate mortgage if you plan to use the property for cash flow then sell, need the minimum payment for a  short period of time then expect to have significantly more cash in the future and/or wish to use an alternative to a Jumbo Loan.

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 

*************************************************
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
    * Add me on Facebook: http://www.facebook.com/mclaughlinchris
    * Join my Fan Page: http://www.mclaughlinchris.com
–

http://www.shortsalesriches.com

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

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

Fix A Flip … Replay Comes Down Soon!

We’ve been flooded with phone calls and e-mails begging
us to reopen Fix A Flip … so today you get another
chance!  If you’ve been frustrated by not being able to close
your flip transactions due to 30 to 90 day seasoning
requirements, this program is for you!

Watch the replay here:

http://www.shortsalesriches.com/fixaflipwebinar
(please allow a few minutes to upload)

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

Housing starts lower than expected

The Commerce Department announced today that Housing starts increased to a seasonally-adjusted annual rate of 590,000 last month, up 0.5% above a revised 587,000 in October, but down 28.2% from September 2008, and less than the 610,000 forecast by Briefing.com.  New construction of single-family homes, the key sector of the housing market, increased 3.9% to an annual rate of 501,000 versus 482,000 in August. Starts fell by 1.7% in both the South and the West, and new home construction was flat in the Northeast at 62,000 units, and in the Midwest at 100,000 units. Multi-family homes increased despite the overall housing starts drop, and new construction of buildings with 5 or more units increased to an annual rate of 104,000, up 7.2% from 97,000 in August.  Applications for building permits also missed predictions; permit applications fell 1.2% to a seasonally adjusted annual rate of 573,000. Economists had expected permits to rise to 595,000.

Wholesale prices down 

The Labor Department announced that the U.S. Producer Price Index (PPI) dropped 0.6% more than expected in September.  Prices paid at the farm and factory gate also fell 4.8% on the year, which was steeper than forecasts of a 4.2% drop, although excluding food and energy, prices declined by a much slimmer 0.1% in September.  The PPI tracks the prices of goods before they reach store shelves and is considered an early read on price trends. It has been on a roller-coaster in recent months, reflecting wide swings in energy costs. The index fell 6.8 percent in the year ending in July, the largest decline on records dating to 1947.  The decline is mainly because of a 2.4% decline in energy prices although rising unemployment, wary shoppers, and tight credit have all helped keep a lid on prices.  The Federal Reserve has been able to keep the short-term rate it controls at its record low rate of nearly zero, where it is expected to remain until sometime next year.

More initiatives from the administration

The Obama administration announced another initiative to aid state and local housing finance agencies in providing mortgages to first-time and lower-income homebuyers and to assist in the development or rehabilitation of rental properties.  Officials declined to put a price tag on the program, but said there would be no cost to taxpayers.  If you’re finished laughing at that knee-slapper, let’s go on…  Under the initiative, the Treasury Department, along with Fannie Mae and Freddie Mac will purchase housing bonds issued by the finance agencies.  This will give the groups the funding needed to make new loans.  The government will also provide a temporary credit program to allow the agencies to refinance their existing bonds to more favorable terms.  Agencies will pay fees to participate in the program, which officials say will cover its cost. They are still working with the agencies to determine the extent of support needed. Earlier news reports said the initiative could cost as much as $35 billion.  Treasury Secretary Tim Geithner explains:  “This initiative is critical to helping working families maintain access to affordable rental housing and homeownership in tough economic times.” 

Home price drop expected 

Fiserv, a financial information and analysis firm, predicts that home values will drop in 342 out of 381 markets, with the national median home price dropping 11.3% by June 30, 2010, before stabilizing with prices rising 3.6% the year after that.  Mark Zandi, chief economist with Moody’s Economy.com, agreed with Fiserv’s assessment. “I think more price declines are coming because the foreclosure crisis is not over,” he said.  Those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Home prices in Miami, for example, are expected to plunge 29.9% by next June — after having already fallen a whopping 48% during the past three years.  If Fiserv’s forecast holds, Miami real median home price will tumble to $142,000 by June 2011. In Orlando, Fla., the second-worst performing market,   Fiserv anticipates a 27% price collapse by June 2010, followed by a less severe drop the following year. In Hanford, Calif., prices are estimated to drop 26.9% and continue falling 9.5% in 2011; in Naples, Fla., they’re expected to fall 26.8% and then flatten out.

RBS says 2.7 million more distressed sales in pipeline

Royal Bank of Scotland (RBS) economists say that recent months of “nascent” housing recovery remain overshadowed by the delinquency pipeline that threatens to put as many as 2.7m distressed sales on the market in the US.  “Given the lag time between a start and a completion, homebuilders and new home buyers probably had to act by July in order to feel confident that they would be able to claim the credit,” said RBS chief economist Stephen Stanley, explaining the surge in sales earlier this year.  “So, a portion of the increase in both starts and sales in recent months likely reflected activity being pulled forward into the summer.”  According to the report, resales are likely to be soft in coming months if the tax credit expires and is not extended as some industry groups are calling for Congress to do.  The inventory of existing homes held at 3.622m in August, 21% below the 4.575m peak in July ‘08. The dip may be due to various foreclosure moratoria as well as a delay in the process of foreclosed properties to reaching the market, RBS said. The typical foreclosure timeline is doubled in some cases from 12 months to 24 months.  “A housing market that is just beginning to climb from the ashes would be unable to handle influx of nearly 3 million additional homes for sale all at once,” RBS economists said.

Arrests on Wall Street

Meanwhile, back on Wall Street, U.S. federal investigators are poised to bring further “significant” cases against insider traders and assorted dirtbags in the wake of hedge fund founder Raj Rajaratnam’s arrest.  The targets will include financial professionals also involved in insider trading, a CNBC source familiar with the matter said, but it’s not clear whether the new cases will be related to the one that caught hedge fund founder Raj Rajaratnam and executives from some of the largest U.S. companies.  Rajaratnam, who established Galleon Group in 1997, was charged on Friday with having used a network of company insiders to tip him off to information that netted $20 million in illegal profits between 2006 and 2009.  Galleon is fighting for its life and investors who once counted themselves as lucky for getting access to one of the industry’s finest technology hedge funds may be running for the exits, industry analysts and lawyers said.

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

More Short Sale Myths

Although we have covered many short sale myths in the past, the growing need for viable information combined with clear confusion surrounding short sales has made the need for a follow-up more important than ever. Here to help define fact from fiction in relation to short sales are the most common myths and the information you need to know to close the deal:

Myth #1- Delinquent amount determines the short sale.

Fact: While the lender understandably desires to minimize losses on any loan, the fact behind short sales is that the delinquent amount is not the sole – nor even the most important – factor used when determining price. Property condition, comparable sales, cost to hold the property, time on the market, original down payment(s) and even the performance of other properties within the same portfolio all play important roles in the lenders decisions on whether to accept or reject a short sale offer.

Myth #2 – Condominiums can’t close as short sales.

Fact: While condominiums always require specialized knowledge and insight from a reputable agent, it is entirely possible to close a short sale on a condominium; in fact, even if a condo association has taken title of a unit, many investors find it preferable to use a short sale contract when purchasing from the condo association rather than the bank. Often a condo association is able to close in less time and with fewer constraints due to greater flexibility in their own portfolio. On the other hand, expect to encounter or specialized considerations when working with condo associations as well as financing.

Myth #3 – Lender mediated programs are preferable to short sales.

Fact: Mortgage mediations have not lived up to the full potential nor do all homeowners desired to mediate an existing mortgage. Some homes simply cannot be saved and others simply do not want to save their homes. Job transfer, high maintenance costs, multiple homes and change of lifestyle such as retirement are just a few reasons some homeowner prefer to walk away. Still others simply want a fresh financial start after filing bankruptcy or facing shrinking 401k accounts and shrinking retirement savings; there is a new focus on frugal living rather. People would rather live in a more modest home that allows them to retire on time despite major drops in other investments. Short sales fill the gap where mediation programs falter.

Myth #4 – It takes too long to close a short sale deal.

Fact: While it can take months, the national average is 9.5 weeks; while this is up from the 4.5 week average just one year ago, it is certainly far from impossible to close a short sale deal in a decent period of time. Of course, this is just an average and includes the nightmare closures that drag on endlessly with those that close quickly because they have a proven process working on their behalf.  Tune in to one our free shortsalesriches.com webinars to learn more about putting your short sale investment on automatic with a proven process designed to maximize profits and minimize workload.

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 

*************************************************
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 nearly
     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
    * Add me on Facebook: http://www.facebook.com/mclaughlinchris
–

http://www.shortsalesriches.com

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

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

Deals Done For You … Unveiled TONIGHT!

Nathan J. Interviews Damian Lanfranchi on his

Deals Done For You System!

See the BIG Miss 96% of Investors Are Making When

It Comes To How-To Use The Internet To Get Deals

(You Can Literally Be Destroying Your Chances Of

Success Before You Start!)

https://www2.gotomeeting.com/register/687161954

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

US Banks Slow to Absorb Commercial Property Losses

The Wall Street Journal says a U.S. Federal Reserve report found that banks in the country are slow to take losses on their commercial real estate loans that have been hit by slumping property values and rental payments.  In a Sept 29 presentation to banking regulators, K.C. Conway, a senior real estate analyst at the Federal Reserve Bank of Atlanta, suggested that regulators were preparing for a rerun of housing-related losses that plagued many banks after the residential property bubble burst.  Conway’s report predicted that commercial real-estate losses would reach roughly 45 percent next year, and that the most “toxic” loans on bank books were interest-only loans, which get no benefit from amortization, since it requires borrowers to repay interest but no principal.  The report also stated that banks have been slow to absorb the losses on their loans, partly due to “capital preservation” concerns.  The Journal said a Fed official had confirmed the authenticity of the document, but added it did not represent the central bank’s formal opinion.

 MBA – Mortgage Applications Increase

The Mortgage Bankers Association’s (MBA) Market Composite Index, a measure of mortgage loan application volume, increased 16.4 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index also increased 16.4 percent compared with the previous week.  The Refinance Index increased 18.2 percent from the previous week, the seasonally adjusted Purchase Index increased 13.2 percent from one week earlier, the unadjusted Purchase Index increased 12.9 percent compared with the previous week, and the seasonally adjusted Government Purchase index is at a record level in the survey after a 14.4 percent increase from the week before.  The four week moving average for the seasonally adjusted Market Index is up 4.2 percent.  The four week moving average is up 0.2 percent for the seasonally adjusted Purchase Index, while this average is up 6.7 percent for the Refinance Index.  The refinance share of mortgage activity increased to 66.3 percent of total applications from 65.3 percent the previous week.  The adjustable-rate mortgage (ARM) share of activity decreased to 6.1 percent from 6.2 percent of total applications from the previous week.

 The dollar who came in from the cold

 An article in Britain’s “Independent” newspaper said that secret meetings were taking place between Arab states, China, Russia, Japan and France, to end dollar dealings for oil and moving instead to a basket of currencies.  The reports were later denied, but the news helps explains the sudden surge in gold prices which would be included in the basket along with the Japanese yen and Chinese yuan, the euro, and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.  It’s not the first time a story like this has been out and about.  “I’ve heard the story many times,” explains strategic investor Dennis Gartman on Fast Money.  “But what’s different this time is that the story came out in the Independent, which is a pretty well respected newspaper.”  Also, the fact that France and Japan were supposedly part of the discussion makes it seem more credible.  “Of course everybody denied being at the meeting, they have to,” says Gartman.  “But do I doubt for a moment that those talks have taken place somewhere?  That leaders have talked behind curtains about the fact the world needs to diversify away from the dollar?  I don’t doubt that for a moment.”  After all, China has broached the subject before too.  In any event, it’s all just talk at this point.

Bill raises down payment requirements

FHA Taxpayer Protection Act of 2009 — HR 3706, a bill introduced in Congress Monday, would increase the minimum down payment for Federal Housing Administration (FHA)-insured mortgages from 3.5% to 5%, and prohibit financing initial service charges, appraisals, inspections, or other fees or closing costs with any part of an FHA mortgage.  The bill’s author, Rep. Scott Garrett (R-NJ), said the current policy of allowing closing costs to be rolled into the mortgage effectively reduces FHA down payments to as low as 2.5% because borrowers don’t have to have as much cash on hand at closing.  “[T]he benefits of promoting homeownership using government subsidies must be balanced against the potential risk of insuring less creditworthy borrowers and exposing the American taxpayer to that risk,” Garrett said in a statement on his Web site.  “As we have learned repeatedly throughout the mortgage crisis, the amount of equity a homeowner has in their home directly correlates to the credit risk associated to their mortgage.”  But Scott Stern, CEO of the Lenders One mortgage cooperative, a group of independent mortgage lenders, says the down payment requirement for FHA loans has been consistent for years before the mortgage crisis, and the FHA program worked well.  Instead, he said, it was the layering of risk, including questionable product terms, prepayment penalties, and unsound adjustable-rate mortgages (ARMs) that led to the rise of foreclosures.

Credit debt down, scores up

Credit Karma, a consumer advocate, released its U.S. Credit Score Climate Report with trend data for September 2009.  Consumer credit card debt decreased this month.  In addition, from June to September credit card debt decreased by 4% nationally and four states experienced double digit decreases in credit card debt quarter over quarter.  In September, the average consumer with an open account had:

–  $6,641 in credit card debt

–  $190,096 in home mortgage loan

–  $50,812 in home equity

–  $14,402 in auto loans

–  $26,295 in student loans

In addition, credit scores are on the rise for many consumers.  39% of consumer credit scores have increased, 29% have decreased, and 32% remained the same.  The current average U.S. consumer credit score is 672, which is down two points since June and four points since the beginning of the year.

Now on to our real estate educational section…

 VAT – Value Added Taxes May Result in Dramatic Real Estate Rate Increase

Although others may not fully appreciate the complete impact of the recently proposed VAT (Value Added Tax) proposed at the recent G20 summit, here at the short sale blog we try to keep readers informed about issues with plenty of advance notification…after all, information is key to success in short sales as well as any other forms of investment.

The VAT or Value Added Tax has long been a bone of contention but growing budget deficits and increased spending has created a need for more tax revenues—and fast. One proposed “solution” is a European style value-added tax or VAT. If recent rumblings and ruminations are any indication, it could be a matter of time before the United States follows the examples of other nations around the world.

According to Jon Podesta, co-charimant of  Obama’s transition team and White House advisor, a “value –added tax is more plausible today than ever…there’s going to have to be revenue in this budget”.

A recent speech at the Center for American Progress by Roger Altman, CAP President Podesta, Laura Tyson and others noted “$400 billion in new tax revenue is needed almost immediately to calm financial market fears, and a VAT would be a great way of doing it”. That’s $400 billion a year, by the way, not over ten years.

In an interview with Charlie Rose, former Federal Reserve Chairman Paul Volcker stated “if Washington can’t get spending under control, either a VAT or a carbon tax would be effective revenue raisers.”

So, what how would a VAT impact real estate? Let’s take a look at Greece for one possible example. The overall VAT in Greece stands at 19% with reduced rates for food, medicine and other necessities. Real Estate transfer taxes average 9% to 11% depending upon the value and location of the property and are paid by the buyer of the property not the seller. Additionally, real estate owners are taxed on the value of the real estate owned much like local property taxes are assed today; there is an exemption for properties below a specified values while those above the limit are assessed .35%-.94% annually.

Taking an average sales price of $160,000 USD and adding an additional 10% would cost the buyer $16,000 more for the exact same home with another $1,600 per year.

Lest you think Greece is an extraordinarily high example, consider Romania with their flat 19% VAT for all real estate or the newly implemented VAT for Cypress of 15% for applicable properties (older properties are grand-fathered in and not subject to the full VAT).

Bottom line…should a VAT be implemented in the United States it could increase the cost of new homes practically overnight while driving up the residual value of existing properties. Is this a sure bet? By no means but it certainly is one quick solution to a growing liquidity problem facing the federal government. Keep your eyes and ears open for both short and long term opportunities to profit from the current economic changes taking place.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com  

P.S. : YOU MUST SEE THIS!  The move celebrated real estate

 investing movie of the year:

http://www.housewarsmovie.com

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

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 

*************************************************
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 nearly
     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
    * Add me on Facebook: http://www.facebook.com/mclaughlinchris
–

 

Real Estate News & Commentary by Chris McLaughlin, March 19, 2009
http://www.shortsalesriches.com/welcome.html

——–

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live on Thursday night at
8:30 PM ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/995947853

 

Why would I do that for no charge?  Because
I want a chance to tell you about the other
high-income opportunity, too.

 

And I can’t do it in an email.

 

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early.  See if there’re any spots
left:

https://www2.gotomeeting.com/register/995947853
———
Floods of money:  Recovery or inflation?

 

The Federal Reserve was widely expected to hold the short-term bank lending rate at between zero and 0.25 percent, so it came as no surprise when it did.  The decision to dump money into the economy to try to buy us out of the recession was only slightly more surprising, but the amount — $1.2 trillion — took everyone by surprise.  Hoping to lower mortgages rates and consumer debt, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

 

Market reaction

The immediate market reaction was good:  the Dow bounced 90 points, the S&P soared, and all market indicators were generally positive.  Government bond prices leaped too, since mortgage rates will be going down even further than before.  If, and it’s a great big if, this can help stabilize credit markets and get us all spending, the economy may start to climb out of recession this year.  But is there a catch?  You bet.

 

 Inflation

Some economists — the ones with more than 10 minutes training in economics 101 — say the $3.9 Trillion slated for the budget can’t help but create galloping inflation the minute the economy starts to recover.  In fact, inflation may not even wait for the recovery; the dollar took an immediate tumble against other major currencies with the Fed announcement.  The Wall Street Journal’s Judy Shelton doesn’t mince words:  “How can capitalism find its footing when the monetary foundation is shifting with each new government bailout — each new infusion of deficit-financed government expenditure?  American families deserve better than to be punished by wasteful public spending and ruinous inflation.”

 

More free eco-cash

So you didn’t qualify for freebies from the mortgage bailout?  Cheer up — Washington is on a spending spree, and you can get up to $19,000 in upgrades to your house.  Expanded tax incentives in 2009 and 2010 for energy-efficient and renewable-energy home improvements include $1,500 in tax credits for qualifying windows, doors, insulation, roofs, heating and cooling equipment, water heaters, and even wood and pellet stoves. You’ll get a tax credit of 30% with no upper limit through 2016 for installing qualifying solar technology, small wind-energy systems, or geothermal-well systems.

 

AIG again

The House will vote today on a bill to levy a 90 percent tax on bonuses paid to employees with family incomes above $250,000, who work at companies that have received at least $5 billion in government bailout money.  Edward Liddy, brought in last year by the government to run AIG, told a House subcommittee Wednesday that the company was contractually obligated to pay the bonuses but added that many of them had already returned part of all of the bonuses.  The saga continues.

 

Now on to our real estate investing education section …

 

Fast Facts About the Stimulus Bail-Out

 

Short sale investors are likely to encounter clients that want to hold out for a big fat government paycheck rather than walk away from a home. After all, the media is filled with reports about big checks, bail-outs and “free money.”   Of course, scams and other fraudulent schemes abound making it tough to educate consumers about the facts versus fiction of the stimulus plan. Here to help is a quick primer about the proposed bail-out:

 

Fact: In order to refinance homeowners must be up to date on their current mortgage yet still demonstrate that they are “at risk” of facing foreclosure. The government anticipates up to 4 million households will fall into this delicate balancing act in order to qualify for funds…and it’s not limited to just owner occupied homes.

 

Fact: Mortgage modification clauses are much more difficult to obtain. Homeowners will have to satisfy the following stipulations in order to qualify:

 

Second lien holders must agree to waive or write-off obligations.

 

The home must be worth 80 to 105 percent of the current mortgage.

 

The primary lien holder must agree to modify principle, extend the duration of the loan and/or reduce interest rates to as little as 2 percent…or a combination of all of the above.

 

The homeowner must agree to credit counseling if they have extensive household debt in addition to high mortgage obligations.

 

Homes must be the primary residence and currently occupied. Homes cannot be vacant, in need of extensive repairs or otherwise hindered.

 

Up to $1,000 annual incentive payments will be made for up to five years – but only if the homeowner isn’t late on payments.

 

A new inspection may be required as well as the following documents:

Recent tax return and 2 to 4 recent pay stubs. Self-employed borrowers will need copies of quarterly estimated tax returns and prior year return.

 

Copies of all bank statements.

 

Proof of income from Social Security, alimony, child support or other income that you intend to use for the purpose of qualifying.

 

Current mortgage and liens including second mortgages.

 

Completed copies of Form 4506-T…a Request for Transcript of a Tax Return.

 

Completed copies of Form 1126 – a Borrower Financial Information form.

 

Proof or documentation of hardship, job loss, or other factors that may have influenced your current financial situation.

 

See you at the top!

 

 

 

 

Chris McLaughlin

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

 

P.S.

 

Don’t miss out webinar this coming Thursday night at 8:30 PM ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/995947853

 

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com 
http://www.sixfigurebpo.com *************************************************
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 flipping of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties

    * Owner and Supervising Broker of one of Florida’s
     largest Real Estate firms, running 4 different
     offices, supporting nearly 450 agents, uniquely
     positioning him to help thousands of investors
     make money in the biggest market opportunity ever!

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

     * On twitter: http://twitter.com/mclaughlinchris
     * On facebook: http://www.facebook.com/addfriend.php?id=709199143

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