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Smart Real Estate News & Commentary by Chris McLaughlin June 22, 2011

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NAR – existing home sales decline

According to the National Association of Realtors (NAR), Existing-home sales, (completed transactions that include single-family, townhomes, condominiums and co-ops), fell 3.8% to a seasonally adjusted annual rate of 4.81 million in May from a downwardly revised 5.00 million in April, and are 15.3% below a 5.68 million pace in May 2010 when sales were surging to beat the deadline for the home buyer tax credit.  There were notable regional differences in home sales. “A large decline in Midwestern existing-home sales can be attributed partly to the flooding and other severe weather patterns that occurred, but this also implies a temporary nature of soft market activity,” Lawrence Yun, NAR chief economist, explained.  The national median existing-home price for all housing types was $166,500 in May, down 4.6% from May 2010. Distressed homes³ – typically sold at a discount of about 20% – accounted for 31% of sales in May, down from 37% in April; they were 31% in May 2010.  NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said a number of proposals being considered in Washington could further jeopardize the housing recovery. “We’re concerned about the flow of available capital, including a possible rule that would effectively raise minimum down payment requirements to 20%,” he said. “We don’t need to throw the baby out with the bath water – increasing down payment requirements would effectively shut many qualified families out of the market. What we critically need is a return to the basics of providing safe mortgages to creditworthy buyers willing to stay well within their budget.”

Bernanke not likely to make big changes

Federal Reserve Chairman Ben Bernanke is unlikely to announce a major change in monetary policy at his second-ever news conference later today, but investors will hang on his every word for clues on whether the Fed will scale back its presence in financial markets, analysts said.  The central bank will release quarterly economic forecasts and analysts expect them to be revised lower to reflect the recent weakness, but they said Bernanke will be quick to say he sees an acceleration in the recovery.  “I’m sure he’ll predict one,” John Wraith, fixed income strategist at Bank of America Merrill Lynch (BAML), said. “I’m sure he won’t announce any reversal of the stimulus.”  The Federal Open Market Committee is likely to take the formal decision to end the second round of quantitative easing – a program under which it pumps liquidity in markets by buying assets – at the end of June but to leave the reinvestment policy in place, according to analysts from Barclays Capital.  Mark Olson, former Fed governor, said he would be surprised if the FOMC did not vote unanimously to stay the course and that he does not expect big changes in the Fed’s statement.

The Fed’s statement is due at 12:30 pm New York time and Bernanke’s news conference is expected to start at 2:15 pm.  The statement is likely to say that headline inflation was pushed higher by a rise in commodity prices but that these have fallen back somewhat and inflation expectations remain stable, Barclays Capital analysts wrote.

MBA – mortgage applications drop

After experiencing a 13% surge in mortgage applications, the mortgage market lost steam last week with applications dropping 5.9% for the week ending June 17.  While homeowners rushed to refinance earlier in the month, that trend reversed itself, with the refinance index and purchase index falling 7.2% and 2.8%, respectively, the Mortgage Bankers Association said Wednesday.  In addition, the four-week moving averages for the market index and the refinance index are up 0.4% and 0.8%, respectively, while the seasonally adjusted purchase index is down 0.7%.  Refinancing activity cooled as the refinance share of mortgage activity fell to 69.2% of total applications from 70% the previous week. In addition, the adjustable-rate mortgage share of activity fell to 5.9% from 6.1% the prior week.  Meanwhile, the average interest rate on the 30-year, fixed-rate mortgage grew to 4.57%, up from 4.51% a week earlier. The 15-year fixed-rate mortgage also rose to 3.70%, up from 3.67% a week earlier.

Mortgage lender CEO sentenced

Paul Allen, 55, the former CEO of Taylor, Bean & Whitaker, or TBW, pleaded guilty in April to one count of making false statements and one count of conspiring to commit bank and wire fraud.  He was sentenced to more than three years in prison.  The Justice Department said the fraud scheme contributed to the failure of TBW, which was one of the largest privately held U.S. mortgage lending companies, as well as the bankruptcy of Alabama-based Colonial Bank, which was one of the 50 largest U.S. banks.  Former TBW Chairman Lee Farkas, who was convicted on April 19 on 14 counts of fraud for his role in masterminding the scheme, is scheduled to be sentenced on June 27. The Securities and Exchange Commission (SEC) also has a civil action pending against Farkas in the Eastern District of Virginia.  Allen’s co-conspirator Sean Ragland, a 37-year-old former senior financial analyst at TBW, was also sentenced today by Judge Leonie Brinkema to three months in prison.  Four other senior officials with TBW and Colonial Bank have also been sentenced to time in prison ranging from three months to eight years for their role in the fraud.

Assistant Attorney General Lanny Breuer said Allen “concealed TBW’s staggering deficits through false financial reports, which ultimately caused investors to lose more than $1.5 billion.”  He said the sentencing sent a “strong message that corporate fraud by senior executives will not be tolerated,” but also showed that plea deals like Allen’s — under which he provided “substantial assistance” to government investigators — would be taken into account at sentencing.  According to court documents and information presented at trial, Allen and Ragland distributed materially false documents to investors in Ocala Funding, a TBW multi-billion dollar lending facility, from early 2005 through August 2009.  As a result, investors in Ocala Funding lost more than $1.5 billion, while Colonial Bank lost $900 million.

Olick – on the distressed property sales drop

“The share of distressed sales in May, that is foreclosed properties and short sales (when the property is sold for less than the value of the loan), fell to 31% of all sales from 37% in April. Investors, who purchase a large share of these distressed properties, also represented a smaller share in May. So what’s going on?  We know there is still a huge supply of bank owned (REO) properties, and we also know that banks are pushing short sales on many more properties than ever before. But they are also pushing REO sales, thanks to new sales incentives from lenders and the GSE’s (Government-Sponsored Enterprises).  ‘Realtors and mortgage loan officers nationwide are driving mid-to-high end organic, short and distressed sales on the fear that buyers will be unable to qualify for loans once the QRM (Qualified Residential Mortgage) rules are in place requiring 20% down,’ says mortgage market analyst Mark Hanson, describing new rules being considered for risk retention by banks (part of the banking overhaul legislation passed last summer).

Some bloggers though, writing in to me after the existing home sales report, claimed that Fannie and Freddie are holding on to REOs, trying to game home prices. Fannie strongly disputes that.  ‘Fannie Mae doesn’t have a shadow inventory of REO properties that are available to be sold. As soon as we acquire a property, we quickly identify a market competitive price, determine whether to make any necessary repairs and list the property. In the first three months of 2011, we sold a record number of REO properties, selling more properties than we acquired,’ said Amy Bonitatibus, Fannie Mae spokeswoman.  ‘We watch taxpayer dollars like it’s our own money. We have an immense responsibility to get the most possible value from each REO property we sell. We are committed to stabilizing neighborhoods and preserving communities across the country,’ she added.

In fact, Fannie Mae recently launched another program of financial incentives to Realtors to sell REO properties. A note from analysts at Goldman Sachs, titled Foreclosure Sales: Federally Backed Lenders Shifting to Net Sellers, states:  ‘Although these entities could hold property off the market to reduce the negative effects of distressed properties on house prices, they do not appear to be doing so…in Q1 the GSEs and FHA became net suppliers of foreclosed properties to the market for the first time since 2009. Moreover, if the temporary slowdown in REO sales over the last two quarters ends, the federal entities seem likely to add roughly 30% to the sales of fore loses property over the next year as compared with the previous four quarters.’

Bottom line, in order for this housing market to recover, the distressed properties need to go, whether by short sales or REO sales. The distress is driving the fear, which in turn keeps buyers on the sidelines. We need investors, and we need first time buyers, and I will say it until I’m blue in the face: These buyers need better access to credit.”

Oil down

Oil prices fell below $94 a barrel today after a crude supply report reflected mixed signs about U.S. demand and the dollar strengthened against other currencies.  By early afternoon in Europe, benchmark oil for August delivery was down 82 cents to $93.35 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 54 cents to settle at $94.17 on Tuesday.  In London, Brent crude for August delivery was down 41 cents to $110.54 a barrel on the ICE Futures exchange.  The American Petroleum Institute (APA) said late Tuesday that crude inventories fell 81,000 barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 2.0 million barrels.  Inventories of gasoline dropped 1.5 million barrels last week, surprising analysts who had forecast an increase of 1 million barrels. Distillates fell 541,000 barrels, the API said.

May delinquencies down

U.S. mortgage delinquencies are faring much better compared to one year ago, according to Lender Processing Services’ “First Look” report released yesterday.  The report provides month-end mortgage performance statistics from LPS’ loan-level database of nearly 40 million mortgages. The Jacksonville, Fla.-based firm will release more detailed reporting in its upcoming “Mortgage Monitor” report, which comes out at the end of this month.  According to the report, 7.96% of U.S. home loans were 30 days past due but not in foreclosure in May, down a staggering 18.3% compared to the same month in 2010. This figure is down a slight 0.1% from April. LPS estimates there are 4.2 million mortgages in delinquency status, with 1.9 million seriously delinquent, meaning 90-plus days past payment.  Foreclosure pre-sale inventory, on the other hand, continued to stay above last year’s averages. Inventory was up 4.11% last month compared to the year ago period, totaling 2.2 million homes.

Florida posted the highest percentage of noncurrent loans statewide in May, followed by Nevada, Mississippi, New Jersey and Illinois. The states with the least percentage were, in descending order, Montana, Wyoming, Alaska, South Dakota and North Dakota.  In other recent news, LPS recently lowered its second quarter earnings estimate by 31% based on the sluggish mortgage market.

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 150 high-value, high-profit
properties

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

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

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

* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Smart Real Estate News & Commentary by Chris McLaughlin April 25, 2011

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Americans still believe home ownership is the best investment

According to a report by Pew Research released this week, this figure is only down 3% from 1991. Pew cites a CBS News/New York Times survey completed in 1991.  Of those 81% of the adult sample, 37% “strongly agree” that a home is the ultimate long-term investment, while 44% only moderately agree. Both figures indicate less adamant view than the 1991 survey.  Pew finds the overwhelmingly positive results notable in light of the fact that 47% of survey respondents said their home value depreciated since the beginning of the recession. About one-third of those surveyed claimed their home value has stayed the same, while 17% said their homes are now worth more than before the recession. 

Almost half (44%) of individuals whose homes lost value said they expect to recoup their equity losses in three to five years. Another third are less optimistic and believe it will take between six and 10 years.  Homeowners aren’t the only people who consider a house the best long-term investment one can make. Approximately 81% of current renters surveyed by Pew reported they would like to buy a house at some point. One-quarter said they would continue to rent.  Homeownership ranked first among long-term financial goals for those who took the survey. That prospect was followed closely by living comfortably during retirement, being able to pay for their children’s college and being able to leave an inheritance.  Pew Research polled 2,142 adults between March 15 and March 29 for this survey. The survey sample was comprised 57% of current homeowners and 30% of renters. The remaining percentage of people had special living arrangements, such as living with family members.

Oil up

Crude oil futures advanced as much as 0.7% after Syrian security forces detained at least 200 protesters while unrest showed no sign of ending in Yemen. US Senator John McCain said rebels in Libya need more assistance in the fight against Muammar Qaddafi’s forces. Saudi Arabia, holder of the world’s largest crude reserves, has no plans to raise production capacity, an oil official said.  “The supply-side story hasn’t changed, we lost more than 1 million barrels a day in Libya,” Dominic Schnider, a Singapore- based director for wealth management research at UBS AG, told Susan Li in a Bloomberg Television interview. “Even if you’re going to raise production, the market will be concerned about what happens down the road, if you have an outage in, let’s say, Nigeria, where you have high-quality crude.” 

Oil for June delivery rose as much as 78 cents to $113.07 a barrel on the New York Mercantile Exchange. That’s the highest intraday price since April 11, when futures reached $113.46, the most since September 2008. The contract was at $112.72 at 3:08 p.m. Singapore time.  Brent crude oil for June settlement increased 46 cents, or 0.4%, to $124.45 a barrel on the London-based ICE Futures Europe exchange.  Bullish bets on crude climbed in the past week, according to the Commodity Futures Trading Commission’s (CFTC) weekly Commitments of Traders report. Net-long positions in oil increased 8,337 futures and options combined, or 3%, to 289,916, according to the CFTC report.  US crude inventories fell 2.32 million barrels to 357 million, the first drop since February, the Energy Department said April 21. Cushing stockpiles declined 770,000 barrels to 41 million barrels, the biggest drop since April 2.

Real estate markets show life at top and bottom

Four years after US housing prices began to nose-dive, eventually triggering a global financial crisis, signs of life are appearing at the top and the bottom ends of the market.  By contrast, a sustained recovery remains far off for the vast middle ground of the US housing sector.  Affluent Americans are feeling more secure as the impact of the recession fades and the stock market racks up big gains.  “People who have decent income are saying, maybe I can trade up, buy a better property,” said Bill Hardin, director of the real estate program at Florida International University.  “Some people are even saying, I’m willing to take a loss on the property I’m selling now to get something I couldn’t buy during the housing peak.” 

Sales of homes worth over $1 million, which account for about 1.5% of total US sales, have risen in most states so far in 2011.  Realtors, brokers and others in the housing industry report the first bidding wars for expensive homes since the crash.  At the bottom end, homes are also on the move as investors pay cash for foreclosed properties to rent them out.  It’s a different story in the middle of the market.  Properties worth between $100,000 and $500,000 make up more than 60% of US housing. Sales in that category in March were down across every region of America from the same month a year earlier, when tax breaks were propping up demand.  Foreclosures and short sales — whereby struggling homeowners sell their homes for below what they owe, with the consent of their lenders — are still a big drag. Credit remains tight and middle-income families are more pessimistic than their wealthier compatriots about the economy.  Access to credit is cited as a broad problem. While the rich can simply put more money down, for most would-be buyers the need for more ‘skin in the game’ is a deal-breaker.  Realtors and brokers complain that the credit drought is as extreme as the flood of loose lending of the boom years.  “The pendulum has swung from too far to the left to too far to the right,” Corcoran’s Liebman said. “We need to find some balance in lending.”

Silver at all time high

Immediate-delivery silver climbed as much as 5.4% to $49.79 per ounce, surpassing the previous peak, which according to research company GFMS Ltd was $49.45 in January 1980. The metal traded at $49.2563 at 1:15 p.m. in Singapore, up for a ninth day and set for the longest winning run since an 11-day increase in March 2008. Spot gold also reached a record.  Precious metals have rallied on investor concern that central-bank programs to revive economic growth with record-low interest rates and increased supply of money will reignite inflation and hurt currencies including the dollar.

Silver has more than doubled over the past year.  “It’s driven mainly by speculative buying, with investors eyeing the record for a while now,” Yang Shandan, a trader at Cinda Futures Co., said from Zhejiang, China. “We might get a bout of profit-taking now that we’ve pushed passed the high.”  July-delivery silver on the Comex in New York jumped as much as 8.2% to $49.845 per ounce, before trading at $48.730. The record was $50.35 an ounce, also set in January 1980, according to the exchange. Gold for immediate delivery climbed as much as 0.7% to $1,517.98 per ounce.

WSJ – buyer’s market?

Falling home prices should give aspiring homeowners the upper hand this spring, but in a growing number of locations, it doesn’t feel like a buyer’s market.  Blame the nearly five-year slide of home prices. Those declines, which accelerated over the past two quarters, have left many sellers unable or unwilling to lower their prices. Meanwhile, buyers remain gun shy about agreeing to any purchase without getting a deep discount.  That dynamic has fueled buyers’ appetites for bank-owned foreclosures. Those homes often hit the market at bargain prices, but they are being snapped up by investors who are paying in cash.  The Wall Street Journal’s quarterly survey of housing-market conditions in 28 major metro areas shows inventories of unsold homes remain high but fell during the first quarter.

Listings were down by nearly 25% from one year ago in Miami and Orlando, and by 12% in Phoenix and Portland, Ore., according to figures compiled by John Burns Real Estate Consulting.  Other markets, including New York’s Long Island and Charlotte, N.C., still face imbalances. At the current sales pace, it would take more than 16 months to sell all homes listed for sale in each market. A balanced market typically has a six-month supply.  Meanwhile, home values fell in every metro area for the second straight quarter, according to data from Zillow Inc. Prices were down by more than 5% in Chicago and Detroit, the largest quarterly drops, to levels not seen in more than a decade.  Values have fallen so far that many sellers with equity aren’t willing to drop their prices. Those without equity can’t cut the prices unless the bank agrees to take a loss in what is known as a short sale. Such sales can take months to complete and fall through at the last minute, deterring some buyers. Still, short sales hit a new high, accounting for 9% of all transactions in January, according to CoreLogic Inc. 

“Frankly, until we start building some equity, the market is just going to sit here and do pretty much nothing for the next few years,” says Christopher Thornberg, a housing economist at Beacon Economics in Los Angeles.  Homes that don’t need much repair work and that are located in choice neighborhoods near transit hubs or with good schools are in demand.  While foreclosures are in demand, mortgage companies’ processing problems have sharply curtailed the flow of bank-owned properties onto the market in states such as Florida, New Jersey and New York, where courts must process foreclosures.  To be sure, some of the challenges facing the housing market are easing as the economy adds jobs, boosting demand and easing mortgage delinquencies.Depressed prices coupled with low interest rates have made housing more affordable than at any time since 1975, according to Zillow.  But the legacy of the housing market’s collapse has left two big structural problems. First, the huge erosion in homeowners’ equity has deprived housing markets of the all-important “trade up” buyer. Even those with equity often aren’t willing to sell at current market prices, exacerbating what housing analyst Ivy Zelman calls the “stuck factor.”  Second, foreclosures are still weighing on housing markets. While mortgage delinquencies are down from their 2009 peak, an all-time high of 2.2 million loans were in foreclosure at the end of March, according to LPS Applied Analytics.  Economists say the “shadow inventory” of another 4 million potential foreclosures will keep a lid on prices for years. Even in markets with rising demand and falling inventory, prices won’t go up because “there’s too much on the horizon, so nobody’s in a hurry,” says Ron Leis, a broker in Sacramento, Calif.  Tighter credit standards have also left markets with fewer buyers at a time when more would help.

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

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

      closed 2,786 sides for a closed sales volume of

      $392,912,927!  
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin April 18, 2011

Forward this e-mail to your friends!  Then they can subscribe directly at the following link:  http://www.smartrealestatenews.com/

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

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

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

DSNews.com – FHA predicts higher sales

Freddie Mac forecasts a 5% increase in 2011 home sales over 2010, according to its U.S. Economic and Housing Market Outlook for April.  The report also contends that refinancing will likely account for a smaller share of loan applications later this year as wealthy borrowers decrease and mortgage rates increase.   “Expect to see a bit of spring in homes sales activity during the second quarter,” said Frank Nothaft, VP and chief economist at McLean, Virginia-based Freddie Mac.  Nothaft continued, “Sales contract signings for existing homes were up in February, positioning the market for a bounce up going into the traditional home-buying season.”  The expected pick-up in home sales is due to recent positive employment reports, the Market Outlook reveals. Unemployment declined for the fourth straight month to 8.8%, and net employment increased by 216,000 jobs. Real estate employment was up by 10,000 jobs since last November.  The report also calculates that the share of adjustable-rate mortgage loans will be 7% in 2011 compared to the 5% 2010 average.  Freddie Mac compiles data on major economic and housing and mortgage market indicators and offers forecasts based on those indicators.

US credit rating outlook lowered

S&P maintained its ‘AAA/A-1+’ credit rating on U.S. sovereign debt, saying the nation’s “highly diversified” economy and “effective monetary policies” have helped support growth.  But the agency lowered its outlook for America’s long-term credit rating to “negative” from “stable,” based on the uncertain political debate around the nation’s fiscal problems.  The outlook means that there is one-in-three likelihood that it could lower the long-term rating on the United States within two years, S&P said.  ”The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term fiscal challenges will persist until at least after national elections in 2012.”  On top of that, the IMF said the U.S. budget deficit was on course to hit 10.8% of nation’s economic output this year, tying with Ireland for the highest deficit-to-GDP ratio among advanced economies. It urged Washington to move quickly to put a credible plan in place to tighten its belt.  While most of the criticism came from emerging market economies, some advanced nations joined the chorus.  Dutch Finance Minister Jan Kees de Jager warned that if the United States and other advanced nations move too slowly it could undermine confidence in the global economy.  Brazil’s finance minister, Guido Mantega, offered sharp words in a thinly veiled attack on the United States. “Ironically, some of the countries that are responsible for the deepest crisis since the Great Depression, and have yet to solve their own problems, are eager to prescribe codes of conduct to the rest of the world,” he said.  The Group of 20 countries agreed on Friday to a plan that could put more pressure on the United States to fix its deficits as well as push other leading economies to address their own shortcomings.

Olick – what about private insurance?

“It’s no surprise that the private mortgage insurance industry is fighting hard against proposed new risk retention rules for the mortgage industry.  They are already trying to pick themselves up and dust themselves off from the near knockout punch the Federal Housing Administration (FHA) gave them, when the government mortgage insurer took over their market share while saving the housing market from complete and total bust.  The FHA became the only game in town for the less credit-worthy borrowers with lower down payments. Now, just when the private guys are trying to get back in the game, they’re getting battered again.  The proposal for a ‘Qualified Residential Mortgage,’ which would be exempt from 5% risk retention by the banks, which of course the banks don’t want to retain, requires, among many things, that the buyer put 20% down on the home.  ‘We do not believe that affordability and sustainability are mutually exclusive goals,’ Kevin Schneider, president of the Mortgage Insurance Companies of America testified before Congress yesterday (he’s also CEO of U.S. Mortgage Insurance of Genworth Financial). ‘We understand the drivers of sustainable, affordable homeownership because the private MI industry has a vested interest in assuring that low down payment homebuyers purchase homes with loans that they can afford to pay over time.’

The FHA is exempt from QRM, so low down payment borrowers have to go there in the current market environment; there’s really nowhere else. Fannie Mae and Freddie Mac may be exempt from QRM, but that is still in question, and they are requiring higher down payments these days as well. Mortgage insurers are happy for Fannie and Freddie to be exempt from QRM, as long as they are under government conservatorship, because many of those borrowers get private mortgage insurance. But once the two are out of conservatorship, which is the big push, then they are no longer exempt from that 20% down payment, or so goes the theory.  ‘A return to private capital in the new home finance structure is crucial. Privately insured mortgage loans should be included in the QRM definition to be given parity with FHA-insured loans,’ stressed Schneider.”

45% owe no taxes

For tax year 2010, roughly 45% of households, or about 69 million, will end up owing nothing in federal income tax, according to estimates by the nonpartisan Tax Policy Center. Some in that group will even end up getting paid money from the federal government.  That does not mean such households end up paying no taxes whatsoever. For instance, those in the group still pay other taxes such as state and local income taxes, as well as property and sales taxes.  And the group doesn’t necessarily get off scot-free when it comes to payroll taxes – which support Social Security and Medicare.  More than two-thirds – or 49 million of the 69 million households – pay payroll tax. Of those, 34 million end up paying more in payroll taxes than they get back on their federal return. The other 15 million pay payroll tax but they get enough refundable credits to offset what they paid.  The vast majority of the 69 million households make less than $50,000 – with very heavy representation among households making less than $30,000. 

The ranks of those whose federal income tax burden nets out to zero – or less – have grown in recent years for two reasons.  The first is temporal.  The downturn in the economy has hurt household incomes and various stimulus bills offered Americans temporary tax breaks to mitigate the economic pain – thereby further reducing their tax bills.  The second is more systemic.  The tax code is filled with hundreds of tax breaks to encourage economic activities the government favors, tax experts say. For instance, the law offers credits to supplement the wages of low-income workers, help families pay for college and encourage them to buy homes and have children.  Temporary tax policies, such as the Bush-era tax cuts and the tax breaks passed under President Obama, have also increased the ranks of the non-payers.  If most tax breaks were removed, the Tax Policy Center estimates, the percentage of households with no federal income tax liability would drop to 27% from 45%.

WSJ – mortgage rates rise for 4th week

Mortgage rates rose slightly, with the average rate on 30-year fixed-rate mortgages climbing for a fourth straight week, according to Freddie Mac’s weekly survey of mortgage rates.  The 30-year fixed-rate mortgage averaged 4.91% in the week ended Thursday, up slightly from the prior week’s 4.87% but down from 5.07% a year earlier.  Mortgage rates generally track U.S. bond yields, which move inversely to Treasury prices. Rates have climbed this year after slumping most of last year when prices rallied on economic uncertainty.  Rates on 15-year fixed-rate mortgages averaged 4.13% in the latest week, up from 4.1% in the previous week but down from 4.4% a year earlier.  Five-year Treasury-indexed hybrid adjustable-rate mortgages were 3.78%, up from the prior week’s 3.72% but down from 4.08% a year earlier. One-year Treasury-indexed ARMs were 3.25%, up from 3.22% but down from 4.13%, respectively.  To obtain the rates, the 15-year fixed-rate mortgages required payment of an average 0.7 point and the others required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

Florida’s $1 Billion “hardest hit fund” rolled out

 The Florida Housing Finance Corp. is finally ready to put $1 billion in Treasury Department funds to use by funding solutions for distressed homeowners across the state.  On Monday, the agency began accepting applications for the Florida Hardest-Hit Fund (HHF), a program that offers qualifying borrowers two options for saving delinquent mortgages. The Treasury Department disbursed funds from its $7.6 billion Hardest-Hit Fund last summer, but the roll-out is just now taking place.  Wells Fargo is also in talks with them Arizona Department of Housing to join a program providing principal reduction on delinquent mortgages using some of the $268 million allocated to the southwest state through HHF, a source familiar with the negotiations said earlier this month. Bank of America is also doing the same in the state.  Plan one under Florida’s program offers unemployment mortgage assistance that runs up to six months or $12,000 in total payments, whichever threshold is reached first. In addition, the mortgage loan reinstatement program was deployed to bring delinquent mortgages up to date, with the cap at $6,000.  Florida Housing Finance Corp. launched a pilot program in Florida’s foreclosure-ridden Lee County in March. Homeowners across the state can now submit applications.  The program is the result of a 2010 Treasury initiative in which the federal agency created the Housing Finance Agency Innovation Fund for the hardest-hit housing markets. The Treasury agreed to allocate millions of dollars to states riddled with distressed loans and suffering from high housing depreciation rates. The states include Florida, California, Arizona, Michigan and Nevada.

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

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

      closed 2,786 sides for a closed sales volume of

      $392,912,927!  
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin December 9, 2010

 

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Home values down

American homes are expected to be worth $1.7 trillion less in 2010 than they were worth last year, according to a report released Thursday by real estate website Zillow.  This year’s drop in home values is 63% larger than the $1 trillion dip in 2009, and brings the total value lost since the housing market’s peak in 2006 to a whopping $9 trillion. While the homebuyer tax credit helped prop up the housing market in the second half of 2009 and the first half of 2010, home values continued their slide in the second half of the year. Almost $700 billion in value was lost in the first half of the year, compared to Zillow’s estimates of $1 trillion in the second half of 2010.  Only 24% of the 129 markets Zillow tracked increased in total home value this year. Home values increased $10.8 billion in the Boston metropolitan statistical area (MSA), and $10.2 billion in San Diego MSA.  The areas suffering the biggest drops in home prices include New York City, which lost $103.7 billion in value and Los Angeles, where home values fell $38.6 billion.  The steep declines in home values are pushing Americans further under water every year. In the third quarter of 2010, 23.2% of single family homeowners with mortgages owed more on their mortgage than their home was worth — up from 21.8% in 2009.

 Unemployment down 

The Labor Department says that the number of initial claims fell to 421,000 in the week ending Dec. 4, down 17,000 from a revised 438,000 claims filed the week before.  The figure beat analyst forecasts of 429,000 for the week.  The four-week moving average, which is calculated to smooth out volatility in the data, fell by 4,000 to 427,500.  The moving average has been inching lower over the last month, after being stuck in the mid- to upper-400,000s since last year.  Continuing claims also fell. The number of Americans who were filing for their second week of unemployment insurance or more — dropped to 4,086,000, in the week ending Nov. 27, the latest data available. That’s the lowest level of continuing claims in two years.  Employers are still jittery about hiring, as they struggle to forecast consumer demand into the next year, said Harry Griending, founder of recruiting consulting firm DoubleStar, Inc.  And while there’s finally more clarity about taxes after President Obama agreed to compromise, uncertainties about the costs of Obama’s health care and financial regulations still hang over employers’ heads, he said.  “There’s still a whole lot of uncertainty that clouds the future, and any company would be crazy to hire into a headwind of uncertainty.”

MBA – Launches Council on Residential Mortgage Servicing

 The Mortgage Bankers Association (MBA) has assembled a task force of key MBA members to examine and issue recommendations for the future of residential mortgage servicing.  The Council on Residential Mortgage Servicing for the 21st Century will be led by Debra W. Still, CMB, President and Chief Executive Officer of Pulte Mortgage LLC of Englewood, CO and MBA’s Vice Chairman.  “The residential mortgage servicing sector has been operating in a time of unprecedented challenges, presenting us with a unique opportunity to explore potential improvements to business practices, regulations and laws affecting the servicing sector and consumers,” said Michael D. Berman, CMB, Chairman of the MBA.  “As the national trade association representing the real estate finance industry, we will bring together industry experts to take a comprehensive look at the current state and ongoing evolution of residential mortgage servicing and make recommendations for the future.” 

The Council will convene a one-day summit on January 19, 2011, in Washington, DC.  Titled, “MBA’s Summit on Residential Mortgage Servicing for the 21st Century,” this meeting will bring together industry leaders, consumer advocates, economists, academics and policymakers who will take a detailed look at the issues that have challenged the industry and identify the essential building blocks for the future of servicing.  In the coming months, residential mortgage servicing will face many more changes in an effort to re-tool the industry for the longer haul said Council Chairman Debra Still. “The Summit will serve as a forum for thoughtful, knowledgeable discussion around how residential mortgage loan servicing should be done in the future.”  Following the summit, the Council will meet on a regular basis to discuss the myriad of issues facing the industry and how the industry can and must change moving forward.

Online sales strong

So far, more than $17.5 billion has been spent online in the first 35 days of the holiday shopping season through Dec. 5, a 12% increase over the same time last year, according to comScore, an online analytics firm.  For the week starting with Cyber Monday, four separate days topped $800 million in aggregate sales for online retailers.  Shoppers kicked off the week by spending $1.03 billion on Cyber Monday, which became the heaviest online spending day on record. That was followed by $911 million on Tuesday, $868 million on Wednesday and $850 million on Thursday.  Overall, sales for the week ended Dec. 5 were up 9% from the year-earlier period — a little below the rate of growth for other parts of the season.  Promotions such as free shipping increased in popularity this year, with each of the most recent three weeks seeing more than 50% of all transactions including the incentive.  “Without a doubt, free shipping has become a critical driver of e-commerce purchasing, with the majority of consumers indicating that they will abandon their shopping carts if they get to check-out and find that free shipping is not included,” said comScore chairman Gian Fulgoni.  Online retailers might have even more to anticipate. Fulgoni said he expects to see activity continue to pick up in the middle of December, when online buying typically peaks.

Housing market braces for rate change 

The U.S. housing market — reeling from the economy’s worst downturn since the 1930s — is struggling to recover despite government stimulus that has included tax credits and foreclosure prevention programs, on top of super low interest rates engineered by the Federal Reserve.  As these programs sputter and mortgages become less affordable, analysts expect housing could dampen economic growth through 2011.  The average 30-year fixed mortgage rate has climbed nearly a half-percentage point since early October to 4.66 percent last week, the Mortgage Bankers Association (MBA) said yesterday. 

 The MBA said its refinancing index last week plunged to its lowest level since June 4, and the impact doesn’t include the bond market’s rout that has sent the influential 10-year U.S. Treasury note’s yield soaring by a quarter percentage point since Friday, Dec. 3.  The rate increase has effectively closed the door on $1 trillion in loans, and another quarter point would add another $600 billion to that number, said Scott Buchta, head of investment strategy at Braver Stern Securities in Chicago.  Put another way, half of all borrowers with 30-year fixed-rate loans would be “out of the money” on a refinance, compared with 90 percent eligible for interest-rate savings in October of at least 0.4 percentage point.  Also worrisome is the impact on rates offered through the Federal Housing Administration’s guarantee program, whose low down-payment requirements have been an important crutch for home sales, Buchta said. The FHA rates, excluding points, have already climbed above 5 percent, according to the MBA.  “Should rates rise higher from here, you’ll start to have an impact on a purchase market that is just starting to recover.”  That could adversely affect the sales of higher-priced homes that lagged the nascent recovery in the housing market in some U.S. regions.

 Now for our real estate education section…

 Dealing with No-Shows

Anyone that has been in the real estate business, rental properties or even investing for any period of time has had to deal with a no-show. Not only is it a complete waste of time but no-shows can drain precious time away from other productive activities. Learn how to deal with no-shows without letting them ruin your life with this quick checklist.

1. Screen Better – Understand the client and who you are working with. For example, if you are showing a home for the first time to a new client it is important to make a first impression…assuming they ever arrive on the scene. Long time clients tend to be more reliable or at least have the courtesy to call if they are going to be late or need to reschedule. Impress upon new clients the need for proper communication and then make it easy to reach you even on short notice. Don’t schedule too far in advance or be sure to provide a follow-up call and/or email to confirm the time and date.

 2. Accept It – If you have taken all the right steps and are still stood up, don’t get upset or assume the worst. Sometimes emergencies happen. Depending upon the travel distance, allow a 5 minute delay for each 30 minutes of travel before calling to confirm. Allow up to 15 minutes delay for each hour of travel before leaving if you were unable to reach anyone by phone. One simple call is typically sufficient; don’t start calling everyone like a stalker. Instead, stay cool and calm then allow the client to reschedule on their own terms with an emphasis on the need to remain in contact prior to meeting again in the future.

3. Have a Back-up Plan – One source of no-shows is actually the professional or investor. Listen carefully to when the client desired to have the meeting then book the time and date based upon their availability not yours. If you simply cannot show up at that time, send a replacement instead. Oftentimes the client or business associate ends up missing the appointment by trying to be two places at once; don’t create your own stress. Have a back-up plan in place and use it when needed.

 4. Multi-Task – If you really aren’t sure about a new client or contact, schedule the first meeting during lunch or another “down-time”. If they fail to show, you have a full hour to yourself for lunch and can engage in a bit of reading or catching up with calls. If they do show, you have a valid write-off for the lunch.

5. Track the Time – Depending upon your market, many no-shows will exhibit a certain pattern. For example, week-days could be a major challenge if your work in a predominantly blue collar area where child-care and work schedules often conflict. In that case, plan to work weekends in order to accommodate the primary time-off available to your market.

 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
–