foreclosures

Smart Real Estate News & Commentary by Chris McLaughlin January 30, 2012

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OC Register – investors are the answer

“According to a foreclosure sales report by RealtyTrac, foreclosure-related homes are still being gobbled up — they represent 20% of total transactions in 2011 Q3.  Foreclosures are usually viewed as a supply and price issue. High foreclosures keep home prices down, creating negative equity — and declining home prices keep foreclosures coming. This is a seemingly vicious cycle that feeds into the “shadow supply” problem and looks potentially like a never ending story.  But all vicious cycles eventually come to an end in a capitalist market system. Ironically, it is the enthusiastic response of investors and regular buyers to low-priced foreclosed homes, which could eventually break the foreclosure cycle.  Foreclosure-related home sales were one-fifth of total US home sales in the third quarter vs. 22% in the quarter before and 30% during the third quarter of 2010.

The decline in the market share of foreclosure-related home sales is partially explained by various hurdles to the efficient conclusion of the foreclosures process, but “even with the hurdles to selling foreclosures, foreclosure sales continue to represent a historical high percentage of all sales,” says RealtyTrac. Foreclosures’ shrinking share could also be caused by declining mortgage delinquencies, which have been dropping relatively quickly in California, according to the Mortgage Bankers Association.  In California, the share of foreclosure related sales was 44% in the third quarter. California has one of the most efficient foreclosure recycling processes in the nation, so temporary supply constraints are not that big of an issue as, for example, they may be in Florida.  Strong demand may be stabilizing the average sales price of home in foreclosure, too, which was up 1% from the previous quarter and down just 3% for the third quarter in 2010. The reported average discount for foreclosed properties relative to regular homes was 34% — but I wouldn’t read too much into these numbers because they are not quality adjusted.  Still, declining mortgage delinquencies and strong demand for foreclosure product could mean that the end may soon be here for the foreclosure business — and what’s lurking in the shadows.”

Income up, spending down

The Commerce Department said today that spending was the weakest since June and followed a 0.1% gain in November.  Economists polled by Reuters had expected spending, which accounts for more than two-thirds of US economic activity, to nudge up 0.1% last month. For all of 2011, spending rose 4.7%, the largest increase since 2007.  When adjusted for inflation, spending dipped 0.1%, breaking three straight months of gains. It increased 0.1% in November.  The government reported on Friday that consumer spending grew at a 2.0% annual pace in the fourth quarter, helping to lift gross domestic product 2.8% — acceleration from the third-quarter’s 1.8% rate.  Part of the spending, which has been concentrated in motor vehicles, has been funded from savings and credit cards as high unemployment constrains wage growth.

Wages rose last month, helping to prop-up incomes. Income advanced 0.5%, the largest gain since a matching increase in March, and followed a 0.1% rise in November. Economists had expected income to rise 0.4%.  Consumer spending is closely watched because it accounts for 70% of economic activity.  Unemployment stands at 8.5% — its lowest level in nearly three years after a sixth straight month of solid hiring.  For the final three months of 2011, Americans spent more on vehicles, and companies restocked their supplies at a robust pace.  Still, overall growth last quarter — and for all of last year — was slowed by the sharpest cuts in annual government spending in four decades. And many people are reluctant to spend more or buy homes, and many employers remain hesitant to hire, even though job growth has strengthened.

LPS – 2010-2011 originations good quality

The December Mortgage Monitor report released by Lender Processing Services shows mortgage originations continued their decline from 2011’s September peak, down 10.1% from the month before. At the same time, those loans originated over the last two years have proven to be some of the best quality originations on record. Likely a result of tighter lending requirements, 2010-11 vintage originations showed 90-day default rates below those of all other years, going back to 2005. December origination data also shows that recent prepayment activity – a key indicator of mortgage refinances – has remained strong, with 2008-09 originations, high credit score borrowers and government-backed loans having benefited the most from recent, historically low interest rates.

Looking at judicial vs. non-judicial foreclosure states, LPS found that half of all loans in foreclosure in judicial states have not made a payment in more than two years. Foreclosure sale rates in non-judicial states stood at approximately four times that of judicial foreclosure states in December. Still, on average, pipeline ratios (the time it would take to clear through the inventory of loans either seriously delinquent or in foreclosure at the current rate of foreclosure sales) have declined significantly from earlier this year.

The December mortgage performance data also showed that foreclosure starts continued to decline, remaining at multi-year lows as of the end of 2011; down 3.7% for the month, and nearly 40% for the year.  As reported in LPS’ First Look release, other key results from LPS’ latest Mortgage Monitor report include:

Total US loan delinquency rate:  8.15%

​Month-over-month change in delinquency rate:  0.0%

​Total U.S foreclosure pre-sale inventory rate:  ​4.11%

​Month-over-month change in foreclosure pre-sale inventory:  -1.3%

​States with highest percentage of non-current loans:  FL, MS, NV, NJ, IL

​States with the lowest percentage of non-current loans:  MT, WY, SD, AK, ND

Big banks hedge against EU

Five large American banks, including JPMorgan Chase and Goldman Sachs, have more than $80 billion of exposure to Italy, Spain, Portugal, Ireland and Greece, the most economically stressed nations in the euro currency zone, according to a New York Times analysis of the banks’ financial disclosures.  But these banks have made extensive use of a type of financial insurance, called credit default swaps, to help them offset any losses that might occur if defaults swamped the five troubled nations. Using these swaps, along with other measures, the five banks have cut their theoretical exposure to the troubled countries by $30 billion, to $50 billion. The analysis also shows that Citigroup has the greatest percentage of its exposure potentially protected at 47%, while Bank of America has bought the least protection at 12%.  Big banks have reduced their sovereign debt exposure, but they still have tens of billions of dollars of it.  Credit-default swaps have functioned well for big bankruptcies, but they were also a big source of systemic weakness in 2008, when the American International Group nearly collapsed because it could not make payments on its side of its swaps contracts. Some market participants now doubt they would work properly during periods of great financial instability.  “The likelihood of actually getting paid out from owning a credit default swap would be troubling to me if this were my hedge against a systemic shock — especially in a political environment unfriendly to more Wall Street bailouts,” Mark Spitznagel, chief investment officer at Universal Investments, a hedge fund, said through a spokesman.

Olick – foreclosure pipeline swells

“The number of new foreclosures in 2011 dropped nearly 40%, according to year-end numbers just released by Lender Processing Services (LPS); there is, however, little cause for celebration.  The fall is largely due to moratoria and process reviews stemming from the so-called ‘robo-signing’ foreclosure paperwork scandal.  Mortgage delinquency rates were largely unchanged from last year, which means all that distress will be pushed forward to 2012 and beyond.  To give you an idea of just how much the ‘robo’ scandal is toying with the numbers, LPS compared states that require foreclosures to go through the courts versus states that don’t (judicial versus non-judicial) and found the following:

- 50% of loans in foreclosure in judicial states have not made a payment in two years, as opposed to 28% in non-judicial states.

- Foreclosure sale rates in non-judicial states are about four times those in judicial states.

‘Nationally, foreclosure pipelines remain at historic highs, but they are clearing at very different rates depending upon state procedures,’ says Herb Blecher of LPS Applied Analytics.  With the nation essentially split between judicial and non-judicial foreclosure states, it’s safe to say the foreclosure crisis will linger longer than anyone expected, especially with negotiations for a settlement between big banks and state attorneys general hitting yet another roadblock.  California Attorney General Kamala Harris rejected the latest proposal this week, calling it inadequate.  ‘Our state has been clear about what any multistate settlement must contain: transparency, relief going to the most distressed homeowners, and meaningful enforcement that ensures accountability. At this point, this deal does not suffice for California,’ she wrote in a statement.  Bank sources say that without California the value of the settlement would drop by billions and banks would still have major liability for foreclosure fraud. About one fifth of the nation’s foreclosures are in California.”

Replacements to help drive economy

Four years after the downturn began, the replacement cycle shows signs of kicking into a higher gear in the United States even among small businesses, and it could give an unexpected boost to growth and employment this year.  In the United States, large corporations have already dug into huge cash piles to upgrade plant and equipment, adding incrementally to an economy that grew by 2.8% in the fourth quarter.  Now small businesses, which drive about half of US economic growth and a big chunk of job creation, are increasing their spending on equipment, too, an important precursor to stronger hiring.  For the early signs of this small business revival, Ian Shepherdson, chief US economist at High Frequency Economics, points to two factors: access to credit has improved markedly as shown by a surge in banks’ commercial and industrial lending, and an index of capital expenditure intentions, as measured by the National Federation of Independent Business (NFIB), is climbing. NFIB policy analyst Holly Wade said anecdotally she hears of more businesspeople talking of increasing their budgets.  “They have stretched out their machinery and equipment and would have normally invested in replacement, but they were waiting as long as possible. Now they are starting to see better sales and earnings, and they are more comfortable investing some of those dollars in capex,” she said.  “In the next three to six months, it wouldn’t be surprising to see the same rate of growth in capital outlays we have seen recently.”

FHA – originations down, delinquencies up

The serious delinquency rate for Federal Housing Administration (FHA) mortgages reached 9.6% in December, the highest level in more than two years, the Department of Housing and Urban Development (HUD) said.  More than 711,000 FHA-insured loans were seriously delinquent, up 18.9% from one year earlier, according to the HUD report. It’s also a 3.2% increase from the month before. The delinquency rate has been steadily increasing since passing 8.2% last summer.  Meanwhile, originations are down. In December, the FHA insured 93,700 mortgages, a nearly 30% decline from the 133,000 insured in December 2010.  In its fiscal year 2011, the FHA Mutual Mortgage Insurance Fund slipped to a 0.24% capital ratio from 0.5% the year prior. By law, the fund must remain above 2%.  FHA officials attempted to temper fears that the fund would need a bailout. An independent study done showed home prices would have to deteriorate significantly before an injection of tax dollars would be needed.

“It would take very significant declines in home prices in 2012 to create a situation where FHA would need additional support,” said FHA Acting Commissioner Carole Galante when the projections came out.  American Enterprise Institute Fellow Edward Pinto isn’t convinced. His study claimed that FHA is actually undercapitalized by as much as $53 billion using more traditional accounting rules.  The FHA put new guidelines in place this week that would tighten restrictions on lenders seeking approval to write FHA mortgages. Also, the changes would force more firms to buyback defaulted home loans and reduce seller concessions, which Pinto said would have the most impact, according to Pinto.  “We need to get back to where the mortgages themselves stand on their own regardless of what happens with house price inflation or deflation,” Pinto said.

Bakersfield.com – no kudos for the POTUS

President Obama’s announcement in last week’s State of the Union address that he has created a new unit to probe mortgage abuse earns no cheers from us. Instead, we are reminded how shamefully little has been done to address the housing crisis that continues to plague so many Americans.  The Making Home Affordable mortgage relief program has been an utter flop. An attempt by the Department of Justice to broker a multistate settlement with major banks over foreclosure abuses that would fund relief for struggling homeowners has gone nowhere. There have been no meaningful prosecutions, no significant relief for homeowners and few new fraud protections.  Now, what little break has been granted to troubled homeowners — in the form of tax relief on canceled mortgage debt — is due to expire at year’s end and too few seem aware of the looming deadline.

Normally, debt that is forgiven or canceled by a lender in a foreclosure or short sale must be included as income on tax returns and is taxable. However, the Mortgage Forgiveness Debt Relief Act of 2007 excluded the reporting of up to $1 million in canceled debt on a primary residence for tax purposes. But not for long.  Local real estate agents report no frenzy of calls or uptick in clients wanting to carry out short sales. Scott Tobias, president of the Bakersfield Association of Realtors, told The Californian last week that “I think, basically, homeowners don’t know about” the tax relief expiring on Dec. 31, 2012.  With nearly half of all Bakersfield mortgages underwater, it’s essential for people to know of the upcoming tax break expiration, especially considering that it can take months to close a short sale.  The housing market is nowhere near recovery; Congress ought to extend the tax relief. But no one should rely on Congress to act. It’s imperative for underwater homeowners to understand their options and be informed about the looming tax deadline.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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About the author:

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

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

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

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

* In 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 January 27, 2012

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60 BOA short sales in Florida

Only 60 Floridians have received cash from a Bank of America (BOA) program that pays up to $20,000 to homeowners who sell distressed properties in a short sale.  The lender still expects thousands more in the Sunshine State to collect the money before the pilot program ends in August. Bank spokesman Richard Simon said it’s too early to judge the results.  “There are some encouraging signs in this early stage,” he said. “This is just the start of the process.”  Several Realtors and title agents around Tampa Bay said deals are in the pipeline, but none has finalized any of the sales.  Real estate agents say some lenders have been closing the deals in 45 to 60 days instead of a year or longer.  Bank of America had targeted 20,000 of the 1.1 million mortgages it services in Florida.  In the program, qualified homeowners would get 5% of the unpaid mortgage balance as of August 2011, with a minimum payout of $5,000. And so on up to a maximum of $20,000. The sales price does not impact the payout.  By offering the incentive, Bank of America saves attorney fees, court costs and property taxes by avoiding foreclosure. It also speeds the process of getting bad loans off its books and gets the properties back on the market faster.  To sweeten the deal further, the lender said it would consider waiving the deficiency on the mortgages, which would allow homeowners to sell the house for less than they owe for it without having to make up the difference to the bank.  The bank tested the program only in Florida because of the higher foreclosure rates.

Asia to drive natural gas demand

Despite natural gas prices falling to near 10-year lows last week, Royal Dutch Shell’s CEO Peter Voser says demand for gas will be much higher than oil in the long term with the Asia-Pacific region driving the sector’s growth.  “I think you cannot travel around Asia at the moment without getting the question, ‘can you sell us some LNG (liquefied natural gas)?’” Voser at the World Economic Forum in Davos.  Low demand and high inventory levels in the US has deterred some companies from future investments, but according to Voser, America’s waning demand doesn’t reflect what is happening in the rest of the world.  “If you’re talking about North American gas, clearly the current price levels are not sufficient to actually bring all the developments forward. You have seen a lot of companies starting to cut their production.”  With oil and gas production normally taking seven to eight years to come on stream, Voser says Shell is sticking to its long-term strategy to produce more natural gas.  “We produce more gas in 2012 now, 52% versus 48% oil,” he said. “Clearly Asia-Pacific, that’s going to be the driver.”

WSJ – mortgage rates rise

Rates for fixed mortgages moved higher over the past week amid positive signals from the long-suffering US housing market, according to Freddie Mac’s weekly survey of mortgage rates.  “Fixed mortgage rates ticked up this week as the housing market ended 2011 on a high note,” said Freddie Mac Chief Economist Frank Nothaft, noting encouraging data like a report that existing home sales rose 5% at the end of the year to 4.61 million houses, the largest amount since May 2010.  The 30-year fixed-rate mortgage averaged 3.98% for the week ended Thursday, up from 3.88% the previous week, though below 4.8% a year ago. Rates on 15-year fixed-rate mortgages averaged 3.24%, up from 3.17% last week and below 4.09% a year earlier.  Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARM, averaged 2.85%, up from 2.82% last week and below 3.7% a year ago. One-year Treasury-indexed ARM rates averaged 2.74%, matching the prior week and below 3.26% last year.  To obtain the rates, 30-year and 15-year fixed-rate mortgages required an average 0.7 percentage point and 0.8 percentage point payment, respectively. Five-year and one-year adjustable rate mortgages required an average 0.7 percentage point and 0.6 percentage point payment, respectively. A point is 1% of the mortgage amount, charged as prepaid interest.

Growth up in Q4

US gross domestic product expanded at a 2.8% annual rate, the Commerce Department said on Friday, a sharp acceleration from the 1.8% clip of the prior three months and the quickest pace since the second quarter of 2010.  It was, however, a touch below economists’ expectations for a 3.0% rate.  Consumer spending, which accounts for about 70% of US economic activity, stepped to a 2% rate from the third-quarter’s 1.7% pace – largely driven by pent-up demand for motor vehicles.  Spending was also lifted by moderate inflation.  A price index for personal spending rose at a 0.7% rate in the fourth-quarter, the slowest increase in 1-1/2 years, after rising at a 2.3% pace in the July-September period.  A core inflation measure, which strips out food and energy costs, increased at a 1.1% rate after rising 2.1% in the third quarter.  The increase last quarter was the smallest in a year and put this measure well below the Fed’s 2% target.

Growth in the fourth quarter got a temporary boost from the rebuilding of business inventories, which was the fastest since the third quarter of 2010, after they declined in the third-quarter for the first time since late 2009.  Inventories increased $56.0 billion, adding 1.94 percentage points to GDP growth. Excluding inventories, the economy grew at a tepid 0.8% rate, a sharp step-down from the prior period’s 3.2% pace.  The robust stock accumulation suggests the recovery will lose a step in early 2012.  Also pointing to slower growth, business spending on capital goods was the slowest since 2009, a sign the debt crisis in Europe was starting to take its toll.  Expectations of soft growth led the Federal Reserve on Wednesday to say it expected to keep interest rates at rock bottom levels at least through late 2014.  Fed Chairman Ben Bernanke said the central bank, which forecast growth this year in a 2.2% to 2.7% range, was mulling further asset purchases to speed up the recovery.  The Fed warned the economy still faced big risks, a suggestion the euro zone debt crisis could still hit hard.

Absorption rates to improve in 2012?

Net absorption rates in the US turned positive during 2011 for all major property types, according to CBRE Econometrics, which expects the trends to continue in 2012 on the heels of employment growth and then accelerate in 2013.  The absorption rate is the percentage of units expected to be rented or purchased over a period of time.  After a downturn across all property types, annualized apartment absorption turned positive at the beginning of 2010, office by mid-2010, industrial in 2010, and finally retail in mid-2011, analysts at Barclays Capital said.  In the apartment sector, CBRE forecasts a 0.7% absorption rate in 2012 and then 1.2% in 2013. Office property, the company said, will experience a 0.6% rate in 2012 and 1% in 2013, while the industrial sector should see a 1.1% rate in 2012 and 1.5% in 2013. Retail property will have a 0.7% absorption rate in 2012 and then 1.2% in 2013.  Grubb & Ellis said the overall outlook for the office market is stronger for 2012. The real estate services firm also expects the industrial sector to experience increased demand this year with total net absorption of 110 million square feet.  Net absorption rates usually follow employment growth. An exception came during the recent downturn when each property type outperformed relative to the levels of job losses suffered during 2008 and 2009.  Given the positive net absorption across property types and almost no new construction, occupancy rates, or the number of occupied units at a given time, began to improve in the third quarter.  According to CBRE, apartment occupancy rose 0.8% from a year earlier to 95%. Office occupancy increased 0.6% to 83.8%, while the industrial sector inched higher 0.9% to 86.3%. Retail, the only laggard, is down 0.1% from a year earlier to 86.8%.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

* In 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 January 25, 2012

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Foreclosures fell 12% in California, but…

The number of California homes entering foreclosure in the fourth quarter fell 11.9% from the same period in 2010 to the second-lowest level over the last four years, said DataQuick, a real estate information firm in San Diego. A total of 61,517 notices of default, which are filed to initiate foreclosures, were recorded on California properties during the fourth quarter. That was a 13.7% drop from the third quarter of 2011.  Some economists say California and other states will probably see an increase in foreclosure actions as banks deal more aggressively with seriously delinquent mortgages. That increase probably will push home prices lower.  Default notice filings fell sharply in December, particularly those involving loans from Bank of America and Bank of New York Mellon, and helped drag down the overall quarterly numbers. Average daily filings on behalf of Bank of New York Mellon dropped 75% from November to December; filings on behalf of Bank of America dropped 50%, Wells Fargo 20% and JPMorgan Chase 13%, DataQuick said Tuesday.  The number of homes taken back through the foreclosure process also fell, by 11.8% from a year earlier to 31,260.

The majority of the loans entering the foreclosure process in the fourth quarter were made in 2005 to 2007, when poor lending practices by major institutions were rampant.  Californian homeowners were a median nine months behind on their payments when they received a notice of default from their lender. Among the state’s largest counties, mortgages in San Francisco, Marin and San Mateo counties were the least likely to go into foreclosure. Homes were most likely to enter the foreclosure process in Sacramento, San Joaquin and Stanislaus counties, according to DataQuick.  In Southern California, the number of default notices filed on properties fell 10.2% from a year earlier, and the number of homes taken back by banks fell 11%.  Many foreclosures were delayed in 2011 as banks worked through issues surrounding mortgage servicing and foreclosure. Settlement negotiations among attorneys general, federal agencies and the mortgage industry over foreclosure and mortgage servicing abuses dragged on through most of last year.

Analysts attributed the delays to the uncertainty over the outcome of those talks. If a deal is struck among the parties and new foreclosure processes by banks are put in place, some analysts say the foreclosure machinery could ramp up again.  Those negotiations continue to inch forward but could still fall apart. State attorneys general have received drafts of the deal with the banks, a $25-billion settlement that would overhaul foreclosure and mortgage servicing practices, according to two people familiar with the negotiations who aren’t authorized to speak publicly.  A key component to any strong deal would be California’s participation. State Atty. Gen. Kamala D. Harris, who must make that decision for the Golden State, has not said whether she will sign on. Harris walked away from talks with the banks last year, saying they were asking for too much release from liability, but since then certain provisions have been added to the deal with the aim of getting her back to the table.  Yesterday the Center for Responsible Lending gave the proposed $25-billion deal a tentative thumbs up, calling it “an important step forward in addressing foreclosure abuses.” The nonpartisan advocacy group noted that the deal would “provide an important template for ways banks can use principal reduction to reduce unnecessary foreclosures and put the country back on a path to economic recovery.”

GOP says Obama economic plan is a failure

President Barack Obama has resorted to “extremism” with stifling, anti-growth policies and has tried dividing Americans, not uniting them, Indiana Gov. Mitch Daniels said Tuesday in the formal Republican response to the president’s State of the Union address.  He took particular aim at Obama’s efforts in recent months to raise taxes on the rich and castigate them. “No feature of the Obama presidency has been sadder than its constant effort to divide us, to curry favor with some Americans by castigating others,” Daniels said, according to excerpts of his remarks released before he and Obama spoke. “As in previous moments of national danger, we Americans are all in the same boat.”  “The extremism that stifles the development of homegrown energy, or cancels a perfectly sane pipeline that would employ tens of thousands, or jacks up consumer utility bills for no improvement in either human health or world temperature, is a pro-poverty policy,” Daniels said.

Obama has halted work on the proposed Keystone XL oil pipeline from western Canada to Texas’ Gulf Coast. Republicans say the project would create thousands of jobs, a claim opponents say is overstated. The administration has also pursued policies aimed at reducing pollution and global warming.  Daniels said Republicans prefer “a passionate pro-growth approach that breaks all ties and calls all close ones in favor of private sector jobs that restore opportunity for all and generate the public revenues to pay our bills.”  Even before Obama spoke, Republicans in the Capitol and on the campaign trail accused him of three years of higher spending, bigger government and tax increases that have left the economy stuck in a ditch.  “This election is going to be a referendum on the president’s economic policies,” which have worsened the economy, said House Speaker John Boehner, R-Ohio. “The politics of envy, the politics of dividing our country is not what America is all about.”

Olick – more plans from the president

“After several largely ineffective programs to help troubled borrowers and after fruitless attempts at budging the hard-line conservator of Fannie Mae and Freddie Mac, President Obama is proposing a brand new refinance program for borrowers who are current on their mortgages, regardless of who owns their loan; the catch is that this one has to go through Congress.  ‘I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks,’ the President announced in his State of the Union address.  Unlike previous efforts in the refinance space, including a recently revamped and expanded government program for borrowers who owe more on their mortgages than their homes are currently worth, this plan would not be limited to those with loans backed by Fannie Mae and Freddie Mac, according to senior administration officials. The two mortgage giants own or guarantee about half of the nation’s mortgages. It would be open to all borrowers current on their loans.

The Obama administration is offering precious few details, promising more in the coming weeks, but several sources say the plan is to ask Congress to allow the government mortgage insurer, the Federal Housing Administration (FHA), to back refinances of underwater mortgages. No estimates were given as to how many borrowers such a plan could potentially help, only that this would be a voluntary, borrower-initiated plan, and not a blanket refinance of all borrowers.  The costs, according to administration officials, would be modest, and the President would request that a portion of his financial crisis responsibility fee offset any of those costs, so there would be no addition to the federal debt.  ‘A small fee on the largest financial institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust,’ Mr. Obama added.  Loan servicers could be faced with a flood of applications and could have to add resources to handle it all, but officials say the opportunity to generate revenues from the refinances would be incentive enough. Still many servicers have balked at the idea of mass refinancing, as the new loans could present more risk and less reward.

The idea is to remove the barriers and ‘frictions’ that have kept many borrowers out of refinancing to historically low rates. Some of those include high levels of negative equity, loan level price adjustments, loan origination dates, put-backs on loans that default, and borrower qualifications.  Then there is the very basic problem of politics. Whatever the details of the plan are, Republicans, despite the fact that they have been calling for more refinances, are unlikely to hand President Obama a popular victory on the eve of a presidential election. They may also oppose anything that makes Fannie Mae and Freddie Mac bigger, when the two are allegedly winding down.”

Americans lead in debt reduction

Americans are cutting their debt faster than other countries and could already be halfway through the deleveraging process, setting the stage for the nation’s economic recovery, says a new report from McKinsey Global Institute.  However, even when U.S. consumers finish deleveraging, they probably won’t be as powerful an engine of global growth as they were before the crisis, warns the report.  According to McKinsey analysts, deleveraging happens in two stages: First, the private sector reduces debt, while economic growth is negative or minimal and government debt rises; then, growth rebounds and supports gradual government deleveraging.  “Somewhat surprisingly, given the amount of concern over the U.S. economy, we find that the United States is furthest along in private-sector debt reduction and closest to beginning the second phase of deleveraging,” says the report.  “The remaining obstacles for its return to growth are its unsettled housing market and its failure to lay out a credible medium-term plan for public debt reduction,” concludes the report.

Since the financial crisis, U.S. household debt has fallen by $584 billion, or 15 percentage points relative to disposable income, which is more than in any other country.  At this pace, Americans could reach sustainable debt levels by the middle of 2013.  The report also found that since the 2008-2009 financial crisis the world’s ten largest developed economies have seen their total debt increase, primarily due to growing government debt.  The U.S., South Korea and Australia are the only countries that have seen a decline in the ratio of total debt to GDP during that time period.  Moreover, the United Kingdom and Spain are deleveraging at a much slower pace, and it could take another decade until their private-sector debt returns to the pre-bubble levels.  In the United States, most of the private-sector deleveraging has happened in the financial sector, where debt relative to GDP had declined to $6.1 trillion from $8 trillion, levels not seen since 2000.

MBA – mortgages down 5%

Mortgage applications decreased 5.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 20, 2012.  The results include an adjustment to account for the Martin Luther King holiday.  The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 13.8 percent compared with the previous week.  The Refinance Index decreased 5.2 percent from the previous week.  The seasonally adjusted Purchase Index decreased 5.4 percent from one week earlier. The unadjusted Purchase Index decreased 9.7 percent compared with the previous week and was 6.5 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 4.12 percent.  The four week moving average is up 0.47 percent for the seasonally adjusted Purchase Index, while this average is up 4.85 percent for the Refinance Index.  The refinance share of mortgage activity decreased to 81.3 percent of total applications from 82.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3 percent from 5.6 percent of total applications from the previous week.  In December 2011, among refinance borrowers, 56.6 percent of applications were for fixed-rate 30-year loans, 24.3 percent for 15-year fixed loans, and 5.3 percent for ARMs.  The share of refinance applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 13.8 percent of all refinance applications. The share for 30-year fixed increased from the previous month while the 15-year fixed, ARM and the “other” fixed category shares decreased from last month.

Markets down on possible Obama re-election

So far, the presidential election has not impacted stocks, but that could change if Mitt Romney appears unlikely to make it as the GOP nominee.  For the past two days, Romney’s vulnerability to former House Speaker Newt Gingrich has been the talk of trading rooms.  Gingrich beat Romney handily in the South Carolina primary Saturday, the second of three early contests that Romney lost. But the volatile Gingrich is not viewed as a strong candidate to beat President Obama.  “Obama’s gone from 50 percent probability to 55 percent on Intrade,” said Dan Clifton, Strategas head of policy research. “This week he just kind of exploded once Gingrich won in South Carolina. The Intrade market is saying there’s a much greater chance of President Obama being re-elected.”  Romney, the former governor of Massachusetts, is by far the preferred candidate on Wall Street, where many disagree with Obama’s policies and have been stung by what they call “class warfare.”  “I don’t think it’s fully reflected in the market yet. The market is drifting. There’s a mild degree of anxiety, and that’s really because it’s overbought. Is there a gentle longing for a smoke-filled room? Yeah. There’s some yearning for that,” said Art Cashin, UBS director of floor operations.  The S&P 500 broke its five-day winning streak Tuesday, finishing 1 point lower at 1314, but it is up 4.5 percent since the start of the year.  Analysts believe if Romney loses the Florida primary next Tuesday, he will have a hard time stopping Gingrich’s momentum.

Huffington post – Romney on mortgages

Finally, a presidential candidate came out and honestly addressed the biggest problem in our economy, the enormous debt overhang in our mortgage market. A few days ago, Mitt Romney was at a forum in Florida talking about foreclosures, and his comments were actually refreshingly honest about our housing and banking situation and the need for a debt write-down.  We’re just so overleveraged, so much debt in our society, and some of the institutions that hold it aren’t willing to write it off and say they made a mistake, they loaned too much, we’re overextended, write those down and start over. They keep on trying to harangue and pretend what they have on their books is still what it’s worth.  Mitt Romney was pointing out that the banks are carrying debt on their books at inflated values. When was the last serious politician to make that point, openly? There’s more.  In some cases, if the debt is not in something you can service, it’s like you have to move on and start over away from those debts. It’s helpful if you get an institution that’s willing to work with you, but if you don’t you have no other option.

Romney is now saying that if you can’t pay your debts and your lending institution won’t work with you, walk away. Perhaps this isn’t so surprising, though, as Romney is an expert in debt restructuring. This is actually just common business sense.  And finally, he offered a real solution to the mortgage debt crisis.  “The banks are scared to death, of course, because they think they’re going to go out of business… They’re afraid that if they write all these loans off, they’re going to go broke. And so they’re feeling the same thing you’re feeling. They just want to pretend all of this is going to get paid someday so they don’t have to write it off and potentially go out of business themselves.  This is cascading throughout our system and in some respects government is trying to just hold things in place, hoping things get better… My own view is you recognize the distress, you take the loss and let people reset. Let people start over again, let the banks start over again. Those that are prudent will be able to restart, those that aren’t will go out of business. This effort to try and exact the burden of their mistakes on homeowners and commercial property owners, I think, is a mistake.”

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

* In 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 January 23, 2012

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Existing home sales up

The National Association of Realtors said Friday that sales increased 5% last month to a seasonally adjusted annual rate of 4.61 million, the best level since January 2011 and the third straight monthly increase. For the year, sales totaled only 4.26 million. While that’s up from 4.19 million the previous year, it’s below the 6 million that economists equate with healthy housing markets. Sales are increasing at a time when the market is flashing other positive signs. Mortgage rates are at record-low levels. Homebuilders have grown slightly less pessimistic because more people are saying they might be open to buying a home this year. And home construction picked up in the final quarter of last year. The median sales price rose 2.3% to $164,500 in December. Still the housing market has a long way to go before it is fully recovered from the housing bust four years ago. In the last four years, home sales have slumped under the weight of foreclosures, tighter credit and falling price. Fewer first-time buyers, who are critical to a housing recovery, are in the market for a home. Purchases by that group fell last month to make up only 31% of sales. That’s down from 35% in November. In healthy markets, first-time buyers make up at least 40%. At the same time, homes at risk of foreclosure made up a third of all sales last month. In healthy markets, they comprise 10% of sales. Investors are increasingly buying homes priced under $100,000. Still, Sales rose across the country in December. They increased on a seasonal basis by more than 10% in the Northeast, 8.3% in the Midwest, 2.9% in the South and 2.6% in the West. The glut of unsold homes declined to 2.38 million homes. At last month’s sales pace, it would take a nearly 7 months to clear those homes. Analysts say a healthy supply can be cleared in about six months.

US and Europe to face more ratings cuts?

The string of sovereign debt downgrades in recent months could be just the beginning. The US, Europe—even Germany—could face further ratings cuts over the next three years, according to a lengthy analysis this week by Citigroup. The European Union got a slight reprieve late Friday as Standard & Poor’s backed it’s triple-A/A-1+ rating on the EU. It had been under review and at risk of a downgrade. The outlook remains “negative.” In announcing its decision, S&P said the EU “benefits from multiple layers of debt-service protection sufficient to offset the current deterioration we see in member states’ creditworthiness.” The US is at the top of Citi’s list for possible downgrades because its debt and deficit troubles are unlikely to be resolved with the political infighting in Washington. Some of the other usual suspects also are on Citi’s list – the European peripheral nations in particular such as Greece and Spain. But even mighty Germany, seen as the continent’s most secure economy, could face a downgrade as the sovereign debt crisis escalates and a European recession spreads through the region. “We expect a string of further ratings downgrades for advanced-economy sovereign debt, and do not expect any ratings upgrades,” Citi analysts Michael Saunders and Mark Schofield wrote. That includes American debt, which Standard & Poor’s downgraded in August in a move that set off a more than 600-point one-day selloff in the Dow industrials.

Citi said it is keeping its outlook unchanged on US debt in the near term but sees trouble looming for the American rating over the next two to three years. Indeed, the list of potential downgrades is ominous and serves as a reminder that while the US equity markets seem conveniently to have forgotten about the world’s debt troubles, some stern and punitive reminders are on the way. Further downgrades for the US, and the initial downgrade for Germany, could be a few years away. But in the next six months, the ratings agencies are likely again to start rattling their sabers, starting with the declaration of a Greek default that is approaching a near-certainty in March. In fact, in the next six months, Citi expects Moody’s to cut ratings for Italy, Spain, Portugal and Greece, with the nascent recovery in Ireland allowing it to be the only one of the “PIIGS” nations to escape the downgrade scalpel. Additionally, France and Austria are deemed likely for a “negative outlook,” while Greece will be placed into either “selective default” or “outright default.” Going out further, the next two to three years are likely to see downgrades not only to the US but also to Japan, France, Italy, Spain, Austria, Belgium, Finland, the Netherlands and Portugal.

DSNews.com – FHA steps up lender requirements
The Federal Housing Administration (FHA) on Friday announced new measures to strengthen standards for the lenders it works with – measures the agency says will help it better manage the risk that comes with insuring mortgages against default. The new regulations institute tighter requirements for lenders authorized to insure mortgages on the agency’s behalf under the Lender Insurance mortgagee program.FHA says these institutions will be required to meet stricter performance standards to obtain and maintain their approval status. More than 80% of all FHA forward mortgages are insured through lenders participating in the Lender Insurance program. FHA’s second mortgagee program – the Direct Endorsement program – requires the agency’s approval for endorsement. In order to be eligible to participate in the FHA single-family programs as a Lender Insurance mortgagee, a lender must be an unconditionally approved Direct Endorsement mortgagee that is high performing. Under the new rule, a Lender Insurance mortgagee must demonstrate a two-year seriously delinquent and claim rate at or below 150% of the aggregate rate for the states in which the lender does business. HUD and FHA will review Lender Insurance mortgagee performance on an ongoing basis to ensure participating lenders continue to meet the program’s eligibility standards. The new rule also establishes a process by which new HUD-approved lenders created through corporate mergers, acquisitions, or reorganizations may be considered for Lender Insurance authority. In addition, FHA has shored up its processes for requiring lenders to cover potential losses from insurance claims paid on mortgages that involve fraud or that are found not to meet the agency’s underwriting guidelines, which could force lenders to buy back more defaulted loans. For those loans insured by Lender Insurance lenders, HUD may require indemnification for “serious and material” violations of FHA origination requirements and for fraud and misrepresentation. In a separate notice to be published soon, FHA plans to propose to reduce the maximum amount allowed for seller concessions, in which the seller contributes a share of the purchase price toward the buyer’s closing costs.

FHA says it will bring the maximum allowable amount to a level more in line with industry norms. The current level exposes FHA to excess risk by creating incentives to inflate appraised value, the agency explained in a press statement. FHA says these measures will help to protect and strengthen its Mutual Mortgage Insurance Fund, which has fallen below the level mandated by Congress, while enabling the agency to continue to fulfill its mission of providing qualified borrowers with access to homeownership. “Taken together, the changes announced today will protect FHA’s insurance fund from unnecessary and inappropriate risks while offering clear guidance to lenders regarding HUD’s underwriting expectations,” said Carol J. Galante, FHA’s acting commissioner. “FHA must continue to strike a balance between managing risks to its insurance funds and ensuring that FHA products are offered as widely as possible to qualified borrowers,” Galante continued. “We hope that the added clarity and certainty provided through these rules will enable lenders to extend financing opportunities to larger numbers of American families.”

Growth but few jobs

The National Association for Business Economics’ industry survey found that two-thirds of respondents expected no change in employment at their companies over the first half of the year. That was the highest share in recent quarters. Although the US jobless rate fell to a near three-year low of 8.5% in December, fewer businesses said they would hire more workers, compared with the previous industry poll. The survey, which was conducted between December 15 2011, and January 5 2012, found that 65% of respondents expect gross domestic product growth to exceed 2% between the fourth quarter of last year and the last quarter of 2012. That was higher than the 1.6% growth rate economists polled by Reuters found. About two-thirds of the companies surveyed said the European debt crisis would have little impact on their sales over the first half the year, while 27% of respondents said they expected to see a decline in sales of 10% or less.

CMBS delinquency rate higher than 9% in 2011

The delinquency rate of loans in commercial mortgage-backed securities (CMBS) bounced higher in December and remained above 9% all year. Delinquency rates were mixed across the five commercial property types in December with hotel and multifamily rates declining while office, retail and industrial rose. Moody’s Investors Service said the rate rose to 9.32% last month from 9.27% in November and from 8.79% a year earlier. The ratings agency said there were $3.7 billion of newly delinquent loans in December, including Bank of America Plaza in Atlanta, while $3.5 billion were resolved or worked out. The $1.4 billion of new CMBS deals was more than offset by $5.5 billion of seasoned loan dispositions and payoffs, pushing the CMBS universe to $582.8 billion, analysts said. The $363 million loan that went into arrears in Atlanta is the seventh largest delinquent loan overall, according to Moody’s. The delinquent rate in the hotel sector fell to 12.96% from 13.54% a month earlier, while multifamily declined to 14.44% from 14.88%, which remains the highest rate among the core asset classes, Moody’s said. Retail delinquencies rose to 7.22% from 6.97% in November; industrial climbed to 12.09% from 11.5%; and office increased to 8.65% from 8.39%. Moody’s specially serviced loan tracker fell to 11.97% in December from 12.1% the prior month.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

* In 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