HAFA

Smart Real Estate News & Commentary by Chris McLaughlin July 6,
2011

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More tweaks for short sales?

According to officials administering the initiative, the Treasury Department is considering more changes to the Home Affordable Foreclosure Alternatives (HAFA) program in order to boost short sales and deeds-in-lieu of foreclosure. In May, the Treasury hosted a HAFA summit with representatives from the mortgage industry. They included mortgage servicers, investors, real estate professionals and insurers – the direct stakeholders in a short sale decision. A Treasury spokesperson said they are looking at making “modest changes and clarifications to program guidance,” but no details could immediately be given.

HAFA launched in April 2010 to provide servicers an incentive to boost short sales and DILs for loans that fell out of the larger Home Affordable Modification Program. Through May, participating servicers started 17,781 agreements under HAFA and completed 8,541. JPMorgan Chase started nearly one-third of the agreements already in the process. In January, the Treasury eliminated some HAFA rules that constricted eligibility. For instance, servicers are no longer required to verify a borrower’s financial information or determine if the borrower’s total monthly mortgage payment exceeds a 31% debt-to-income ratio. But through April, the top-10 servicers provided more than 113,000 short sales and DILs through their own private programs. That’s nearly 10 times the amount of HAFA.

A wider HAFA program could cut into the 2.1 million trial modifications the top-10 servicers denied or canceled due to insufficient documentation, redefault or the borrower was deemed ineligible through April. Roughly 646,000 of these loans received an alternative modification, but servicers started another 307,000 and completed 136,000 foreclosures through April, according to the Treasury.

Sluggish growth ahead

According to a CNN survey of 27 economists, sluggish economic growth will continue into 2012, if not beyond, with only modest hiring and high unemployment. The economists predict that gross domestic product, the broadest measure of the nation’s economic health, will grow at only a 2% annual rate in the second quarter, little improved from the 1.9% growth rate in the first three months of the year. For the full year, they’re projecting growth of 2.6% — even weaker than in 2010. While they expect growth to pick up to 3% in 2012, that’s just barely enough to get employers hiring at a significant pace.

Forecasts for the job market aren’t much better. The June jobs report due Friday is expected to show 120,000 jobs added to payrolls, with businesses adding 130,000 as government employment continues to decline. Typically, the economy needs to add about 150,000 just to keep pace with population growth.
The unemployment rate is expected to fall only slightly to 9% from 9.1% in May. Hiring for all of 2011 is expected to come in just under 2 million jobs. And unemployment is expected to be at 8.7% at the end of this year.

The economists blame the hiring slump on uncertainty about consumer demand and Washington’s future actions on debt, health care reform and financial regulation. While the forecast is slightly better for hiring next year, with economists expecting about 200,000 jobs being added on average each month, that will only be enough to bring unemployment down to 8.1% by the end of 2012. For that reason, most economists don’t expect the Federal Reserve to start reining in the economy anytime soon, even though inflation is likely to pick up. The economists predict overall prices will rise about 3.2% this year, up from 1.2% last year.

Only two economists expect a rate hike from the central bank this year, while about half expect the Fed’s next move will be to raise rates in 2012 or later. Others expect lower-profile steps, like setting an explicit inflation target or changing the interest rate paid on excess reserves. None of them expect the Fed to embark on another round of asset purchases to pump cash into the economy, a controversial effort known as quantitative easing, although Keith Hembre, chief economist of Nuveen Asset Management said that could happen if there is a European sovereign debt default or an unexpected hard landing for the Chinese economy.

MBA – mortgage applications decrease
Mortgage applications decreased 5.2% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 1, 2011. The Market Composite Index, a measure of mortgage loan application volume, decreased 5.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5.1% compared with the previous week. The Refinance Index decreased 9.2% from the previous week. The Refinance Index has decreased for 3 consecutive weeks, reaching its lowest level since May 6, 2011. The seasonally adjusted Purchase Index increased 4.8% from one week earlier. The unadjusted Purchase Index increased 4.4% compared with the previous week and was 11.7% higher than the same week one year ago.

“Stronger economic data towards the end of the week coupled with the end of the Fed’s second round of quantitative easing helped bring mortgage rates to their highest level in over a month,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Refinance activity, already constrained by a smaller pool of eligible borrowers, declined in response to the higher rates, but purchase applications picked up appreciably in the week before the July 4th holiday.” The four week moving average for the seasonally adjusted Market Index is down 0.5%. The four week moving average is up 0.8% for the seasonally adjusted Purchase Index, while this average is down 1.1% for the Refinance Index. The refinance share of mortgage activity decreased to 66.4% of total applications from 69.5% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.8% of total applications from the previous week.

Pace of layoffs slowing

According to a monthly survey by Challenger, Gray & Christmas, planned job cuts rose 11.6% to 41,432 in June, but the overall pace of downsizing fell to its lowest level in 11 years. The mid-year total of 245,806 layoffs is the lowest since the turn of the century, according to the report, which noted that since a lull in April, companies have been looking to increase the pace of job cuts in May and June.

The government sector is the most active in trimming staff, the Challenger report noted. The public sectors accounted for 77,591 of the total cuts, although the year-on-year figures show a slowing of the pace of layoffs. Almost 100,000 government jobs were lost in the first half of 2010. The aerospace and defense industry, which is heavily exposed to government spending, has seen a considerable spike in downsizing this year. In the first half of 2011, the sector saw a 241% increase in job cuts over the previous year, from 6,121 to 20,851, according to the report. Financial-services companies are still cutting staff, with 11,734 laid off in the first six months of 2011, up 18.5% on the previous year. Cuts in the industrial goods sector also increased.

John A. Challenger, CEO of Challenger, Gray & Christmas, said that while these are “bellwether industries” for the overall health of the economy, the cuts were low enough “to prevent alarm bells from sounding.” There was no reason to predict a surge in job cuts in the second half of the year, he added. “Any progress made on the hiring front will appear anemic due to the fact that we started in such a deep hole,” Challenger said. “To provide some perspective, the 16-month long recession that stretched from July 1981 to November 1982 resulted in 2.7 million job losses from the nation’s payrolls. It took about 11 months for employment to return to pre-recession levels. “Following the relatively short 2001 recession, which also saw 2.7 million jobs losses, it took nearly 40 months for payrolls to return to pre-recession levels… So, while we expect that employers will continue to steadily add jobs in the second half of 2011, at times it will appear that employment is standing still,” he said.

WSJ – new mortgage caps coming

The federal government is readying its first retreat from the mortgage market, with the size of loans eligible for government backing set to decline in October. As an emergency measure three years ago, Congress raised to as high as $729,750 the maximum loan amount that Fannie Mae, Freddie Mac and federal agencies could guarantee. That made it easier—and cheaper—for borrowers in pricey housing markets to obtain mortgages, because the government guarantees that investors receive payments on those mortgages even if homeowners default. Now those limits are set to decline modestly in hundreds of counties across the US as the government attempts to reduce its outsized footprint in the mortgage market and create room for private investors to compete. Government-related entities stand behind more than nine of 10 new mortgages, and taxpayers have sunk $138 billion into Fannie and Freddie, underscoring the eagerness to dial down the government’s share. The new limits will vary widely by location, but will drop to $625,500 in top-tier markets such as New York, Los Angeles and Washington, D.C. Even though the new limits won’t take effect until Oct. 1, some lenders are already warning borrowers that they will stop accepting applications for loans that exceed the new limits much sooner, to ensure the loans are funded before the cutoff date.

US banks starting to loan

Second-quarter earnings reports due this month are likely to reveal a slight reversal of the long-term shrinkage in bank loan books, one of several positive signs for investors, bank analysts said. A number of other long-term clouds over the weakened banking sector may be clearing. Credit quality is on the mend, signaling that many large banks will bolster their bottom lines with money that had been reserved to cover losses on bad loans. Banks, of course, are far from being in the clear. Weak fixed-income trading and market volatility are believed to have weighed heavily on the biggest banks in the second quarter, while their net interest revenue continues to be pummeled by low interest rates. And low rates are expected to continue for the indefinite future. A growing loan book, however, could cover a multitude of woes. The Federal Reserve said last week that loans and leases in bank credit grew about 1% on an annual basis in both April and May, with the biggest growth — over 11% each month on an annual basis — coming from commercial and industrial loans.

Olick – will loan limits hurt or help?

“A few weeks ago the National Association of Home Builders put out a report asserting that new lower loan limits going into effect in October at Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) ‘will reduce housing demand and place downward pressure on home prices in major housing markets.’ On the blog that day, I wrote that the games were only beginning. Now another report, this time from researchers at George Washington University, is suggesting just the opposite, that lower loan limits may raise cost for a very few borrowers, but overall will not affect most mortgage shoppers.

The report focuses on the FHA, claiming, ‘The FHA still could serve 95% of its historic targeted market even if the maximum FHA loan limit were reduced by nearly 50%.’ Its market share right now (30%) far exceeds its target population. ‘FHA’s expansion played a major role in keeping the housing market afloat during the economic collapse of 2008 and 2009,’ said Robert Van Order, co-author of the report. ‘However, we now are left with large loan limits that were set when home prices at the top of the bubble. They don’t reflect current market conditions and are unlikely to assist the FHA in reaching its historical constituencies – first time, minority and low income homebuyers.’ After analysis, researchers concluded that a loan limit of $350,000 in high cost markets at $200,000 in the lowest cost markets would, ‘satisfy more than 95% of FHA’s target constituency.’

Economist Paul Dales at Capital Economics extrapolates to Fannie and Freddie, and agrees, albeit with concerns: ‘The scheduled reduction in conforming mortgage loan limits at the start of October is unlikely to trigger a further precipitous fall in house prices as some have suggested. Nevertheless, it certainly won’t help the market at a time when millions of households already can’t obtain a mortgage.’ Dales cites FHFA (the overseer of Fannie and Freddie) studies which find that the lower loan limits, ‘will only affect 250 counties, or just 8% of the 3,000 counties in the US…in 2010 the GSE’s provided just 50,000 mortgages ($3b) where the loan amount was above the new limits. I would add that they also come with even tougher credit standards, not that conforming loans these days aren’t tough enough to obtain.

A big issue, though, is who will fund this jumbo loan market that is about to get many more customers. Also, the bulk of the sales action right now is on the lower end of the market. If we’re going to return to a ‘normal’ housing market, we need those move-up buyers. Yes, the distress is on the low end, but the mid range is stalled, and that’s not healthy. I’m sure we’ll be hearing more as we near the fall.”

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)

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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 June 9, 2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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Lenders make short sales even more attractive

CitiMortgage, the mortgage servicing arm of Citigroup is paying borrowers an average $12,000 after completing a short sale this year.  Justin Rand, the senior vice president of loss mitigation at the bank, said servicers are putting more of an emphasis on streamlining the process and pursuing a short sale ahead of foreclosure. The short sale process in 2009 took an average 120 days from listing to close. But by reaching out to borrowers instead of waiting for them to ask the bank, short sales now take an average 83 days to complete, Rand said at a panel for the REO Expo Conference in Fort Worth, Texas, earlier this week.  “For Citi-held portfolio loans today, we have a little over 16% of delinquent loans in a short sale program,” Rand said, adding that increased from roughly 4% two years ago.

Not only are the timelines shrinking to complete these deals, but the incentives paid to qualifying borrowers – again only on loans owned by Citi – increased in recent years as well.  In early 2009, Citi offered an average $1,500 to qualifying borrowers. That went up to between $3,000 and $5,000 in 2010 and finally up to an average $12,000 so far in 2011, Rand said.  “Incentives will be offered to customers experiencing financial hardship who need funds to proceed with the short sale,” a Citi spokesman said. “The amount, which is agreed upon up front, varies according to the borrower’s individual circumstances and loan characteristics. It is disbursed to the homeowner when the sale is completed.”

The key to a successful short sale, just like modifications, is the timely collection of financial documents. Regulators helped move the process along with guideline changes to programs like the Home Affordable Foreclosure Alternatives initiative, which lessened the amount of documents required.  “It took us about 30 days to collect documentation in 2009 to now less than 10 days,” Rand said. “A lot of the time, for seriously delinquent loans, all we need is just a letter of authorization from the homeowner.”  David Sunlin, the operations executive for short sales at Bank of America (BOA) was on the same panel as Rand. He said the entire industry is becoming more proactive. BOA completed more short sales than REO every month for the last year and a half. The short sale department at BOA grew from 150 people to now over 3,000. Each employee handles roughly 75 cases.  “We’re past the point where we’re bumbling around losing files,” Sunlin said.

Rand said the big shift began in 2009 as the Treasury Department was putting together plans for the HAFA, which would launch in April 2010.  “In 2009, we started a proactive approach, reaching through MLS services and reaching out to real estate agents and customers with underwater mortgages, distressed loans,” Rand said. “We’re not going to turn anybody away if the short sale meets the net requirement we’re looking for.”

IMF lowers outlook for US

In the latest update to its World Economic Outlook, the IMF said it expects the US economy to expand at an annual rate of 2.5% this year and 2.7% in 2012. That’s down from projected growth rates in April of 2.8% and 2.9%.  The US government said last month that the economy grew at an annual rate of 1.8% in the first quarter of 2011, down sharply from 3.1% in the final three months of 2010.  The slowdown in the first quarter was due partly to “transitory factors,” the IMF said, including higher commodity prices, bad weather and supply chain disruptions due to the March earthquake and tsunami in Japan.  The report said “heightened potential for spillovers” from the fiscal challenges facing indebted nations on the periphery of Europe have grown since April. In addition, the IMF pointed to concerns in the financial markets about the slowing US economy.  “If these risks materialize, they will reverberate across the rest of the world — possibly seriously impairing funding conditions for banks and corporations in advanced economies and undercutting capital flows to emerging economies,” the report reads.  The IMF also called on policymakers in advanced economies to come up with “credible and well-paced” plans to bring down long-term deficits.  In the United States, the IMF said it is “critical” to immediately address the debt ceiling, which was exceeded earlier this year and has yet to be raised by Congress.

Olick – foreclosures down, but far from out

“Delays in foreclosure proceedings and a new push by big banks and servicers to find foreclosure alternatives are drawing a new, albeit still troubling picture of the nation’s real estate market.  New notices of default, the first step toward foreclosure, fell to a level in May not seen since the end of 2006, according to a new report by online foreclosure site RealtyTrac. Bank repossessions, or REO, the final stage of foreclosure, also fell on a monthly basis for the second straight month. That pushed total foreclosure activity down 33% from a year ago.  ‘I really wish I could say that looking at a 42-month low in foreclosures action means that the housing market is recovering, and the foreclosure problems are all going away and we should all go about our business and be happy,’ says RealtyTrac’s Rick Sharga. ‘Unfortunately, those would all be lies.’

The numbers have been on a roller coaster since the so-called ‘robo-signing’ foreclosure paperwork scandal that unfolded last Fall.  Now there are big discrepancies in the numbers state to state, depending on which states practice judicial foreclosures and which don’t.  The foreclosure timeline is also increasing as more banks and loan servicers focus on short selling distressed properties, which is when the sale price is less than the value of the mortgage.  REO activity was down 6% overall in non-judicial foreclosure states month-to-month, but some non-judicial foreclosure states posted substantial month-over-month increases.  Bank repossessions jumped 79% in Georgia, 36% in Virginia, and 19% in Michigan.  In judicial states, bank repossessions actually rose 1% month to month, as courts finally begin to get new paperwork and work through lawsuits.  In New York, REO activity jumped a whopping 97% and 21% in New Jersey.

While the usual suspects, California, Arizona and Nevada still lead the nation in foreclosure activity, the pain is still spreading nationwide.  The sheer volume and share of distressed properties in the current market continues to push home prices to new lows since the worst of the housing crash.  Some states may see higher numbers, but the effect is the same.  ‘It’s a little bit like saying that aside from that one unfortunate incident with the iceberg, the Titanic had a really wonderful cruise,’ describes Sharga.  ‘What we’re talking about are really markets that drive a lot of the real estate market, a lot of the economy. And these are states that have had really severe foreclosures. But beyond that, 72% of the top 200 markets saw an increase in year over year foreclosures activity in the last year.’”

ING sells US unit to Capital One

Capital One Financial Corp plans to buy ING Groep NV’s US online bank for $9 billion in cash and stock, freeing the Dutch bank to repay bailout funds and sever its state ties.  ING is in the throes of a wrenching restructuring, forced on it as a condition of a 10-billion-euro state bailout during the 2008 financial crisis.  The European Commission and ING agreed on a restructuring plan in late 2009, the most surprising part of which was a mandate that ING sell its US online banking operations.  But ING has made clear it wants to be freed of its state shackles, as that would lift restrictions on making acquisitions and give it more flexibility on pricing and allow it to compete more easily.  The Capital One deal caps a long list of divestments by the Dutch banc assurer.  It has raised at least 5.4 billion euros from the sale of assets including its Asian private banking assets and insurance operations in Canada, Taiwan, Australia and Chile, and agreed to sell most of its real estate investment management operations to CB Richard Ellis and other parties in a deal worth $1.1 billion.  But it still must complete the sale of ING Direct USA, and spin off its US European and Asian insurance operations in two separate IPOs next year. It also plans to divest its Latin American insurance business in the next few months.  Last month, ING paid 3 billion euros to the Dutch state, which included a 50 percent premium, and said at the time that it would repay the remaining 3 billion euros by May 2012.  With the proceeds from selling its US unit to Capital One, ING could repay the remainder sooner, but Chief Executive Jan Hommen said any decision on early repayment could be dictated by the outcome of a European court case, with a hearing set for next month.

NAR – home prices drop

According to the National Association of Realtors (NAR), the median home sale price in May dipped 1.6% compared to April, down to $188,900, according to one real estate listing website.  , May’s median price was about 2.1% below a year earlier when government tax incentives were still driving consumer demand. The drop in price could be attributable to seller uncertainty of a double-dip in home prices.  “The modest pull-back that occurred in May 2011 could signal seller concerns over widespread reports of a ‘double-dip’ in the housing market based on sales results for the first quarter of 2011,” according to the website Realtor.com. “However, unless there is further retrenchment, the results for the past three months could be viewed as a positive indicator of future home pricing trends.”

Median prices fell in 126 out of 146 markets covered by Realtor.com. Twenty-three markets experienced a more than 5% decline in home price, 14 of which were in Florida. Chattanooga, Tenn. witnessed the largest price drop, down 17.8% between April and May to a median $145,000. That price is down 16.9% compared to May 2010.  As prices fell, sale inventory grew. Realtor.com reported a 3.5% growth in inventory to a total 2.3 million listed properties in May. That figure is down 14.3% compared to one year earlier, however.  The average number of days a home spent on the market decreased to 92 days in May from April. The age of market inventory has been gradually decreasing since the beginning of 2011 and is now roughly equal to the age seen last summer.

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 June 9, 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

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

Fannie Freddie are better, but still cash drains

Conservatorship has been good for Fannie Mae and Freddie Mac, but the companies continue to drain federal resources away from other government operations, according to the regulator of the mortgage giants.  In its third annual letter to Congress, the Federal Housing Finance Agency (FHFA ) said stronger loan underwriting standards enabled the companies to narrow losses in 2010 to $28 billion from $93.6 billion a year earlier. The companies have received more than $160 billion funding from the Treasury Department the past few years.  “Since being placed under conservatorship in 2008, Fannie Mae and Freddie Mac remain critical supervisory concerns,” said Edward DeMarco, acting director of the FHFA. This is a “result of continuing credit losses in 2010 from loans originated during 2005 through 2007 as well as forecasted losses from loans originated during that time.”  Still, DeMarco said governmental control allowed the companies to “accomplish their statutory mission of facilitating stability and liquidity for single-family and multifamily housing finance.”

The FHFA said Fannie and Freddie remain plagued by “credit risk, operational risk, modeling risks and retention of qualified leadership and personnel.” The companies hold a 60% share of single-family loan production.  As conservator, the FHFA is tasked with minimizing credit losses at the GSEs, and DeMarco said more stringent underwriting standards and a stronger price structure have helped.  “Although past business decisions leading to these losses cannot be undone, each enterprise, under the oversight and guidance of FHFA as conservator and regulator, has improved underwriting standards for loan purchases in the past two years.,” he said. “Another way FHFA minimized losses was to require the enterprises to enforce existing contractual representation and warranty loan repurchase agreements with lenders.”  The FHFA also oversees the dozen Federal Home Loan Banks and said all 12 reported profits in 2010. Loans to the banks dropped to $479 billion last year from $631 billion at the end 2009.  The regulator said the banks’ financial condition and performance stabilized in 2010, but several continue “to be negatively affected by their exposure to private-label mortgage-backed securities.”

Retail sales down

Total retail sales slipped 0.2% last month, the Commerce Department reported. The decline broke a winning streak of consecutive monthly gains going back to June 2010. But from a year ago, sales were up 8%.  Economists had expected a 0.7% drop, according to consensus estimates from Briefing.com.  Declines were led by a 2.9% slide in sales at motor vehicle and parts dealers. This drop overshadowed stronger sales at building material companies and restaurants, which came in the face of higher gas prices last month.  Sales excluding autos and auto parts were 0.3% higher, beating forecasts for a 0.2% rise.

“The numbers we’ve been seeing from retailers lately have been running better than expected, and the number today excluding autos is better than expected,” said Ken Perkins, an analyst at Retail Metrics. “But there’s still definitely a soft patch unfolding here in terms of economic growth, which I think was reflected in sales of autos.”  Perkins said the widespread supply chain disruptions sparked by the earthquake in Japan were mainly to blame for the big decline in auto sales last month.  But even taking auto sales out of the mix, many big areas like consumer electronics and appliances were disappointing, partly due to high gas prices.

Olick – short sales surge, but not because of government

“Any time I see a 74% jump in anything, I hear alarm bells, so when the Treasury Department reported just that big a jump in its Home Affordable Foreclosure Alternatives (HAFA) program, I figured there had to be something really big behind it.  And I was wrong.  There’s nothing big behind it, in fact there’s something very small behind it: Small numbers. 

HAFA provides financial incentives for servicers and borrowers to do short sales (selling the property for less than the value of the mortgage) and deeds in lieu of foreclosure (basically just giving the property back to the bank). The program launched in April of 2010 and was later streamlined in December, 2010, based on feedback from mortgage servicers, real estate agents and homeowners.  So far, HAFA has completed 7,113 short sales or DIL’s. In April, however, HAFA saw 1,666 completed, up 74% from the 959 done in March.  Why the jump?’  It’s too early to draw broad conclusions,’ says Treasury spokesman Andrea Risotto, noting that Treasury just began reporting the numbers two months ago. She also points to a long reporting lag because the short sale process still takes so long. But none of this is the story. The 74% jump exists because the numbers are just so small, and that’s the story. HAFA is doing a relatively miniscule number of short sales, when you compare the program to what the big banks are doing on their own.

JP Morgan Chase has done over 110,000 short sales since 2009, now processing about 5000 a month, according to recent reports to Congress, and they are the number three servicer behind Bank of America and Wells Fargo. If you extrapolate that out, the top three banks are probably doing more than 20,000 a month, and they’re ramping up the sales as we speak.  ‘Short sales shot up in the Spring as banks wrestled with foreclosure problems and delays,’ says Guy Cecala of Inside Mortgage Finance. In fact, the Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey reported short sales hit a record high of 19.6% of all home purchase transactions in March. ‘Banks have discovered that short sales are often the fastest and most cost effective way to resolve a severely delinquent mortgage, and they have greatly improved their processing systems (any turnaround times) for handling these transactions.’ 

Compared to a foreclosure, other sources say, short sales result in smaller losses. There is more financial certainty than from an REO (bank owned) sale many months down the road when the property has likely deteriorated. The banks are currently looking at so many potential REO’s from so many delinquent loans in the pipeline, they’d be ridiculous not to try to short sell as many as they possibly could.  Some servicers are aggressively seeking out borrowers for short sales.  ‘Chase reaches out to borrowers who have already listed their homes or were recently denied a modification to initiate the short sale evaluation process. The goal is to have as much paperwork completed as possible prior to receiving the offer, thereby reducing the time from offer receipt to approval,’ a Chase spokesman explains.

But why, if HAFA actually pays borrowers and servicers to do short sales and DIL’s, would banks be doing so many outside of the program?  ‘HAFA is a taxpayer funded program, so it has eligibility requirements targeted at a certain segment of the population,’ says Risotto, noting that the program is for owner occupants who can demonstrate financial hardship and whose first mortgage is less than $729,750. ‘HAFA is not meant to be for every person looking to do a short sale,’ she adds.  That knocks out investors, jumbo loans and borrowers who don’t meet the ‘hardship’ requirements of the Treasury. The big banks are likely more lenient on that last one, again knowing that a short sales will be cheaper in the end than a foreclosure.”

US economy “bumbling along”

The US economy is just “bumbling along” and creating an uncertainty among business that is likely to stifle hiring and growth, says investor Wilbur Ross, fund manager and head of W.L. Ross & Co.  Ross blamed Washington policies for much of the problems, from the lack of a housing recovery to the recent controversy in which the Obama administration is trying to block Boeing from building a plant in a right-to-work state.  “It’s not going to be a ‘W’ or a ‘V’ or an ‘L’ (recovery) or another alphabet letter,” said Ross. “It’s going continue to be punctuation—dots, dashes, question marks, exclamation points, one strong month, one weak month—a very fragile economy.”

That lack of direction could stand in the way of businesses that want to expand.  “This kind of thing is bad because it’s unsettling to companies,” he said. “Business has a terrible time adjusting to uncertainty. Good news they can adjust to, bad news they can adjust to. Uncertainty makes it very, very hard to make long-term commitments.”  Businesses also are facing weak consumer spending. Unemployment remains mired at 9.1 percent while housing prices recently have double dipped despite aggressive efforts in Washington to stem the crisis.  “The consumer still hasn’t been rehabilitated,” Ross said. “All the meddling in the real estate side of life has not fixed residential real estate. If anything I think it’s made it worse because it’s extending out the foreclosure time lines and putting more uncertainty and more downward pressure.”

Ross also wondered about the state of job creation considering the battle the National Labor Relations Board has waged against Boeing.  The agency contends that Boeing broke the law when it moved a plant to South Carolina, where workers are not required to belong to a union.  Boeing contends that even though it has a unionized work force it also can build plants in right-to-work states. Some in Congress have called on cutting funding to the NLRB on ground that the agency has overstepped its authority.  For Ross, the issue comes down to the kind of message the administration is sending at a time when job creation is at a premium.  “Who in American business is going to have confidence to build a new factory, add employees, if you’re not even sure you can build the factory where you want to?” he said. “You can’t have social experimenting interfering with turning the economy around. And I think that’s what’s going on here. It’s social experimenting instead of building the economy.”

WSJ – Beazer CEO departs

In a surprise move, builder Beazer Homes USA Inc. said Chief Executive Ian McCarthy stepped down over the weekend, three months after he agreed to repay millions of dollars as part of a settlement with the Securities and Exchange Commission.  He will be succeeded by Chief Financial Officer Allan Merrill, Beazer said in a written statement.  Mr. McCarthy, 57 years old, became CEO at the time of Beazer’s 1994 initial public stock offering, and he helped the company become one of the nation’s largest builders. He also led the builder during several incidents that bruised investors’ confidence in the company.  Most recently, in March, Mr. McCarthy agreed to repay $6.5 million and return tens of thousands of shares of company stock as part of the settlement with the SEC. He didn’t admit wrongdoing.  Mr. McCarthy wasn’t available for comment Monday. His separation agreement is expected to be filed this week, according to a company spokeswoman.

While all builders have struggled to sell homes in recent years, Atlanta-based Beazer’s problems go beyond the housing crash. According to an SEC complaint filed earlier this year, Mr. McCarthy received millions of dollars in bonus compensation and stock profit from Beazer while it was filing what the agency said were fraudulent financial statements for the year ended Sept. 30, 2006.  Although Mr. McCarthy wasn’t accused of a crime, he was still required under the Sarbanes-Oxley Act, a corporate-governance law enacted in the wake of several accounting scandals, to reimburse the company for the ill-gotten gains.  In 2008, Beazer settled civil allegations brought by the SEC over the company’s accounting practices without admitting any wrongdoing. Beazer said it understated earnings by a net total of about $28 million between fiscal years 1998 and 2006.  In 2009, the company agreed to pay as much as $55 million to the federal government and homeowners after a joint federal probe in which the company acknowledged violations of certain mortgage-lending regulations and accounting rules.

Another misstep involved the 2002 acquisition of Crossman Communities Inc. for about $500 million in cash and stock, a deal that boosted Beazer’s presence in the South and Midwest. Beazer later reduced Crossman’s goodwill, or value to the company.  Some shareholder activists said Mr. McCarthy’s exist was overdue. In November 2007, CtW Investment Group wrote Beazer directors asking that Mr. McCarthy be removed in response to the recent “mortgage meltdown.” The demand occurred soon after Beazer said it would restate financial results for a three-year period following an internal probe that found its mortgage-originations unit violated federal lending rules.  After getting the letter, a Beazer executive and outside director assured CtW that “the board has taken charge and would monitor Ian McCarthy,” said William Patterson, executive director of CtW Investment Group, the investment arm of labor federation Change to Win in Washington. “The [subsequent] loss of shareholder value is beyond acceptable.”

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 June 9, 2011

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DSNews.com – short sales up

Servicers completed 1,666 short sales and deeds-in-lieu (DIL) of foreclosure under the Home Affordable Foreclosure Alternatives (HAFA) program in April. That’s up 73.7% from the 959 HAFA transactions completed the month before.  HAFA has been in place since April of 2010. According to Treasury’s latest report, which covers program activity through April of this year, a total of 7,113 short sales and DILs have concluded through HAFA.  Treasury says another 7,780 HAFA transactions have been started, meaning an agreement has been put in place between the servicer and the homeowner for terms of a potential short sale of DIL.  Treasury notes that a short sale typically takes 120 days to complete under the program. The number breakdown in the report doesn’t specify how many of the HAFA“starts” are still in process or may have been withdrawn. Any short sale also requires the cooperation of a third-party purchaser, junior lien holders, and mortgage insurers to complete the transaction.

The latest data show that the 10 largest servicers participating in the federal government’s foreclosure prevention programs have completed a short sale or DIL for 82,995 borrowers who did not qualify for a Home Affordable Modification Program (HAMP) trial and 31,048 borrowers whose trial plans were canceled, indicating that servicers are employing their own short sale programs to avert foreclosure for borrowers that don’t fit the mod equation.  Critics of HAFA have urged Treasury to raise the monetary incentive for servicers, investors, and subordinate lien holders, citing low payouts as a common reason HAFA short sales are rejected.

WSJ – mortgage rates hit new 2011 low

Home mortgage rates fell again to a fresh 2011 low as a week of downbeat jobs data fueled concerns over a possible economic slowdown this year, according to the latest survey from Freddie Mac.  The decline in fixed rates represented the eighth-straight weekly fall and comes after the Bureau of Labor Statistics this week said employers added far fewer private-sector jobs than expected.  The housing market continues to be fragile across the nation as well,” Freddie chief economist Frank Nothaft said, with Federal Reserve data released Wednesday showing weak sales and prices in most districts.  The 30-year fixed-rate mortgage averaged 4.49% in the week ended Thursday, down from 4.55% the prior week and last year’s 4.72% average. Rates on 15-year fixed-rate mortgages fell to 3.68% from 3.74% the previous week and 4.17% a year earlier.  Five-year Treasury-indexed hybrid adjustable-rate mortgages fell to 3.28%, from 3.41% last week and 3.91% a year earlier. One-year Treasury-indexed ARM rates decreased to 2.95%, from 3.13% the prior week and 3.91% a year earlier.  To obtain the rates, fixed-rate borrowers required an average payment of 0.7 point, while the adjustable-rate mortgages required a 0.5 point payment. A point is 1% of the mortgage amount, charged as prepaid interest.

Banks fight back

The Foreign Account Tax Compliance Act was passed by Congress last year and comes into force in 2013. Last week, senior bank executives implored Tim Geithner, US Treasury secretary, to modify the law, according to people familiar with the meetings.  Banks say they are already racking up significant costs. Eventually, they say, the task of scouring records for US citizens and then reporting them could run into billions of dollars and conflict with domestic privacy laws. Disclosure records show groups including Switzerland’s Credit Suisse, Barclays of the UK and TD Bank of Canada have together spent millions of dollars lobbying on the issue.  Terry Campbell, Canadian Bankers Association head, said the act was “conscripting financial institutions around the world to be arms of US tax authorities”. Algirdas Semeta, the European tax commissioner, told the Financial Times that he shared the concerns of the financial sector and expected more meetings with US counterparts. “We can find alternatives that would ensure all necessary information on their taxpayers without imposing additional burdens on financial institutions in the EU,” he said.  People involved in meetings on the subject say the Obama administration has indicated it will look to reduce the burden on banks, which have to identify US citizens with accounts of more than $50,000.

Olick – predicting home prices is impossible

“When Robert Shiller, co-creator of the S&P/Case-Shiller Home Price Indices , speaks, he tends to make headlines, and yesterday was no different.  Claiming that he wasn’t making any predictions, he predicted that home prices could fall another 25%.  ‘That wouldn’t surprise me at all,’ he hedged. And there was the headline, tragic as it is.  I happened to be at the conference yesterday where he said that. In fact, I was a speaker/panelist at the Standard and Poor’s ‘Housing Summit 2011: Boom, Bust and Beyond.’ And, no offense, but that wasn’t the headline. What really struck me was what he said right before that.  ‘Statisticians deal with things that repeat themselves. This housing boom and bust is so historic and unprecedented, you can’t forecast the future because you have no comparison.’  That was not only the headline, but the theme of the conference, as I sat on a panel with economists from S&P, Experian and Columbia Business School. Chip Case was there as well, disagreeing with Shiller on several points.

Audience members, largely from the finance industry, kept asking the same question in different ways, ‘When is this all going to get better??’  One by one, we panelists opined on headwinds and tailwinds, but never really answered. This is something of a shift from just the past few months, when the economists who cover housing seemed to be suddenly more bullish.  But now we have a new dip in home prices, which is putting more borrowers in a negative equity position. There is more concern of more borrowers hitting that ‘stress threshold,’ as one panelist put it, where they just quit paying on their loans.  We already have millions of borrowers who are not current on their mortgages. They haven’t hit the foreclosure pipe yet, but many will, and the panelists seemed most concerned about this huge glut of properties that will not just hit, but continue to plague the market for years to come.

This as the Treasury released a lackluster report on its own mortgage modification program and then punished several big banks for poor performance by cutting off the program’s financial incentives.  By far the biggest concern among questioners and panelists alike was lack of buyer demand. The demand that should be there is pressured by fear, tight credit and under-employment.  ‘Even with recent job growth, we still have 7 million fewer people employed today than at the peak in 2008, and the unemployment rate remains high at 9.1% officially, but a whopping total of 15.9% are underemployed or have given up their search,’ notes housing analyst John Burns.  This ‘wage-less recovery,’ he argues is largely behind the lack of buyer demand, despite much-improved affordability. 

But all real estate is local, right? And all these national numbers that folks like me spew don’t have any footing in local reality, right? Yes, that may be true when it comes to the numbers. All real estate is local, but consumer confidence is national, and that trumps the local numbers.  I have to say, leaving yesterday’s conference, I felt a strange unease, not because we talked about the same barriers to recovery that I talk about every day of the week, but because all these experts who are supposed to tell us when it’s all going to be alright…don’t have a clue.”

Oil prices fall on productivity boost

Oil prices fell to near $98 a barrel today, extending a big loss from Friday after a report said Saudi Arabia plans to boost its crude production.  Saudi newspaper al-Hayat reported Friday that the country will increase production by 13%, or about 1.14 million barrels per day, to boost global supplies and help lower prices. Earlier last week, the Organization of Petroleum Exporting Countries failed to reach consensus to raise output and left the cartel’s production quotas unchanged.  Fighting in Libya since February has shrunk global crude output by shutting down the OPEC nation’s 1.6 million barrels a day of production. Political violence and upheaval in the Middle East and North Africa this year has probably added about $15 to the price of oil, said Paul Sheard, global chief economist at Nomura.  Analysts are concerned an escalation of violence and instability in the Middle East would send oil prices higher and undermine global economic growth.  In other Nymex trading in July contracts, heating oil rose moved up 0.01 cent to $3.1061 a gallon while gasoline added 0.14 cent to $3.0191 a gallon. Natural gas futures gained 5 cents to $4.807 per 1,000 cubic feet.

Fitch downgrades 9 mortgage servicers

Fitch Ratings downgraded ratings on nine mortgage servicers because of tougher regulations and the lack of urgency these companies displayed in response to the foreclosure crisis.  The credit rating agency took action on two Bank of America servicing divisions of, two Wells Fargo servicing divisions, JPMorgan Chase , Citigroup , MetLife Bank , PNC Bank and SunTrust Mortgage .  In late 2010, procedural defects surfaced across the servicing industry. Servicers halted the foreclosure process to fix affidavits required in judicial states. Federal regulators followed with investigations and consent orders, requiring new standards for servicing loans. Negotiations between the 50 state attorneys general remain ongoing.

“The full extent of the concerns resulting from this and other related functions within servicer operations is far from resolved. Fitch expects that the additional scrutiny from a wide range of interested parties, as well as the potential new regulation and heightened risk from litigation, will result in continued reluctance to proceed with foreclosure,” Fitch said.  In November, Fitch placed these ratings on watch and complete a full review of the rated sevicers later in 2011.  Fitch already incorporated the heightened resolution times and loss severities into its analysis of outstanding residential mortgage-backed securities bonds. Therefore, it does not expect to change outstanding RMBS bond ratings.

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.  Own 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