Smart Real Estate News & Commentary by Chris McLaughlin February 22, 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
************************************************************
Foreclosure abuse rampant
A report this week showing rampant foreclosure abuse in San Francisco reflects similar levels of lender fraud and faulty documentation across the United States, say experts and officials who have done studies in other parts of the country. The audit of almost 400 foreclosures in San Francisco found that 84% of them appeared to be illegal, according to the study released by the California city on Wednesday. “The audit in San Francisco is the most detailed and comprehensive that has been done – but it’s likely those numbers are comparable nationally,” Diane Thompson, an attorney at the National Consumer Law Center, told Reuters. Across the country from California, Jeff Thingpen, register of deeds in Guildford County, North Carolina, examined 6,100 mortgage documents last year, from loan notes to foreclosure paperwork. Of those documents, created between January 2008 and December 2010, 4,500 showed signature irregularities, a telltale sign of the illegal practice of “robosigning” documents.
One of the major problems that has emerged in the foreclosure crisis is that it is far from clear that many lenders foreclosing on properties actually own the loans and have the right to take action against them. In many cases during the housing bubble that burst in 2008, original mortgages were repackaged and sold to so many investors that it is now unclear who actually holds the loans. In the San Francisco study, which studied properties subject to foreclosure sales between January 2009 to November 2011, 45 per cent were sold to entities improperly claiming to be the owner of the loan. “It is not impossible that there are homeowners who are alleged to have defaulted on loans to which they never fully agreed to and, further, are being foreclosed upon by lenders that might not even own such loans,” the report stated.
One factor that probably caused the particularly high 84 per cent rate of illegal foreclosures in San Francisco is that California is a “non-judicial” foreclosure state. In other words, the foreclosure process does not need to be overseen by a judge. That left the conduct of lenders in California – one of the hardest-hit states in terms of foreclosures – largely unscrutinized until the robosigning scandal gained prominence in late 2010. In judicial foreclosure states such as New York, some judges have been taking banks to task for submitting faulty foreclosure paperwork. But Ray Brescia, a visiting professor at Yale Law School and an expert in housing law, said foreclosure fraud had been as rampant in judicial states as non-judicial ones. “This number around 80% is not a number we have not seen before,” Brescia said, referring to both the issuing of faulty loans during the housing bubble and the foreclosure crisis that followed. “There have been a very high level of irregularities across the country.”
Businesses brace for new “fair” tax plan
The Treasury Department will roll out a corporate tax reform plan today from President Barack Obama, administration officials said yesterday, with expectations low for any major tax code overhaul in an election year. The Obama plan will follow such principles as “fairness” that the president laid out in his State of the Union address to Congress last month, the officials said. A cut in the corporate tax rate, which presently tops out at 35%, may be included, as well as a proposal for a minimum tax on overseas profits, analysts said. After the presidential and congressional contests are decided in November, however, a number of major tax and budget issues will converge on Washington and new momentum for comprehensive tax reform may follow. Potomac Research analyst Greg Valliere said: “Even if Geithner floats something and members of both parties say they’re interested, I simply cannot see a reform bill passing before the election, close to a zero% chance.” He added: “I suppose anything would be possible in a lame-duck session in December, but something this huge and complex will require a thorough vetting, and that could take a year – or much longer.” The last major rewrite of the tax code came in 1986 under Republican President Ronald Reagan.
Republican Representative Dave Camp, chairman of the US House of Representatives tax-law writing Ways and Means Committee, wants to slash the top corporate rate to 25%. Obama last week unveiled a $3.8 billion budget-and-tax proposal that called for aggressive government spending to boost the economy and for higher taxes on the rich. On Friday, Congress approved extending a payroll tax cut through the end of 2012. Its expiration will coincide with several other fiscal earthquakes: the expirations of individual tax cuts enacted under President George W. Bush, and $1.2 trillion in automatic budget cuts across all government programs imposed as part of last year’s deal to raise the debt ceiling. After these events and others, analysts said, thorough tax reform may be a realistic prospect. For now, they said, tax proposals will largely amount to political messaging. Republican presidential candidate Mitt Romney on Tuesday called for a flatter, fairer and simpler tax code. He is scheduled to make a major economic speech on Friday in Detroit. Details of his tax plan may emerge before then.
Mortgage applications down
The Mortgage Bankers Association (MBA) said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.5% in the week ended Feb 17. The MBA’s seasonally adjusted index of refinancing applications gave up 4.8%, while the gauge of loan requests for home purchases slipped 2.9%. The refinance share of total mortgage activity dipped to 80.1% of applications from 81.1%. Fixed 30-year mortgage rates averaged 4.09%, up 1 basis point from 4.08% the week before. The survey covers over 75% of US retail residential mortgage applications, according to MBA.
Eurozone at the brink of recession
The euro zone economy is in danger of tipping into recession, with the services sector shrinking this month along with manufacturing, tempering a wave of optimism after a new bailout deal for Greece struck this week. Surveys of purchasing managers published on Wednesday showed unexpectedly weak activity in the region’s most powerful economy, Germany, and in France. This is as well as in the bloc’s floundering debtor states, such as Spain, where unemployment is running at 23%, and Greece where the euro debt crisis began more than two years ago and continuous cuts have provoked riots. The Markit Eurozone Composite Flash PMI, a good leading indicator of overall economic growth, fell to 49.7 in February from 50.4 last month, below expectations for a rise to 50.6 and under the 50 line that divides growth from contraction. That weakness was echoed in China, whose PMI showed export orders falling in their worst performance in eight months. Europe is China’s biggest export market. Older data published on Wednesday, official figures on euro zone industrial orders for December, showed there had been some stabilization at low levels. Manufacturing orders in the 17 countries that share the euro rose 1.9% on the month, beating the 0.7% predicted in a Reuters poll and reversing a 1.1% fall in November. But with euro crisis curtailing on British business with the bloc, two Bank of England policymakers voted earlier this month for an even bigger stimulus to the economy in February than the extra 50 billion pounds ($79 billion)that their colleagues agreed to pump into the economy, minutes to the BoE’s February 8-9 meeting showed.
Olick – will gas prices be the spoiler?
“I spent Sunday afternoon at a Toll Brothers neighborhood in Northern Virginia called ‘Dominion Valley.’ It’s a planned community about 45 miles from the heart of DC that sprung up in 2000 and has sold 2500 homes, with another 1,000 still planned. My mission was to get a sense of buyer traffic as the President’s Day weekend unofficially kicks off the spring home selling season. As I was driving back toward DC, I noticed the price of gas (for the cheap stuff) was $3.75 a gallon. Ouch. (They’re higher in other parts of the country). That can’t be good for sales. Some of the potential buyers I spoke with worried about the drive time, but hadn’t seemed to give gas prices as much thought. Many people who live in Dominion Valley commute into the city, or just outside to the Pentagon and surrounding contractor base in Crystal City. Commutes in this area are often long, but when gas prices spike they become more costly, too.
The sales center and model homes bustling with potential buyers. With a weather forecast for snow and the ‘National Sales Event’ advertised by Toll Brothers was mostly discounts on upgrades, I was surprised to see a steady crowd. John Elcano, Toll’s VP for Virginia Sales, told me they’ve raised prices four times since October. Several of the potential and actual buyers I spoke with were eager to move, one from a condo in the same community, another a first time home buyer, and another who was downsizing from a bigger house with a bigger yard. Scott Genburg and his wife, who live near Dominion Valley, already sold their existing house, without even putting it on the market. A realtor canvassed their neighborhood and they accepted the offer. So they ended up needing to buy something fast and bought a new home. But none of the folks I spoke with were looking for a bigger house with a longer commute, a stable of the boom times. With the federal government a steady source of jobs, the Washington, DC, and Northern Virginia markets have shown resilience in the face of the great recession. Builders seem to be responding. Metrostudy reports that finished, vacant housing inventory rose more sharply than any other market it studies in the last quarter, up 17.7%. At the same time, the inventory of existing homes for sale is low. Ken Croisetiere, who just got married, expressed frustration with the house hunting process ‘it feels like a great time to buy, but what we’re finding out is that the houses that appeal to us are not as abundant as we would like to find. Toll’s Elcano says, ‘people are relocating to the area, they can’t find a resale to move into so they‘re moving more toward the new construction.’ But will people still move to new construction in the suburbs if it cost $100 to keep the tank full on a weekly basis? ISI home building analyst Steve East says higher gas prices will impact builders, with a ‘modest effect’ on the entry level market.”
Oil hits $106
Oil prices hovered above $106 a barrel Wednesday in Asia amid concern that conflict over Iran’s nuclear program could lead to global crude supply disruptions. Benchmark crude for April delivery was up 11 cents to $106.36 per barrel late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $2.65 to settle at $106.25, the highest since May, in New York on Tuesday. Brent crude was down 16 cents at $121.50 per barrel in London. Oil has jumped from $96 earlier this month amid escalating tension between Western powers and Iran. On Tuesday, Iran Gen. Mohammed Hejazi warned his country is prepared to carry out a pre-emptive strike against any nation that threatens Iran. His comments followed Iran’s announcement of war games to practice protecting nuclear and other sensitive sites — viewed as a message to the US and Israel that the Islamic Republic is ready both to defend itself and to retaliate against an armed strike. Iran said over the weekend that it will stop selling oil to Britain and France in retaliation for a planned European oil embargo this summer. The move was mainly symbolic — Britain and France import almost no oil from Iran — but it raised concerns that Iran, which produces almost 4 million barrel a day of crude, could take the same hard line with other European nations that use more Iranian crude. “A real stoppage of 4 million barrels a day will send crude markets to at least $130,” Carl Larry of Oil Outlooks and Opinions said in a report. “A stoppage longer than a month will push that number to $150. Damage to oil fields or transport areas will add even more premium that will not go away for years.”
WSJ- should mortgage rates be even lower?
Mortgage rates are the lowest on record. But by a key historical measure, they should be even lower. Over the past year, a wide gap ripped open between the mortgage rates house hunters see and a benchmark interest rate investors demand to buy bonds backed by home loans. In normal times, this obscure metric would only be of interest to bankers, brokers and traders of mortgage-backed securities. But with housing still dragging on the economy, the spread is potentially slowing the recovery—and important to everyone from top Washington policy makers to strapped homeowners who could use a few extra dollars each month.
For months, a key interest rate on mortgage-backed securities—known as the current coupon yield—has tumbled faster than average US 30-year mortgage rates. In recent weeks, the difference between the two has flirted with levels seen in the aftermath of the financial crisis. Some say the wide spread shows the large banks that dominate the mortgage market are flexing their muscle by keeping prices relatively high. Others argue the gap reflects increased regulatory costs, risks and new realities of mortgage making. Either way, the spread is wide. Tuesday afternoon, it was 0.96 percentage points—almost double its average over almost 30 years. It has been as high as 1.20 percentage points this year.
If history is any guide, it should be a lot lower. With yields on mortgage-backed securities at these levels, the 30-year fixed rate mortgages would be roughly 3.40% if the spread was around its historical average of 0.50 percentage points. That rate would save a US homeowner with the average outstanding loan balance of $155,000 about $41 in mortgage payments each month, versus the current rate. Over the seven-year period someone usually holds a 30-year mortgage, that translates into a roughly $3,446 difference, according to numbers provided by trade publication Inside Mortgage Finance. Wider spreads generally translate into better margins for banks and brokers. And some lenders have seen profitability on mortgage origination improve as the spread has widened. Some mortgage-finance observers suggest that increased concentration among the large banks that dominate the mortgage market better helps explain the wide spreads. They argue that because there are fewer banks doing the bulk of the mortgage lending than in years past, it is easier for them to capture market share without offering rock-bottom prices. “It’s a lack of competition. We really haven’t seen a competitive marketplace since 2008,” said Guy Cecala, publisher of Inside Mortgage Finance.
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
